Physical capital is well distinguished from human capital. The major points of differences are given below.
1. Physical capital is tangible and can be easily sold in the market like any other commodity. Human capital is intangible; it is endogenously built in the body and mind of its owner.
2. Human capital is not sold in the market; only the services of human capital are sold and hence the necessity of the owner of the human capital to be present in the place of production. The physical capital is separable from its owner, whereas, human capital is inseparable from its owner.
3. The two forms of capital differ in terms of mobility across space. Physical capital is completely mobile between countries except for some artificial trade restrictions. Human capital is not perfectly mobile between countries as movement is restricted by nationality and culture.
4. In the case of human capital, depreciation takes place with ageing but can be reduced, to a large extent, through continuous investment in education, health, etc. This investment also facilitates the human capital to cope with change in technology which is not the case with physical capital.
5. Nature of benefits owing from human capital are different from that of physical capital. Human capital benefits not only the owner but also society in general. This is called external benefit. An educated person can effectively take part in a democratic process and contribute to the socioeconomic progress of a nation. A healthy person, by maintaining personal hygiene and sanitation, stops the spread of contagious diseases and epidemics.
6. Human capital creates both private and social benefits, whereas physical capital creates only private benefit. That is, benefits from a capital good ow to those who pay the price for the product and services produced by it.
