a stitch in time returns 18% annualised over 40 years

October 13, 2012 3:30 PM

welfare and social spending is usually discussed as a cost, a substantial cost. can you suggest any good resources that analyse the economics of welfare and social spending as an investment? or that examines funding cuts as a kind of borrowing?

eg. where cutting 1 million from kindergarten funding results in x million more crime, welfare payments and reduces the tax income over the next forty years, so that the interest rate on borrowing 1 million from the kindergarten budget is effectively r%.

posted by compound eye to society & culture (6 answers total)

I can recommend these, as I've read them and they deal with exactly the equation you bring up, albeit from an ethnographic perspective. And, in addition to the content, check out both the bibliographies of these works and the footnotes for data. If you search for Neil Smith's book, you can find the full book as a free download from a university in Athens (Greece), by an arrangement he made with them before his recent, and tragic passing:

Bourgois, P.
1995. In Search of Respect. Selling Crack in El Barrio. Cambridge.

Harvey, D.
2005. A Brief History of Neoliberalism. OUP Oxford.

Morgen, S., and J. Maskovsky
2003. The Anthropology of Welfare“ Reform”: New Perspectives on US Urban Poverty in the Post-welfare Era. Annual Review of Anthropology: 315–338.

Smith, N.
1996. The New Urban Frontier: Gentrification and the Revanchist City. Routledge.

Susser, I.
2012. Norman Street: Poverty and Politics in an Urban Neighborhood. OUP USA.
1996. The Construction of Poverty and Homelessness in US Cities. Annual Review of Anthropology: 411–435.
posted by jardinier at 7:54 PM on October 13, 2012 [1 favorite]

Benefits such as SSA/SSDI benefits, job training, food stamps, etc. for parolees are associated with significantly lower recidivism rates.
posted by ClaudiaCenter at 11:19 PM on October 13, 2012

The Canadian Centre for Policy Alternatives has many excellent reports and studies that deal with exactly these issues. Most are downloadable for free. You will need to sift through them to find what you are looking for, but one example is The Cost of Poverty in Prince Edward Island (2011) [pdf]:

We estimate the economic costs of poverty to government directly as well as to society as a whole. The three components measured here are: (1) the extra public expenditures on health care to remedy poorer health associated with poverty, (2) the additional (incremental) costs of crime, and, (3) the foregone tax revenue, while making adjustments for higher transfer payments to people with low income.

posted by hurdy gurdy girl at 12:18 AM on October 14, 2012

NPR's Planet Money looked at James Heckman's study of Head Start which seems to show that Head Start pays back many times over.

Here's a Health and Human Services 2010 Head Start impact study final report executive summary that finds less impact, although a quick scan indicates that the "Head Start: A tragic waste of money" New York Post headline is dramatically overstating the case (and what's with "journalists" who say things like "a study", rather than specifying which one? Even if they are Cato Institute talking heads).
posted by straw at 1:24 PM on October 14, 2012

The latest Planet Money: Why preschool can save the world, revisits the Heckman study and looks at the The Carolina Abecedarian Project.
posted by straw at 10:53 AM on October 20, 2012

From the executive summary of The Economic Benefits of Literacy: Evidence and Implications for Public Policy [PDF]:

At a national level, estimates of the direct costs and benefits of a literacy investment large enough to raise all adults to prose literacy Level 3 imply an initial rate of return of 251%, and an approximate payback period of 4.8 months (Murray, Jones, Willms, Shillington, & Glickman, 2008). In other words, the large estimated returns to individuals and to society more than justify the required investment provided that the Canadian economy can absorb all of the new literacy skill as it is created.

posted by hurdy gurdy girl at 1:47 PM on October 20, 2012 [1 favorite]