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vol 22 | no 3 | summer 2011 the economics of inequality: the value of early childhood education the economics of inequality The Economics of Inequality : The Value of Early Childhood Education James J. Heckman James J. Heckman is the Henry by James J. Heckman Schultz Distinguished Service Professor of Economics at the University of Chicago, a Nobel * The following article has also appeared in the Spring 2011 issue of American Educator, Prize winner in economics, and an expert in the economics of hu- the quarterly journal of the American Federation of Teachers, AFL-CIO. man development. He has held a joint appointment as an American Bar Foundation Research Profes- sor since 1991. Among other ABF research projects, Heckman has ducational equity is often Conversely, what is efficient may not investigated the economics and psychology of capabilities with an discussed as a moral issue. be fair. Thus a cut in the tax rate on emphasis on self-control with a Another way to think about capital gains promotes economic ef- particular focus on the effects of Eequity is as a way to promote produc- ficiency by stimulating investment; it self-control on crime and health. He was co-organizer of the confer- tivity and economic efficiency. As an is not fair because it mainly benefits ence “Creating Capabilities: Sourc- economist, I focus on the economic the rich. es and Consequences for Law and value of equalizing educational op- What is remarkable is that there Social Policy,” which was held at the University of Chicago Law portunities and achievement in or- are some policies that both are fair— School in April 2010, and was der to identify the most effective way i.e., promote equity—and promote partially funded by the American to increase the productivity of the economic efficiency. Investing in the Bar Foundation. Heckman’s current research focuses American economy. We need a ca- early years of disadvantaged children’s on the economics of human devel- pable and productive workforce that lives is one such policy. opment and building theoretical will compete successfully in the glob- A large body of data from eco- and empirical models of human capacity formation, with an em- al economy. Underdeveloped human nomics, biology, and psychology phasis on the role of the family in potential burdens our economy and shows that educational equity is more producing capacities and the effects leaves us with a workforce that is less than a social justice imperative; it is of capacities on education, wages, health, crime, and other dimensions than it could be. an economic imperative that has far- of lifetime achievement. The article Traditionally, equity and ef- reaching implications for our nation. that follows is based on “Schools, ficiency are viewed as competing My work has focused on the economic Skills, and Synapses,” which Heck- man wrote for the July 2008 issue goals. One can be fair in devising a value of human capital development, of Economic Inquiry, available at policy, but it often happens that what specifically the value of providing http://ftp.iza.org/dp3515.pdf. is fair is not economically efficient. resources to disadvantaged children 1 researching law © 2011 James J. Heckman. All rights reserved. No part of this material may be reproduced or transmitted vol 22 | no 3 | summer 2011 in any form, by any means, in part or in whole without the prior written permission of the author. the economics of inequality and their families in an attempt to the data show a need achievement gap, reduce the equalize the children’s possibilities for for a new model of need for special education, in- social and economic success. skill formation crease the likelihood of healthier For many years, Flavio Cunha lifestyles, lower the crime rate, from the University of Pennsylvania, America is using antiquated models and reduce overall social costs. myself, and colleagues at the Univer- of human skill formation in devising In fact, every dollar invested in sity of Chicago, University College policies to educate children for suc- high-quality early childhood Dublin, and other institutions have cess in the 21st century. My colleagues education produces a 7 to 10 been synthesizing what is known and I have analyzed many long-term percent per annum return on 1 from the fields of biology, human studies of early human development investment. Policies that pro- development, education, psychology, and the impact of early investment vide early childhood educational cognitive science, and economics to on schooling and adult outcomes. We resources to the most disadvan- answer the following three questions: reached the following conclusions: taged children produce greater social and economic equity. 1. When does inequality start? 1. Inequality in early childhood ex- We can create a more level and 2. Is it worthwhile to reduce periences and learning produces productive playing field for all inequality by investing inequality in ability, achieve- by making wise and timely in- in education? ment, health, and adult success. vestments in effective education. 3. How best to invest limited 2. While important, cognitive abil- resources to create more ities alone are not as powerful as winning or losing the productive human capital? a package of cognitive skills and lottery of birth social skills—defined as atten- It is important to look at the data tiveness, perseverance, impulse Each of us is born into circumstanc- and invest wisely. This is an impera- control, and sociability. In short, es over which we have no control. tive among economists. Our society cognition and personality drive Our parents, their genes, education, has finite resources. Taxpayers can education and life success, with health status, economic resources, and should expect value for their in- character (personality) develop- and environment are passed onto us vestments in government programs ment being an important and through our families and neighbor- and in their fellow citizens. Taking a neglected factor. hoods. These endowments shape the hard look at the economic value of ef- 3. Adverse impacts of genetic, trajectories of our lives. forts to create human capital helps us parental, and environmental By nature and circumstance, en- see where best to invest our resources resources can be overturned dowments are unequal. At birth, each in education to achieve its ideal— through investments in quality child inherits different capabilities equalizing opportunity to build early childhood education that and different resources to capitalize greater and enduring value for all. provide children and their par- on them. We can’t completely change The evidence is quite clear that in- ents the resources they need to that picture. But we can change some equality in the development of human properly develop the cognitive of it. In particular, we should address capabilities produces negative social and personality skills that create the inequity in the resources families and economic outcomes that can and productivity. have to properly develop their chil- should be prevented with investments dren’s potential. 4. Investment in early education in early childhood education, partic- It comes as no surprise that there for disadvantaged children from ularly targeted toward disadvantaged are significant differences in family birth to age 5 helps reduce the children and their families. environments and the resources in- vol 22 | no 3 | summer 2011 © 2011 James J. Heckman. All rights reserved. No part of this material may be reproduced or transmitted researching law 2 in any form, by any means, in part or in whole without the prior written permission of the author. the economics of inequality vested in children across socioeco- portion of American children under married parents or that individuals nomic groups. Gaps in cognitive and the age of 18 with a never-married pass a parenting test before having emotional stimulation for children mother grew from less than 2 percent children. It is feasible to recognize from families of different socioeco- in 1968 to over 12 percent in 2006. the trends in our society and make nomic status open up early. Family The fraction of American children adjustments in social investments to status makes a substantial difference. under age 18 with only a single par- fill gaps and improve social and eco- The graphs below show the fre- ent (i.e., never married or divorced) nomic outcomes. quency of cognitive stimulation and has grown from 12 percent to over 27 The problem is not just one of emotional support against standard- percent during this period. single parenting. We currently have ized scales arrayed from the worst The problem is not just income. a society that makes high-quality on the left to the best on the right. A Even though income is the standard parenting difficult. The high cost of curve shifted rightward indicates more way to measure poverty, recent re- living often requires dual careers and beneficial stimulation or support. In- search suggests that parental income incomes. Work hours and commutes tact families invest greater amounts in is an inadequate measure of the re- are long, wages are stagnant, and rela- their children than do single-parent sources available to a child. Good par- tively few jobs offer generous paren- families, although the exact reasons enting is more important than cash. tal leave benefits. In addition, we no why are not known. These invest- High-quality parenting can be avail- longer live in intact, intergenerational ments pay off in higher achievement. able to a child even when the family families where parents are supported There are large gaps in cognitive is in adverse financial circumstances. in the daily tasks of child-rearing by stimulation and emotional support While higher income facilitates good their parents and siblings. at early ages. They persist through- parenting, it doesn’t guarantee it.

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