Economic Theory Discussion on Human Capital Depreciation and Pay Rule

I believe that the case for this rule is very strong. The deadweight loss rule and the argument from the maximand rule give logical certitude that human depreciation is expected to be recovered in pay. The convergence axioms would then give actual recovery as anorm. The rule disallows the prior claims hypothesis, or possibility that maintenance is recovered too, from an accumulation of implausibilities that led me finally to rule them out by adjusting the axioms. The life cycle model should also specify that human capital continues after retirement. | admit that this rules out the simplicities assumed in the boss/secretary parable. It continues because we earn imputed pay until the end, and human capital remains as its present value. I would also model in my depreciation theory. Pay, like the mortgage payments, is all realized work (interest) at the start and all human depreciation (amortization) at the end. No other explanation of age-wage profiles will hold water. A New Approach to the Pay Rule ] reasoned to the pay rule from the maximand and deadweight loss rules. Another approach can reach the same conclusion. The total return truism finds output = capital growth + cash flow. (6.16) expressed Ben-Porath’s equation as human growth = invested consumption + self-invested work -recovered human depreciation. Cash flow is the flow discounted to present value. Tradition, since Farr in the mid- nineteenth century, has seen human capital as present value of future pay less what Chapter 6: Parallels with the Firm 2/4/16 20 HOUSE_OVERSIGHT_011054