The Costs of Cost-Benefit Analysis

Reason Foundation takes on RAND Corporation over cost-benefit calculations for California's Prop. 82 universal preschool proposal. RAND found Californians would reap benefits of about $2.62 for every $1 spent on universal preschool; Reason critiques their analysis and says the state would actually lose money on its investment. I'm not an expert on cost-benefit analysis, so I'll leave that to others to sort out.

The Reason report is worth a look, if only for the hilarious graphic (on page 18) of a sweating little boy pouring buckets of greenbacks down the gullet of a big purple monster label "Prop 82." I do think, though, that the Reason authors misunderstand aspects of Prop. 82. For example, they keep referring to publicly-funded preschool under Prop. 82 as "government-run" preschools. But the referrendum is written to allow non-government providers--such as community-based providers and charter schools--to become part of the publicly-funded preschool system if they meet quality standards. Understanding this idea could clear up some of their mystification at certain assumptions in the RAND report.

More seriously, I do wonder sometimes if the preschool movement doesn't put entirely too much stock in cost-benefit analyses. Sober assessments of costs and benefits do have an important role in policymaking, and they can be useful advocacy tools, but, contrary to what we learned in school (apologies, Professor Walter), they aren't the only, or even necessarily the main, factor driving policy decisions. The RAND report's looking at returns to preschool investments throughout children's lives--60 years down the road! That's a much longer timeline than it's easy for most elected officials to think in terms of. And, because the set of assumptions analysts choose can have dramatic effects on the costs and benefits they arrive at, these estimates can seem wierdly fragile and subject to challenge by those who employ alternative assumptions.

Further, just because society eventually reaps returns on preschool investments doesn't make it any easier to find the funds governments need to spend to establish preschool programs NOW. Many of the benefits prominent cost-benefit analyses of preschool capture accrue to private citizens or other parts of government (such as the criminal justice system), so it's not really accurate to say these investments will pay for themselves down the road--that's just not how budgets work.

That's not to deny the significance of the preschool cost-benefit analyses or the value of the work done by researchers in this field. But I do think it would behoove the preschool movement to make sure its case doesn't rest too heavily on these cost-benefit calculations. Other aspects of the case for preschool must also be fully developed.