Complements and Substitutes between Innate Endowments and Environmental Factors

We dispute the claim that economic efficiency entails complementarity between endowed talent and human capital investment, absent credit constraints. Complementarity means that parents invest more in highly endowed children. We show that even in a minimal, value-free, model in which marginal benefits of human capital are optimized, endowments and human capital investment are substitutes as well as complements. Depending on the level of marginal costs of human capital, this argues that human capital investment in less endowed children cannot be dismissed in a demand and supply model. Though our attempt here is basic to the point of simplicity, it begins to provide salient sufficient conditions for substitution and complementarity of those attributes based on marginal costs and the demand for human capital