Early Eductation and the Private Sector

Courtesy of BusinessWeek.Blog

Early Childhood Investment and the Private Sector

Posted by: Michael Mandel on September 23

When I was out in Telluride this week at the Economic Summit on Early Childhood Investment(no, please don’t show me any sympathy), I heard a very interesting talk from Congressman Jared Polis. Polis, with a long history as an entrepreneur and an education supporter, was discussing ways to get the private sector to invest in desirable social goods, such as early childhood education. His point (broadly interpreted by me) was that there is a systematic market failure: Even if the social return on investment in early childhood education is high, as the data seems to show, there’s no way for private investors to take advantage of these opportunities.

In particular, the data seems to show that improving early childhood education seems to reduce a wide variety of government expenses, including crime and prisons. Polis suggested creating securities where private investors could put money into early childhood education, and at some point in the future get a share of the cost savings. In the language of economics, he’d create private property rights in future tangible fiscal benefits from social investment (my words, not his).

This is an idea which I don’t remember having seen before. It would have two advantages. First, it would provide more money. Second, it provides a market assessment of the return on early education spending, which could guide the public sector.

I thought this was a really interesting proposal which would have broader applications than early childhood education. I’m not sure I quite get the mechanics, but we need more innovative ways of getting the private sector aligned with public issues.

and and excellent point in the comments section:

The problem is the benefits of early childhood education seem to be more than income, they also include not-spending on things like prison or law enforcement. It's much harder for a government to budget money that it would have not spent compared to an alternate reality. Also this method would exaggerate the amount spent on the children of the wealthy as they are more likely to become wealthy.