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Is preschool really a better investment than buying stock?
Several studies suggest that the Obama administration's proposal for universal preschool education, though costly, would pay off
 
Some studies have found that preschool can yield a rate of return between 7 and 10 percent, compared to 5.8 percent for stocks.
Some studies have found that preschool can yield a rate of return between 7 and 10 percent, compared to 5.8 percent for stocks. Thinkstock

President Obama is visiting Georgia on Thursday to promote early childhood education, one of the priorities he plugged in his State of the Union address. Obama is proposing to essentially make preschool universal, with the federal government partnering with states to pay for early education for every 4-year-old in a low- or moderate-income family. In his speech, Obama said that studies have proven that children educated early "grow up more likely to read and do math at grade level, graduate high school, hold a job, form more stable families of their own."

Obama's on pretty solid ground here, according to Dylan Matthews at The Washington Post. Several studies, including the influential Perry Preschool Project (conducted in 1960s Michigan) and Carolina Abecedarian Project (from North Carolina in the '70s), suggest that early childhood education pays off, big time. James Heckman, an economist at the University of Chicago who won the 2002 Nobel prize for his work on improving econometric methods, looked at the Perry experiment and tried to evaluate the annualized returns on the $18,000-per-child annual cost of early schooling, and what he discovered was pretty convincing.

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.

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. [Washington Post]

Not everyone is convinced, though. Laura Byrne at Red Alert Politics says that the evidence of the Perry Project's success is too flimsy to justify spending billions on Obama's preschool initiative when the country's already $16.4 trillion in debt. Just because academics found that the kids in the Perry experiment were more likely than their outside peers to graduate from high school and get a well-paying job, doesn't mean that success will be repeated everywhere.

What they don't tell you is that this study used a very small sample size and would be very hard to recreate, according to The Heritage Foundation. Not to mention, no other preschool program has been nearly as successful as the Perry Program.

In fact, studies by Stanford University and the University of California showed that attending preschool can actually cause bad behavior, not reduce it like Obama claims, possibly because students are spending less time with their parents at such a crucial age. [Red Alert Politics]

"Dozens of studies have shown Head Start graduates are more likely to complete high school than their at-risk peers who don't participate in the program," says The Associated Press. But a study last year by the Department of Health and Human Services that found big vocabulary and social development gains for at-risk youngsters faded by third grade. We can quibble over the rate of return on investment on early childhood education, but, according to Travis Waldron at Think Progress, it's clear that preschool education yields "substantial benefits for children who receive it." Chicago's program, for example, "generates '$11 of economic benefits over a child's lifetime for every dollar spent initially on the program,' according to one study, and at-risk youth who receive early childhood education are more likely to go to college and less likely to drop out of school, become teen parents, or commit violent crimes." That means society benefits, too. One 2009 study found that universal programs boost the nation's gross domestic product. Isn't it the fiscally responsible thing, then, to consider what just might prove to be a lucrative investment in American preschoolers?

 

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