The Diversity Paradox?

An Article in the Boston Globe highlights Robert Putnam’s research on diversity. The take home message is that diversity seems to lower social capital, yet increase creativity and possibly economic growth. This is labeled a diversity paradox.

However, it seems to me that there is no paradox at all, at least with respect to creativity. Diversity increases creativity because it lowers social capital.


A sketch of a model:

There are two levels of social goods: global and local.

Finding a cure for cancer is a global social good; building a children's center is a local social good.

People are compensated for the production of social goods through status.

Each ethnicity has a different preference ordering over local social goods.

In a mulit-ethnic community there are fewer people who prefer any one social good. Therefore, the status return is lower to producing local socials goods. The status return to global social goods is constant everywhere.

When communities become more diverse people substitute the production of local social goods for global social goods.

That is, it is more difficult to become famous and loved by all for being a civic leader so I tend to invest more time in becoming famous and loved by all through some national level accomplishment.

This might suggest that diversity itself is a public good but I am not sure. That is, it could be that homogenous communities are piggy-backing off of the global social goods produced by diverse communities.

Hat-tip Mankiw

Losses II

Losses 0.9 Beta.

Something like this is probably going out.

What's Next

The start from what I am working on now




A Contribution to the Theory of IQ and Economic Growth


This paper takes Garett Jones seriously. Forty years after Robert Solow’s classic article suggested that long run growth depends on increases in total factor productivity Jones and Schneider (2006) proclaim:

stylized facts related to IQ and productivity are ready and waiting for the theorist who seeks to explain a large part of the puzzle of cross-country productivity differences. Accordingly, persistent difference in national average IQ—regardless of their source—may play an important role in answering Prescott’s (1998) call for a theory of total factor productivity

In a series of papers Jones, twice with Schneider argues, that

1) IQ is one of, if not the most powerful predictor of economic growth

2) IQ is a proxy for and indeed may be the primary source of otherwise unobserved worker heterogeneity

3) IQ correlates heavily with a tendency towards cooperation

4) The effect of IQ is more powerful at the macroeconomic level than the microeconomic level

5) The effect of IQ on growth rates is persistent and likely associated with higher growth rates rather than higher steady states

6) The importance of IQ on economic growth has been increasing since at least the mid twentieth century

7) At least in a naive sense the growth does not appear to cause changes in IQ

My goal below is to provide a theory consistent with these facts.

Nice work if you can get it . . .

The jobs report disappointed today at 92K vs. a consensus 130K. I believe this number is likely to be revised downward in the coming months because of the birth-death adjustment.

Each month the BLS has to estimate how many jobs were created in new companies and destroyed when old companies went out of business. The way it does this is by looking at how far its count was off a year ago.

That is, if last year the BLS counted 150K new jobs in July but then, after all new companies were firmly established, they went back and counted 170K new jobs they say that the birth-death adjustment needs to be 20K higher. In other words, last time they guessed 20K too few so this time they will add 20K to their baseline guess.

Here is the problem. Last time the housing market was surging and all sorts of upstart companies were coming on to cash in. Fly-by-night organizations that support builders, suppliers, etc.

Clearly those extra jobs aren't being created now and so the BLS is likely to be overly optimistic. By how much, I don't know. If there was a reliable way of fixing this problem then the BLS would use it. However, there is not and so we are left to readjust on our own.

Bottom line . . . job growth is slowing.

UPDATE: Commentors on Ritholz report that the Birth-Death adjustment for July is 26K new jobs. Typically, we find that around 50K are lost from companies' Birth/Death in July as kids get ready to go back to school, housing sales slow, etc. However, this time we got an estimated 26K created from Birth/Death. I strongly expect that to be revised downward.

Fertility and the IQ of Nations

We have long known that economic growth was associated with decreasing family size. It appears the increases in IQ may also be associated with decreases in family size. The myriad of ways in which this trivariate correlation could be explained are tantalizing but for now I will leave you with the data itself.



P.S.

I can't help but mentioned that if low IQ caused larger families then we would expect IQs to decline over time. In fact they have been doing the opposite. What I wouldn't give for good measures of Chinese IQ before the 1-child policy.

Do Smart Guys Tell Better Jokes?

In the wake of the recent blog brouhaha over IQ and the Wealth of Nations I have been thinking about the general connection between intelligence and income.

My interpretation is that many people find it natural to conclude that IQ causes macroeconomic growth because IQ appears to cause microeconomic success. High IQ people are richer people, on average.

While I am sure that many smart people are quick to assert that their intelligence is what got them where they are, are we so sure? Height is correlated with individual success. I willing to bet height is also correlated with economic growth. And, we know that there is a height “Flynn effect.” That is, people have been getting taller over time. Do we think height causes growth?

The height correlation is usually settled by noting that height is a general sign of health and fitness, thus the correlation with macroeconomic growth, and therefore tall people are more likely to be chosen as spouses of successful people. Rich men and women have a greater choice in spouse and they tend to choose taller ones. Therefore, height and the genetic or cultural traits that produce wealth are commingled.

Could the same thing be true with IQ? That is, are smarter people more likely to be chosen as spouses to the rich and powerful? Now one possibility is that intelligence is just out and out attractive. Some people may agree with that conjecture.

Another, however, is that intelligent people are more likely to land a successful spouse because they are more clever at the dating game. My pet theory is that the human brain evolved through sexual selection. It’s just too big and mostly useless to have come about any other way. Looking at the monstrous and dangerous thing sitting a top most people’s shoulders one cannot help but be reminded of the Irish Elk.

It wasn’t so much that we impressed each other with our big brains, but that those brains busied themselves with devious plots to ensnare the objects of our affections. Most of us are aware of the modal thought among men and I would reason a guess that the modal thought among women is the dissection of the thoughts and intentions of men.

It seems possible then that IQ may simply be commingled with the attributes that produce success. My guess is that those attributes have more to do with perspiration than inspiration.

Why Trade?

So the common objection I have gotten to my draft both on and off line is, why trade? Doesn’t this apply to any policy, not simply trade? Or, we already know that people are afraid of trade?


I am sensitive to this but I think the trade argument is important because of the special status free trade has within economics.

Perhaps, my perception is way off but I think that most economists feel comfortable asserting that the gains to the winners from trade liberalization will outweigh the losses to the losers except in the following cases:

1) There are externalities.

2) There are unexhausted returns to scale.


I am offering a third and I believe more general critique. The very fact that there are winners and losers is inherently costly. Unless you know for certain exactly who those winners and losers are, you are imposing uncertainty on the world.

It is possible that the cost from this uncertainty outweighs the gains from trade liberalization.

In fact, it is possible that freer trade is unambiguously a social ill. That is, the increase in uncertainty could make every single person in the world worse off because of freer trade. In this case there is no social welfare function that would rate this as a good idea.

Since this is a theoretical possibility, the notion that the gains to the winners outweigh the losses to the losers becomes an empirical question that is almost impossible to rule out a priori.

Now, I think that distributional uncertainty is an issue that goes beyond trade. Indeed, I think it affects any policy we might consider. However, I do think that trade is unique in the level of confidence economists display about policy prescriptions.

In a survey reported by Robert Whaples 90.1% of economists disagreed with the suggestion that US should restrict outsourcing.My guess is that the 10% who agreed did so primarily on the grounds of equity and that most of those who disagreed felt that in the absence of externalities or a returns to scale argument trade unambiguously promoted the general welfare.

I am challenging that assumption.

Oldies but Goodies

So to finish working on Losses from Trade I am reading

The Foundations of Welfare Economics

and

Welfare Propositions of Economics

They are both fun reads, especially the first. It is wonderful just how careful these guys were.

Losses From Trade

A draft of the idea in the last post.

Tear it apart :)

Kaldor Hicks Preview

Gabriel says that I should post my ideas no matter how nascent because lets get real, whose gonna want my ideas.

So here is one that I have been kicking around promising myself that I would finish the write up on but haven’t gotten around to it.


Kaldor-Hicks tends to overestimate the net benefits of a policy whose distribution is uncertain.

That is, when we think about whether a policy is a good idea we do a cost-benefit analysis. We add up all the costs to whomever they occur and all of the benefits to whomever they accrue. If the benefits are greater than the costs we declare the policy to be efficient.

Perhaps, the policy is not equitable but it is efficient. The winners could compensate the losers and be better off.


Now the problem is that the winners don’t compensate the losers. And, that’s not just a problem for the reason you think it is. We all admit that the distribution of the gains may be such that the winners don’t personally value their gains as much as the losers personally value their losses. However, without the ability to do interpersonal comparisons we are stuck.

Yet, there is another problem. If the distribution of the gains is not certain then the individual agents will value them at less than their face value. Likewise if the distribution of the losses is not certain than the individual agents will value them at more than there face value.

This means that even if the total benefits outweigh the total losses with certainty, uncertain distribution can lead to individual agents perfering not to make the trade.

To drive the point home I create the following example:

There is a policy were the gains to the winners outweigh the losses to the losers with certainty but NO AGENT wants to see the policy enacted. That is, there is a policy which passes cost-benefit analysis but is uniformly rejected by each person affected by it.


The simplest example is easy. Suppose that the benevolent government is offered the following deal. One million of your residents will be selected and given $100,000. Another one million of your residents will be selected and charged $99,999.

To make matters simple only residents who have at least $99,999 will participate in this program. However, whether the resident is a winner or loser is chosen at random.

This program seems like an economic free lunch. The gains are guaranteed to outweigh the losses by $1 million. The selection process is completely random, so there are no economic distortions. In fact, there is no a priori reason to expect that the winners will have lower marginal utilities of income than the losers.

Yet, we could expect that every single agent will reject this program. Why? They reject it because the program exposes them to risk. The cost of that risk outweighs the expected benefit of program.

Perhaps, the agents could insure against the risk. Since the expected gains are positive they should be able to write a contract that splits the expected gains with an insurer so that everyone winds with more than what they started with.

However, what if I said that I am not going to announce the winners and the losers? I am simply going to subtract the losses from the losers net worth and add the gains to the winners net worth with no record of the transaction. How could one insure that?

If this seems a little far fetched and unrelated to real world issues, allow me to change the offer again. Rather than simply adding $100,000 or subtracting $99,999 I am going to do this.

The winners will receive an increase in the demand for their services and a pay raise. The losers will see their jobs outsourced to Asia. The winners won’t know for sure why they lost they received a raise. The losers won’t know for sure why they lost their job.

To add another layer of realism lets change the terms a little. I won’t change any of the expected values but this time instead of selecting 1 million winners and giving them each raises worth $100,000, I will select 100 million winners and give them each raises worth $1000.

The expected gains from this deal are still $1 million. Does anyone want to go for it?


There are two insights that I draw from this thought experiment.

1) That distributional risk is a real concern in policy. If the winners don’t know they will be winners and the losers don’t know if they will be losers the policy will seem better than it really is.

This was the idea that I started with. Workers I talked to disliked outsourcing not just because some people did loose there jobs but because they felt like any of them could loose their jobs. The difference is subtle but important. The first is just about direct costs; the second includes a notion of risk.

2) The second insight I take away is that just as Von Neumann / Morgenstern risk comparisons allow us to define cardinal rather than simply ordinal utility. Who-will-gain risk comparisons allow us to define a sort of interpersonal utility comparison. If you had an equal shot of being on any end of this policy would you still support it? Its not exactly interpersonal comparisons but it carries much of the intuition we want to gain from it.

Comments? Suggestions?

Prior Trap Preview

Arnold Kling has an interesting post on Inequality, that references Brink Lindsey's piece in the Wall Street Journal.

My October talk at GMU is going to be on the same issue that Lindsey refers to as the Culture Gap.

The type of facts that go to the heart of my concern and apperantly his is this:

Among students who received high scores in eighth grade mathematics (and thus showed academic promise), 74% of kids from the highest quartile of socioeconomic status . . . earned a college . . . 29% for those in the bottom quartile [did as well].

That is socio-economic status seems to have an effect independent of ability.

Lindsey argues that it is a cultural phenomenon. On one level I do not disagree.

However, I believe that "culture" is the rational extrapolation of unknown parameters from the behavior of people in your reference group.

Whew! In other words:

Look life is full of choices. The consequences of those choices depend upon the complex interaction of factors that you don't have the time or in many cases even the resources to understand. So what do you do? You copy the behavior people who seem to be doing well given similar circumstances. If you think Joe is doing good for himself and Joe has constraints similar to your own then you copy Joe. If Fred is screwing up royally and Fred was faced with the same choices that you had, you avoid Fred's behavior.

This is in part why people feel moved by an example "they can relate to." This is simply a way of saying the constraints in this problem as sufficiently similar to my own that I can use it as a data point.

When your circle is an unbiased sample of population consequences this works remarkably well. It is possible for people to make fully optimal choices in the face of no data, apart the actions and consequences of those around them.

In other words, to be successful you don't have any clue about how the world actually works, you only have to learn from the experience of the people around. This is nice because in academia some of the smartest people, with the most powerful computers and the largest data sets spend all day trying to understand how the world actually works and they still have no clue.

When your sample is biased, however, you can be steered off track. If everyone you see is a high school drop out and most of them are just as smart as you, then what makes you think that you can or should finish high school, let along go to college.

Remember that investing in education requires giving up work and leisure today for the possibility of gains tomorrow. Working at McDonald's or spending time with you friends pays off with probability one. College? Well in a world where the only person you know that has graduated from college is your teacher, what are likely to conclude about the expected return from that investment.

The corollary to my theory is that good teachers are not ones who have high instructional ability but high motivational ability. Good teachers encourage already successful students to push themselves even harder. Good teachers can relate to at risk students and convince them that the pay off from education is indeed positive.

Rick Hanushek shows that working with great teachers four years in a row can eliminate the performance gap between low income and high income students However, what makes a great teacher has little to do with education or experience. He says that the missing factor is unknown but probably innate.

I suggest that the missing factor is the ability to gain a student's trust. The ability of a teacher to convince a student to disregard that giant data set called her community and instead believe the message the teacher is painting. This often requires disregarding parents as well. After all, poor parents are disproportionately likely to be people who estimated a low expected return to education themselves.

Whats Going On

A commenter asks just how slow this summer is going to be.

Pretty slow I am afraid. In fact, I think I am quasi-retired for the time being.

The incentives in Academia being what they are I have to concentrate on writing for other economists before I can get back to writing for the blog.

My feeling is that it is better to wait and come back full-time rather than popping the occasional post every week or so.

If people feel differently then I can start posting on a when-I-have-a-moment basis.

The Argument against Gouging

In the wake of concerns about rapidly increasing gas prices and the resurgence of anti-gouging laws, I wanted to take a moment and think about whether there could be any economic justification for preventing price gouging. That is, is there any way of framing the problem so that economists would agree that anti-gouging laws are good for society as a whole.

To be clear, anti-gouging laws will help some people. Most economists, however, believe that when all is said and done such laws hurt more people than they help. I am skeptical. I am skeptical because I am always skeptical. I am particularly skeptical because the public reaction is so hardily in favor of such laws.

Collective ignorance is hard bullet for me to bite. That’s not to say that it doesn’t happen, just that it takes heavy doses of evidence to convince me that it’s true. I should say also that collective ignorance and mass ignorance are two different beasts. It is entirely possible for people acting in a society to arrive at the right conclusion even if each individual has no idea what’s going on. Call it social emergent intelligence.

The first culprit when trying to reconcile a difference in opinion between economists and the public is on distribution. Economics proper is largely silent on how wealth is distributed; the public cares a great deal.

So, what does price gouging do to the distribution of wealth. The most obvious answer is that it transfers it from costumers to sellers. This is true but for various reasons I find it unsatisfying. What interests me more is the transfer between customers.

When the price of something goes up people buy less of it. True enough. But, who are those people? Does everyone buy less of it? In particular, do the poor reduce their consumption more than the rich?

That depends in part on whether the good is a luxury or a necessity. When the price of luxuries go up, poor people stop buying them in droves but the rich only cut back a little. On the other hand, both the poor and the rich try to hold on to their necessities as long as the can.

Now let’s just say for the sake of pure argument that a person must have a few basics to survive including gasoline or some much more expensive alternative. The cost of the basic level is almost the entire budget of the poor but a small fraction of the budget of the rich.

Enter price gouging. The back drop is this: War destroys the US oil supply. There is a shortage of gasoline. Oil companies can respond one of two ways. The first is that they turn to the price system and keep increasing the price until demand falls. The second is some sort of non-price rationing like waiting in really long lines.

What happens if the oil companies choose the price system or gouging as the politicians call it. The price of gasoline keeps rising and rising and rising and doesn’t stop until demand falls to match supply. If the price rises to the point where the more expensive alternative is available then the wealthy will switch to it and all will be well.

However, what happens to the poor who could not afford that alternative to begin with? In this example they all die. They needed gasoline or the alternative to survive. They could only afford gasoline. Since the price of gasoline rises to the price of the new alternative they don’t survive.

What would happen if we used non-price rationing? In this example, the worst that could happen, even if you picked a rationing system at random, is that the poor still die. If the lives of any of the wealthy are threatened by the rationing system they will just turn to the more expensive alternative.

However, the lives of some of the poor could be saved. If the rationing system differs in anyway from the price system then more people will live. Said another way, price gouging is the worst possible thing that could happen.

For the nerds out there what is going on is that willingness-to-pay is not accurately measuring the utility gain because of budget constraints. The poor are forced into a corner solution. The poor would really like to trade consumption from states of nature without gouging to states of nature with gouging but cannot because of incomplete insurance markets. As a result relatively small utility gains for the rich are paid for with huge utility losses to the poor.

The death example is extreme but it is only for the purpose of clear illustration. No one disputes that death involves a large loss of utility. However, the poor could simply lose their jobs, not be able to take their kids to day care, or not be able to visit a dying relative. In any of these cases gouging could be worse than the alternative.

hat tip to mankiw

Summer Lull

Posting will be light for much of the academic summer. Thanks to all the regular visitors.

The Evolution of Economic Psychology

Paul Rubin echoes an argument popular in economics and business circles these days. Most people fail to appreciate the gains from trade and immigration because they are trapped by Neolithic analysis. They see outsiders as threats to the tribe. They view competition as a zero sum game and they over-estimate the importance of anecdotes. What they really need is a good dose of economics education.

There is a part of me which is inclined to agree. Certainly impetuous young freshman, eager to change the world, often transfer models of small group interaction to the national stage. They forget the costs of information. They are unaware of the wide dispersion in preferences. They consistently overestimate the effectiveness of deliberate social pressure. They are also vulnerable to the Neolithic traps Rubin describes.

In my experience, however, the average person is more immune to those types of errors. Such analytical errors are most prevalent in white space thinking; the kind that passionate intelligent college students revel in.

Most people, however, rely on experience. Indeed, experience is so important in the modern world precisely because instinct is so ill suited to it. But that is another post. Trade and illegal immigration are so hated in the decaying cities of the Rustbelt, in the ghost like mill towns of Carolina, and in the crammed exurbs of Southern California because their experience with it is so horrific.

Some Americans see that and think, “That could be me” but more see and think “but for the Grace of God that would be.” The difference is subtle but important. The first involves a mistaken estimation of probability, the second a sympathetic heart. Both might be born out our evolutionary past, but the later is no less relevant today.

The real question is why so many economists are so quick to dismiss such objections as ill formed. The first question shouldn’t be why is this person wrong, but how can I understand what they are really complaining about. Is it truly a misestimation of the dangers of trade, or is it a cost that we have failed to pick up? Is sympathy an important externality? Is fear of change a real largely uninsurable cost? Do social spillovers induce a particular and non-linear pain when children have to leave home to find a job elsewhere?

These are the questions we should be asking, but perhaps the psychology of economics isn’t as evolved as we like to think.

Hat tips: Mankiw and Caplan

Signal to Noise Ratio

Will Wilkinson takes a walk on the dark side. He agrees with Bryan Caplan that education is mostly just a signal that you are already talented and suggests that there is “a huge entrepreneurial opportunity for whomever can come up with an alternative scheme of credible human capital certification”

My longstanding objection to the signaling hypothesis is two fold

1) The market abhors unclaimed profits. That is, it is hard to imagine that individuals in the economy are spending vast resources on something which is largely useless and that profit maximizing firms are rewarding them for doing so!


2) There is little to no evidence for the signaling hypothesis. The evidence shows that when we control for ability the return to college goes up, not down. For me this explains why nerds tend to find school useless. It was useless for them. That doesn’t mean that it’s useless for everyone.

My own theory is that the human capital formed in higher education is the ability to solve problems, manage time, work independently, seek out assistance, communicate your ideas, form and in some cases direct teams. These skills, not knowledge are what employers want.

Traditionally education focused on the classics for the same reason that athletes run hills. They’re hard. It’s not that your ability to run hills signals your ability as a football player or wrestler. It makes you a better football player or wrestler.

Now in athletics there was a revolution in “sport specific training.” That is, some people said “hey why don’t we have these kids train in ways that are actually related to the sport they are playing.”

It made a difference but not a huge one. The key factors of strength, speed, motivation, endurance, emotional self-discipline and tolerance for pain where sometimes better honed under conditions that had nothing to do with the actual sport.

Education, I believe, operates mostly the same way. The skills needed to direct an engineering project are sometimes best honed by slogging your way through purposefully near impossible homework assignments. The understanding of unintended consequences needed for white space thinking in big business may come best from analyzing why it is that none of your favorite economic policy proposals work out the way you thought. The communication skills needed to lead a company through restructuring my first come from writing and rewriting an essay that can persuade a stern professor that Hume is properly considered an atheist, not a deist.

In each case it is the skill set that is important. The knowledge is relatively unimportant.

hat tip to Kling

Technology and Trade

A reader asks where technological change fits into the analysis below. This question goes right to the heart of the matter. For trade to increase GDP without increasing factors trade must induce some type of technological change.

It seems pretty straight forward how this might happen with less developed countries. Technology transfer from the West pushes them closer to the frontier.

The argument gets a little more complex when you start thinking about developed countries. Anyway you slice it you are going to have to give up constant returns to scale to get technological growth from trade.

The options I see are:

1) The market for advanced technology grows which increases investments in R&D.

2) There are spillovers at the international level. That is, American firms learn techniques from foreign firms and vice versa. This is a little bit different than the first because a technique might be something like Total Quality Management which isn't quite the same as a new technological device.

3) Efficiency through dynamicism. I haven't seen this as a model but I think many economists believe that robust competition in and of itself can push the technological frontier. I think many observers would agree that AMD's competition with Intel was key in speeding up the development time in semi-conductors.

However, as I have said before once you open the door to these type of non-linear effects then the trade argument becomes much much more complex. For Example, it could be the case that increased trade gives the wealthier countries the opportunity to crush foreign competition early on. If you believe the dynamicism argument this might be bad in the long run.

What Happens to A Market Disturbed

There seems to be some confusion about the difference between welfare loss and GDP loss. Welfare loss (in partial equilibrium) is approximated by the Harberger Triangle. In the graph above C.

Partial equilibrium GDP loss is how much smaller the market is. In the graph above that is A - B. We measure the size of the market as quantity X price.¹


It is entirely possible for the Harberger Triangle to be large and the GDP loss to be negative. That is, a tax could decrease welfare but increase GDP.

Moreover, in general equilibrium GDP loss can only come from decreased production. For most of our models that means that either there has to be less labor supply or less capital. Same labor, same capital implies same GDP.

Why is this important.

First, in most cases I believe GDP losses are significantly smaller than welfare losses. I may be able to prove this always true but I have to think about it.

Second, the standard answer that economists give when talking about the losses from taxation, tariffs, regulation, etc is a welfare measure. Yet, policy makers hear a GDP measure. In the back of policy makers minds they are already converting GDP to welfare. If you give them the wrong number they will convert twice and really overestimate the loss.

(1) Just as in Harberger case we assume that taxes are lumped summed back and spent on something else.

What's New About the New Offshoring

I am happy that economists like Alan Blinder are rethinking the consquences of free trade. It is too easy for most economists to conflate flawed reasoning with a flawed position. Even fools are right sometimes.

This, I believe is the case with free trade. The fact the anti-free trade crowd espouses a reasoning that does not hold up to scurnity does not imply that they are necessarily wrong.

Blinder's critque brings up the heart of the issue. There will be a transition process. That process will be difficult for some people. To the extent that we care about those people, we must be aware the consquences of globalization and be prepared to address them.

Moreover, it is in our naked self-interest to do so. A favorite quote of mine:

Why do we care about the poor? Because when they revolt, they always hang the elite.

Perhaps the new message should read:

Why do we care about the upper middle class? Because when their jobs are threatened they always vote out the current administration.

If there is anything new about the new offshoring then that's it. Its not how I would have prefered to gain allies, but I'll take it.

Nothing New Under the Sun?

Interestingly, my background research on "cognitive capital" turns up some work by McFadden and others around 2000. The really cute thing is that they actually use the term "cognitive capital" and in roughly the same way I use it.

As far as I can tell the work seems to be mainly empirical in nature, primarily focusing on experiments. I have not yet seen a formal theory. If anyone has seen one let me know. I think there is some really cool work to be done here.

If you can model comprehesion as a produciton function of cognitive labor and cognitive capital then the Inada conditions should hold. If you combine that with non-linear depreciation my guess is that the importance of early childhood eduction/mental stimulation will fall right out.