Hey Congress: Pre-K is a better investment than the stock market

February 13, 2013

Students at preschool in Arlington, Va. Little do they know the amazing things happening to their tiny little brains. (Jahi Chikwendiu-The Washington Post)

Perhaps the biggest proposal in the State of the Union was President Obama's plan to make preschool for all 4-year-olds a basic service in every state of the union. That policy, which effectively adds a full year to the nation's public education mandate, has significant upfront costs. Obama argued that the benefits would, however more than make up for it. What was he talking about — and is he right?

We touched on this in our footnoting last night, but Obama is riffing off considerable literature suggesting that early childhood education is a tremendously effective investment. Unlike many areas of policy, a number of randomized controlled trials (RCTs) have been conducted to measure the effects of high-quality early childhood education.

The most influential are the Perry Preschool Project and the Carolina Abecedarian Project. Those are two randomized trials, conducted in 1960s Michigan and 1970s North Carolina, respectively. Participants have been followed ever since so as to ascertain long-term outcomes in terms of things like incarceration rates, teen pregnancy, average education level, average income, and more. Because the studies were randomized, we can know beyond a reasonable doubt that any significant differences are due to the influence of the preschool programs.

Both found huge economic and social gains to high-quality preschool. The upfront costs of each were relatively high, with Perry costing about $18,000 a year initially, but the return on investment was, as Obama said, enormous. The best work on Perry, in particular, has been done by James Heckman, an economist at the University of Chicago who won the 2002 Nobel prize for his work on improving econometric methods. He put those skills to use evaluating the benefits of preschool programs.

Heckman and his coauthors started from the observation that those who received preschool in the Perry experiment ended up earning more money — and thus paying more taxes — as well as using fewer criminal justice system resources (because they committed fewer crimes) and receiving less in the way of welfare, food stamps and other transfer payments. He tried to determine the annual return on investment, using those cost reductions to society, and to the government in particular, as benefits and comparing them to the upfront $18,000 a year cost.

Nobel laureate James Heckman, a champion of early childhood education. (University of Chicago)
Nobel laureate James Heckman, a champion of early childhood education. (University of Chicago)

He found that the annualized rate of return was somewhere between 7 percent and 10 percent. For comparison, historically the stock market has grown an average of 5.8 percent each year. Bonds have grown less. By this calculus, early childhood education is a better investment than either. And those benefits compound over time. If you assume the conservative estimate of 7 percent annual returns, that's a sixty-fold increase over 60 years. Abecedarian was similarly successful. Thirty-six percent of recipients of early childhood ed going to college, compared to 14 percent of non-participants.

What's going on here? Heckman's theory, which he explained both in an essay in "Boston Review" and an episode of "This American Life," is that preschool programs help kids develop "non-cognitive skills." Traditionally, we think of school as imparting book smarts: adding and multiplying, reading and writing, foreign languages, etc. But especially for young students, they also teach skills like patience, cooperation, planning and delaying gratification. Over time, those basic self-discipline skills become immensely valuable, enabling other learning and making students better participants in institutions like schools and workplaces.

That's not to say these conclusions aren't subject to criticism. Perry and Abecedarian both used small samples. The latter used 57 students in the treatment group and 54 in the control, while Perry had 58 and 65, respectively. The initial study for each was pretty costly, so it's easy to see why bigger studies haven't been conducted, and the fact that even with such small samples results were found is striking. But it's not an insignificant concern. Also potentially distorting outcomes is the fact that Perry only served African-American children with IQs one to two standard deviations below the mean — this is, students were were seriously mentally handicapped, and, especially given that this was the 1960s, socially persecuted.

Oklahoma Gov. Frank Keating, a Republican who oversaw the implementation of the state's pre-kindergarten program in 1998 despite initially opposing it. (The Energy Advocates)

The validity of the findings to students of average intelligence, and in more privileged social classes, is thus disputable. Abecedarian's similar findings in a population not screened for IQ put some of those worries to rest, but that program also targeted an overwhelmingly poor, black population. The fact that we have proven programs that work in socially disadvantaged communities is tremendous, but does limit one's ability to impute outcomes outside those contexts, and the political will to pursue programs that work best at helping the worst-off in society may not be forthcoming.

So "high-quality" preschool works, at least for poor communities. But what do we mean by "high-quality"? When talking to experts like Heckman, one gets the sense that it's a euphemism for "not Head Start." One would expect the 40-year-old pre-K program to do worse than Perry, considering as its $7,000-$9,000 average cost per student, per year is about half that of Perry's. And sure enough, many evaluations of Head Start are hardly promising.

A randomized trial run by the Administration for Children and Families (ACF), which runs Head Start, found some effects in the first few years for program participants, but those benefits faded away by grade school. Some Head Start supporters, like Danielle Ewen, formerly of the Center for Law and Social Policy (CLASP), argue that this says more about K-12, and that what's likely happening is that poor quality public schools are actually reversing Head Start's gains.

And more recent research may yet salvage it. David Deming at the Harvard Graduate School of Education has found that Head Start provides 80 percent of the gains of Perry or Abecedarian. That study, unlike ACF's, isn't randomized and thus less valuable, but it's still worth noting. In any case, the program doesn't have nearly the empirical backing that more comprehensive — and expensive in upfront terms — programs like Perry or Abecedarian do.

What about state programs? William Gormley, a professor at Georgetown, has extensively evaluated Oklahoma's pre-K program and found that participants are much better off than Head Start participants in terms of cognitive development. He also has found that the programs makes students more prepared for school, with participants doing 52 percent better on tests of their ability to recognize words.  New Jersey has a court-ordered preschool program for poor districts whose participants, one evaluation found, do better on reading, writing, math and oral skills, and are half as likely to be kept back a grade. A 2004 evaluation of Georgia's program found gains for four-year-olds on cognitive skills and math. Those studies rely on controlling for factors like race and income, and thus are less reliable than randomized studies, but worth noting all the same.

There's some dispute as to whether Head Start does any good, and it's fair to question the benefit of high-quality preschool for privileged students who'll do fine anyway. But the overwhelming bulk of the evidence suggests that there are few better investments for poor children. The costs more than pay for themselves over time.

The first version of this article claimed Danielle Ewen still worked at CLASP. She has since moved to become director of early childhood education programs for the District of Columbia. We regret the error.

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