Arnold Kling  

An Idea only an Economist Could Love

Malcolm Gladwell on Enron... Juntas vs. Open Societies...

Dwight Lee writes,

The suggested policy is straightforward. Simply give Americans the right to sell their citizenships to non-Americans, with the sellers having to leave the country and the buyers allowed to move in with all the rights and opportunities of any other U.S. citizen.

Lee suggests that the very poor would be the ones who sell their citizenship rights. However, this may not be the case. The people who would sell citizenship rights would be people who get the least value for those rights at the margin. This might be someone who is getting ready to marry someone from another country or to retire to another country.

UPDATE: "PGL" recasts Lee's argument in tariff-vs.-quota terms.

Putting price tags on human beings [might] sound objectionable to some, but some economists find the restrictions of the mobility of people even more objectionable.

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The author at Economist's View in a related article titled Trading Places writes:
    Arnold Kling finds An Idea only an Economist Could Love suggesting that creating a market for U.S. citizenship would help the poor. He says of the idea: Dwight Lee writes, The suggested policy is straightforward. Simply give Americans the right [Tracked on January 2, 2007 2:55 PM]
The author at Adam Smith Institute Blog in a related article titled Blog Review 97 writes:
    Scott Burgess is back at The Daily Ablution. Today's target is the Today Programme and their Yoko Ono show. Arnold Kling notes an interesting argument. Why shouldn't citizens who are emigrating be allowed to sell their citizenship to those wh... [Tracked on January 3, 2007 10:43 AM]
The author at 3x09_3x10 in a related article titled One US Citizenship, like new! No reserve! writes:
    Would you auction off your citizenship? If you’re born within our borders or on a military base you’re given US citizenship with little question. And if you’re an immigrant it was a matter of a lottery, rudimentary background checks, paperwork, [Tracked on January 3, 2007 10:59 AM]
COMMENTS (28 to date)
Bruce G Charlton writes:

The idea doesn't sound very likely to happen - but if it did, it might encourage what I term 'reverse migration' - ie. from the developed to the less-developed nations.

My hunch is that reverse migration is the solution to 'outsourcing' and other consequences of globalization; and we will see a lot more of it.

For example (to simplify), US mathematics professors will be displaced from their jobs by better Hungarian ones, and will migrate to Hungary to teach at the Hungarian colleges where the Hungarian professors _would_ have been teaching pre-globalization.

This kind of thing requires the continued expansion of English as a universal second language, but since that is in everyone's interests (except for local cultural elites) I think this will happen anyway.

Vincent Clement writes:

Question: Where do the sellers go? Since most, if not all countries require some form of identification that indicates an individual's citizenship, how would a seller enter another country? It seems to me, for this work there would have to a sufficient number of countries that would either permit the sale of their citizenship or permit people to enter on temporary visas. Am I missing something?

Vincent, There are several countries that allow dual citizenship. India being one. So a person could get the back-up one just in case. If you had a couple of million US dollars, I can't imagine any country turning you away.

But this brings up a lot of issues. Would the Libs sell off their citizenship for cheap? Consider they already are saying they want to denounce their citizenship.

Would homeless people sell it off?

And would an old person's citizenship be worth the same as a young woman's? Considering that allowing the demographics to change in the process and thus larger birth rates?

Alex writes:

That's a fancy idea, I trade my citizenship for a few quids if someone jolly wants it.

quadrupole writes:

I would say that you would have to set the following conditions for sale:

1) The seller would have to have citizenship or permanent residency in another country.

2) The seller would only be able to close the sale while physically outside the country (thus no deportation costs), or posting of a deporation bond (refundable upon physical exit from the country).

I think this would be very likely to cause other countries to sell citizenships, since it would create a large market for people seeking to swap down from high value US citizenships to lower value citizenships.

The more interesting question for me is whether citizenships could be used as general purpose property. For example, could I borrow against mine? If I could, could the lender forclose? How exactly would that work?

I could see a lender as a condition for making a loan against citizenship requiring either

a) Another citizenship or permanent residency.
b) An option to buy another citizenship and a bond to cover that cost.

I could also see the lender requiring posting of the deportation bond. Naturally, all of these costs could be rolled into the loan.

The possibility of using citizenships for finance becomes even more interesting when you consider the potential to finance purchase of citizenship for foreigners. A talented Indian engineer could probably secure financing, a migrant agricultural worker probably could not.

Another interesting approach to financing of citizenship is it's possible application to all kinds of other problems of human capitalization. Currently our student loan programs provide all kinds of bad signalling around college education. People take majors that won't even begin to pay the cost of their education, and student loans make that possible. Might student loans be replacable by citizenship loans?

Are citizenships leasable? Can I buy up a portfolio of citizenships and lease them to folks who want to come to the US temporarily. That way not only can I extract rents, but I can also hopefully gain appreciation on the value of citizenships...

Hmm... if you look at what property did for land (in the De Soto sense) imagine what it could do for citizenship...

KipEsquire writes:

Why stop there? How about letting minorities "sell" their affirmative action rights or the handicapped their ADA preferences?

Snark writes:
Almost all [of America’s homeless] own an asset—their United States citizenship—that is worth several hundred thousand dollars.
How did Mr. Lee arrive at this figure? Simple supply/demand analysis would suggest that, at several hundred thousand dollars, the market for U.S. citizenships would create orders of magnitude more sellers than buyers, ultimately causing the price to be bid down to a much lower dollar amount, at which point the cookie starts to crumble. And doesn't this presuppose a market failure, where the agents are primarily composed of poor, tired, and huddled masses?

In either case, citizenship for sale is not a new idea (at least not for the wealthy). Which makes me question why wealthy foreigners would want to buy U.S. citizenship anyway?

quadrupole writes:

There is a great distinction between citizenship for sale, and citizenship as property. No country to my awareness will allow me to *sell* my citizenship to another individual. The state retains monopoly of supply of citizenship rights, and such rights are non-transferable. Citizenship for sale isn't particularly interesting. Citizenship as property *is* :)

Snark writes:


I can appreciate the distinction you draw between the two, although I apparently see parallels that you don't. Citizenship as property is more than an interesting idea, it's intriguing. But citizenship as property for sale is still cheap.

quadrupole writes:

When I think about citizenship as property, I tend to think about the parallels to 'land' and the improvements on land as property. I tend to think Hernado De Soto. Freeing up the capital locked in citizenship rights strikes me as potentially *very* useful, on a par with the capital freed up with the notion of land as property.

What do you mean by 'But citizenship as property for sale is still cheap.'?

Snark writes:


By "cheap", I mean property value nowhere near the figure of several hundred thousand dollars Mr. Lee suggests in his article. I would be interested in knowing what valuation model he, or anyone else, would use to calculate this amount.

aaron writes:

How do you stop people from buying and selling citizenship repeatedly?

Vincent Clement writes:

Ronald: What does dual citizenship have to do with this issue? Most countries only issue dual citizenship under strict regulations. For example, dual citizenship in India only applies to people of Indian origin. It's not like some American born to American parents with absolutely no Indian background can walk down to the Indian Embassy and become an Indian citizen.

quadrupole writes:

So... consider this model (admittedly, a back of the envelope model).

The cost, per annum, of borrowing $100k a year at 7% over 30 years is around $8k a year. According to the BLS the median software engineer in the US made $74,980 in 2004. According to the median salary of a senior software engineer in India is $12,825. The differential is $62151. Clearly there are huge cost of living differences as well, but with a pay differential between the US and Bangelore of almost 5 times your annual wage in Bangelore, I imagine you could drive a lot of demand.

shecky writes:

I wonder why Dwight R. Lee considers citizenship such a highly valuable asset? Simple legal residency status would seem just as valuable for an awful lot of folks, even Americans, who may never use the privileges of citizenship and grumble over the obligations. If I were to move to the US, I might not really care about citizenship at all, but rather, my ability to earn a living, a different priority altogether.

quadrupole writes:

It's important to look at what rights citizenship conveys:

1) Right of residency
2) Right to vote
3) Certain enhanced rights and privileges under the law

Ivan writes:

You needn't require people to move out.

Just make them resident aliens. They can't vote or run for office.

Freeman writes:

This idea has some resonance with mine, which has a slightly different slant.

My proposal is that governments should (if they wish) set up a kind of bilateral "dating agency", maybe something more like a house swap arangement, but with no actual property involved. What would happen is that a citizen of one country and one of another (or equal sized families) would agree a Nation Swap. No money exchange, just change of their location and nationality, one for one. So no problems with changes in population numbers anywhere.

If you later think you have made a big mistake, just find another "date" and swap back.

quadrupole writes:

The problem with the 'date swap' approach is the gross differences in value of residency/citizenship between different places. Without cash exchange there is no way to even up the scales between the two values. You also effectively fall back to a pure barter system with none of the magical properties of property :)

Freeman writes:

Quadrupole is correct in his financial analysis, and thank goodness for the point he makes! But, most countries don't want large numbers of third world economic migrants, as their language/culture problems they bring are unnecessarily disruptive. Hence the barriers we have at present.

My proposal simply facilitates the cross-border movement of peoples who have their own reason (eg climate, retirement, etc) to want to move, separate from purely financial motives.

Snark writes:

NCH estimates there are close to 4 million U.S. homeless (those most willing to sell) in a given year. The number of applications filed annually for U.S. citizenship is approximately 1 million. But wealthy foreigners (those most able to buy) applying must comprise an infinitesimally small percentage of the total number of applicants. This would almost certainly result in a market glut and a very low equilibrium price for U.S. citizenships.

From a market standpoint, the equilibrium price for citizenships would have to fall somewhere between the highest price an average immigrant could afford to pay and the lowest price a homeless person would be willing to sell, which is probably closer to several thousand dollars (nowhere near 5x the annual wage of a Bangelorian software engineer or the several hundred-thousand dollar figure proposed by Mr. Lee).

quadrupole writes:

So first, I completely disbelieve the number of homeless quoted by NCH, however, I am willing to accept it for purposes of discussion since I have no better number to offer at this time.

Second, a DHS report shows the number of legal immigrants to the US at around 1 million per year. I would say this established a floor on the demand for US citizenship. So in four years you have absorbed the (in my opinion inflated) estimate of homeless from NCH.

Please also note, in a world were citizenships are property, the purchaser need not be wealthy, they may merely be sufficiently skilled that they can generate an income capable of supporting the mortgage for a citizenship.

Please also note that in a world with citizenships as property, I suspect there will be folks who will note that while there may be a sizable population in the US *today* who could be persuaded to sell their citizenships, that once that initial population has sold, the number of *new* citizenships likely to be sold will be smaller. As such, I expect citizenships will appreciate over time, and so will investors. Thus I expect to see investors driving up the initial price of citizenships.

Or to put it differently, let's just say the initial supply of citizenships is 4 million, and that 5% of the 4 million or so folks born each year in this country will eventually choose to sell their citizenships... that means we have a base of 4 million plus about 200 per year. After five years we've got a situation where the demand floor is about 20% of the available pool of citizenships...

Snark writes:

OK, let’s make a few adjustments. Assume the lower figure of 1.5 million, keeping in mind that this number constitutes only the homeless and not the multi-millions currently living in poverty, who would probably be willing to sell their “chips” (citizenships) if your valuation is accurate, so that the market would essentially remain flooded. And let’s raise the ante of immigrants to 1.5 million and assume a 1:1 bilateral bargaining environment, which strengthens the demand side of your argument.

First, the number of homeless would not remain static, so they’ll never be completely absorbed.

Second, financing mortgages for chips requires collateral. What collateral do most of these 1.5 million immigrants possess that qualifies? Lenders aren’t likely to hold chips (an intangible asset) as collateral based on immigrant earnings potential because the risks are simply too great (ie. the earnings potential of the average immigrant is too small). Even if lenders were initially willing to accept chips as collateral for those with greater earnings potential, what happens when jobs are lost? Do chips get repossessed and sold to the highest bidder (price is starting to fall again)? Are those immigrants who find themselves suddenly unemployed repatriated or deported (a very complex and expensive proposition).

Finally, assuming you’re correct about the number of new chips being sold is smaller, this would eventually drive up the cost of citizenship to the point where only the very rich could afford it, bringing us back to square one. However, if our hypothetical 1.5 million homeless were able to successfully expatriate to other countries $100,000 dollars richer, I suspect that a large percentage of the multi-millions living in poverty here would want to cash in their chips as well, keeping the market flooded.

Pardon me, but the whole thing is starting to sound more like a game of poker with too many wild cards than a “modest policy proposal.”

Bob Smith writes:

The article in question has a certain ?Alice in Wonderland? quality to it, but I thought I would wander into the morass, just for fun. I apologize up front for its length, but there was just too much material to work with

Immigration has become an increasingly divisive issue and chronic homelessness and panhandling are our plaguing our cities
Immigration as a ?divisive issue? will fade now that the Dems control both houses. A supply of hard working individuals that are willing to work for less than others are willing to work for is generally not perceived as a bad thing. Especially, when they show up for work sober, put in a full day?s work and generally stay out of trouble. Additionally, as long as we border Mexico and have a income ratio of 12:1 for the same work we?re going to have people moving Heaven & Earth to get here. We?d be better served if we let them come and go with as little restriction as possible, all the while making it clear that they are not part of the social welfare system until they have worked some given number of hours/weeks/months/years and have applied for Permanent Resident Alien status ? which can be fairly restrictive in nature.
Homelessness and panhandling are chronic only in the sense that we will always have them with us; just as we will always have the chronically unemployed and underemployed. The Supreme Court has ruled that we can?t institutionalize the mentally ill ? the largest contingency of non-drug using homeless - against their will, if they don?t represent a threat to the public safety. So, yes, we?ll always have them with us, but since they?re mentally ill, it?s not likely that they will have the capability and focus to complete a transaction of this nature. Actually, the more I ponder this particular aspect of this idea, the more complicated it becomes. For example: Can someone who is not of sound mind legally sell his citizenship? Can anyone imagine Congress writing legislation that permitted something of that nature? Probably not & NO! Essentially, I would expect the participation rate among the homeless to be near 0%.
Panhandlers are primarily drug/alcohol abusers. And while it may be possible to sober them up long enough to complete the transaction, who would help them in such an endeavor? Citizenship Brokers? Would these brokers have to be licensed? What would the standards be for such licensing? Could the former citizen sue for malpractice? What court would have jurisdiction? Would attorneys take these cases on contingency? My head hurts from all these questions that have no obvious answers. To sum up: I wouldn?t expect the homeless or panhandlers to make up a large fraction of citizenship sellers.

Almost all own an asset?their United States citizenship?that is worth several hundred thousand dollars
I have no idea if this is an accurate estimate of the market value of citizenship. Especially, since there is no market. It seems to me that I could make an argument that it could be more or less than the figure given. But, I?ll assume for the sake of argument that it is.

Simply give Americans the right to sell their citizenships to non-Americans, with the sellers having to leave the country and the buyers allowed to move in with all the rights and opportunities of any other U.S. citizen
So, with citizenship worth ?several hundred thousand dollars,? why would we want that money taken somewhere else? Even if the individual was non-contributing to society before he sold his birthright, he?s now ?several hundred thousand dollars? wealthier. And if this poor miserable wealthier individual were to waste it on riotous living, they would end up where they began and the economy would be ?several hundred thousand dollars? better off. Seems like win/win/win to me. That means the seller would win, the buyer would win and the economy in general would win.

Obviously almost all those who sell their citizenship will be poor.
More likely most of those who would be willing to sell their citizenship would be the retiring middle class. A couple in their mid-50?s each with 401k?s in the $400-500k range could bundle their citizenships ? making them more valuable ? and sell them for approximately $500k (given the earlier estimate). That would mean that their retirement nest egg could be somewhere between $1.3 million and $1.5 million. Seems to me that they could live like royalty in Central or South America. Add in any property or non-sheltered securities they have and the situation is even better. I?m told Gibralter is a nice place to retire to.

If someone is too mentally incapacitated to make a free choice in a market for citizenships, should she be considered competent enough to choose a life on the street rather than being institutionalized?
Only someone ignorant of the law could make such a silly statement. The mentally ill don?t choose a life on the streets, they were thrown out of the institutions by Supreme Court decision. Furthermore, once someone is institutionalized, as soon as they are stabilized, either through drug therapy or detox, they are released back into the community, where they generally return to their homeless status in fairly short order. To compound the problem, homeless men and women often have a legal guardian or conservator that represents their interests. Would that person have the capability to sell an intangible but singularly unique asset ? their ward?s citizenship? It?s unlikely that the enabling legislation would permit it.

But poor immigrants will be able to borrow the money needed to purchase citizenships based on their earning potential as Americans, and with those citizenships as collateral.
I?m not sure Bank of America will want to be in the business of foreclosing on citizenships. Seriously, what would a lending institution have as collateral? Once the buyer received the necessary documents showing he had purchased his citizenship ? an obvious requirement ? the lender is in a very precarious place. Could they have the borrower arrested? Could they foreclose on the citizenship rights? Would they then have a pool of citizenships that they could offer for resale? Would the rights revert back to the original owner?
This is why I read these kinds of columns. It makes for a mentally stimulating evening, knowing nothing like this will ever take place.

Vol Abroad writes:

I'm an expat American living in the UK. While I wouldn't ever sell my citizenship, I would gladly rent my residency spot - since I'm not really using it right now.

Even if I had to pay a residency rent to a departing Brit, I bet I could have made a tidy little sum out of my right to reside in the US.

Yes, bring it on. I definitely won't need it for the next couple of years. Any offers on a 2 year lease?

quadrupole writes:

Foreclosure of citizenship would work just as foreclosure of houses. If your house is foreclosed and you refuse to vacate, the sheriff is sent to evict you. If your citizenship is foreclosed, the law is sent to deport you. Just as the bank can't take possession of your house until you are evicted from it, they can't take possession of your citizenship until you are deported. Naturally, since you are no longer the legal possessor of your citizenship, you are liable to criminal arrest as an illegal alien, just as you would be subject to arrest for criminal trespass if you resisted eviction.

Really folks, this whole property thing is really quite well understood, just follow the well worn path and make small changes as needed and it's really very simple...

quadrupole writes:

Oh, one other thing...

Just as in the case of people being unable to pay the mortgage on their house there is a strong tendency for them to try to sell in order to recover their accumulated equity, there will be strong pressure for the holder of a mortgaged citizenship to sell in order to recover the equity they have in the citizenship.

Just as with mortgages on houses, I imagine lenders for mortgages on citizenship would require some amount of money as a down payment. Just as with mortgaged on houses, I imagine lenders for mortgages on citizenship would require proof of income, look at ability to pay, etc.

martin freeman writes:

4. Why is capitalism so prevalent in the global economy?

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