University of Minnesota economist has seen that investment in kids yields real economic returns

At least once a week the economist Art Rolnick gives a talk on the big economic returns from publicly funding early childhood education, or he helps an elected official get up to speed on the phone. He's been doing that for going on 15 years now, he said. "There's always someone calling me."

One of those opportunities to share some insight just came in a little feature called "3 Questions," an online series published by a group affiliated with the University of Chicago.

"Inequality begins at birth," Rolnick said in response to the question about what he's working on now. "Indeed, it begins prenatal. And there is no market for purchasing parents. That is, there is a market failure."

Admittedly this seems like an odd way to frame any problem. Who talks about things like the nonexistent market for parents? Well, economists might. And when you hear them talk about market failures, that means they have concluded, maybe reluctantly, that government might have to jump in.

Mainstream economists like Rolnick love markets, the way they move around money, people and other resources in ways that put them to the best use, making the people better off. Mostly governments should butt out.

But they also love calling attention to market failures.

Markets that don't really work like they are supposed to are a big deal in economics. It's what the Swedes found so interesting in the work of the two American economists who shared the Nobel Prize this year.

One of the just-named Nobel winners, William Nordhaus of Yale University, received his award for groundbreaking work that tried to figure out the real cost of burning fossil fuels.

It's not the price at the pump. One reason it makes sense to burn coal or gasoline is that the people who buy and burn that stuff can get away with dumping their carbon pollution for free. If they had to pay for it, and contributing to a carbon buildup actually costs a lot, fossil fuels might be so expensive that buyers would look for something else.

"Climate change is a result of the greatest market failure the world has seen," is how the Royal Swedish Academy of Sciences put it in its backgrounder on the economics award, quoting a well-known 2007 report.

In at least a decade of following Rolnick and the debate over whether to invest more in early childhood education for some of the most vulnerable kids in our state, this is the first time I remember seeing him talk market failure.

Newborns obviously can't pick their own parents, the market failure Rolnick cited, but Rolnick is not trying to say that there is a parent failure problem. These kids born into poverty need the same kind of support middle- and upper-class families give their kids, and it's a struggle for poor families to provide it.

Rolnick, now a senior fellow at the Humphrey School of Public Affairs at the University of Minnesota, got started on this topic more than 15 years ago as research director for the Federal Reserve Bank of Minneapolis. He had chided an advocate of early childhood education for trying to make a case for taxpayer support with a fairness argument, when it's costs and benefits the policymakers really needed.

Before long, Rolnick had been talked into putting together the numbers, asking Fed economist Rob Grunewald for help. They calculated an inflation-adjusted rate of return in the high teens on dollars spent on 3- and 4-year-olds.

This financial home run resulted from the good things that happened in these kids' lives into adulthood, compared with kids who hadn't gotten into a comparable preschool program. Much of the benefit went to the public, as the kids who got into school grew up to use a lot less taxpayer money, including by staying out of jail.

Grunewald remains at the Fed, working on the economics of early childhood development, but Rolnick retired in 2010 after 40 years. Yet he did not abandon his work in support of more funding for the youngest kids.

He favors giving money to families to find the right programs, whether it be Montessori schools, church-based child care programs or for-profit child care centers.

Rolnick plans to make his case again as a panelist at the Global Business Summit on Early Childhood conference in New York next week, a more or less typical speaking engagement for him now. Doug Baker, chairman and CEO of St. Paul-based Ecolab, will be speaking there, too, as one of the Minnesota business executives who have climbed aboard as a supporter.

Minnesota has a success story to talk about, although Rolnick said we have not yet done nearly enough. By far most of the more than 43,000 young kids in the state who could really benefit from this kind of investment still aren't being helped, he said.