Looking Backward: How Childhood Experiences Impact a Nation’s Wealth Daniel Trefler Rotman School of Management

1. Looking Backward: How Childhood Experiences Impact a Nation’s Wealth Daniel Trefler Rotman School of Management Rotman Life-Long Learning Lectures 2003 June 6, 2014

2. Introductory Notes • Children’s issues play a surprising role in Canadian productivity, particularly in the set of policies we need to make Toronto the wealthiest city in North America and Canada the richest jurisdiction in the world. • Having studied the range of policies needed to meet these goals, I now understand that there is no single policy, no magic bullet that will propel us forward. Instead, there is a set of complementary policies, policies that reinforce one another, that must be put into place. Several of these policies involve investing in people and that is how I come to early childhood research.

3. Introductory Notes • By the time I have finished I hope to have persuaded you of three facts: • Our understanding of why early childhood interventions are successful is based on hard-nosed science. In the last decade, research on animal models and fundamental human biological processes have revolutionized our understanding of ourselves and placed early development issues at the forefront. • Cost effective investments in people are ones targeted early on in the life course. • Early childhood interventions are a touchstone for many important productivity-enhancing policies that this country must implement if it is to become the world’s best place to live.

4. Introductory Notes Overview of talk: • Human capital formation, especially a university education, is fundamental in the new economy. I will use this as an extended example of how early childhood experiences force us to rethink post-secondary education policy. • I will review just three hard scientific findings that shed light on the role of early childhood education. These are early brain plasticity, the stress system, and serotonin metabolism. • I will return to the broader question of how childhood interventions complement a host of productivity-enhancing policies that Canada must consider if it is to become the most desirable location in the world in which to live.

5. Part 1. Post-Secondary Education Policy Why do poor teens fail to enroll in post-secondary institutions?

6. Human Capital is strongly associated with growth Wealth Post-Secondary Education Source: Author’s calculations based on PWT and Barro-Lee

7. Canadian Post-Secondary Participation Rates by Income: Evidence of Credit Constraints or Lack of Demand? 25% Teens From Poor Families Teens From Rich Families • Why the difference: poor early childhood experiences limit demand? • Tamara Knighton and Sheba Mirza, “Postsecondary Participation: The Effects of Parent’s Education and Household Income” Education Quarterly Review, 2002, Vol. 8(3). ‘Poor’ (‘Rich’) means in the bottom (top) quartile of the after-tax household income distribution.

8. U.S. Post-Secondary Enrollment for Bright Teens:After adjusting for early experiences, income does not matter 21% 4% • Bright Teen: Top third of 12 year old students who took the High Armed Forces Qualifying Test (AFQT). • Source: Heckman and Carneiro, “Human Capital Policy” NBER working paper.

9. Additional Notes I can do a similar analysis for: • High school graduation • Grade 10 math streaming • Readiness to learn in JK • Cognitive and non-cognitive test scores at the earliest ages.

10. High/Scope Perry Preschool Project - major findings at age 27 Early Childhood Interventions: Perry Preschool Program +17% +23% -28% Sample consists of disadvantaged, low-IQ children, ages 3-4, from Ypsilanti, Michigan. Children were provided with an enriched environment during ages 3-4 and then followed, along with a control group, for 35 years. Source: Schweinhart et al. (1993)

11. “Readiness to Learn” Program in Toronto 28% 23% Cognitive Development Social Competence Source: McCain and Mustard, Three Years After

12. ROI for Human Capital Investments During the Life Course Early Childhood K-12 Post- Secondary Work- Force Rate of Return on Investment Age • Human capital accumulation is a dynamic process. The skills acquired in one stage of the life cycle affect learning at the next stage. • Remediation of early childhood opportunities is very expensive.

13. Part 2. Basic Science • What explains why • educational interventions • are more cost effective • early in the life course? • Brain ‘Plasticity’ • The ‘Stress System’ • Serotonin Metabolism

14. Brain Plasticity (2)

15. The Stress System: Coping With Challenges (1)

16. Mean Swimming Distance to the Platform Non-Handled Rats Distance (In Metres) Handled Rats Age (In Months) Source: Sapolsky, 1992, figure 12.8

17. Evidence on IQ – Romanian Orphans VINELAND MEASURES Note that institutional adoptions <6 months do much better than >6 months

18. Evidence on Aggression – Knock-Out Rhesus Macaques • Control group: Offspring raised by biological mother display the usual aggressive behaviour. • Treatment group: Offspring adopted by highly nurturing mothers displayed healthy exploration of their environment, coped better with stress, and were less upset about weaning. There were also marked improvements in serotonin metabolism.

19. Part 3. Policy Complementarities Early childhood interventions complement other productivity-enhancing policies that Canada must adopt.

20. Universities Innovation Agenda • Worker Quality Productivity Early Childhood

21. Human Resources: Canada’s Skill Shortage Source: Education and Knowledge: Some Perspectives from 21st Century Manufacturing, Canadian Manufacturers and Exporters

22. Universities Innovation Agenda • Worker Quality Productivity International Trade Cities Health • Infrastructure • Clusters • Immigration • Quality of Life Early Childhood

23. Early Childhood Research as a Touchstone • Universities and tuition • Cities: invest in people, not infrastructure. • Do so through community-based interventions (e.g., schools) • Added bonus: reduce crime and poverty. • Immigration • stress, acculturation • Human resource development: a coworker who • performs poorly in the stressful world of high-tech innovations, • who shows little curiosity, • reacts aggressively, • and is not particularly bright? • International trade: • We do not want workers whose skills compete with those of low-wage foreigners.

24. How Are We Doing In Canada?

25. Suggested Readings • Pedro Carneiro and James Heckman, “Human Capital Policy” National Bureau of Economic Research Working Paper #9495, February 2003. • This paper evaluates the cost effectiveness of investments in people at various stages of the life course. Heckman is a Nobel Laureate who specializes in evaluating training programs. Available on the web at http://www.nber.org/papers/w9495. • Bruce McEwen, “Stress and the Brain” in States of Mind: New Discoveries about How Our Brains Make Us Who We Are edited by Roberta Conlan, pages 81-102. • The entire book was written by the leading scientists in the field and then re-written by journalists in order to make it a pleasure to read. • Margaret McCain and Fraser Mustard, Government of Ontario Early Years Study: Reversing the Real Brain Drain, April 1999. • Available on the web at http://www.gov.on.ca/CSS/page/services/oey/earlyYearsStudy.pdf.