What Is the Payoff of Economic Research for Early Childhood Policy?

Over the past two decades, scientific discoveries in neuroscience, developmental psychology, and program evaluation have transformed the way researchers, policymakers, and the public think about early childhood. These discoveries have been interpreted to suggest that early childhood furnishes a window of opportunity for enriching the inputs in children's lives and a window of vulnerability to poverty and dysfunctional home environments.

Yet another field—economics—has also played an increasingly prominent role in discussions about early childhood policy. Over the past decade or so, RAND Corporation researchers have been instrumental in translating some of the insights from economics into practical guidance that policymakers can use when it comes to crafting early childhood policy.

In a new synthesis document, RAND researchers step back and discuss some key insights that the field of economics can bring to early childhood policy.

Understanding the Importance of Human Capital Theory

Current thinking about early childhood policy combines many disparate threads: that later skills build on earlier skills; development occurs over multiple stages; human development involves the interaction of nature and nurture; and human capital, skills, or capabilities involve multiple dimensions. In this regard, an overarching economic model known as human capital theory provides a simple framework that is consistent with observations about skill formation and helps predict how various policies would be likely to affect the skills that children and youth acquire as they move toward adulthood.

Assessing Costs and Benefits

When policymakers invest in early childhood programs, they want to know what the monetary “payoffs” of such interventions are—their costs and their benefits. A fundamental insight of economics is that a growing body of program evaluations shows that early childhood programs can generate government savings that more than repay their costs and produce returns to society that outpace most public and private investments.

The research identifies a number of benefits and shows that these benefits accrue to different stakeholders. For example, early childhood programs can increase labor-force participation and earnings in adulthood, which benefits the participants but also benefits the government by generating increased tax revenues.

As for the costs and benefits of specific programs, a summary based on earlier research shows that early childhood programs can produce benefits that offset their costs, but that not every early childhood program does so; that a spectrum of program types generates payoffs (e.g., both small- and large-scale programs); and that returns from early childhood programs may decline under certain conditions (e.g., for universal programs versus targeted ones).

Deciding How to Allocate Resources

Another insight from economics is that there is generally a quality-quantity trade-off in early childhood services unless budget outlays grow. To reap the benefits of programs, those programs must be of high quality. But high-quality services cost more. Thus, given a fixed budget, policymakers must trade off the amount of services that can be provided against the quality of the services provided.

Given the need to allocate resources, how can policymakers decide, for example, who should benefit from their policies? Economics contributes here as well by providing different decision rules. A key insight is that early childhood policy that provides a spectrum of services rather than being “one size fits all” provides the greatest total benefits; moreover, economic theory also provides some guidance about how to choose an optimal level of each type of service or program.

The Bottom Line

Taken together, the insights from economic research argue for reorienting child and human services toward investment and prevention and away from attempting to “treat” poor outcomes that manifest later in the life cycle. Implementing such an approach would require fundamentally rethinking how nearly every human service is delivered. But shifting toward a paradigm in which resources are invested in early human capital might produce better outcomes, save taxpayers money, and improve the quality of life for the people in whom we invest.

INTERVIEW

Moving Ahead: The Next Generation of Child Policy Research Rebecca Kilburn is a Senior Economist and the Director of RAND Child Policy whose research has included the influential report Investing in Our Children, which pioneered the application of cost and outcome analysis to early childhood interventions. She directs the Promising Practices Network, a Web site that screens and synthesizes evidence-based information on child and family policy. She has a Ph.D. in economics from the University of Chicago. Taking stock of where the early childhood research field is, what do we know now? As with interventions in any field, such as teen drug-prevention programs, it helps to think about such fields as going through “generations.” At the moment, we are through the “first generation” in the childhood policy field. And what have we found? Studies on various early childhood interventions have found that intensive, high-quality services for disadvantaged youngsters can improve a range of outcomes and that these improvements may persist well into early adulthood. Also, further research has shown that these programs can generate savings to government that more than pay for themselves. So what is the challenge for policymakers going forward? Most policymakers and the public at large seem to have gotten the message that investing in early childhood intervention could not only improve outcomes for participating children and families but also represents good public “investment.” Based on the first-generation research, many policymakers have the will and the justification to take action and support early childhood interventions. The challenge now is that beyond this, we don't know a lot about the specific forms that this intervention should take. Can you give us some examples? While we know that many of the early childhood interventions work, we don't know what characteristics make for better programs. For example, one question is how intensive such services should be—Full-day? Half-day? Full-year? And who should these programs be for—Only for four-year-olds? For three- and four-year-olds? We also don't know what training the providers should have; for example, do home visitors have to be nurses and do child care teachers have to have bachelor degrees? We also want to know how to set standards for programs and how to measure quality. How do we get the answers to such questions? That's the job of “second-generation” studies that bore down more deeply. Such studies are seeking to “unpack” the services that those programs provide to identify what practices are required to improve outcomes. Such research is currently under way, but definitive answers will not be available for about a decade. So what should policymakers do in the meantime? While policymakers await the findings from the second generation of research, they can take a couple of steps to increase the value of early childhood programs. They can implement “model” programs, for which rigorous evaluations have demonstrated their effectiveness, and they can monitor their own outcomes and engage in continuous quality-improvement systems.

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