A defining characteristic of markets is that they create winners and losers, in this instance based upon individual skill levels. This fact is reflected in Figure 5 as markets influence the distribution of individual outcomes in the economic, social, health and educational domains. These same markets also influence the distribution of outcomes realized by a range of social institutions, such as firms, families, schools and communities, and ultimately the distribution of outcomes observed at the macro level in these same domains. Figure 6 provides examples of outcomes in each domain and level. A less obvious characteristic of markets for skill is that they can be relatively more or less efficient allocation mechanisms. For example, labour markets are thought of as being information poor, a fact that leads to high transaction costs and considerable inefficiency in the employee-employer matching process.

This final observation allows one to think about how public policy might seek to influence human capital. First, it can serve to increase the supply of skill available to markets, largely by financing learning. Second, it can attempt to influence the demand for skill in each of these markets at the individual level or at the level of social institutions. Finally, it can try to improve the efficiency of markets that match supply and demand for skill. As with any set of market oriented policies care must be taken to ensure that skill supply and demand are roughly in balance over the long term or market distortions and failures will emerge.