DOCSLIB.ORG

Why Were the Nineties So Good? Could It Happen Again?

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Why Were the Nineties So Good? Could It Happen Again? University of Wisconsin–Madison Institute for Research on Poverty Volume 22 Number 2 Focus Summer 2002 Why were the nineties so good? Income Volatility and the Implications for Food Could it happen again? 1 Assistance Programs: A Conference of IRP and the Economic Research Service of the U.S. Department of The right (soft) stuff: Qualitative methods Agriculture, May 2002 and the study of welfare reform 8 Income volatility and the implications for Marriage and fatherhood food assistance programs 56 Expectations about marriage among unmarried parents: The role of food stamps in stabilizing income New evidence from the Fragile Families Study 13 and consumption 62 The economic circumstances of fathers Income volatility and household consumption: with children on W-2 19 The impact of food assistance programs 63 The life circumstances of African American fathers with Short recertification periods in the U.S. Food Stamp children on W-2: An ethnographic inquiry 25 Program: Causes and consequences 64 Children’s living arrangements after divorce: Food Stamps and the elderly: Why is participation How stable is joint physical custody? 31 so low? 66 IRP Visiting Scholars, 2002 32 Gateways into the Food Stamp Program 67 Including the poor in the political community 34 WIC eligibility and participation 68 Evaluation of State TANF Programs: An IRP Confer- The correlates and consequences of welfare exit and entry: ence, April 2002 Evidence from the Three-City Study 70 TANF programs in nine states: Incentives, assistance, Measuring the well-being of the poor using income and and obligation 36 consumption 72 TANF impact evaluation strategies in nine states 41 Perspectives of researchers and federal officials: A panel session 48 ISSN: 0195–5705 Why were the nineties so good? Could it happen again? Robert M. Solow the five years 1995–2000, the U.S. economy grew faster, Robert M. Solow is Institute Professor of Economics maintained a lower unemployment rate, and experienced Emeritus at Massachusetts Institute of Technology. This less inflation than in the quarter-century from 1970 to article is adapted from the Robert J. Lampman Memorial 1995 (Table 1). No serious macroeconomist that I know Lecture that he delivered in Madison in June 2001. would have thought in 1990 that the U.S. economy could go through a five-year period of rapid growth, drive the unemployment rate steadily down to 4 percent in the fifth year, and still find the inflation rate steady or falling. This The research project I sketch here had its origin in some would have been regarded as an impossibly optimistic facts about the performance of the U.S. economy. During scenario; and I would have agreed. Yet the years 1995–2000 were not quite an economic miracle, as Table 1 also shows. The decade of the 1960s Table 1 exhibited equally good performance. By the end of the Economic Performance, by Decade, 1960–2000 1960s, however, the Vietnam War was driving the U.S. 1990s economy. We now think of that period as the prelude to (second half) 1980s 1970s 1960s the inflation of the 1970s. So far, the prosperity of the 1990s does not seem to have that consequence. So we are Real GDP growth (%) 3.2 (4.0) 3.0 3.3 4.4 talking about a remarkable five years. Unemployment rate (%) 5.8 (5.0) 7.3 6.2 4.8 Inflation rate (%) 2.9 (2.4) 5.1 7.4 2.5 Two lively and interesting New York foundations—the Russell Sage Foundation and the Century Foundation— ployment.” They wondered what factors had permitted were provoked to try to understand this surprising epi- this to happen, and whether such conditions could be sode. Their interest was not purely scientific. They re- sustained as a normal outcome. Nothing could be more membered that “full employment” had once been a important for the well-being of the least advantaged part primary goal of national economic policy. In those days, of the population. Even those who are necessarily out of that meant a state of affairs in which inflation did not the labor force profit from full employment, if only be- threaten, and the measured unemployment rate was very cause governments find themselves flush with revenue close to the inevitable amount of frictional unemploy- and better able to support transfer payments relatively ment.1 painlessly. Full employment, in that sense, was expected to bring The two foundations asked Professor Alan Krueger of with it many social benefits: lower crime, better health, Princeton University and me to design and organize a improved family structure, wider access to education. research project that explored the causes and likely per- The foundations were aware that over the years, the goals manence of these changed economic relationships. The of macroeconomic policy had receded to the acceptance findings from this research have been published as a of unemployment rates much higher than the frictional volume, The Roaring Nineties: Can Full Employment Be level; the avoidance not merely of inflation but of accel- Sustained? by the Russell Sage Foundation (see box, erating inflation had become the overriding objective of p. 4). It did not occur to me until this project was well macro-policy. Now suddenly the United States had under way that it had an unusual aspect. We were trying achieved something very like the old ideal of “full em- to understand a single episode in one country. One might think that there is nothing special about that: we just have to see how it fits into some more general “covering” The Robert J. Lampman Memorial theory. But that is much too simple. Any event that is Lecture Series singled out as an “episode” is almost by definition atypi- cal or peculiar. Otherwise it would not be dignified with Established to honor Robert Lampman, professor that label. There are always exogenous events occurring, of economics and founding director and guiding and it is rarely clear how they are to be integrated into a spirit of IRP until his death in 1997, the lecture coherent story about the episode. Except very rarely, one series is organized by IRP in conjunction with the cannot intelligently compare one episode with another, University of Wisconsin–Madison’s Department because the other will have been influenced by a different of Economics. A fund has been established to collection of exogenous events and different historical support an annual lecture by a distinguished antecedents. After all, it is over two hundred years since scholar on the topics to which Lampman devoted 1789, and right now someone, somewhere, is writing his intellectual career: poverty and the distribu- another book about the causes of the French Revolution. tion of income and wealth. This memorial has been established by the Lampman family, with It was not our goal to reform macroeconomic theory, so the help of the University of Wisconsin Founda- we approached our question in the vocabulary of the tion. The series offers a special opportunity to theoretical consensus of the time: roughly speaking, the maintain and nurture interest in poverty research expectations-augmented, accelerationist Phillips curve among the academic community and members (although I, personally, have always had my doubts about of the public. The Institute extends its deep ap- that theory). This consensus view presumed the effective- preciation to the Lampman family and other do- ness of two constraints on macroeconomic performance. nors for making this opportunity possible. (For an explanation of the Phillips curve, see box, p. 3.) The 2002 Lampman Lecturer is Eugene Smolensky, Professor of Public Policy at the Uni- First, the trend growth rate of potential GDP in the United versity of California, Berkeley. Other Lampman States was widely believed to be somewhere near 2.0–2.5 Lecturers have included Sheldon Danziger, Ed- percent a year, and to be limited mainly by the slow ward M. Gramlich, and Angus Deaton. growth of productivity, at a rate of 1.0–1.5 percent a year. Of course, the economy could grow faster than that after a 2 The Phillips curve and inflation The Phillips curve is named for its originator, New Zealand economist A. W. Phillips, whose studies of unemployment and the rate of inflation in Britain between 1861 and 1957 led him to conclude that there was a predictable inverse relationship between the two. The “Phillips curve” graphically describes this observation: Whenever unemployment is low, inflation tends to be high. Whenever unemployment is high, inflation tends to be low. In the 1970s, however, higher inflation in the United States was associated with higher—not lower—unemploy- ment. The average inflation rate rose from about 2.5 percent in the 1960s to about 7 percent in the 1970s, and average unemployment from about 4.75 percent to about 6 percent, calling into question the validity of the relationship posited in the Phillips curve and raising serious issues for policymakers. If the relationship between unemployment and inflation was not predictable in the way the Phillips curve assumed, then the inflation cost of targeting a particular unemployment rate was not clearly identifiable. As Robert Solow discusses in the accompanying article, the years 1995–2000 also challenge the conventional understanding of the inflation- unemployment relationship. Inflation is considered low or high relative to the expected rate of inflation. Unemployment is considered low or high relative to the so-called “natural rate” of unemployment, a concept first presented in 1968 by Milton Friedman in his Presidential Address to the American Economic Association. In Friedman’s view, which is accepted by many macroeconomists, the “natural rate” is determined by the microeconomic structure of labor markets and household and firm decisions affecting labor supply and demand.
Load more

Recommended publications
  • The Political History of the Earned Income Tax Credit, 1969Ð99
    The Collision of Tax and Welfare Politics The Collision of Tax and Welfare Politics: The Political History of the Earned Income Tax Credit, 1969–99 Abstract - This paper uses the political history and pre–history of the EITC to describe how the politics of welfare reform influence tax policies that function as social policy. It suggests that the eco- nomic tradeoffs inherent in the formulation of tax–transfer pro- grams are also political tradeoffs. It examines policy choices be- tween costs and labor supply incentives, as well as those between ease of participation and compliance rates. This paper concludes that although economic analysis influenced the creation and devel- opment of the EITC, political factors, not economics, animated the history of the program. INTRODUCTION ver the course of the last 30 years, tax expenditures Ohave become increasingly visible components of the U.S. tax–transfer system. Although they do not require annual review by the appropriations process, they are subject never- theless to the whims of politics and national mood.1 The Earned Income Tax Credit (EITC) is a case in point. Enacted in 1975 as a refundable tax offset for low–income workers, the EITC appeared to politicians an attractive, work–oriented alternative to existing welfare programs. It was both an anti– poverty and anti–welfare instrument. It complemented na- Dennis J. Ventry, Jr. tional concerns over welfare caseloads, unemployment rates, Department of History, and the working poor. By the 1990s, the same political forces University of California, 1 Political scientist Christopher Howard (1997) has argued that tax expendi- Santa Barbara, tures slip through the policymaking process; they are, he concludes, the Santa Barbara, CA result of surreptitious and undemocratic policymaking.
    [Show full text]
  • Making the Politics of Poverty and Equality
    2015 Lampman Memorial Lecture Transcript of Lecture Transcript: Improving Equality of Opportunity in America: New Evidence and Policy Lessons Professor Raj Chetty March 4, 2015 [Lonnie:] Welcome. I’m Lonnie Berger, the Director of the Institute on Poverty, and on behalf of IRP, the Department of Economics, and the Lampman Family, I want to thank you for joining us for the 16th Robert. J. Lampman Memorial Lecture. Unfortunately, the Lampman family is not able to be with us today, but they have assured me that they are very much looking forward to watching the lecture online as soon as we can get it posted, and they are clearly here with us in spirit. We are grateful to the family for their ongoing support of the University and of this lecture series, and of IRP. In just a minute I will introduce today’s speaker Raj Chetty, but first I want to say a few words about Robert Lampman, who the lecture is named for. Bob was a professor of Economics at UW-Madison for over 30 years, and he was the founder and the guiding spirit of the Institute for Research on Poverty. By all accounts, he was an exceptional and unique scholar, teacher, mentor, and individual. His legacy looms large throughout the halls of the Social Science building on campus, and indeed in poverty research throughout the nation and throughout the world. Bob was well-known as the intellectual architect of the U.S. war on poverty. He served on the Council of Economic Advisers from 1961 to 1963, and he is credited in 1963 for writing a memo on poverty, the income distribution, and the implications of economic expansion in the U.S.
    [Show full text]
  • Incentive and Disincentive Experimentation for Income
    INCENTIVE AND DISINCENTIVE EXPERIMENTIATION FOR INCOME MAINTENANCE POLICY PURPOSES By Guy H. ORCUTT AND ALICE G. ORCUTT* Man's progress on the technological front has been enormous, but in spite of this-- or in part even because of this--his progress on the social front seems dangerously inadequate. Nor does it appear that present research in the physical and biological sciences, valuable as it is, is likely to contribute more than marginally to the solution of those social problems which man must solve if he is to have a continued and attrac- tive footing on this planet. To create the world of his dreams man must learn to control himself, and he must learn to do so in a way which is compatible with his values. A deeper knowledge of individual and social behavior seems essential, for this. We need a development of the social sciences directed towards finding how to utilize and control the forces put into our hands by the physical and biological sciences. We need to know how incentives and disincentives, for instance, can be used to keep our social behavior under reasonable control without the sacrifice of values which are central to our well-being. Policy makers in our social institutions are able to exert control over certain variables; they are expected to achieve some control over still other variables. It follows that policy makers need to know how these other variables are related to the variables which they do know how to regulate. For instance policy makers know how to set minimum wage rates, and they need to know how the employability and earned income of individuals are affected by changes in these rates.
    [Show full text]
  • What Does It Mean to Be Poor in a Rich Society?
    What Does it Mean to be Poor in a Rich Society? Robert Haveman University of Wisconsin–Madison Robert J. Lampman Lecture 2008 Presented at 2008 IRP Low Income Workshop Madison, WI June 19,2008 Institute for Research on Poverty University of Wisconsin - Madison Robert Lampman ¾ Gentle, Incisive, Patient, Encouraging ¾ True mentor ¾ Father to an entire generation of poverty researchers ¾ Role model ¾ Friend Bob Lampman and Poverty Policy ¾ An Economist with a Policy-driven Research Agenda ¾ Two Central Questions Target Efficiency of Public Transfers Measurement of Poverty Bob Lampman on Poverty Measurement Being poor means being short of money. Annual income should be the indicator of a family’s access to resources. Income should be compared to an absolute poverty line (adjusted for family size). Income below the line indicates being in poverty. These same principles underlie the nation’s official measure of poverty. The Original Poverty Measure—A Little History ¾1965, the War on Poverty, and Mollie Orshansky ¾In1963 Social Security Bulletin, she first described her income poverty concept and applied it to families with children. ¾In1965, also in the Bulletin, she presented a refined version of her measure and described the poverty thresholds. ¾Four months later, the Office of Economic Opportunity adopted her measure as a quasi-official national definition of poverty. In Defense of an Absolute Income Poverty Measure “While income poverty is a relative matter, I do not think we should engage in frequent changes of the poverty lines, other than to adjust for price change. As I see it, the elimination of income poverty is usefully thought of as a one-time operation in pursuit of a goal unique to this generation.” Robert Lampman (1971) The U.
    [Show full text]
  • The Legacy of James Tobin
    ON LIMITING THE DOMAIN OF INEQUALITY: THE LEGACY OF JAMES TOBIN Robert W. Dimand Brock University James Tobin (1918-2002) is best known as an outstanding “Old Keynesian” econo- mist whose contributions were recognized by the 1981 Bank of Sweden Prize in Memory of Alfred Nobel. His keen devotion to the reduction of poverty, inequality, and discrimination is less well known. This commitment extended beyond academic research: at the Tobin memorial at Yale in April 2002, the political scientist Robert Dahl recalled how he and Tobin had spent the “Freedom Summer” of 1964 in Missis- sippi in the hope that the presence of the two Yale professors would afford some protection to the student volunteers in the civil rights movement, after three volun- teers had been murdered by segregationist extremists. Tobin was acutely aware of living in the country’s richest state and in one of its ten poorest cities.1 Tobin recalled that “When a distinguished colleague in political science asked me about ten years ago why economists did not talk about the distribution of income any more, I followed my pro forma denial of his factual premise by replying that the potential gains to the poor from full employment and growth were much larger, and much less socially and politically divisive, than those from redistribution. One rea- son that distribution has returned to the forefront of professional and public atten- tion is that great progress was made in the postwar period, and especially in the 1960’s, toward solving the problems of full employment and growth” [1970, 263].
    [Show full text]
  • A Brief History of the Institute for Research on Poverty by Elizabeth Evanson
    A brief history of the Institute for Research on Poverty by Elizabeth Evanson Genesis describes the essential features that characterize the Institute today, even though the OEO has not existed for many years Certainly one of the justiJications for a large-scale grant and the optimistic belief that poverty could be eliminated to a single institution as opposed to a whole set of small within one generation has faded. project grants scattered out all over the place, is that you reach a critical mass of research interest when you get a The agreement specified that the Institute would embrace a group of people together who have similar interests, but number of the social science disciplines; that it would diferent backgrounds. encourage new as well as established scholars to inquire into the origins and remedies of poverty; that it would promote Robert Lampman, 1966' sharing of knowledge among researchers and policy analysts by means of conferences held at periodic intervals (see the The Institute was created in March 1966, when the Univer- list of conferences, page 29); and that it would communicate sity of Wisconsin-Madison reached agreement with the U.S. its findings through a publications program (the list of books Office of Economic Opportunity to establish a national ten- that the Institute has sponsored appears on page 33). ter for study of "the nature, causes, and cures of poverty." A national center, located in Madison, was a logical response Institute staff, then as now, consisted of a director, advised to the issues and the times. by an internal committee of faculty members and a national advisory committee of members outside the university (see When the federal government undertook new efforts to aid page 24 for the names of those who have served on the the poor in the 1960s, it also determined that social programs National Advisory Committee); researchers, who would would be studied and evaluated to determine their effective- hold university appointments and divide their time between ness.
    [Show full text]
  • The Idea of a Negative Income Tax: Past, Present, and Future 1 Why Is Human Services Integration So Difficult to Achieve? 35 Robert J
    University of Wisconsin–Madison Institute for Research on Poverty Volume 23 Number 2 Focus Summer 2004 The negative income tax The opportunities for service integration under current law 30 The idea of a negative income tax: Past, present, and future 1 Why is human services integration so difficult to achieve? 35 Robert J. Lampman and the Negative Income Tax Experiment (an extract from an oral history) 4 The consequences of a criminal record for employment The effects of welfare reform on participating families How willing are employers to hire ex-offenders? 40 Economic success among TANF participants: The mark of a criminal record 44 How we measure it matters 9 Visiting Scholars, Spring 2004 Has welfare reform affected children’s living The spatial distribution of neighborhood employment: arrangements? 14 San Francisco, 1940–1970 47 Measurement and management for outcomes Children’s chronic illnesses and mothers’ Performance management in federal employment health and employment 48 and training programs 20 Service and systems integration: A collaborative project 27 ISSN: 0195–5705 The idea of a negative income tax: Past, present, and future Robert A. Moffitt review how NIT proposals have fared in the evolving 1 Robert A. Moffitt is Professor of Economics at Johns U.S. welfare system. My focus will be on the design of an Hopkins University and an IRP affiliate. He delivered the optimal welfare system, one of the more important ques- 2004 Robert J. Lampman Memorial Lecture at Madison tions posed by the early NIT literature. in June. This article is adapted from his lecture. Lampman and the other early NIT advocates Robert Lampman was a seminal figure in the history of In the mid-1960s the NIT was one of the most heavily research on poverty in general and on the negative in- discussed antipoverty policies, and Lampman became come tax (NIT) (see box, p.
    [Show full text]
  • Evaluating the Success of President Johnson's War on Poverty
    Finance and Economics Discussion Series Divisions of Research & Statistics and Monetary Affairs Federal Reserve Board, Washington, D.C. Evaluating the Success of President Johnson's War on Poverty: Revisiting the Historical Record Using a Full-Income Poverty Measure Richard V. Burkhauser, Kevin Corinth, James Elwell, and Jeff Larrimore 2020-011 Please cite this paper as: Burkhauser, Richard V., Kevin Corinth, James Elwell, and Jeff Larrimore (2020). \Eval- uating the Success of President Johnson's War on Poverty: Revisiting the Histori- cal Record Using a Full-Income Poverty Measure," Finance and Economics Discussion Series 2020-011. Washington: Board of Governors of the Federal Reserve System, https://doi.org/10.17016/FEDS.2020.011. NOTE: Staff working papers in the Finance and Economics Discussion Series (FEDS) are preliminary materials circulated to stimulate discussion and critical comment. The analysis and conclusions set forth are those of the authors and do not indicate concurrence by other members of the research staff or the Board of Governors. References in publications to the Finance and Economics Discussion Series (other than acknowledgement) should be cleared with the author(s) to protect the tentative character of these papers. Evaluating the Success of President Johnson’s War on Poverty: Revisiting the Historical Record Using a Full-Income Poverty Measure Richard V. Burkhauser Cornell University Kevin Corinth Council of Economic Advisers James Elwell Joint Committee on Taxation Jeff Larrimore Federal Reserve Board November 2019 The views in this paper reflect those of the authors and should not be attributed to the Board of Governors of the Federal Reserve System, the Council of Economic Advisers, the Joint Committee on Taxation, or their staff.
    [Show full text]
  • Front Matter, Economic Transfers in the United States
    This PDF is a selection from an out-of-print volume from the National Bureau of Economic Research Volume Title: Economic Transfers in the United States Volume Author/Editor: Marilyn Moon, ed. Volume Publisher: University of Chicago Press Volume ISBN: 0-226-53505-3 Volume URL: http://www.nber.org/books/moon84-1 Publication Date: 1984 Chapter Title: Front matter, Economic Transfers in the United States Chapter Author: Marilyn Moon Chapter URL: http://www.nber.org/chapters/c8802 Chapter pages in book: (p. -12 - 0) This Page Intentionally Left Blank Economic Transfers in the United States Studies in Income and Wealth Volume 49 National Bureau of Economic Research Conference on Research in Income and Wealth lxonomc Transfers in the United States Edited by Marilyn Moon The University of Chicago Press Chicago and London Marilyn Moon is a senior research associate at the Urban Institute, Washington, D.C. The University of Chicago Press, Chicago 60637 The University of Chicago Press, Ltd., London 0 1984 by The National Bureau of Economic Research All rights reserved. Published 1984 Printed in the United States of America 93 92 91 90 89 88 87 86 85 84 5 4 3 2 1 Library of Congress Cataloging in Publication Data Main entry under title: Economic transfers in the United States (Studies in income and wealth; v. 49) Papers presented at the Conference on Social Accounting for Transfers held in Madison, Wis., on 14-15 May, 1982. Bibliography: p. Includes index. 1. Transfer payments-United States. 2. Income distribution-United States. I. Moon, Marilyn. 11. Con- ference on Social Accounting for Transfers (1982: Madison, Wis.) 111.
    [Show full text]
  • La Follette Policy Report
    La Follette Policy Report ROBERT M. LA FOLLETTE SCHOOL OF PUBLIC AFFAIRS VOLUME 12, NUMBER 2, FALL–WINTER 2001–02 DIRECTOR’S PERSPECTIVE Economic Development: The Role of The events of September 11 deeply affected all of us at State and Local Government in Wisconsin La Follette as they did every- one. Faculty, staff, and students by Stephen Malpezzi gathered quickly around televi- sions that morning, standing in Professor Malpezzi is an associate professor and Wangard Faculty Scholar in the Department stunned silence as events un- of Real Estate and Urban Land Economics of the School of Business, as well as an associate folded. Our collective grief and member of the Department of Urban and Regional Planning, of the University of Wisconsin– dismay grew throughout that Madison. The following article is based on a study the author prepared for the Governor’s day and in the ensuing weeks. Blue-Ribbon Commission on State and Local Government Partnerships, chaired by Professor A standing-room-only im- Donald Kettl (see www.lafollette.wisc.edu/reform). References, acknowledgments, and support- promptu seminar took place ing data are available from the author at [email protected]. soon after the tragedy, in which students, faculty, and staff— with a wide range of interna- he recent softening of the U.S. and fits, economic development. Economic tional expertise and experi- TWisconsin economies, preceding development, broadly and appropriately ence—shared their thoughts but exacerbated by the economic fall- construed, translates into improved and concerns, insights and un- out from September’s terrorist attacks, standards of living and well-being for derstanding.
    [Show full text]
  • Reducing Poverty and Increasing Self-Sufficiency in America
    x Chapter 9 Reducing Poverty and Increasing Self-Sufficiency in America Despite strong economic growth and a tight labor market, millions of nondis- abled, working-age Americans remain on the sidelines of the labor market, struggling to make ends meet. President Lyndon B. Johnson—facing a similar situation in the 1960s—declared a War on Poverty. In this chapter, we show that though President Johnson’s War on Poverty is largely over and has been a success based on 1963 standards of material hardship, it was not won by helping low-income Americans become self-sufficient, as President Johnson envisioned. We then describe how to wage a new war on poverty based on con- temporary standards of material hardship but with a renewed focus on work, and how the Trump Administration’s actions have already made important initial progress along these lines. Bringing workers off the sidelines in this way will not only help maintain the current pace of strong economic growth, but just as important, will also ensure that all nondisabled, working-age Americans can share in the dignity of work. In the chapter’s first section, we show that President Johnson’s War on Poverty, based on 1963 standards of material hardship, is largely over and has been a success. Limitations in both the Official Poverty Measure (OPM) and the Supplemental Poverty Measure (SPM) that the Census Bureau produces each year make them incapable of fully capturing this success. When we use a new, Full-Income Poverty Measure (FPM) that is anchored to 1963 standards—and which thus includes the full impact of government taxes and transfers (both cash and in-kind, including the market value of health insurance); which bet- ter accounts for inflation, by using the Personal Consumption Expenditures 427 Price Index; and which uses the household instead of the family as the sharing unit—we find that the poverty rate declined from 19.5 percent in 1963 to 2.3 percent in 2017.
    [Show full text]
  • Walter Heller and the Introduction of Human Capital Theory Into Education Policy Jeff Biddle Dept. of Economics Michigan State U
    Walter Heller and the Introduction of Human Capital Theory into Education Policy Jeff Biddle Dept. Of Economics Michigan State University [email protected] Laura Holden College of Education Michigan State University [email protected] November 2014 Abstract Prior to 1958, there was no such thing as “human capital theory” in economics, much less in the discussion of education policy. Within five years, there was an active theoretical and empirical human capital research program in economics. Over the same short period, the new idea of public spending on education as a form of investment with a demonstrably high rate of return and the capacity to contribute to the achievement of important national goals was enthusiastically communicated to the public by opinion leaders, policy makers, and even a President. This paper aims to shed light on why the human capital idea so rapidly came to influence education policy: the human capital idea implied policies promoting education could advance goals – first faster economic growth, then poverty reduction -- that circumstances pushed to the top of the nation’s policy agenda during the period of human capital theory’s initial development; and an advocate of the theory who could persuasively explain the logic and the emerging empirical evidence linking education to those goals moved into a position of power and influence. We also argue that this episode is that it marks the beginning of, and was a contributing factor to, a profound transformation of the public discourse surrounding education policy in the United States. 1 “I propose to treat education as an investment in man and to treat its consequences as a form of capital.
    [Show full text]