A Lesson in Thinking

Please read Richard Posner’s analysis of a proposal to pay kids to go school. Aside from the insights, admire the way he builds the argument:

  • Background into Friedman’s proposals re welfare in the 1960’s
  • How Friedman’s cash grants morphed in the earned income tax credit
  • Why children affect a normally libertarian mindset
  • Why compulsory-schooling and child labor laws are necessary
  • Analysis of why some parents don’t send their kids to school
  • How paying them could be expected to impact those factors
  • Identifying a potential unintended consequence – lowered truancy but continued poor quality of education

Entire Posner Post
Paying Children to Go to School–Posner’s Comment

The Mexican and New York City programs are well described in Becker’s post and in a recent article in the Financial Times by Christopher Grimes, “Do the Right Thing,” May 24, 2008, http://www.ft.com/cms/s/0/a2f1b24a-292a-11dd-96ce-000077b07658.html?nclick_check=1. I cannot comment on the Mexican program; nor do I oppose social experiments financed by private money, as in New York. But I am skeptical about the New York program, and if I were a New Yorker I would be reluctant to support public financing of it.

Before Milton Friedman proposed to replace welfare programs with a negative income tax–that is, a cash grant with few if any strings attached–welfare programs were in part devices by which the government endeavored to buy good behavior from the poor. Hence food stamps, but not food stamps that could be used to buy liquor. Or money earmarked for health or education.

Friedman’s criticism of such programs was that people have a better sense of their needs than government bureaucrats, so that if the government simply gave poor people money they would allocate it more efficiently than the welfare bureaucracy would do. This philosophy was eventually adopted by the federal government in the form of the earned income tax credit. The danger in giving the poor money (or anything else for that matter) is that it will reduce their incentive to work; this problem was addressed by the replacement of welfare by workfare at the state and later the federal level.

Friedman’s analysis requires qualification, however, when the issue is the welfare of children. The reason is that not all parents balance their own welfare with that of their children in an impartial manner. That is why we have laws forbidding child neglect and abuse. It is also why we have compulsory-schooling laws and forbid child labor. These are paternalistic laws in a quite literal sense, but are justified to the extent that there is legitimate concern that not all parents are faithful agents of their children. Nevertheless, as a general rule parents both know better than welfare officials what is good for their children and love their children more than the officials, however well meaning, do, so any proposal to expand the role of government in controlling children should be viewed with caution.

Public school is both free and compulsory, and schooling adds considerably to a child’s lifetime income prospects, so we must ask why some parents do not compel their children to attend school regularly. One reason might be that some of them do not value their children’s welfare. Another that they cannot control their children. And a third that they do not think their children benefit significantly from regular attendance. I would guess that the second and third reasons are more common than the first.

Paying children to go to school would probably have at least some effect in countering all three cases. However, the benefits would be limited to children who, but for the payment, would attend school less frequently. I do not know how those children could be identified in advance, which means that the program would confer windfalls on some, perhaps many, children. (It would be odd to disqualify children on the basis of their good attendance!) In addition, there would be substantial costs, both direct and indirect, to the program. The direct costs would consist of the costs of distributing the money to the kids, making sure that it is not appropriated by the parents, and monitoring the children’s school attendance. (So: more bureaucracy.) The indirect costs would include perverse incentive effects–some parents would spend less on their children to offset the payments that the children would be receiving for staying in school. Also, giving children their own source of income would reduce parental control and by doing so weaken already weak families. And some children contribute more to family welfare by occasional truancy than by consistent school attendance–for example, they may be older children helping to take care of younger siblings in households in which the parents work full time, or in which there is only one parent. Also, how does one end such a program? If the payments are suddenly withdrawn, will the kids feel aggrieved and resume truancy with a vengeance?

The largest indirect cost, I would guess, would consist in relaxed pressure to improve the public schools or to allow them to be bypassed by means of voucher systems. High rates of truancy may be due in significant part to low quality of schools. Paying children to attend school will reduce truancy rates some but without improving school quality, and perhaps without improving the education of the children receiving the payments. (School quality may actually decrease, with more crowded classrooms–crowded by kids who don’t really want to be there.) Suppose that a school is in session 200 days a year, a student is truant 10 of those days, and if paid to attend would be truant only 5 days. Then the effect of the payment would be to increase the number of days the child was in school by only 2.5 percent. If it’s a bad school, there might be zero benefit from this modest increase in attendance.

Granted, there are many children in New York who are truant for much longer periods. An article by Harold O. Levy and Kimberly Henry, “Mistaking Attendance,” New York Times, Sept. 2, 2007, http://www.nytimes.com/2007/09/02/opinion/02levy-1.html?_r=2&ex=1189396800&en=1d2692cb89c474d7&ei=5070&emc=eta1&oref=slogin&oref=slogin, estimates that 30 percent of New York public school students miss a month of school every year. But they may be children who for mental or psychological reasons, or extreme family circumstances, cannot benefit significantly from additional schooling. The beneficial effects of paying children to go to school are likely to be concentrated on the kids who are casual rather than extreme truants, and those benefits, as suggested by my numerical example, may be slight.

Another component of the program is paying children for performing well on standardized exams. Such measures reward work more directly than paying for attendance, and also avoid the bad signal that is emitted by bribing people to do what the law requires them to do (i.e., attend school until 16 or 18, depending on the state), but they may largely reward intelligence rather than study. Working hard in school is no guaranty of getting good grades. Scholarships for promising students and awards for high performance have good effects, but the paid students are unlikely to qualify in competition with students who do not have to be paid to attend school.

Paying children to attend school is a band-aid approach at best. Far better would be a voucher system that would create competition among the public schools to serve children better.

About Jorge Costales

- Cuban Exile [veni] - Raised in Miami [vidi] - American Citizen [vici]
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