David Strand is a KARA board member, he has lived in Finland, worked on the making of public policies for children and written about how other advanced nations make public policy on children’s issues. He is a frequent contributor to KARA’s web pages. Look up his other articles under “select a category – David Strand” on the right hand side. David’s article today;
Edwin Green (recently deceased and not his real name) was an executive for 3M from the 1960’s into the 80’s. He once gave me a lecture on business philosophy, a lesson that resonates in today’s climate of political impasse. Edwin mentored me and asked why I was bothering to study for an MBA at night school. I replied my engineering education was quite narrow and studying business helped me understand working at 3M. Smiling broadly, Edwin told me he (also an engineer) hadn’t studied business but “he knew how to run a business.” Mostly, he said, all you have to know is when “to spend a nickel to make a dime”, his one-minute lecture.
After getting the MBA, Edwin asked me to join 3M’s International Division. The job involved many long airplane rides and impetuous Edwin created my first. Digging into his nickels, he sent me to Japan and Europe, a $5000 3-week around the world adventure.
Edwin’s lesson of a return on an investment is a business fundamental, arguably the foremost. The business of business is to create value. There are reasons why government is different from business, but one similarity is a return on a public or private investment. Unfortunately, many in the anti-government community choke on the idea that government can use taxpayer money to create value. To them governments only spend money. Not so for economists, however. Some even study and compare attractiveness of public investments, more on that later.
One way to find common ground at the Capitol would be for Democrats to join Republicans and agree our government is spending too much money. This wouldn’t be a big leap since it’s true. One of the rat holes of spending is the enormous cost of cleaning up society’s mess when our youth fail to become productive citizens. Research shows that a good start in life is crucial for kids. When that doesn’t happen the social costs required include all the intervention work, special education, social services, crime, courts, law enforcement and finally imprisonment. A single off-track child can easily cost taxpayers a million or more.
The notion that the expense to educate kids is different from costs of incarcerating criminals isn’t new. Keeping an inmate a year in prison (spending) is roughly equivalent to paying for a year at a fine university (investing). Appreciating the difference motivated our founders when they wisely created public education for a newly minted America.
Back to economists who study public investments, including rating which are better than others. Art Rolnick, formerly the Director of Research at the Minneapolis Federal Reserve and now on the faculty of the Humphrey Institute, joined colleague Rob Grunewald and conducted research on the rewards of early education. Anyone can check out what they discovered by seeing Art Rolnick’s 21 minute TED talk.
Here is the interesting part. Not only does early education make economic sense, they couldn’t find another public investment its equal. In the nickels and dimes of investing, they found a conservative 16% real return, a rate that doubles your money every 4 ½ years. And after the investment, the returns go on for decades.
OK, since kids can’t vote and they aren’t big money donors to campaigns, what would motivate lawmakers to help them succeed? The answer is simply because we can eliminate tons of public spending, something that both parties should support. It’s an idea that has also “turned the crank” of the public. A new NBC/Wall Street Journal poll shows a whopping 85% of respondents rank early childhood education an urgent priority.
Would Edwin Green have jumped on a 16% investment return? In a heartbeat!
David Strand is retired and lives near Aitkin
