Bryan Caplan

"Are Low-Skilled Americans the Master Race?" Flashback

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How's this for Trackback delay - the Economist blog just referenced last year's controversial Econlog post "Are Low-Skilled Americans the Master Race?" In the process, it accidentally underscores the case for congestion charges:

America or Europe could easily be demographically swamped if even a fraction of the world's five billion other citizens headed for the West. The physical infrastructure of buildings and roads is not up to a sudden massive increase in population, much less the government institutions.

Worries about not having enough buildings are rather silly; if demand goes up, so do real estate prices. Eventually people either downsize their living space or decide that the cost of living in the U.S. is so high it's not worth coming. (That's how New York City handles the problem, after all). Worries about roads are more serious, but only because we eschew user fees and most of the advanced technology that makes them extremely easy to collect.

In writing this, I can just imagine the anti-foreign reading: Immigrants are going to make real estate unaffordable! Now let's see. What's the nationality of the owners of almost all U.S. real estate?


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TrackBack URL: http://econlog.econlib.org/mt/mt-tb.cgi/709
The author at The Free Thinker in a related article titled Immigration and the Harberger Triangle writes:
    I just had a brain-wave for a dissertation topic. In a debate on immigration at EconLog, anti-immigration commenter Tino responds to my argument that the consumer-surplus benefit to natives from immigration outweighs the effect on natives through the t... [Tracked on May 24, 2007 10:59 AM]
COMMENTS (32 to date)
Mensarefugee writes:

Frankly,
Ive always thought, and sometimes said, that the real estate argument is the weakest of the Anti-Immigrant complaints. But the other reasons to limit immigration - the main being IQ - are grave.

Tino writes:

Wrong again Professor. The argument is more subtle than that.

Unskilled immigration may increase the aggregate demand for property, but at the same time it also changes the *composition* of demand.

Areas where a lot of for example lows skilled Mexicans move in see a dramatic reduction in demand from natives. Most people do not appreciate high crime rate or living in a ghetto.
With more Mexicans the willingness to pay for the natives goes down, that of the immigrants up, until the native white/black sell and move.

They might (or might not) make a financial gain, but most will have made an economic loss. People choice to live in their house because they value their home MORE than the market price. The marginal resident (per definition) doesn’t , but the average does. If you push down the livibillity of a neighborhood down you destroy this economic value.

Unless Caplan missed this, most homeowners that experience inflow of third world immigrants to their neighborhood do not become happy because of increased demand. To the extent they can they tend to resist it. This is called revealed preferences.

The process of gentrification is yet another economic evidence that the location value of the neighborhood is higher in the hands of skilled than unskilled residents, if only the population composition would change.

Economics gives us good tools to analyze these issues. Oddly enough Caplan and others are choosing to ignore them. Why? Could it possibly be due to B I A S?

Lord writes:

How about a market in immigration? We can sell spots to the highest bidder that meets basic acceptability requirements. Residents can sell theirs if they can obtain something elsewhere. No longer would there be a question whether it is positive or negative, only a question of level.

8 writes:

If your entire life is summed up in your net worth, then yes, immigration will make some people richer. But if you look at migration of natives out of cities and restrictions on development, especially in blue states, then clearly the opposite is true- people care about things other than the price of their house, because real estate prices rise fastest in congested areas.

Americans are leaving congested cities like NYC, and being replaced by immigrants who don't mind it as much. They are moving to small(er) towns, where development is restricted. They don't want to see the place they moved to become as congested as NYC, otherwise they wouldn't have left. The term Californication would not exist if American immigration had been more restricted in the past 30 years.

As a young person in a northeast state, I can tell you that between taxes and home prices, it's very difficult to afford a home (defined as one my parents could afford). I'm already seriously considering leaving, but your proposal is to make my life worse- make more places congested and expensive, with higher taxes for new roads and schools to boot, in addition to lowering air quality (carbon taxes?!) and creating more water restrictions. No thanks.

Neal Hockley writes:

Dani Rodrik's Blog has a similar question

However, I'm not convinced.

Adam Smith said:
"It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own self-interest."

The question is, are nation states different to individuals?

Smith expected his butcher and baker to be bound by moral rules, (and not go around murdering latin americans), but did not expect them to be do gooders (in fact he was quite scathing about do gooders). Similarly, nation states should not actively harm the citizens of other nations, and should strive to trade freely with them: goods, services and capital should be exchanged freely. But I remain to be convinced that responsible governments (as opposed to individuals) should actively promote the welfare of foreign nationals. Their own citizens, however, constitute a perfectly legitimate "special interest".

Also, as a Libertarian, I'm not convinced that Bryan Caplan is a pure consequentialist, so I don't think he believes everything comes down to cost benefit analyses. Rights matter too. And some people would regard the ability to control immigration into one's society as a right, just as ability to control acces to one's own property is a right. That doesn't make them evil.

Steve Sailer writes:

No, low-skilled Americans are our fellow citizens.

In contrast, the ethnic racketeers at the National Council of La Raza, for example, want more Mexican immigration because Mexicans are members of La Raza.

Bryan, if you would spend a few minutes thinking and studying on the topic of immigration before you spew these postings, you wouldn't humiliate yourself so much. The Myth of the Rational Voter, indeed!

John Pertz writes:

Are the anti-immigration folks really arguing that the low I.Q Mexicans are going to enter the U.S and begin to reduce the land price of valuable real estate? So let me get this straight, we should not want Mexicans to enter the U.S because for the most part they are unskilled workers who will be a drag on native low wage earners. Yet as home buyers they have suddenly morphed into a consumer block with substantial buying power that is able to diminish the value of quality real estate? At some point the anti-immigration folks have to chose a line of reasoning and stick with. You cant have both sides of an argument.

Anon writes:

An "IQ problem"?! *Mexicans* are going to cause an IQ problem? And this, in a country that elected Dubya president?

Dog of Justice writes:

Whatever happened to the right of self-determination? That is one of the basic tenets of libertarianism, yes? The US somehow doesn't have this right, just because it's inconvenient for the rest of your worldview?

As Jason Malloy has pointed out in a previous thread, a US that acts in the self-interest of its existing citizens is most likely acting in the long-term interest of Mexicans. Who has done more for the welfare of Chinese, Ted Kennedy with the 1965 Immigration and Nationality Act, or Deng Xiaoping?

America's job is to compel Mexico to be responsible for its own people, not to artificially sustain the status quo against the will of its own citizens.

Tino writes:

John :

Yes, again you failed to “get it straight”. And please stop using the word “reason”, if you refuse to use it.

Low skilled Mexicans are raising the C O S T of housing for the white, but not the V A L U E. Areas with high crime and bad schools lose property value.

Some High School Economics for John. Caplan and others:

Cost of housing = monetary cost + undesirable probability that you will get mugged, and your children beaten up in school.

Only the first part will be transferred to other Americans. The second is a pure externality for society.

NY and L.A are arguably the intrinsically best cities in the US. Through the inflow of low skilled, high-crime, low IQ-people large parts of these cities are now uninhabitable for *both* the lower and upper class white.

The later areas are uninhabitable for the white, who have to bid for whatever is left. When this happens the load rents in the areas that are still livable obviously go up. Supply is going down, with constant demand. What happens to price?

Just like the arguments about tax payer benefits, the argument about school achievement, the argument about assimilation, and the argument about IQ this is not theory. It is an empirical fact. The average cost of housing in L.A is 1 million dollars. In previously white but now Hispanic areas 300.000.

Property values in lower class Hispanic parts of L.A are far below the rest of the city. If the low skilled would somehow leave en masse and whites move in aggregate property prices in Los Angeles, New York and D.C would skyrocket.
Unskilled immigration has managed to make housing less affordable for natives, at the same time as aggregate land rents have gown down. No secret to this, just ghettoisation.

If Caplan seems to think those who lack “bias” are those who apply the simplest cliché that comes to their mind to immigration (“free trade”, “more demand”), instead of thinking about the particulars of the issue.

Ps.
John even if crime, worse schools and ghettoisation did not exist, poor immigrants could bid up prices, simply through numbers. (in that case however Caplan would be right that the value would go to some Americans. At least if we also ignored for a second that about half the income of unskilled immigrants comes from American taxpayers).

As I explained above we can easily check who is right. Have AGGREGATE land values (not just land values in the still white areas) gone up or down because of immigration?

PPS.

Anon: People vote for bad policy not only due to IQ, but also due to bias. Observe high IQ people like Bryan Caplan. Make sure you never actually check the actual Hispanic IQ, I see that you value your delusions.

John Pertz writes:

Tino:

So basically you are saying latin immigrants are destroying land values and the subsequent result of such destruction is higher prices? What am I missing? The argument makes little sense. You act as though poor natives have something to lose by an increase in immigration. They are described as poor natives because they are after all "POOR." Your description of them as natives who are losing their land values makes little sense. If they are poor in the first place then when exactly are they losing? If they had something of significance to lose then they wouldnt be described as poor, they would be middle class to wealthy and would probably have little social contact with the low I.Q immigrants.

Nathan Smith writes:

Tino writes:

"Areas where a lot of for example lows skilled Mexicans move in see a dramatic reduction in demand from natives. Most people do not appreciate high crime rate or living in a ghetto."

Tino implies that immigration to a neighborhood increases crime. The truth is the opposite: crime falls when immigrants move in, and indeed immigration is probably one of the main reasons for the fall in crime over the past 30 years. But no doubt it is true that people like to live next to similar people, so when immigrants move in, natives may move out in order to live near other natives. Or, simply because the immigrants are driving up land values. Nothing wrong with that.

I'd like to argue with Steve Sailer but I can't understand what argument he is trying to make, nor why he thinks the insult to Bryan has any force.

Bryan-- brilliant post, although immigration is sort of low-hanging fruit.

Mensarefugee writes:
Anon writes:

An "IQ problem"?! *Mexicans* are going to cause an IQ problem? And this, in a country that elected Dubya president? by Anon

Yup. If Americans are so dumb as to elect Dubya, imagine what Mexican Immigrants with an IQ 10 points below even Americans will do. :)

Nathan Smith writes:

Even when Tino and Steve Sailer don't get their facts wrong, they miss the point in a bigger way. There's a concept in economics called "surplus," as in consumer surplus, producer surplus, etc. When we trade with illegal immigrants both sides benefit. The precise value of those transactions are hard to measure, but it's pretty clear they overwhelm the pocket-change redistribution that immigrants cause through the tax-and-transfer system, even if those did (contrary to fact) hurt the native-born. Immigrants working construction lower house prices (the price of the physical house, that is; the underlying value of the land is another story). Immigrants working in restaurant lowers the cost of eating out. And so on. If immigrants did cost us a few tax dollars, on net, it would be a price well worth paying for all that consumer surplus. The fact that they pay Social Security taxes and get nothing in return is just an added bonus for natives.

Of course, Tino and Steve Sailer miss an even larger point, too, namely that to protect the interests of the native-born through the use of coercion to cut off millions of peaceful workers from the opportunity of a better life is unacceptable in terms of Kantian, Rawlsian, utilitarian, Catholic-Aquinian, or any other ethical theory.

Nathan Smith writes:

By the way, I'm a late-comer here, but this meme that we should try to maximize national IQ seems to run afoul of the idea of comparative advantage. If I have high IQ, I should welcome low IQ immigrants who can do the lawn-mowing and garbage-removal but don't compete with me for the statistical analyst jobs. If we drive average national IQ too high, I'm more likely to have to mow my own lawn, or even mow lawns for a living.

Nathan Smith writes:

Whoops, I forgot, there's one ethical theory that would justify placing zero value on the utility of foreigners. As Bryan points out with his "master race" line.

Jim F. writes:

Are unskilled workers the "Master Race"?
What an exquisite preemptive smear!

So any unskilled Americans whose wages are harmed by unrestrained immigration are now nothing but a bunch of whining "Nazis"?

Wow!
You are absolutely the most vile of race-baters Mr. Caplan.

Matthew c writes:

Jim,

At least Caplan isn't proposing to haul you and your family to the border like human refuse and dump you there.

Dog of Justice writes:

At least Caplan isn't proposing to haul you and your family to the border like human refuse and dump you there.

40 years ago, if I was dumped on China's border, that would have really sucked. But nowadays, I wouldn't complain.

The best way to help Mexicans is to IMPROVE MEXICO. You have never addressed Jason's (totally accurate, as far as I can tell) argument that continued cooperation with the corrupt Mexican elite in allowing illegal immigration is probably hurting the overall welfare of the Mexican people more than helping.

j writes:

A generation ago, low-skilled Americans defeated the self-proclaimed Master Race. Since then, no other contestant appeared. They are the current holders of the title.

Nathan Smith above introduced an argument no one dared to post yet, that low IQ immigration improves the lives of high IQ natives.

That is an idea worthy of debate. If I were a high IQ person, where would I prosper: in a high IQ society (say Hong Kong), a low IQ society like (say Equatorial Guinea) or a mixed society like Brazil and the USA? People who actually face this dilemma seem to prefer the third option.

Tino writes:

1. “So basically you are saying latin immigrants are destroying land values and the subsequent result of such destruction is higher prices? What am I missing?”

That good land (close to jobs for example) is fixed, so that smaller supply will lead to higher price. Next question?

2. “You act as though poor natives have something to lose by an increase in immigration.”

I wrote quite clearly that poor AND rich Americans lose. Are you selectively illiterate?

3. “they would be middle class to wealthy and would probably have little social contact with the low I.Q immigrants.”

The middle class has plenty of contact with low I.Q people, when they are driven out of their original neighborhoods, and when their taxes go to fund benefits for illegal’s.

4. “crime falls when immigrants move in, and indeed immigration is probably one of the main reasons for the fall in crime over the past 30 years.”

I see that we are giving Professor Caplan plenty of material for his next book about political bias. Let me guess the background:

“Among men of Mexican descent, for instance, 0.7% of those foreign-born were incarcerated compared to 5.9% of native-born, according to the study, co-written by UC Irvine sociologist Ruben G. Rumbaut.”

First of all even the RAW Mexican crime rate is somewhat higher than the white, due to demography. (the experience of a neighborhood does not “correct” for demography). But most importantly the 5,9% Mexican native incarnation rate is 3-4 times as high as the white crime rate.

Any Hispanic neighborhood is, I hope you are sitting down now, a MIX of first generation immigrants and their kids. The extremely high crime rate of the later more than compensate for the fear of deportation of the former.

5. “so when immigrants move in, natives may move out in order to live near other natives. Or, simply because the immigrants are driving up land values. Nothing wrong with that.”

Nothing wrong, except that it contradicts Bryan Caplans argument, that you a few seconds later consider brilliant.

Again, let me put it simple:

The welfare effect of immigration displacement are positive only if they come about through voluntary sale of homes, because of rising property values in the neighborhood (higher value). If the displacement is due to the original inhabitants being driven out (higher costs), than the welfare effects for Americans in negative, quite contrary to Caplans shallow analysis’s.

Another test would be to look afterward if Hispanic neighborhoods have higher or lower land prices that equivalent white neighborhoods.

6. “When we trade with illegal immigrants both sides benefit.”

If all interaction was through markets, such as with free trade. But when we give benefits through the tax system (or when they and their kin commit crime there is no such guarantee). All economic analyses and common shows that the small gains of the trade are overwhelmed by the large costs of the later in the case of low skilled immigrants.

7. “but it's pretty clear they overwhelm the pocket-change redistribution that immigrants cause through the tax-and-transfer system, even if those did (contrary to fact) hurt the native-born.”

More evidence of bias! Borjas estimate of gains from trade to Americans is 10 billion per year. The lowball estimate of the tax-and-transfer estimate of low skilled immigrants is 90 billion per year.

What you perhaps do not understand is that very little of the gains from trade goes to natives, since immigration does not change the price of low skilled a lot. This is economics 201. The gains of immigration go one way, to the immigrants.

8. “the use of coercion to cut off millions of peaceful workers”

Rawls and Nozick both accepted the right of national control over border. Where they adherents to “the Master race”? Utilitarian’s would argue that we could buy a lot more “utills” by stopping Mexican immigration, and giving the net cost as foreign aid to starving Africans.

10. "use of coercion"

Ensuring property rights is no more coercion than calling the police to remove you from General Motors Headquarter.

If that is coersion liberterian principle fall apart. Nozick understood this, Milton Friedman understood this. Why are you not capable to do the same?

11.“comparative advantage”.

Again, your textbook example is only with no welfare system, no increase in crime, no affirmative action and quotas and no ability for the low IQ masses to vote for more taxes on the rest this would be true. When you have fixed those problem come back and we can talk.

12. “At least Caplan isn't proposing to haul you and your family to the border like human refuse and dump you there.”

This is what Mexicans do to other central Americans. Are they also Nazis?

By the way, I am not allowed to move to Swizerland tomorrow. They would deport me. Am I therefore logically human refuse? Or are you just using strawmans?

At least i hope the libertarian movement are proud of the high intellectual quality of their members in this debate.

13. "why he thinks the insult to Bryan has any force."

Maybe it will shame him to put some intellectual effort into his posts, instead of the easily refutable clichés we have seen so far .

Ken Hirsch writes:

Well, this is hardly a theoretical issue. More than 1.5 million (net) native-born citizens left California between 1990 and 2000.

Did American citizens feel better or worse off as real estate prices rose in California?

Josh writes:

Tino, I feel like you probably have valid points to make and I would like to read them. But the condescension you display while making them forces me to skip your comments. I suspect I'm not alone.

DENNISW writes:

Natives are having trouble forming families due to high real estate prices. Insane commutes if you want to have 3-4 children. And they cannot have as many children. So it becomes a self fulfilling prophecy. Our native population don't reproduce as much as it should and foreigners are allowed in (illegally and legally) to pick up the slack. These Mexicans and other foreigners don't mind having 3-4-5-6 children in dire & impoverished circumstances that no white American would. So they will out breed the natives who are the rightful claimants to America. Or perhaps you think reconquista is a joke. Or that Muslim jamming into Europe don't mean to swamp that continent with their babies and take it over. Dream on dumb European man

Nathan Smith writes:

"Ensuring property rights is no more coercion than calling the police to remove you from General Motors Headquarter."

I think Tino puts his finger on the difference between his own statist views and the libertarian alternative. A libertarian thinks that my house is MY property, and I get to decide who comes in. Anti-immigration statists think that the whole country, including my house, is the STATE's property, and IT gets to decide who is admitted.

Nathan Smith writes:

"Rawls and Nozick both accepted the right of national control over border."

Yes, but for what end? National security? Or labor protectionism? Certainly the former is valid. It is the latter that is questioned.

Perhaps Tino will tell us the arguments he thinks Rawls and Nozick make in favor of his position? Then we can see if they are valid or not.

Nathan Smith writes:

Tino writes:

"12. “At least Caplan isn't proposing to haul you and your family to the border like human refuse and dump you there.”

This is what Mexicans do to other central Americans. Are they also Nazis?"

Nazis is such a harsh word. Let's call it "national socialism."

Mr. Econotarian writes:

America's job is to compel Mexico to be responsible for its own people, not to artificially sustain the status quo against the will of its own citizens.

Compare and contrast the results of US immigration policy with Cuba (none, unless you somehow outrun our warships and helicopters) versus the mass emmigration from East Germany to Austria through Hungary in the year leading up to the fall of the Berlin wall: East Gemany, free and democratic - Cuba, still a communist dictatorship.

mike writes:
Did American citizens feel better or worse off as real estate prices rose in California?

They probably felt better after having realized a 250% or more appreciation of their real estate in less than 10 years, and then probably felt great after monetizing that gain effectively by then moving to a cheaper area and semi-retiring. If they didn't move, well - they have nothing to complain about, since real estate prices don't affect them, does it?

Furthermore, the racists taking the view of a brown-vs-white showdown are gravely mistaken, as it's obvious to anyone with half a brain that it's largely a brown-vs-black labor and neighborhood "battle".

mike writes:
Did American citizens feel better or worse off as real estate prices rose in California?

They probably felt better after having realized a 250% or more appreciation of their real estate in less than 10 years, and then probably felt great after monetizing that gain effectively by then moving to a cheaper area and semi-retiring. If they didn't move, well - they have nothing to complain about, since real estate prices don't affect them, does it?

Furthermore, the racists taking the view of a brown-vs-white showdown are gravely mistaken, as it's obvious to anyone with half a brain that it's largely a brown-vs-black labor and neighborhood "battle". Talk about race-baiting!

Dog of Justice writes:

Compare and contrast the results of US immigration policy with Cuba (none, unless you somehow outrun our warships and helicopters) versus the mass emmigration from East Germany to Austria through Hungary in the year leading up to the fall of the Berlin wall: East Gemany, free and democratic - Cuba, still a communist dictatorship.

(i) We were constantly putting pressure on European Communist governments to change, while after the Bay of Pigs we were too embarrassed to continue trying to do so for Cuba.

(ii) Immigration from East Germany was skilled. It was a loss to East Germany and a gain to West Germany, which is why the Berlin Wall was built in the first place. Do you see the Mexican government trying to keep its people? No, they're deliberately trying to get rid of them.

There are many cases where immigration is a win-win situation. But there is plenty of evidence that unskilled Mexican immigration isn't one of them -- opportunity cost overwhelms any comparative advantage they have to offer.

Stan Whiting writes:

"The best way to help Mexicans is to IMPROVE MEXICO. You have never addressed Jason's (totally accurate, as far as I can tell) argument that continued cooperation with the corrupt Mexican elite in allowing illegal immigration is probably hurting the overall welfare of the Mexican people more than helping."

Agreed.

Keep in mind Mexico has a fair number of high-IQ, successful people. They are not leaving Mexico because they are doing fine in Mexico. They like Mexico. It's their country. Its values are their values. They like coming to the US, Europe, or even Asia, South America or Australia for tourism and to stash money in banks (particularly in Switzerland). They would no sooner move here or to those countries than most Americans who enjoy a vacation ion Acapulco would like to become Mexicans.

The Mexicans coming here are mostly the people who can't make it in Mexico. People who for 400 years have not succeeded over there. Some don't even speak Spanish. They can't read or write. They can do stop labor and make babies and raise them to do stoop labor-as many as they can feed. The Mexican upper and middle classes don't want them. They are happy to see them leave. Many admire Andrew Jackson.

Low skilled Americans are low skilled for two reasons. Some are low-IQ or developmentaly inhibited. And some have no skills because the traditional way people learned skills-on-the-job training-has been largely done away with.

Employers in the US are more than ever reluctant to train employees for needed skills, preferring to simply hire already-trained ones, often overpaying for temp agency or consultant labor for short term results. The fact is, being a hourly employee today is usually to be underpaid by any previous metric. Employers are spoiled by immigrant labor, both in unskilled and skilled positions by illegals and H-1B entrants.

By throttling immigration, the low end of the labor market would skyrocket in salaries. This would raise consumer costs, true, but not by a tremendous amount, because the pay of labor is only a small proportion of its cost to the consumer. Car dealerships get $100 per flat rate hour for labor, but the mechanics don't get all that. It would make certain businesses-burger franchises now largely relying on immigrant labor, for example-far less attractive, and others-manufacturing operations needing skilled, English-speaking, and legal help-more attractive.

Employers would be much more inclined to hire people with the potential to be, say, machinists, mechanics, or cabinetmakers, but no experience or trade schooling, and train them via apprenticeship or in-house schooling. "Experienced only need apply" would start to disappear from help wanted classifieds. Companies would offer to pay for training to promising prospective employees.

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