The Huge Economic Cost of No Public System of Child Care?

In Monday’s Globe and Mail, Erin Anderssen covers some of the many arguments for publicly funded child care.

There are lots of good reasons for finding a way to produce affordable, high quality, child care (private or public!), but I cannot for the life of me buy into the so called “huge economic cost to Canada” argument.

Yes, it’s true that there is may be a significant economic cost to the Canadian economy when parents are unable to return to work because they can’t find affordable child care.

On the other hand, isn’t there a cost as well in sending children to formal child care programs, whether at someone’s home or at the office?

For instance, if we assume that parenting is superior to institutional child care programs in terms of producing healthy, well-adjusted, and active teenagers and adults, then sending children to child care institutions also entails significant economic and social costs.

I’m no expert in this field ( and I’ll happily defer to people like UofT political scientist Linda White), but I’m not convinced that we need a publicly funded child care program because of the significant “national economic costs” of the status quo.

Groups or Individuals? Which are More Likely to Make Decisions in a Game Theoretic Way?

I haven’t read the article below yet, but the findings in the abstract remind me of Condorcet’s Jury Theorem, which uses math to show how a group (e.g. a jury) is more likely to reach a correct (and unbiased) decision compared to a single individual (e.g. a judge).

Groups Make Better Self-Interested Decisions

Gary Charness & Matthias Sutter
Journal of Economic Perspectives, Summer 2012, Pages 157–176

Abstract: In this paper, we describe what economists have learned about differences between group and individual decision-making. Continue reading

This literature is still young, and in this paper, we will mostly draw on experimental work (mainly in the laboratory) that has compared individual decision-making to group decision-making, and to individual decision-making in situations with salient group membership. The bottom line emerging from economic research on group decision-making is that groups are more likely to make choices that follow standard game-theoretic predictions, while individuals are more likely to be influenced by biases, cognitive limitations, and social considerations. In this sense, groups are generally less “behavioral” than individuals. An immediate implication of this result is that individual decisions in isolation cannot necessarily be assumed to be good predictors of the decisions made by groups. More broadly, the evidence casts doubts on traditional approaches that model economic behavior as if individuals were making decisions in isolation.

Genetic Diversity and Economic Development?

The journal Science reports:

“The Long Shadow of Genetic Capital

Comparative analyses of human genomes have contributed to a spatiotemporal narrative that begins in East Africa and extends to the other continents. These historical traces reveal a decrease in genetic diversity as migratory distance from Addis Ababa increases. Ashraf and Galor present the hypothesis that genetic diversity has exerted a long-lasting effect on economic development Continue reading

—which is quantified as population density in the precolonial era and as per-capita income for contemporary nations—beyond the influences of geography, institutions, and culture. They posit that intermediate levels of heterozygosity allow for a productive balance between the social costs of high diversity and the creative benefits of higher variance in cognitive skills. They show that the optimal level of diversity was approximately 0.68 in 1500 CE, and that this
increased to 0.72 (which is pretty much where the United States sits) in the year 2000, with the most homogeneous country, Bolivia, placed at 0.63 and the most diverse country, Ethiopia, at 0.77. Just how large an effect are we talking about? They estimate that genetic diversity accounts of 16% of the cross-country dispersion in per-capita income; put in another way, shifting the diversity of the United States higher or lower by one percentage point would decrease per-capita income by 1.9%. — GJC Am. Econ. Rev., in press (2012).”

I haven’t read the paper yet, but I can’t quite understand how genetic diversity, isolated from mediating variables like institutions and culture, can affect “and the social costs of high diversity and the creative benefits of higher variance in cognitive skills.” Clearly genetic diversity can affect cognitive skills, but how does genetic diversity affect “social costs?”

I’m looking forward to reading this paper when it comes out though since the policy implications are substantial.