An Update Concerning the Economics of Lighthouses

Lighthouses have been a canonical example for economists--but what that example is intended to illustrate has shifted dramatically over time. 

The lighthouse example was original used by economists as an example of a situation where government provision of a good was necessary, because lighthouses could not easily impose charges on ships passing at sea, and so a private firm could not earn a profit by investing to build a lighthouse. This example dates back at least to John Stuart Mill's 1848 Principles of Political Economy. In Book V, Chapter XI, "Of the Grounds and Limits of the Laisser-faire or Non-Interference Principle," Mill writes: 

[I]t is a proper office of government to build and maintain lighthouses, establish buoys, &c. for the security of navigation: for since it is impossible that the ships at sea which are benefited by a lighthouse, should be made to pay a toll on the occasion of its use, no one would build lighthouses from motives of personal interest, unless indemnified and rewarded from a compulsory levy made by the state.

The lighthouse example was then cited by a succession of prominent authors as an example where government action was needed because markets could not function, including repeated mentions in Paul Samuelson's classic introductory textbook that defined economics pedagogy for most of the second half of the 20th century (and arguably since then, too). 

But Ronald Coase reversed this argument in his classic essay "The Lighthouse in Economics" (Journal of Law and Economics, October 1974, 17:2, pp. 357-376). He discussed the use of the lighthouse example by Mill, Samuelson, and others. But Coase then pointed out that however much these earlier arguments appealed to intuition, as a matter of actual historical fact, many British lighthouses in the 17th and 18th centuries were in fact built and run by private companies. 

The common process was that private investors would petition the Crown for a "patent" to build a lighthouse in a certain location. The petition was signed by local ship-builders and ship-owners, who pledged that they were willing to help pay for the lighthouse. "The King presumably used these grants of patents on occasion as a means of rewarding those who had served him. Later, the right to operate a lighthouse and to levy tolls was granted to individuals by Acts of Parliament." Ships that arrived in nearby ports where then charged tolls. In other cases, Trinity House--an institution dating back to the medieval guilds which had authority to regulate pilotage and shipping--would apply for a lighthouse "patent," and then lease the patent to a private individual who would provide the money for building the lighthouse and receive the funds. 

All markets rely on enforcing contracts and property rights. Coase argued that in the case of British lighthouses of this earlier time period: 

The role of the government was limited to the establishment and enforcement of property rights in the lighthouse. ... [E]conomists wishing to point to a service which is best provided by the government should use an example which has a more solid backing.

Of course, one might quarrel that when it comes to the distinction between the role of government and markets in lighthouses, Coase is splitting hairs. This is a case where government is granting a right to set  up what is in effect a local monopoly, and where government often also played a role (through customs agents) in collecting tolls in the ports. This is clearly not a multi-competitor free market in action.  But on the other side, Coase did show that the earlier argument that government itself needed to provide lighthouses was oversimplified. The British government back in the 17th and 18th century was not choosing sites for the private lighthouses, nor was it financing their construction. Moreover, the lighthouses were private property: those who owned lighthouses could sell them, or bequeath them to their heirs. In modern terminology, Coase is saying that a public-private partnership, in which the private partner is responsible for investment but is also able to make a profit, is not the same thing as outright government provision. 

There have been ongoing arguments since the 1974 Coase essay concerning how to think about the public and private roles. But there has been less discussion of how the changing role of technology might reshape the lines between public and private. Theresa Levitt argues that Coase was correct to point out the role of the private sector in lighthouses of the 17th and 18th centuries. However, she argues that changes in lens technology, greatly altering the cost and power of lighthouses, was an economic change leading back to the old wisdom that government provision of lighthouses was necessary. Her essay is "When Lighthouses became Public Goods: The Role of Technological Change" (Technology and Culture, January 2020, 61:1, pp. 144-172). She writes: 

The crucial technological change was in the illumination apparatus, with the introduction of mirrors in the 1780s and Fresnel lenses in the 1820s. This was not only a change in technical performance, as each development increased the brightness by more than an order of magnitude. It also brought about the sort of social and institutional transformations that historians of technology have identified as a technological system. As lighthouses became reliably visible at safe distances for sea-coast lighting the first time, their purpose and function changed, as well as their costs and financing. The lighthouse system of the seventeenth century discussed by Coase was fundamentally different from that of John Stuart Mill and Paul Samuelson, with different expectations, expenses, and implications for excludability. While a market could support the lights that existed before 1780, which were primarily effective at close range, it could not support the transformed system that emerged in the wake of improved illumination. Nor could the market provide for the technological improvements, with no private owners of lighthouses investing in Fresnel lenses, one of the key improvements. Only after England introduced greater state intervention did the lights improve.

The private lighthouses of the 17th and 18th centuries mostly burned candles or coal, and could be seen for no more than about five miles. But in the late 18th century and into the 19th century, there was a wave of innovation involving oil lamps for illumination and lenses to focus the light out to sea. But Levitt argues that the breakthrough innovation was the Fresnel lens in 1820. France had abolished private lighthouses in 1792, and instead used a government Lighthouse Commission. This government commission hired August Fresnel to design and install this new light, which was essentially visible all the way to the horizon. Levitt describes the next step: 

The French Lighthouse Commission placed Fresnel in charge of a massive overhaul of the French lighthouse system known as the Carte des phares. ... Instead of focusing on port entrances alone, the plan was now to form a rational network which would illuminate the entire coast, so that whenever a ship went out of sight of one lighthouse, it would already be entering into sight of another. ... Fresnel divided the lights into different orders based on their size, with the largest, first-order lights warning of a ship’s first approach to the coast, second-order lights aiding in the navigation of tricky passages, and the smaller “feux de port” marking port entrances. ...

One of the key attributes of the system was that it would allow mariners to distinguish between the lights, and thus know their precise location at all times. Fresnel proposed three distinct light signatures: a rotating light of eight bulls-eye panels that flashed every minute, a rotating light of sixteen panels that flashed every thirty seconds and a fixed light that gave out a continuous beam . The rotating lenses were mounted on columns that were turned first by an escapement mechanism, then by chariot wheels, and finally on a mercury bath (an idea conceived by Fresnel but not put into practice until the 1890s). The parabolic apparatus could also be rotated to produce a distinct flashing light. But Fresnel went one step further: carefully arranging the various lights so that no two similar ones were alike, and, with the visibility of lights overlapping, a sailor would be able to identify their location with precision. Jules Michelet commemorated the completion of the project in 1854 with the phrase, “For the sailor who steers by the stars, it was as if another heaven had descended to earth.”

Levitt makes a case that when John Stuart Mill was writing about lighthouses back in 1848, he was well aware of these changes. It turns out that one of Mill's childhood teaches was a British leader in efforts for upgrading Britain's lighthouses, which for a long time lagged behind those of France. The US soon adopted the French approach. 

The United States had leapfrogged over Britain as well after adopting the French model of lighthouse provisioning. The colonies built ten lighthouses under British rule ...  The federal government appropriated them in 1789 in the first application of the Commerce Clause. Substantial investment in infrastructure only came in the 1850s, however, when a coalition of sailors, scientists, and engineers demanded the creation of a lighthouse board modeled on the French Lighthouse Committee. This board effected a massive, tax-funded program of new building and updated technology, and by the end of 1859 the United States had more than twice as many lighthouses as the British, virtually all of them equipped them with Fresnel lenses.

Thus, the history of lighthouses suggests a lesson that for focused and local projects with static technology, a public-private partnership can work well. But for development and investment in a new technology which will be applied to an interconnected national network where it is difficult to charge end-users for value received, government may usefully play a larger role. Levitt writes: 

This fact can also help us understand the lighthouse’s transformation into a public good. When lights simply marked harbors, one could charge every ship that entered the harbor. But when a light marked some empty, desolate stretch of coast, it was not so easy to charge whoever happened to pass by. Rather than being “plucked from the air,” Mill’s position accurately reflected the new situation. ... A more detailed study of lighthouse administration supports the status of the lighthouse as a public good: the private market failed to either develop or invest in the technology necessary to establish the effective sea-coast lights now associated with the term “lighthouse.”

The Closing of the (Urban) Frontier

Much of the history of the United States for its first century is a story of expansion from its original foothold on the eastern seaboard across the North American continent. By 1890 or so, that expansion was over. The historian Frederick J. Turner wrote about this shift in a famous 1893 essay, "The Significance of the Frontier in American History."  He began: 

In a recent bulletin of the Superintendent of the Census for 1890 appear these significant words: “Up to and including 1880 the country had a frontier of settlement, but at present the unsettled area has been so broken into by isolated bodies of settlement that there can hardly be said to be a frontier line. In the discussion of its extent, its westward movement, etc., it can not, therefore, any longer have a place in the census reports.” This brief official statement marks the closing of a great historic movement. Up to our own day American history has been in a large degree the history of the colonization of the Great West. The existence of an area of free land, its continuous recession, and the advance of American settlement westward, explain American development.

America's narrative of opportunity and mobility shifted at the tail end of the 19th century. In the 20th century, the narrative focused much less on a rural frontier, and instead was a story of moving to the city, where the opportunities to raise one's economic status and social status. But over the last 50 years or so, Edward L. Glaeser argues, we have in effect seen "The Closing of America’s Urban Frontier" (Cityscape: US Department of Housing and Urban Development, 2020, 22:2, pp. 5-21). 

As Glaeser points out that the end of the western frontier was an important cultural event. But even back in the decades before Turner was writing, a relatively small share of the US population was actually made up of settlers. The land that mattered most for US economic growth and was not plots of ranchland in wide-open western states, but instead the areas surrounding the urban cores of that time, what Glaeser calls the "open urban frontier." The overwhelming population movement of the late 19th and early 20th century was from rural to urban areas, often in search of economic opportunity. Glaeser writes (citations omitted): 

In a sense, America’s urban frontier became more open during Turner’s lifetime [1861-1932] because the traditional downsides of urban crowding, such as contagious disease, became less problematic. The urban frontier remained largely open during the dynamic 25 years that followed World War II. African-Americans migrated north by the millions to flee the Jim Crow South and take advantage of urban industrial jobs. Americans built new car-oriented cities in Sun Belt states like Arizona and Texas. The movement of people and firms diminished the vast income differences that once existed between locations.

Sometime around 1970, the urban frontier began to close. Community groups mobilized and opposed new housing and infrastructure. Highway revolts slowed urban expansion in car-oriented suburbs. Historic preservation made it more difficult to add new density in older cities. Suburbs crafted land-use restrictions that stopped new construction. While some productive Sun Belt cities still permitted significant amounts of new housing, even those one-time refuges of affordable urbanism had begun to be more restrictive. ...

Migration has fallen dramatically over the past 20 years, and poorer migrants no longer move disproportionately to richer places. Housing costs have risen sharply in more productive places, which has generated a wealth shift from the young to the old. Income convergence across regions has stalled.  ... America’s growing geographic sclerosis makes it increasingly difficult for out-migration to solve the problems of local joblessness. ...

The closing of America’s urban frontier seems to be a far more significant event in American economic history than Turner’s motivating fact that “the unsettled area has been so broken into by isolated bodies of settlement that there can hardly be said to be a frontier line.” Vast amounts of the American West were unpopulated in Turner’s time and remain so today. Cheap land could still be had for homesteading in 1893, and there remains plenty of inexpensive ranchland today for anyone who wants the rugged life of a mid-19th century frontiersman. By contrast, the high price of accessing America’s most productive urban areas today is an important fact of life for tens of millions of Americans.

Glaeser discusses these shifts in some detail, but ultimately, his focus is on housing costs. In the last few decades, metro areas with exceptionally high productivity and a large share of high-skilled workers have experienced a virtuous circle, where they become magnets for other high-skilled workers and still greater productivity. However, when this shift is combined with limits on housing and infrastructure, these urban areas become unaffordably expensive for those who are not already high-skill workers. The young up-and-coming go-getter, especially if the person is thinking about starting a family, would have to hesitate before moving to these areas unless there is already a high-paying job lined up. 

At least in theory, at some point the cost of living in these high-cost, high-skilled, high-productivity areas should rise so high that economic activity is displaced to other areas. But at least so far, any such process of displacement has been very slow. What gets displaced to other metro areas is often a fairly standard factory or office, not the companies (or parts of companies) with the highest economic value-added.

There are essentially two non-exclusive approaches here. One is to make it easier for people of average and lower skill levels to move to the skill-magnet cities. The major step here is make it more affordable to live in those metro areas, which involves thinking about a large surge of housing construction along with patterns of transportation. The other approach is to figure out how to increase the number of cities with concentrations of high-skilled and highly productive workers, and in particular how to have such cities more spread across the country. I've written about some proposals along these lines in "Re-seeding America's Economic and Technological Future" (January 31, 2020). Both of these approaches have numerous costs and tradeoffs, and actual policies to achieve these goals are largely unproven.

Although I don't have a proven policy to propose, I'll note  that this separation across US metro areas isn't healthy in economic terms. When people are hindered by high housing costs from moving to whether they could be more productive and earn higher wages, economic growth suffers. It's also not healthy in political terms. When looking at a political map of the United States, this separation between the cities that have become magnets for high-skilled, knowledge-based growth and the rest of the country is very stark. 

Some Ways the Pandemic Could Alter the Shape of the US Economy

It's clear that the COVID-19 pandemic has caused a recession. But is the form of this particular recession also reshaping the US economy in other ways? The Hamilton Project at the Brookings Institution recently published a set of four papers on the subject "How COVID-19 is Reshaping the Future of Business and Work." Video of a one-hour discussion by some of the authors, along with links to the paper, is available here. 

The short overview paper by Wendy Edelberg and Jay Shambaugh points out that this recession is fundamentally different ("How the Pandemic Is Changing the Economy," July 2020).  

Recessions often result from an imbalance in the economy— for example, overinvestment in a sector, asset bubbles, or excessive leverage by businesses and households—and a rapid change in expectations about the future. ... The COVID-19 recession was precipitated by necessary collective action taken to preserve the lives of Americans and to buy time to put responsive public health measures in place; a partial shutdown of the economy resulted from decisions by federal, state, and local governments as well as decisions by businesses and households. The nature of the shutdown led to a much sharper contraction than during prior recessions but also—so far—to a shorter period during which the economy was contracting. The unemployment rate began to fall just two months after it initially rose, and job gains in May were the fastest on record (BLS 2020). Retail sales bounced up in May after a sharp downturn in April (U.S. Census Bureau 2020a). Still, the quick onset of the recovery has not meant a full rebound, and the resurgence of the virus in June and July may signal more ups and downs for the economy. Even if improvements in the labor market and spending continue to be significant, the U.S. economy will likely face a sharply elevated unemployment rate and sizable gap in output relative to precrisis levels for well over a year (Congressional Budget Office 2020).

What are some likely effects of this particular kind of recession? David Autor and Elisabeth Reynolds point out several of them in "The Nature of Work after the COVID Crisis:Too Few Low-Wage Jobs " (July 2020). One example is what they call "telepresence," which is meant to describe a wider phenomenon than just telecommuting. 

Autor and Reynolds trace the term "telepresence" to an essay a few years back about underwater drones. As they write: 

Placing people in any physically hostile environment—such as at the bottom of the sea, in Earth’s upper atmosphere, at a bomb disposal site—entails costly, energy-intensive, life-support systems that provide climate control (i.e., oxygen, temperature regulation, atmospheric pressure), water delivery, waste disposal, and so on. By obviating these needs, telepresence not only reduces costs but also typically creates better functionality: machines unencumbered by physically present operators can take on tasks that would be perilous with humans aboard. These same lessons apply to workplaces.

Though (most) work environments are not overtly hostile to human life, they are expensive, duplicative places for performing tasks that many employees could telepresently accomplish from elsewhere, albeit with a loss of the important social aspects of work that they facilitate. Not only is providing and maintaining physical offices costly for employers, but also the need to be physically present in offices imposes substantial indirect costs on the employee. The Census Bureau estimates that U.S. workers spends on average of 27 minutes commuting to work one way, which cumulates to 225 hours per year (U.S. Census Bureau 2019; authors’ calculations). Arguably, many of us who perform “knowledge work” have been so accustomed to the habit of “being there” that we failed to notice the rapid improvements in the next best alternative: not being there.

Telepresence is not just a matter of commuting to previous job locations, of course. It also involves business travel, and rebalances the question of when it's worth a personal trip and when telepresence will suffice. It involves how telepresence may substitute for in-person visits in health care, education, retail shopping, perhaps even in areas like guidance for doing your own small repairs around the home. It involves shifts in the travel, hospitality, and entertainment businesses. Once these possibilities are discovered and explored, they will not just vanish from memory as the economy recovers. 

 Autor and Reynolds also point to prospects for "urban de-densification": 

The past three decades have witnessed an urban renaissance. U.S. cities have seen steep reductions in crime, significant gains in racial and ethnic diversity, outsized increases in educational attainment, and a reversal of the tide of suburbanization that drew young, upwardly mobile families out of cities in earlier decades (Autor 2019; Autor and Fournier 2019; Berry and Glaeser 2005; Diamond 2016; Glaeser 2020). It seems plausible, though far from certain, that the postpandemic economy will see a partial reversal of these trends. If financiers, consultants, product designers, researchers, marketing executives, and corporate heads conclude that it is no longer necessary to commute daily to crowded downtown offices, and moreover, if business travelers find that they need to appear at these locations less frequently, this may spur a decline of the economic centrality, and even the cultural vitality, of cities.

Cities have needed to redefine and reinvent themselves repeatedly over the decades and centuries. In the aftermath of the pandemic, they may need to do it again. 

Autor and Reynolds also point to "automation forcing," which is just the idea that in case you were already worried about automation and labor markets, now there is additional economic pressure to substitute machines for people. They write: 

Spurred by social distancing requirements and stay-at-home orders that generated a severe temporary labor shortage, firms have discovered new ways to harness emerging technologies to accomplish their core tasks with less human labor—fewer workers per store, fewer security guards and more cameras, more automation in warehouses, and more machinery applied to nightly scrubbing of workplaces. In June of 2020, for example, the MIT Computer Science and Artificial Intelligence Lab launched a fleet of warehouse disinfecting robots to reduce COVID risk at Boston area food banks (Gordon 2020). Throughout the world, firms and governments have deployed aerial drones to deliver medical supplies, monitor social distancing in crowds, and scan pedestrians for potential fever (Williams 2020). In the meatpacking industry, where the novel coronavirus has sickened thousands of workers, the COVID crisis will speed the adoption of robotic automation (Motlteni 2020). Surely, there are myriad other examples that are not yet widely known but will ultimately prove important. ... As the danger of infection recedes and millions of displaced workers seek reemployment ... [f]irms will not, however, entirely unlearn the labor-saving methods that they have recently developed. We can expect leaner staffing in retail stores, restaurants, auto dealerships, and meat-packing facilities, among many other places.

Yet another shift is that the business sector is seeing a wave of bankruptcies, which may lead to some monthly rates as bad as the depths of the Great Recession. On the other side, business start-up rates were already on a downward trend in the US economy. With more firms going broke and fewer start-ups, the economic stage seems set for large firms to play a bigger role. Moreover, some months down the road if and when the public health trends become more clear, a number of weakened firms will want to seek out partners for mergers as they try to reconstitute their strength.  Nancy L. Rose discusses these issues in  "Will Competition Be Another COVID-19 Casualty?" (July 2020). She writes: 

In the tech sector, responses to COVID-19 produced strong positive demand shocks for many firms engaged with the digital economy, as work, school, shopping, entertainment, and other traditionally in-person interactions all moved online (Koeze and Popper 2020). Social media sites saw increases in usage, and online video and streaming services reported record growth in demand, likely reflecting a combination of new users and more-intensive engagement by preexisting users. This has tended to reinforce the preexisting advantages of the largest firms, which often had the systems, logistics, and capacity to better accommodate the surge in demand associated with the shift online. This impact is likely to reinforce their dominant position not only during COVID-19 shutdowns, but also extending into the future. As many households tried online grocery shopping for the first time, for example, their experiences may keep them as regular online grocery shoppers even when the economy reopens, exacerbating the shift from brick-and-mortar retail to online shopping, and to the largest online grocers, including Amazon’s subsidiary, Whole Foods. If this reinforces the network advantages of these large platforms, it may become even more difficult for competitors to gain a toehold. As competition diminishes, consumers, workers, and suppliers all stand to lose.

These economic shifts will not affect all groups equally. The in-person service industries that are some of the hardest-hit in this recession are also industries that hired relatively large numbers of low-skilled workers and also women worker. Women who are parents are also experiencing a double-whammy in the recession, because they are more likely to bear the larger share of child-care responsibilities at a time when schools and child-care facilities are shut down. Betsey Stevenson discusses this issue in "The Initial Impact of COVID-19 on Labor MarketOutcomes Across Groups and thePotential for Permanent Scarring" (July 2020)

The pandemic has also hit women harder than men by the increased burden of care since children’s schools, daycare providers, and camps have closed, and many remain closed. Additionally, many families have had to consider how to best provide elder care and how to ensure the safety of those more vulnerable to the worst effects of COVID. Women’s traditional caregiving role and the crisis of care that many families are facing in the United States could have long-term repercussions for women’s labor force attachment and success, although we have yet to see this impact in the data. ... 

While Congress has scrambled to save airlines on the belief that air travel is essential for a well-functioning modern economy, they have overlooked what is perhaps the most important industry in a modern economy: our child-care providers and schools. Parents will continue to struggle with child-care issues, particularly with the potential of children out of school and without child care this coming fall and the risk to grandparents of relying on them for child care. The pandemic has highlighted the fact that child care is not a women’s issue, it is not a personal issue, it is an economic issue; parents cannot fully return to work until they are able to ensure that their children can safely return to child-care and educational arrangements. The child-care crisis spurred by the pandemic could force families to make difficult decisions that will lead to lower labor force participation and lower earnings for decades to come. The solution to preventing large-scale permanent scarring, particularly among women, is to prioritize safely opening schools, to ensure that child-care centers do not go bankrupt and that the centers have the resources to adapt their buildings and practices to new protocols like improved air flow and increased surface disinfecting, and to encourage workplace flexibility

My youngest child graduated from 12th grade earlier this year, so I no longer have a child in the K-12 system. But I'll point out in passing that several nonpartisan organizations and reports have argued that for the good of the children, and with appropriate precautions in place,  K-12 schools should be reopened this fall. For example, here's a short statement from the the American Academic of Pediatrics (June 25, 2020) and here's a more detailed report from the National Academy of Sciences on
Reopening K-12 Schools During the COVID-19 Pandemic: Prioritizing Health, Equity, and Communities. 

Equality of Opportunity for Young Children

Children are born into very different settings: families with higher or lower incomes; two parents or one; neighborhoods with high poverty and unemployment; and many other differences. On average, and of course with lots of individual exceptions, these circumstances of early childhood matter. For example, Ariel Kalil and Rebecca Ryan write in their essay in the Spring 2020 issue of Future of Children ("Parenting Practices and Socioeconomic Gaps in Childhood Outcomes"): 

Socioeconomic status is correlated across generations. In the United States, 43 percent of adults who were raised in the poorest fifth of the income distribution now have incomes in the poorest fifth, and 70 percent have incomes in the poorest half. Likewise, among adults raised in the richest fifth of the income distribution, 40 percent have incomes in the richest fifth and 53 percent have incomes in the richest half. Many factors influence this intergenerational correlation, but evidence suggests that parenting practices play a crucial role. These include doing enriching activities with children, getting involved in their schoolwork, providing educational materials, and exhibiting warmth and patience. Parental behavior interpreted in this way probably accounts for around half of the variance in adult economic outcomes, and therefore contributes significantly to a country’s intergenerational mobility.

For those unfamiliar with the term, "socioeconomic status" or SES is common term in the social sciences. It's often defined a little differently across various studies, but it commonly includes some mixture of data on income, education, and occupation. This issue of Future of Children looks at a number of factors that have a bigger effect on children from low-SES families. Here are some examples: 

Melissa S. Kearney and Phillip B. Levine look at "Role Models, Mentors, and Media Influences." They point out that children born into families with different income levels grow up in different neighborhoods: more adults who are high school dropouts and fewer who are college graduates, higher unemployment, more single mothers, more families receiving public assistance. 

They also look at data from the Child Development Supplement to the Panel Study of Income Dynamics (PSID-CDS) and find that the ways in which children spend time are different in lower-SES households: specifically, less time in school and family or other adults, and more time involved with media. They write: 

The amount of time children spend in school has risen over the years, particularly among preschool children. Between 1981–82 and 2014, the length of time spent in preschool has almost doubled, jumping from a little over two hours per weekday to four hours. This is consistent with the rise of full-day preschool programs during this period. ...  We also see a large shift toward children spending much more weekend time with media, though weekday media exposure hasn’t changed much. Weekend media exposure has jumped by 62 percent among children ages 12 to 17, and by roughly 40 percent among younger children. The data show a corresponding drop in time spent with family, other adults, and peers.

Young low-SES children spent considerably more time exposed to media and considerably less time in school, as compared to higher-SES children. In fact, low-SES children between the ages of two and five spend more than twice as much time exposed to media as do high-SES children: 2.6 hours per day versus 1.2 hours per day. They also spend much less time in school: 3.7 hours per day versus 5.2 hours. ... Other researchers have found especially large summer timeuse gaps across SES groups, most notably in children’s television viewing.

Other papers in the issue, like "Peer and Family Effects in Work and Program Participation," by Gordon B. Dahl and "Social Capital, Networks, and Economic Well-being," dig into the effects of growing up in neighborhoods with different social and peer networks. 

In their essay, Ariel Kalil and Rebecca Ryan "provide an overview of what scholars know about the differences in parenting behavior by SES that contribute to differences in children’s outcomes by SES." They survey evidence  that "high-SES parents have consistently engaged in a wide range of enriching activities in and outside the home—such as reading to children and taking them to the library or a museum—far more often than their lower-SES counterparts." They mention the well-known study of how many words children hear in their early years: 

A famous example of this difference comes from a study by Betty Hart and Todd Risley, who intensively observed the language patterns of 42 families with young children. They found that in professional families, children heard an average of 2,153 words per hour; in working-class families, the number was 1,251 words per hour; and in welfare-recipient families, it was only 616 words per hour. By age four, a child in a welfare-recipient family could have heard 32 million fewer words than a classmate in a professional family. More recent studies have clarified that the bulk of the difference in the number of words heard by children in higher- versus lower-SES families comes from words spoken directly to the children, not words said when children are present, and that the language used in higher-SES homes is more diverse and responsive to children’s speech than that in lower-SES homes. This SES-based difference in linguistic environments could plausibly contribute to SES-based gaps in children’s early language skills, especially given the robust evidence linking the quantity and quality of parents’ speech to young children to children’s early language development.

More broadly, research has found differences in parenting styles: 

Mothers living in poverty display less sensitivity during interactions with their babies than do their higher-SES counterparts, and in descriptive analyses these differences explain gaps in children’s early language outcomes and behavior problems. ... Authoritative parenting describes a broad style of interacting in which parents place high demands on children but also use high levels of warmth and responsiveness. Authoritarian parenting, by contrast, is characterized by strict limits on children and little warmth or dialogue, and punishment tends to be harsh. Studies have found that parents—both mothers and fathers—with more education are more likely to use an authoritative style than less-educated parents, who are likelier to use either an authoritarian style or a permissive style (characterized by “low demands coupled with high levels of warmth and responsiveness”), a pattern we see within racial and ethnic groups and in cross-country comparisons. Supporting these broad differences in style, studies have also shown that lower-income parents use more directives and prohibitions in speech with children than their middle-income counterparts do. Finally, in a large national sample, researchers saw a significant negative correlation between punitive behavior (such as yelling and hitting) and income.

One reason behind these differences is the financial resources available to families. A common pattern is that lower-income families spend a greater share of income on their children than higher-income families. But in absolute dollars, the gap between what high- and low-income families spend on children is rising. Moreover, the gap in time spent with children by high-income and low-income families is also rising: 

The best evidence on differences in money spent on children across the socioeconomic distribution comes from two studies by Emory University sociologist Sabino Kornrich, using data from the Consumer Expenditure Survey. (This survey, conducted by the Bureau of Labor Statistics, provides data on the expenditures, income, and demographic characteristics of US consumers.) Kornrich and his colleague Frank Furstenberg found not only that parents at the top of the income distribution spend more on children’s enrichment than lower-income parents do, but also that the difference in real dollars has increased substantially since the 1970s. This spending gap has grown despite the fact that parents at all income levels are devoting an increasing share of their income to children, and that the lowest-income parents spend the largest share. ...

That said, high-SES parents (especially mothers) tend to work more hours than lower-SES parents and have less discretionary time—but still spend more time with their children. This stems from fact that higher-SES parents (especially mothers) spend more of their childcare time primarily engaged in activities, while lower-SES mothers tend to spend childcare time being accessible to their children but largely engaged in housework or leisure activities. ... [I]n a crossnational comparison study, highly educated mothers in many developed countries spent more time than less-educated mothers in primary child investment activities—even in Norway, where universal family policies are designed to equalize resources across parents.

The puzzle posed by Kalil and Ryan is that in survey data, families across different levels of income and education express similar beliefs about what characteristics their children will need to succeed. But on average, families with lower levels of education and income are not spending the same time or having the same success in providing these skills. 

Family structure surely plays a role here as well, and Melanie Wasserman contributes an essay on "The Disparate Effects of Family Structure." The big-picture patterns are probably familiar to many readers, but at least for me, they have not lost their ability to shock. From the 1960s through the 1980s, there is a sharp decline in share of children living with two-parent families, which has leveled out since about 1990. 

The pattern is less extreme for some groups and more extreme for others. Here's the data on black children, where the share growing up with two parents dropped sharply in the 1960s and 1970s and has remained at that lower level since then. 

As Wasserman points out, the effects of growing up in a family without a father, and in a neighborhood with few fathers, seems to have a negative effect on boys in particular. 

Research indicates that growing up outside a family with two biological, married parents yields especially negative consequences for boys, with effects evident in educational, behavioral, and employment outcomes. On the other hand, the effects of family structure don’t vary systematically for white and minority youth—with the exception of black boys, who appear to fare especially poorly in families and low-income neighborhoods without fathers present. ... The evidence on the disparate effects of family structure for certain groups of children may help explain certain aggregate US trends. For instance, although boys and girls are raised in similar family environments, attend similar schools, and live in similar neighborhoods, boys are falling behind in key measures of educational attainment, including high school and college completion. The fact that boys’ outcomes are particularly malleable to the family in which they’re raised provides an explanation for this disparity. ... And when we’re considering policy, it’s important to emphasize that the benefits of being raised by continuously married parents don’t stem from marital status alone. Instead, parents’ characteristics, their resources, and children’s characteristics all work together. In particular, when their biological fathers have limited financial, emotional, and educational resources, children’s cognitive and behavioral outcomes are no better when they’re raised by married parents than when they’re raised by non-married parents.59 Perhaps for this reason, policies intended to encourage marriage or marriage stability among fathers with limited resources are unlikely to generate lasting benefits for children.

The issues offers a number of other angles and perspectives as well. For example, I posted a few weeks about about Daniel Hungerman's essay on investigates "Religious Institutions and Economic Wellbeing," which explores an institution that also provides support and networking.  There are a couple of articles about articles about discrimination and bias, relating to the effects on parents and families, and also whether young people grow up believing that they have an  opportunity to succeed: 

"How Discrimination and Bias Shape Outcomes," by Kevin Lang and Ariella Kahn-Lang Spitzer, and "The Double-Edged Consequences of Beliefs about Opportunity and Economic Mobility," by Mesmin Destin.

Many of the article discuss possible policy interventions, and a number of the ideas are being pilot-tested in communities around the country. Here, I'll just say that a lot of the interventions are focused on families: for example, support groups or home visits for new parents, helping new parents set goals for the kind of parents they want to be and then follow-up on these goals, income support for new parents, job training and placement, and other steps. It seems important to continue experimenting with such programs and paying attention to the results. 

But I'll also add that it may be of equal or greater importance to focus on the communities in which children from low-SES households are growing up. What I have in mind here is support for public libraries, with after-school and evening hours; public parks with opportunities for recreation and hanging out; passes and concrete travel plans to go to museums, historical sites, state parks, cultural events;  pre-school and after-school programs; recreation centers; and just the basic provision of carving out ever-larger safe areas and times in neighborhoods.