This chapter reviews the arguments for intervening in the lives of disadvantaged children. It examines the origins of inequality and analyzes policies to alleviate it. Families play a powerful role in shaping adult outcomes. The accident of birth is a major source of inequality. Recent research has shows that in American society, about half the inequality in the present value of lifetime earnings is due to factors determined by age 18. It is possible that the figure is as high, or even higher, in Western Europe because labour market inequality is lower there. Compared to 50 years ago, a greater fraction of American children is being born into disadvantaged families where investments in children are smaller than in advantaged families. Growing unassimilated immigrant populations in Western Europe create similar adverse trends there. Policies that supplement the child rearing resources available to disadvantaged families reduce inequality and raise productivity.

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