What’s the One Big Change?

I enjoy idle speculation, and like many libertarians I like to speculate on the following question: If you could make one big change, what would it be? In other words, what’s the real big issue.

I’m increasingly convinced that the one big issue is immigration. If we opened borders internationally, world GDP would increase by an estimated 50-150%. World income would double! That’s incredible. All those people living on $2 per day would suddenly by doing significantly better if they could only be allowed to work for you!

And the benefits don’t stop there! Gains from trade! By now we all should understand that if I work for you it’s because I value my wages more than my time and you value my time more than the wages (and payroll taxes, and administrative costs) that you pay in order to hire me. So by letting poor people into America they gain by making their employers better off. Their employers are made better off by making their customers better off. You and I are those customers.

So why isn’t this already happenings. There are three basic oppositions.

  1. They’ll use public services without paying taxes.
  2. They’ll depress wages and steal jobs
  3. They might be dangerous. Either because they’ll commit crimes, or they’ll vote for stupid things (like restricting immigration).

I’m not including a more traditional reason for opposing liberalized immigration: xenophobia and racism. Xenophobia makes sense from the perspective of evolutionary psychology, but it’s not a legitimate reason, and it’s one we can choose to be bigger than.

Okay, so point one, simple solution: give anyone who wants one a work visa. Problem solved. Anyone can come here, but nobody is automatically eligible for public services. They’re above board, on the grid, we can see them, and if they commit crimes they’re out. But they’re obliged to pay into a system that they can’t exploit.

Point two: empirical evidence is that the only group in America genuinely negatively affected are high school dropouts. Want to increase high school graduation rates? Increase the cost of dropping out by letting in immigrants. Everyone else is made more productive because immigrants have different skills than natives, creating opportunities for gains from trade. They are complementary to us, and so make us better off by working along side us. Imagine a lone man on an island. He’s a baker. If he meets another marooned baker, it’s nice, but not as nice as if he meets a marooned butcher.

Point three: first off, getting rid of illegal immigration will make it easier to keep people safe from the foreign menace. Second, immigrants currently have lower incarceration rates than natives. Besides, it’s cheaper to punish them: just deport criminals. No feeding, sheltering, and clothing them; just ship them off. For voting: again, just give them a worker’s visa that doesn’t let them vote.

So what’s the takeaway? A simple policy of letting people come into the U.S. to live and work will make nearly everyone better off, especially the world’s desperately poor. America’s poorest (high school drop outs) may suffer, but there are fairly simple ways to address that. Here’s one: use a slice of the tax revenue from the new immigrants to pay for GED’s, and a stipend to give these folks time to study and pass the test. If they aren’t willing to do that, then that’s on them. If they have some disability that prevents it (maybe they dropped out because of undiagnosed learning disorders), then address those problems, because with that increased tax revenue we can afford to. And anyone born after 1999 is responsible for graduating high school and will be told the costs of failing to do so.

What do we get out of it? International poverty reduction, local wealth increase, a more cosmopolitan society, and a better, more humane world.

16 thoughts on “What’s the One Big Change?

  1. Rick: I like what you are saying and I agree that this would be the one big change. However, I don’t believe that world joint GDP would increase by 50% or 150%, except in the impossibly far future, possibly. Please explain. And when you have done, I would like you to speculate on what would happen to the GDPs or currently rich countries such as the US (where I live) in the short term such as twenty years.

    I repeat that I think this is a good topic.

    • Source for the ~100% GDP increase.
      That’s on my to-read-very-soon list (yeah, I’m lazy for citing it before reading it, but this is a blog so whatever), but pp.84-85 gives a back of the envelope calculation that shows that it’s very plausible that the gain to the world’s poor amount to ~40% by allowing them to migrate. In general we would see the GNP of poor countries increase dramatically (recall that GNP is the product of people from a country while GDP is the product of people in a country.

      It’s certainly the case that the increase would require 1) people actually moving, which takes time even if red tape is eliminated, and 2) people (natives and immigrants) adjust to changes due to such migration.

      Speculating on how anything besides a gradual increase would play out is difficult, and made more so by existing inefficient policies (common pool roads, minimum wage, etc.). But in general we would see the largest gains going to the owners of land and capital. More demand for housing means that land lords will do well, and this benefit will spill over into other housing segments (note to senators: here’s your way to push housing prices back up without causing a new bubble!). Availability of cheap labor means that firms will be able to produce more at lower costs which will help the performance of pension funds. The big losers in this situation will be the low-skilled workers currently here (high school dropouts and illegal aliens… although the latter would probably move up to more productive jobs as their status changed). My guess is that native U.S. wealth and income per capita will increase at a higher rate than it otherwise would have, but the biggest increases would go to the poor people who are able to be safer and more productive than in their previous situations. I’m also guessing that the change would be S-shaped (probit-shaped?), with increasing growth at an increasing rate that finally levels off at a higher level than before. I suspect the real big upswing would start happening around 5-15 years with the inflection point coming around year 20.

      But I don’t know my history very well so that’s idle speculation. Perhaps someone can chime in with an overview of the effects of previous waves of immigration as well as the baby boom and the entry of women into the workforce.

    • Here is an ungated version of the paper for those of you who are barred from scientific research: “Economics and Emigration: Trillion-Dollar Bills on the Sidewalk?“. It was written in 2011 by an economist named Michael Clemons and the refereed version appeared in the Journal of Economic Perspectives.

      Addendum: Here is a more recent ungated paper by economist John Kennan that builds off of the Clemons paper originally cited by Rick. Vipul’s links are worth checking out, too. He does a great job at the Open Borders blog.

  2. I haven’t thought a ton on immigration, but the biggest issue for me has always been the Federal Reserve (and any central banking in general). It seems to me that no amount of social or economic change can be totally effective so long as there is a parasitic elite that controls our laws and determines how much they will rob from us to sustain their grip on power.

  3. A Long Comment on The Big Thing (open borders)

    Thank you, Rick, for causing me to read this very good paper (and thanks to Brandon for making it easily available). I did not find the 150% increase in GDP you promised . That’s OK because it helps me point to one weakness of this paper that should be relevant to any discussion of emigration/immigration focused on policies. The author seems to have been unable to extract from the others articles on which his is based any coherent time dimension. A temporal dimension seems to be lacking. When discussing public policy it ‘s always necessary to consider: “In the short run, in the long run.” An increase of world joint GDP of 150% in fifty years thanks to relaxed immigration seems plausible; the same rise by next year is out of the question, of course.

    On several issues, the author comes close to confusing “absence of evidence” with “evidence of absence.” This may be fine for a scholarly article in the discipline of economics. Difficulty to measure or to act upon should not constrain blog discussion however. Five things.

    1 “Begin with the country of origin. The departure of some people such as the skilled or talented from a poor country might reduce the productivity of others in that country.”

    “might”?

    Qualitative differences between those who emigrate and the population of origin may be very large: This is “cream of the crop” vs “bottom of the barrel” issue. This should be obvious with respect to easily measured age and health status for example. The young and stalwart go first. It may be as true with respect to difficult to measure but obviously existing qualities such as the propensity to take economic risks, for example. Thus, I would be surprised if current Mexican illegal immigrants to the US where not economically more desirable immigrants than their own siblings of the same sex who stayed put. I mean more desirable from my viewpoint, someone who is already inside a country of destination. The risks the illegals took to move act like a beneficial sift in this respect, it seems to me.

    Periodically African immigrants drown off Lampedusa in the Med just for a chance to set foot in the EU where medial jobs expect them. They all have close relatives living in the same economic circumstance at home who did not join them.*

    The author calls these considerations a kind of externalities and mentions that they are difficult to measure. Difficult to measure does not mean non-existent; it does not even mean small, as he implies. Passion is also difficult to measure, and so is the wrath of a woman scorned. Neither is small in any sense of the word. Stuff that you do not enter into the equation does not show up in the results except in an unclear, residual sort of way. Those who should be in charge of measuring them, the government bureaucracies of countries of origin, are often inept, corrupt, uninterested or discouraged from doing so by government that prefer slogans to facts. Yet, that’s no reason to write these thing off from our thinking.

    2 Author asks sensibly:

    “Is productivity mostly about who you are, or where you are?”

    Productivity clearly has a lot to do with where you are. (Take a man’s shovel in Sonora, teach him how to drive a backhoe in Brooklyn….) I don’t know what the proportions are between it and the answer to the “who” question but I think it would be absurd to set the “who” at zero. Even national origin may matter on the average: If you absolutely must choose between an unknown Englishman and an unknown Frenchman for a cook, which would you chose?

    3 Author is too quick to dismiss the argument of impoverishment caused by emigrants’ departure in their countries of origin. He even uses a logically flawed argument, I think:

    “But if human capital externalities from health workers were a first order determinant of basic health conditions, African countries experiencing the largest outflows of doctors and nurses would have systematically worse health conditions than other parts of Africa. In fact, those countries have systematically better health conditions (Clemens, 2007).

    Or, is it more likely that: African countries possessing quality health personnel training programs enjoy superior health conditions as a result (I am thinking vaccinations) and some of the health personnel they train are employable in rich countries.

    By the way, this raises the general problem of losing at – least temporarily – the benefits associated with the cost of rearing labor. When a Filipina arrives in the US at 19, ready to work in a hospital, the fact is that I contributed nothing to the cost of bringing her up to that point. Someone else has, in the Philippines, most likely. It’s possible that on the average, the home remittances of such immigrant workers more than covers the cost of rearing and training them. I don’t know if it’s true, or how often. I would like to find out.

    Author’s savant discussion of externalities seems (seems ) to conclude that even if there is a loss to the country of origin, not much can be done. Of course, something can be done: Let the country of destination pay fees to someone or something in the country of origin that supported the cost of training the immigrant worker; in other words, re-imburse at low cost the expense incurred in creating an unearned benefit in the country of destination.

    4 Policy makers in Europe are much exercised over the “lifeboat effect.” Even if immigrants’ arrival results in superior economic growth, even if it solves long term problems, as in Social Security, a sudden influx of large numbers may quickly overwhelm destination societies. It may markedly lower their standards of living. (Think of elementary school classes suddenly crowded with children who don’t know the teachers’ language.) I did not find that this article deals with this matter except between the lines, in an implied manner.

    [Wholly theoretical Figure 1 does not help me with this although I am attracted to its curves.]

    5 Author does his job as an economist well. He writes about the economics of emigration/immigration and he reports on solid research within the constraints of the discipline of economics discourse. But here are also political consequences of immigration we are free to discuss on this blog. (That’s what blogs are for, I think.) This is especially true for a libertarian blog because it poses squarely the problem of national boundaries, of the respect they are owed or not, of their convenience or inconvenience vis-a-vis libertarian aspirations.

    Political consequences of immigration loom large in the imaginations of many people in the countries of destination. The manifestations of their concern are not all vacuous or ignorant, or hysterical. The 8 million Swiss -including many immigrants – may have good reason to wonder how many people they can absorb who think that separation of church and state is not only a bad idea but a major sin. Many French people of old French origin are openly racist. Among those responsible French people who are not racist at all, it’s common to worry about the short-term consequences of the legitimate burden high fertility immigrants place on their already sinking welfare system. (The high fertility is documented; it’s not a rumor.) Many American conservatives are worried about Mexican immigrants’ high propensity to vote Democratic. In the end, it’s possible to imagine a scenario where, in combination with other factors,** Mexican immigration helps turn the United States become a one-party state for all intents and purposes. Incidentally, I like Mexicans and I think they make first-rate immigrants. See my co-author articled with Nikiforov on my – Facts Matter – blog.

    Sometimes, author handles humor a little too lightly: “Mayda (2006) finds that it is the wealthier, better educated, and less nationalist individuals in rich destination countries who have more favorable
    attitudes toward immigration.” Sure thing, I am thinking! They want a study supply of maids and gardeners.

    * As some readers already know ad nauseam, I am an immigrant myself. I had four siblings brought up in pretty much the same micro and macro environments as I. They all shared my mediocre level of educational attainment (high school or less). Three of my siblings never tried to move to a richer country as I did; another tried and failed. The difficulties inherent in emigration must select in favor of the desperate, the brave, and of the sociopathic. (Ask me for a good recent book on the latter.)

    ** The Republican Party’s current striking political incompetence (small p) looms large on my mind as I write this

  4. Rick, I had not thought of immigration that way, as the “one big change.” Many who understand how prices and free exchange work would not hesitate to argue in favor of free trade using an example such as, “Is it beneficial for society for people from New York to trade with people from Connecticut? If so then what makes trade with Canada any different, what about Mexico?” We should be just as ready to use the same example regarding immigration. “Should I be able to move from Connecticut to New York to find a job? What about move from Mexico to New York to find a job?”

    To address one of Jacques comments:
    My understanding of the empirical evidence is that “brain drain” is really not a major drag on developing countries. Further, that remittances more than make up for any losses. The quantity of remittances is very large compared with foreign aid transfers, and do not suffer from the knowledge problems that foreign aid suffers from. In short, remittances do more to develop human capital in developing countries than the loss of human capital to emigration.

    Finally, I want to raise a question regarding immigration policy. Really a secondary effect of restrictive immigration policy.
    Emigration is a from of “voting with your feet.” If the policies or institutions in your country are horrible you can leave, but if restrictive immigration policy in more developed countries prevent you from leaving you do not have this option; thus, limiting the competition for good policies and institutions. If this is the case, restrictive immigration policy could have the second order effect of limiting institutional development in poorer countries. Again, this is just an idea and if people have comments on this I would be glad to hear them.

  5. Colin: I did not find in the article of reference what you say about the net zero or near-zero effect of emigration on the country of origin. Perhaps it’s in some other refereed article or perhaps, I simply misunderstood the article. The topic is potentially important enough to not be dismissed out of hand.

    Incidentally, as my example of the 19-year old Filipina suggests, “brain drain” is a narrow construction of the issue. When high school dropout but vigorous and enterprising Jesus leaves his small village in Sonora to work as a cook’s helper in your village it’s certainly a loss to his village although it’s not really brain drain. It may or may not be a net loss depending on the size of remittances he sends home.

    I suspect that you may be indulging in the same tyranny of the measurable for which I criticize the author of the article of reference. Just tell me I a wrong.

    • Jacques, Clemens touches on remittances in the Trillion dollar bills article, but does not give it a full discussion. Other studies do find very measurable effects that argue that brain drain is not as big of a concern as we may have thought, and actually my be a net positive.

      Remittances may actually “train” the next brain and then some, offsetting the brain drain effect. Some studies even show that brain drain increases the incentive to generate skills/education. You are correct that we cannot observe what would have happened if those people did not emigrate, but we can compare places did have migration and did have migration. If anything the recent research should make people update their beliefs in the direction of brain drain is probably less harmful that we once thought. For me it has persuaded me that brain drain is actually a net positive. But as always, there is still room for debate.

      This Economist article summarizes a little of the literature, some good citations at the end of the article.
      http://www.economist.com/node/18741763

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