Human capital considers education and health as a means to increase labour productivity. On the other hand, human development is based on the idea that education and health are integral to human well-being, because only when people have the ability to read and write, and the ability to lead a long and healthy life, they will be able to make other choices which they value. Human capital treats human beings as a means to an end; the end being the increase in productivity. In this view, any investment in education and health is unproductive, if it does not enhance output of goods and services. In the human development perspective, human beings are ends in themselves.

Human welfare should be increased through investments in education and health, even if such investments do not result in higher labour productivity. Therefore, basic education and basic health are important in themselves, irrespective of their contribution to labour productivity.