Determining Early Childhood Program Costs and Benefits

A new review from Rand providing research on the costs and benefits of programs to support early childhood development indicates there is vast room for improvement—not just in programs, but in the application of economic analysis to these programs. Too often, BCA becomes a tool for advocacy for existing programs rather than for understanding and developing better programs and policy.

Our recently published chapter in Future Directions for Early Childhood Policy finds that advocates often portray ECEC as a means to “decrease inequality and improve the life course for young children from disadvantaged backgrounds, mitigate the negative effects of early childhood adversities, meet obligations to address children’s rights, support women’s labor force participation and success, raise fertility rates, and generate high rates of economic return and development—an amazing array of benefits to expect from a single public investment.” All of these are laudable goals, but for these benefits to be realized even partially, ECEC policies must be designed and implemented specifically to attain each of these goals and this must be done in the context of a broader set of policies that also support these goals.

Now I don’t mean to downplay the importance of early childhood programs as such. Studies launched half a century ago—the Perry Preschool, Abecedarian, and Chicago Child-Parent Centers—remain influential because they provide comprehensive assessments of many of the hoped-for benefits. They demonstrate that even modest benefits across multiple domains and many years can yield large economic returns. Many other benefit-cost analyses have looked at much too narrow a slice of the potential outcomes, for example, just focusing on increased earnings for either parents or the children when they reach adulthood.

The lack of comparable recent studies leaves us relying on older studies, though to be fair long-term benefit estimates can only come with time. Still, it should be recognized that benefit-cost ratios and rates of return for Perry, Abecedarian and CCPC are best regarded as general indicators of the potential magnitude of benefits of early childhood programs, as programs and conditions today are much different form those in the studies.

Large-scale programs now, by and large, are not designed to be as intensive and deliver the same quality. And, when attention is given to intensity today, all too often policies or programs are narrowly focused in order to maximize one specific benefit with no thought for the consequences on other specific benefits. The details of policies matter a great deal for the benefits to both children and parents and the economic return.

In general, state and school district pre-K programs serving primarily four-year-olds are estimated to have benefits that exceed their costs. In any specific analysis, differences in interpretation of results and assumptions can lead to very different conclusions regarding a program’s benefit-cost ratio. There are very large confidence intervals around these estimates. In other words, we can’t have much confidence that differences in these estimated economic returns reflect real differences.

Moreover, my best guess is that differences in implementation are as important as differences in design. All of this underscores the importance of guiding policy and practice not by economic analyses of programs operated in the distant past but with data-driven continuous improvement systems.

Nevertheless, I do believe benefit-cost analysis can be truly useful to policymakers. This will require economists to focus more on today’s programs and policies and expand the range of benefits typically included in such studies. Our chapter states “In addition to the other outcomes measured and valued in previous studies—educational cost savings, child maltreatment, delinquency and crime, welfare dependency—additional outcomes that have been observed but not assigned an economic value in ECEC studies include effects on child mortality and morbidity including obesity, quality of life, mental health, parental stress and life satisfaction, educational and social inequality and social cohesion.”

Research measuring such a wide range of benefits will require more patience—and more resources—than is typical for education research today. As one of my wise colleagues once remarked, “Even economists need straw to spin gold.”

W. Steven Barnett is a Board of Governors Professor and Director of the National Institute for Early Education Research (NIEER) at Rutgers University. His research includes studies of the economics of early care and education including costs and benefits, the long-term effects of preschool programs on children’s learning and development, and the distribution of educational opportunities. Dr. Barnett earned his Ph.D. in economics at the University of Michigan.