April 13, 2010
You’ve done a lot of work lately around human capital policy. You’ve suggested the nature versus nurture debate is obsolete.
It’s totally obsolete. Correct.
Generally, in popular discussions, everyone who was educated in college over the last 20 or 30 years will typically say that there is this contrast between the role of nature and the role of nurture (family and social environment). What we have come to learn from modern genetics, which has huge social implications, is that it’s neither nature nor nurture. It’s both combined. The fact is that nature – genetic material and other aspects of biology – interact strongly with nurture, and interact in such a way that actually produces genetic changes.
It turns out that two identical twins can have exactly the same genetic material, but as a result of the experiences they face in their lives, the expression of that genetic material will be fundamentally different. We’ve come to understand this.
The work you have done has identified nine factors that drive success in human development. One of those is that early intervention has high payoffs.
What I have brought to this discussion is an economic analysis.
I have done cost-benefit analyses where you can identify the benefits of early intervention versus later intervention. Suppose that society takes as its point of view, as it typically does, that it doesn’t matter when we intervene, as long as we intervene. How costly is that? What I have done is quantify that cost, using some of the methods that won me the Nobel Prize, but now applying that to a much richer area of human development.
Before, I was worried about job training programs – what the Europeans called active labor market programs. These were programs for high school dropouts, criminals, and for rehabilitation for late adolescents and young adults. What I found, in a series of studies, is that those programs, as they are currently constituted, have very low economic returns and, in some cases, we found even negative returns.
But then as you go back earlier in the life cycle, where the human being is developing and creating and skills are being formed. Once we go back – early, early, early – we find extremely high rates of return.
Can you discuss your work in analyzing the Perry study?
Just recently I computed the rate-of-return to the so-called Perry preschool program in the United States. That was a program given to disadvantaged children in a suburb of Detroit some 40 years ago. Kids were randomly assigned to getting a high-quality, active learning preschool program and others who were denied that program.
The program’s participants were followed. The kids are now 50 years old.
What did we find? We found that in substantial ways – in terms of crime, education, welfare dependency, home ownership, earnings – that the Perry participants earned a lot more than those who did not participate in the program.
The economic rate of return was higher than what you get on equity. If you take the historical real return on US stocks, which has been about 5.8 or 6%, the return on Perry is somewhere over 6% and can range as high as 10%. It depends on different assumptions.
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