Economists and economic historians have long known that the formation of human capital, in the shape of an educated and skilled workforce, is an important contribution to economic growth. In the nineteenth century formal schooling typically ended at much younger ages than today, and training in the workplace played a much greater role than it does today. CEPR Programme Director Roderick Floud calls attention in a recent Discussion Paper to the different systems of technical education in industrial countries and the explanation of these differences.

Floud argues that collective irrationality, which has been advanced as an explanation of the British failure to adopt German methods of industrial training, is inadequate to explain why Germany, the United States, France and Britain should each have developed and maintained entirely different structures of industrial training. Instead, he suggests that human capital theory, and in particular the distinction between 'general' and 'specific' training, can illuminate the analysis of these structures. The German system gave to the state the responsibility for the general training of a worker for a particular occupation, while in contrast the system in the United States relied entirely on specific training of the worker by an employer. Between these two extremes, the British and French systems embodied a division of responsibility between the employer who provided specific training in the workplace, and the employee who obtained general training often through part-time, evening classes provided by the state.

The systems of training which developed were therefore quite different, probably because the tasks which they needed to perform were different. In both Germany and the United States, the need was to socialise and train quickly a migrant population largely unused to manufacturing industry, while in France and Britain the longer history of manufacturing had already socialized the workers and meant that they could be given greater responsibility for their own training. Floud argues that the transplantation of one system into a different economic and social milieu, for example the Prussian system into Britain, is unlikely to have been successful.