This paper by James J. Heckman examines the sources of skill formation in a modern economy, emphasizing the importance of both cognitive and noncognitive skills for economic and social success. It highlights the dynamic and synergistic nature of skill development, where early investment promotes later investment, and noncognitive skills and motivation are crucial determinants of success. The paper critiques current policies that focus primarily on cognitive skills and formal academic institutions, neglecting the roles of families and firms in fostering learning. It argues that early interventions and informal learning environments are more effective than formal schooling alone. The paper also discusses the costs and benefits of various educational policies, such as college attendance and job training, and suggests that current investments are inefficient, with a greater return on investment in the very young. The analysis is supported by empirical evidence, including studies on credit constraints, school quality, and the impact of competition and incentives.This paper by James J. Heckman examines the sources of skill formation in a modern economy, emphasizing the importance of both cognitive and noncognitive skills for economic and social success. It highlights the dynamic and synergistic nature of skill development, where early investment promotes later investment, and noncognitive skills and motivation are crucial determinants of success. The paper critiques current policies that focus primarily on cognitive skills and formal academic institutions, neglecting the roles of families and firms in fostering learning. It argues that early interventions and informal learning environments are more effective than formal schooling alone. The paper also discusses the costs and benefits of various educational policies, such as college attendance and job training, and suggests that current investments are inefficient, with a greater return on investment in the very young. The analysis is supported by empirical evidence, including studies on credit constraints, school quality, and the impact of competition and incentives.