Bryan Caplan  

Klein Answers the Davos Question

The Fantasy Testimony Continue... Murray and Me...
The Davis Question asks:

What one thing do you think that countries, companies, or individuals must do to make the world a better place in 2008?

Dan Klein vlogs his answer: Deregulate the drug approval process.

My answer, of course, would be free immigration.

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    Have you heard about The Davos Question?What one thing do you think that countries, companies, or individuals must do to make the world a better place in 2008?As we go through a global financial crisis, and as we prepare to [Tracked on October 15, 2008 7:51 AM]
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Steve Sailer writes:

How's massive immigration working out for California these days, where about half the defaulted mortgage dollars in the country are found?

Selfreferencing writes:

Lol, Steve Sailer is teh troll.

OneEyedMan writes:

I'm with you on the immigration issue. However that policy would have a lot of new losers even though they would be outnumbered by the winners.

A choice with fewer losers and similarly huge gains would be legalizing drugs.

The Snob writes:


Do you have any papers of your own, or references to others, that address the question of immigration's economic impact on native-born unskilled workers?

I used to be a WSJ/open-borders guy but looking at the economic situation of inner-city blacks changed my mind.

I don't doubt that many of these immigrants are often better workers and contributors to our society than the native-born lower-class people whose labor they substitute for. The problem I see is that as a society we are still stuck with the economic and ethical bill.

If we take these into account, I wonder whether the higher productivity of immigrants offsets the costs of policing, incarceration, section 8 housing, free healthcare, etc. that are needed to prevent these bantustans from boiling over into functional parts of society.

Also, I wonder if the accounts of economic contributions of unskilled immigrants take into account the large percentage of wages that are remitted to family in the home country. Do all of these come back to us eventually via exports, or should these be considered as the equivalent of imports?

I would be very interested to see a reasonably scholarly article looking at any of these questions. FWIW I think the US needs a lot more skilled immigration, and a lot less unskilled, not unlike the Canadian system.

Jay writes:

could you elaborate on the immigration issue? Your conclusion doesn't seem immediately obvious to me.

Cyberike writes:

I would love to tackle the immigration question, because I am much more concerned with keeping my costs down (which immigration does) than uncertain tax costs. But I want to answer the question.

I would change the educational system to reflect that fact that only about 20% of our jobs require a college degree. Over 50% of our projected job growth (we are talking about millions of jobs here) are in the skilled trades, which require some education but not a degree. I would emphasize mechanical aptitude and problem solving ability, not academics. This change needs to be done primarily in high school, allowing college to regain its place as the high quality and high standard institution it once was.

Alex J. writes:

Low skilled Americans are hurt some by competition from low skilled immigrants. Other Americans are helped somewhat more by the work of low skilled immigrants. The immigrants themselves benefit tremendously by coming here. Otherwise they wouldn't make the substantial effort it takes to get here.

With the assumption of declining marginal benefit of income, the cost to low skilled Americans is dwarfed by the gain to the immigrants. This is basic stuff. It's hard to see because of the in-group chauvinism that basically everyone has.

The immigrants don't need to be more productive than natives for this to work. They just have to be productive. Free trade would be a substitute for free immigration, but one of the benefits that immigrants get is escape from their own destructive governments.

Insofar as dollars "leave the country" we benefit via seignorage.

Immigrants don't cause our government to give them various handouts. If you're opposed to handouts to immigrants oppose the handouts. Many people are opposed to restricting welfare to citizens on grounds of universalism. I say restrict the welfare to nobody.

Jose Jimenez, free immigrant writes:

My answer: get rid of all the economists (sorry man).

Did you know that in Swahili, "economist" means "rich man's codpiece"?

Ella writes:

About immigration: does any of your calculus take into account the crime from illegals? In Arizona and Colorado, 30-40% of all crimes are committed by illegals (it varies for the specific charge, naturally, but that's about the range).

As for improving the immigrants' lives, quite frankly, I don't care. I don't care about meddling in Canadian wages or trying to help their welfare moms find gainful employment. Why is it to important to care because it's Mexico? I certainly don't wish them ill, but I'm hard-pressed to find a reason that I should make the public school system completely worthless to my children (Tulsa Public School District, I'm looking at you!), overwhelm and close hospitals, and have to press "1" before talking to an operator just so they can be "improved."

(Full disclosure: I don't have kids yet. Tulsa public schools still suck.)

Ella writes:

Oh, but de-regulating drug trials is a great idea, particularly for terminal or severely debilitating diseases. Give people a chance, FDA!

TC writes:

One problem with too much immigration could be the burden they place on our political system.

If you are a low wage, marginally educated Mexican who speaks little English, you are far more likely to vote for politicians who support increased social service spending and less likely to vote for politicians who support reducing taxes, spending, regulation and litigation.

So, while from a purely economic perspective, low-skilled immigrants probably help our economy. But once the effects of adding a large increase in the number of voters inclined to support socialism is taken into account, immigration is probably a net negative to our economy.

The Snob writes:

Alex J.,

I would argue that the substitution of superior immigrant labor for native labor is not the same as free trade in cost-benefit analysis. If French wines become dramatically cheaper than domestic ones and put California vintners out of business, with their talent and capital being redeployed to more productive ends.

However, if high-quality, inexpensive El Salvadorean labor reduces legitimate job opportunities for unskilled citizens, there is nowhere for them to go except crime or the public dole, both of which impose significant costs on society.

The one area which is open to question in my book is how much crowding-out is really going on. I.e., if high-quality Mexican dishwashers were not available at $8/hr, how many restaurants would hire lower-quality American ones, and how many would buy Hobart dishwashing machines instead?

Mr. Econotarian writes:

End the War on Drugs?

Alex J. writes:

Compared to low skilled immigrants, low skilled Americans have the advantages of English proficiency, cultural familiarity and local contacts. So one would expect the locals to move out of the kitchen and up to the counter.

Regarding public schools: school state separation.

Regarding crime and politics:

One does not govern well and, especially not cheaply, when one has no competition to fear, when the ruled are deprived of the right of freely choosing their rulers. Grant a grocer the exclusive right to supply a neighborhood, prevent the inhabitants of this neighborhood from buying any goods from other grocers in the vicinity, or even from supplying their own groceries, and you will see what detestable rubbish the privileged grocer will end up selling and at what prices! ... Well! What is true for the lowliest services is no less true for the loftiest. The monopoly of government is worth no more than that of a grocer's shop. The production of security inevitably becomes costly and bad when it is organized as a monopoly.
ben writes:

Alex J

If you think that allowing immigration improves the governance of other countries like Mexico? Why not allow only high skill immigrants, they are the people foreign governments would likely be most concerned about loosing.

It would also be better from an opportunity cost point of view.

Also if you think that English proficiency, cultural familiarity and local contacts are advantages for native workers, you should check out SoCal.

Steve Sailer writes:

I guess you guys haven't noticed at all that 50% of the foreclosures and maybe 75% of the dollar value of defaulted mortgages are in four heavily immigrant states: California, Florida, Nevada, and Arizona.

Minorities got 50% of the subprime dollars in 2004-2007. Total mortgage lending, prime and subprime, to Hispanics more than septupled from 1999 to 2006, versus only a little more than doubling for whites.

Immigration is intimately implicated in the roots of the Housing Bubble that set off the current financial collapse. It's time to wake up and smell the coffee.

The Snob writes:

Alex J.,

"Compared to low skilled immigrants, low skilled Americans have the advantages of English proficiency, cultural familiarity and local contacts."

If you think the people I'm talking about have these things, then you don't know who I'm talking about. The 19-year-old black kid from the bad part of town has probably spent his whole life around people who spent their whole lives collecting welfare, occasional odd jobs, stint in jail, no college, lucky to finish HS, etc. Heck, if they speak standard American English at an 8th-grade level they're doing pretty well.

Anyway, I think there are possible arguments against mine. For instance, maybe the overwhelming majority of these people are so intractable that even a 50-100% increase in the wages for unskilled labor wouldn't lure them into the regular workforce. Or maybe employers would allocate a lot more to capital investment/higher producitivity from better-quality workers. I'm sure there are others.

I'd love to see a more rigorous analysis either for or against my viewpoint. I'm hoping on a blog like this I can get more than rote recitations of shibboleths.

Kurbla writes:

If capital from rich country and cheap workers from poor country have to meet, it is almost certainly better to move capital than people. On that way poor country benefits of infrastructure, taxes, spending of employees and it is not depleted for human (even genetic) material. The cultural changes are smoother and families are kept togethe. Unlike people, capital doesn't suffer if it leaves the country.

So it might be better to discourage immigration and direct equivalent investments to the poorest of the poor countries.

monica writes:

We are facing a crisis, and we should focus on helping the Americans,not foreigners, who will take our money and send it back home.

MikeP writes:

I'd love to see a more rigorous analysis either for or against my viewpoint. I'm hoping on a blog like this I can get more than rote recitations of shibboleths.

You can find a short summary of the major players in an Economist piece. The go-to guy for the anti-immigrant crowd is George Borjas, whose 2005 work finds that a 10% increase in population due to immigration causes a 4.8% decline in average wage of low skilled native workers and a 0.1% increase in average native wage overall. The go-to studies for the pro-immigrant crowd find that the hit to low skilled native wages is practically nil. From a recent article...

Using our estimates and Census data we find that immigration (1990-2006) had small negative effects in the short run on native workers with no high school degree (-0.7%) and on average wages (-0.4%) while it had small positive effects on native workers with no high school degree (+0.3%) and on average native wages (+0.6%) in the long run. These results are perfectly in line with the estimated aggregate elasticities in the labor literature since Katz and Murphy (1992). We also find a wage effect of new immigrants on previous immigrants in the order of negative 6%.

At best for opponents of immigration, the economic argument against immigration is a wash: There is a mild upside for the economy as a whole due to immigration and a mild hit to low skilled workers in direct competition with new immigrants.

But notice that that argument considers only the members of the current society. When you add in the well beings of the immigrants themselves, immigration provides astonishing economic gains.

MikeP writes:

Incidentally, I agree that free migration is the answer to the question. Prohibiting free travel, residence, and labor is far and away the greatest rights abrogation perpetrated by the US today.

Jacob Miller writes:

Why is it when immigration comes up, everyone exclusively focuses on unskilled labor? The United States is shooting itself in the foot by severely restricting the inflow skilled labor (doctors, programmers, etc.). The U.S. could even go out and recruit! Other countries foot the bill for the education, and then the peeps move here! Perhaps illegal immigration and unskilled labor are too big of a distraction for the U.S. to gobble up this free lunch. I believe this would also coincide well with a lot of Romer's research on growth.

Continuing what has been said above, one of the few legitimate anti-immigration arguments I have heard points out that a large influx of immigrants in a democratic country could result (from their votes) in a negative change in rule of law and property rights. Possible, yes, but is it likely? I don't know.

Eric H writes:

Seems to me the question is much easier to answer than that.

Countries - Get out of the way
Companies - Serve your customers, make a profit
Individuals - Love God, love your neighbors

I suppose if you discount the faith aspect (as I know you do), then 'serve people' could would be the next best answer for the individual.

PRCalDude writes:

The author advocates free immigration out of some sort of Davosesque religious conviction, not because he has the data to defend the idea. As Steve Sailer pointed out, how is free immigration working in California? I only need to drive 1 mile to be east of the 405, where there's several foreclosures on every block. Strangely, I don't see any in the "white" areas of Los Angeles. Oh well. Fantasy is fun!

scineram writes:

Who cares if hispanics foreclose at higher rates?

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