Knowledge Capital as a Driver of Long-Term Economic Growth: Rethinking the Role of Education

Book Review: Hanushek E., Woessmann L. (2022) Intellektualnyy kapitalv raznykh stranakh mira. Obrazovaniye i ekonomicheskaya teoriya rosta [The Knowledge Capital of Nations. Education and the Economics of Growth].Moscow: HSE Publishing House (in Russian). 349 p.

Abstract

Eric Hanushek and Ludger Woessmann’s The Knowledge Capital of Nations: Education and the Economics of Growth (2015; in Russian: 2022) presents a comprehensive examination of the relationship between educational quality and long-term economic development. The authors argue that traditional quantitative indicators, such as average years of schooling or enrolment rates, are insufficient to capture the true contribution of human capital to economic growth. Instead, they propose a shift in focus towards qualitative dimensions of education, emphasising cognitive skills— the capacity for critical thinking, problem-solving, adaptability, and the assimilation of new knowledge. This set of abilities, which they define as knowledge capital, is identified as the principal factor underpinning sustained economic prosperity and the competitiveness of nations. The book integrates various theoretical frameworks of human capital— including the neoclassical model, endogenous growth theory, and the concept of technological diffusion— to demonstrate that cognitive skills stimulate innovation and productivity. Empirical analyses based on international assessments such as PISA, TIMSS, and PIRLS provide robust evidence of the enduring link between the level of cognitive skills in the population and countries’ economic performance. The authors also highlight the institutional conditions necessary for improving educational quality, recommending policies that simultaneously raise basic skills across the population while nurturing high-achieving students. Although primarily written for specialists in economics and education, the book also addresses policymakers engaged in shaping education systems and development strategies. At the same time, this review highlights some limitations of the authors’ approach. These include the role of soft skills, socio-psychological attributes, and the importance of social capital in shaping human potential. Furthermore, the book gives limited consideration to the impact of new technologies such as artificial intelligence, which, while enhancing productivity in the short term, may weaken cognitive capacities over the longer horizon. This emerging challenge calls for a rethinking of strategies for developing the intellectual capital of future generations.