Child Care Quality and Regulation

I have been reading and writing a lot about childcare throughout the last year. Something I never thought I would do, but turns out to be quite interesting actually. It is also something I can talk to people about, which I was never able to do with the other things I have been working on. So I thought I would write up the few basic insights I’ve gained in researching this topic.

1. The quality of interactions between a child and its caregiver matters more than the frequency. What follows from this insight is that neither group size nor the ratio of children per staff matter all that much, but teacher training is essential. The cool thing is that the literature in early childhood psychology is in basic agreement with the economics literature regarding this insight.
2. When it comes to teacher training, the most important variable seems to be whether the caregiver has taken a college level class in early childhood education in the last year. This is something that friends of ours have confirmed anecdotally: they have three daughters and they have been hiring female students enrolled in USU’s Family Life Studies program, which combines various fields within the family, human development, and consumer science disciplines, as nannies. Our friends have reported that whenever their nannies have recently taken classes in early childhood development, their kids got to do many activities that are more engaging and would learn new things quickly. In fact, when asked how the nannies came up with the activities they would say things like “We learned this in class a few weeks ago and I thought I’d try it out.”
3. Things that negatively affect childcare outcomes are low teacher pay and high teacher turnover. Both of those variables are highly correlated as you might expect, since poorly paid childcare staff tend to be less committed to their jobs than better-paid staff.
4. European child care facilities tend to have better educated staff that receive higher pay than American day care center staff, largely because limits for child/staff ratios and group-size limits are not as low in Europe (this is not true for all European countries or all American states, but the consensus seems to be that on average child/staff ratios are higher in Europe).
5. One other problem with US childcare regulation is that small family day care homes, i.e. mothers taking care of a few other children in addition to their own in their own residence, are regulated in many states, which makes it difficult for such small family day care homes to operate. In order to operate legally, they have to undergo a number of health and safety inspections (not in all states but in a large number of states). Often, the cost of compliance is too high to warrant legal operation. This type of regulation severely constraints entry into the market for child care provision and as every econ 101 student knows, lower supply results in higher prices.
6. Another effect of this regulation is that because parents are relatively price sensitive, increasing regulatory cost often result in lower staff wages rather than being passed on to parents. As explained above, lower staff wages are one of the main culprits of creating a high quality care environment.

Overall, the lesson that I draw from this is that deregulation of staff-child ratios and groups size limits, as well as the removal of most health and safety standards for small family day care homes would result in better quality childcare outcomes in the US as well as lower prices. Currently health and safety are elevated as standards while childcare quality is largely neglected. Returning some of the decision making rights over how safe a care environment has to be to parents would lower barriers to entry into the child care sector, lower the cost of care, and probably also result in higher wages for child care staff (even though that may seem counterintuitive). I know not all parents may be well informed, but I do think that all parents have enough interested in their child’s health and safety that they would not drop them off at a day care construction site that does not follow any safety standards. Another thing I know for sure is that with snow on the ground 8 months out of the year, day care centers and homes in Utah do not have to have an outdoor play area to provide good care, even though that is one of the things they are required to have.

Deficits, Cognitive Bias, and Thinking Critically about Thinking

In a great book, Democracy in Deficit: The Fiscal Legacy of Lord Keynes, James Buchanan (1986 Nobel prize winner) and his student Richard Wagner (one of my professors) argued that spending is very closely related to reelection and that taxing works against reelection. The argument that we could spend when we were in bad economic times and save when we returned to prosperity (Keynes's countercyclical argument) gave rise to one of the enduring problems with the modern state -- fiscal opportunism. They called the balanced budget idea of government, "that old-time fiscal religion," and argued that only a balanced budget amendment could help save congress from the incentive to shy away from taxes and always increase spending.

California passed measures that has made it in effect a public referendum on every tax cut and every spending increase. This has led to California becoming completely bankrupt with no good way to get out of the fiscal mess. Voters easily vote for more programs and for tax cuts in the same ballot. In fact, people are watching California from China and arguing that democratic reforms could destroy the economy. There is a new assumption is that economic growth and democracy might work against one another.

The very essence of the argument of the republican idea of government was that representatives would have to be held to account for their stewardship of the resources that they are entrusted. I think one way to solve this issue of mis-allocation of resources is to trust them with fewer resources. I have little faith in the idea that we just need to elect better stewards.

Think about this example: In a business, no one cares how many times you failed before you succeeded. In politics, no one admits fault or past mistakes for fear that it will be used against them. This incentive means that dishonesty creeps into the system, little learning takes place and information is sharply limited. The only profit and loss signal is reelection (which is infrequent and clumsy, because it is not broken down to specific issues). Politicians go on TV regularly and refuse to comment on the substance of the issues for fear it will affect their ability to negotiate and vote trade later. It says something about our public discourse in this country that John Kerry's worst mistake was to change his mind in light of new evidence. George Bush's major selling point was that he was above changing his mind. This virtue would ensure a businessman failure, but a politician ought to have this to succeed.

On the other side of the debate are people who want the government to have more power. Obama goes to sleep every night thinking that no one could do a more honest and better job than he is doing. Strictly speaking, he might be right - given that anyone is making decisions for the 300 million people in this country. What these people seem to want is for politicians to make decisions for them. These individuals prefer the myth that there are guards on a wall ensuring that we won't have to tackle the difficult issues. After-all, they are elected to decided for us. This view assumes that only Obama has access to the information about the banks, about the war, about the economy. More trust is needed in his secret files that make it clear which decisions to make. People who have run a business of any size understand the importance of managers seeming to have a clear plan. However, asserting confidence doesn't save the manager when errors are discovered. The plan has to adapt. I am not sure that politics contains the necessary incentives for this to occur no matter who is wearing the hat.

At the end of the day, I have become convinced with the evidence arguing that the majority of how we view the world politically is derived neurologically (Jon Haidt, U Virginia). We can do brain scans and determine the more active centers of people's brains. To break it down to the most important dichotomy, we can look at the left-right political space in this country. Those with a greater portion of activity in the higher-order cognitive thinking areas tend to believe that we can reason our way out of every problem. They don't see natural connections between family members or small group affiliations, they see larger pictures, ethnic groups, political groups, and nations. They then "know" in some sense that greater data collection and more central control will help eliminate "errors" that others are making. Those that have less of this frontal lobe bias, when shown a picture made of dots, see the individual dots and have to have the picture pointed out to them to see it. They are more likely to be religious or traditional in other ways. They see the world made up of very strong social ties. These individuals are the ones that donate to charity, preferring help to come from knows how the one receiving the aid will use it to make themselves better off. Groups are smaller in this perspective and individuals are very meaningful pieces of the whole. These brain types fear outsiders and tend to see reasoning about issues as propaganda meant to ensure compliance rather than agreement.

Of course the frontal lobe types dismiss the others as less evolved. Actually, more research is being done to see if frontal lobe injury makes one more conservative. The implication here is that those that are conservative are brain damaged in some way. Actually, I don't know that this implication holds logically. Any good economist knows that there is a division of labor. The frontal lobe functions are necessary to making well-rounded decisions, but not enough to guarantee that well-rounded decisions are made. Too much focus on high-cognitive reasoning is like Spock from Star Trek. I think that there are good reasons that local knowledge and knowledge of meaningful social connections are important. What we tend to think, at least in academia, is that frontal-lobe activity takes the place of all of the other things that are important to being a well-rounded individual. We have spent so much time defending our nerdy habits that we don't realize the limitations of being nerdy. No one that I know of is doing good research on the impacts of this hypothesis on the political economy. I think it shows that the founders of this nation knew something about people when they wrote the constitution that we have forgotten over time. The reason we need competition between the federal and state levels is to help us balance between high-ideals and the way those ideals come into practice. I just hope that we can account for the goodwill of both sides amid a very frustrating political conversation and economic environment.