Tuesday, August 28, 2007
Jeffrey M. Lacker, president of the Federal Reserve Bank of Richmond, recently spoke at the Governor's Summit on Early Childhood Development in Virginia. Here is an excerpt:
It is worth noting that the skills that have become most valuable over time seem to be general skills that come with higher levels of education -- as opposed to the very specific skills gained through experience in a particular job or occupation. This is an important distinction. It means that more than ever, the path to economic success lies in education rather than in on-the-job experience. And if these general skills are the key to success, it follows that a lack of skills presents a formidable barrier to success -- for an individual, a community, a state or a nation.
What does this have to do with early childhood? I mentioned that acquiring skills improves one's ability to acquire further skills. Could this logic extend back to the earliest investments in human capital -- those that occur between birth and age 5? I believe the
evidence indicates that the answer is yes.Economists like to think about investment in terms of rate of return, and there is reason to think that the rate of return on early childhood investment could be particularly high. Like any investment in human capital, some of the return accrues directly to the individual in increased lifetime earning ability. But a substantial share of the return -- perhaps as much as three-quarters of the total -- is a broader, social benefit coming from such sources as reduced costs of remediation and other special services in primary and secondary school, as well as from the reduced incidence of the array of social problems often associated with low educational achievement.
There are many explanations for the apparent high economic returns to early childhood education, but a key difference between early childhood investments and investments at primary and secondary education levels is the potential for compounding. That is, enhancing early childhood development appears to improve a child's ability to learn at later stages. This means the return on early education comes not just from the direct effects, say on the development of cognitive ability, but also from the fact that these early investments increase the productivity of later educational investments.
Read the entire article...
Mr. Lacker is not the first economist to propose this return for early education. Minnesota's very own Art Rolnick was one of the earliest voices raised about the economic value of early childhood spending.
