Social Capital and Public Policy

Progressives and social democrats in America have espoused the virtues of comprehensive social insurance, universal healthcare, universal college, universal housing, among other things. I believe generally liberals and socialist have two different core reasons for their support of public programs like these, and I’d like to discuss my views and approach to public policy with respect to social welfare.

The first important thing to note is the distinction between a liberal and a socialist view on social welfare. For most liberals and in the modern context, some conservatives, social welfare is fundamentally something people ought to secure for themselves, given they are able. This is because the lack of productivity and self-sustenance of one individual is necessarily a burden on someone else or society. That being said, everyone is entitled to adequate assistance in development and maturation. A child cannot be expected to flourish in adulthood if they were raised without adequate healthcare, socialization, parenting, nutrition, and educational opportunities. We cannot sustainably help people who do not help themselves, but we can get people started and guide them on the path to self sustenance.

The Equity Approach Versus The Egalitarian Approach

The difference between my more liberal approach and the more populist left-wing approach to social welfare is I do not support just any nice sounding program which makes any arbitrary service or commodity free for all. I support profitably investing in public education, health, and other domains, not only to enhance the nation’s productivity and well-being, but to come ever closer to fulfilling the promises of meritocracy and equal opportunity.

The idea that everyone is entitled to all sorts of luxuries and privileges by virtue of existence is a component of European social-democratic ethos, not American ethos. Equality of opportunity, however, is an idea all Americans can and do get behind.

I believe the aim of public policy concerning social welfare should be to meet the immediate critical needs of all people, but make rigorous and value-based investments in social capital. We want people capable of excelling in the workforce, who will attain for themselves and their children a permanent cycle of general well-being.

Now that the more philosophical stuff is out of the way, let’s talk about some examples of public policy and how we should approach designing them.

Preschool is an interesting policy issue for a few reasons. It’s often said that preschool enhances later-life outcomes for young children and maybe even increases IQ’s. I’m skeptical about the strength and reliability of these sort of effects, which wouldn’t matter, except that with preschool, we’re talking about a lot of money. Full time childcare and preschool is often running in range of $1,000 a month, especially in more expensive parts of the country.

Another impact preschool and childcare may have is enhancing the socialization of young children, which could yield more extroverted or socially skilled adolescents and adults. That’s a little more speculative. What’s not speculative is the economic impact of universal preschool. When the District of Columbia introduced universal childcare, they saw a double-digit point increase in the labor force participation among mothers, a substantial benefit not only to those households, but to the district’s economy. Other parts of the country, and especially foreign countries have observed similarly large increases in maternal workforce participation.

Given that with workforce training and a couple years experience in the workforce, the median full-time working woman is generally able to earn between $30,000 and $45,000, a targeted childcare and preschool program could pay for a not-insignificant portion of itself through tax revenue growth. While a system of universally ‘free’ childcare payed for with increased taxes would be very expensive and perhaps inefficient, subsidies that make it affordable for low and middle income families will permanently increase labor force participation, boost short-term GDP, and make universal for all children the potentially profitable investment in their lifelong welfare and development.

To eliminate tuition, or to not elimination tuition…

Bernie Sanders and Elizabeth Warren ran on a platform that included making college free for all with the idea that everyone should be able to attend college. I disagree with their premises. I believe everyone in the nation can attend college already, they are simply responsible for the debts they incur to do so, which is to say in a more perfect market students would receive as much of an education as is economical (with added lifetime earnings in excess of the added cost of education).

University does not provide a positive return on investment for every graduate, let alone all attendees (most of whom will not graduate). We know that college attendance increases incomes, but right now that affect is measured in the few individuals that attend and graduate college. If you invited the left half of the academic bell curve into university, you would probably see very high attrition, poor performance, and very low graduation rates. All-round, not very efficient.

In my view, the issue is that student loans have inordinate rates of interest which can be excessively dissuasive to students, particularly lower income students. I believe the way to maximize human capital in an economic way is reduce the rate of interest on student loans to a fixed rate in line with long-term inflation projections, give or take some milder fluctuations due to miscellaneous factors. Ultimately we want every single individual capable of increasing their net lifetime earnings via education to attain such an education, and not be inhibited by finances, since ultimately then it would be a profitable investment for themselves and our economy.

In general, making profitable investments is not as simple as making a decision. We have to conduct controlled studies of the effects of policies on outcomes. We can’t simply assume our way to policy success. If policy makers are too lazy or impatient to study and design functioning policies, they will make costly mistakes, some of which will sabotage public support for government investment efforts.

When we consider public works, high speed rail, new entitlements, among other things, we have to carefully consider the costs and savings, and whether or not programs provide society of a positive return on investment. Anything less would be letting down taxpayers and the nation.

Main photo license and source. No changes made.

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