The Economics of Scaling Early Childhood Programs: Lessons from the Chicago School

Many ideas succeed in small trials but weaken considerably at scale. Using early childhood investment as a case study, this paper develops a dynamic microfounded human capital model stylized in the Chicago tradition. The framework features optimizing agents, complementary skill formation, and a policymaker choosing scaling strategies. The model shows that naive extrapolation from pilots systematically overestimates societal impact by overlooking voltage drops: declining benefit-cost profiles due to unrepresentative samples and contexts. Optimal scaling requires option C thinking, a mechanism-based design approach that anticipates these failures through backward induction from real-world implementation constraints. Studies in this special issue enrich the model’s insights.