David R. Henderson  

Good News from David Friedman

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Earlier this week, David Friedman announced that he is considering a third edition of one of my favorite books ever: The Machinery of Freedom. I'm not a big fan of the title but I love the contents. One of my biggest regrets when I was writing 5 or 6 book reviews a year for Fortune between 1984 and 1990 was that they "killed" my review of David's second edition.

David is taking suggestions about what chapters to include, eliminate, etc. One of the most interesting sets of suggestions is by commenter Less Antman.

There's so much to love about the book: the tight analytics not are never boring, always pithy, and often flashy; the clever turning of a phrase; the numerate take-apart of various ideas; the willingness to admit that he doesn't have the solution for national defense.

Some of my favorite highlights from the book are below.

His argument ("Might Have Been") that some Americans could have gotten to the moon with zero government funding:

The moon landing alone had an audience of 400 million. If pay TV were legal, that huge audience could have been charged several billion dollars for the series of shows leading up to, including, and following the landing. If the average viewer watched, altogether, twenty hours of Apollo programs, that would be about twenty-five cents an hour for the greatest show off earth.

His argument for open immigration:
In my opinion, the restriction on immigration is a mistake: we should abolish it tomorrow and reopen the most successful attack on poverty the world has ever seen.
One danger in this policy is that poor immigrants might come with the intent of somehow surviving until they become citizens, and then going on welfare.[DRH note: I guess he didn't realize that you don't need to become a citizen to get welfare.] I therefore include in my proposal the condition that new immigrants should face a fifteen year 'residency' requirement before they become eligible for welfare. I also suggest that the federal and state minimum wage laws be altered so as not to cover new immigrants, or, better yet, be repealed. [DRH note: his proposal for making only native-born and earlier immigrants subject to the minimum wage would be devastating to people in those categories who are less skilled. Why hire them at $7.25 an hour when you can hire a new immigrant at $4.00 an hour? It would be much better, therefore, to go with his more-radical proposal: repeal the minimum wage.]
The new immigrants will drive down the wages of unskilled labor, hurting some of the present poor. At the same time, the presence of millions of foreigners will make the most elementary acculturation, even the ability to speak English, a marketable skill; some of the poor will be able to leave their present unskilled jobs to find employment as foremen of 'foreign' work gangs or front men for 'foreign' enterprises.

Related to this is this point from the aforementioned Less Antman:
(6) In Welfare & Immigration section, discuss U of Hawaii Prof Ken Schoolland's evidence that people move FROM the high welfare states TO the low welfare states.
Hmm. Are David, his late father Milton, many commentators on immigration, and I overstating the "welfare as a magnet for immigration" argument? Or could it be that Schoolland is not distinguishing between the kinds of people who move? Could it be that the more-productive people move from high-welfare states to low-welfare states and that the differential in welfare benefits between high-welfare and low-welfare states causes migration in the opposite direction?

I could go on and on. There's much to love in The Machinery of Freedom.



COMMENTS (19 to date)
Ted Craig writes:

Is there an archive of your Fortune reviews?

David R. Henderson writes:

@Ted Craig,
Sometimes this one works:
http://money.cnn.com/magazines/fortune/fortune_archive/
You key in "David R. Henderson"
Other times, like the last ten times I've tried, it doesn't.
Best,
David

David R. Henderson writes:

@Ted Craig,
I just figured out how to do it. Go the link in the comment above, but instead of keying in my name in Fortune archives, ignore that and go to the top. Along the line that has CNN Money, go to the right end and key in my name. Other stuff comes up too, but a large % of what comes up is by me.

Ed writes:

I recently read his 2nd edition and was not impressed. It just did not do it for me. He did a terrible job addressing the anti-freedom arguments made by the left and quite frankly, I don't see how you could have anarcho-capitalism. I think the anarcho-socialists are onto their track more because you cannot have private property without government force and David Friedman failed to really address this.

If he puts out a new edition, I hope he updates the chapters which are over 3 decades old.

MikeP writes:

Are David, his late father Milton, many commentators on immigration, and I overstating the "welfare as a magnet for immigration" argument?

I think this argument is overstated. Nonetheless, the solution to that purported problem -- have a very long probationary period before immigrants are eligible for welfare -- is so apparent and harmless that I have little problem mustering it against the inevitable "oh noes the immigrantz will haz our welfare" claim.

But David Friedman himself has long sat on the opposite side of his father with regard to immigration and welfare. Rather than saying that legal immigration cannot be increased because it will overburden the welfare state, he notes it is at least as likely that freeing migration will so overburden the welfare state that it will be recognized as unaffordable and thus corrected.

He notes...

The redistributionist tendencies of modern states are an argument against free immigration, but also an argument for it. The argument against takes the level of redistribution as given and points out its effect on who migrates where and why. The other half of the argument reverses the causation by considering the effect of migration on levels of redistribution. The harder it is for people to move from one country to another, the more attractive redistributional policies are. The possibility of redistribution tends to increase inefficient migration, but the possibility of migration tends to decrease inefficient redistribution....

While I have not seen this argument used in discussions of international migration, it is a commonplace in discussions of interstate migration. American supporters of the welfare state routinely argue that welfare ought to be Federal rather than state, precisely because state welfare is held down by the threat of interstate migration. Indeed, one possible explanation for why the U.S. moved more slowly than Europe countries towards a welfare state is that European redistribution was by national governments with control over immigration, whereas American redistribution was largely by state governments without such control.

MikeP writes:

Oh, and a new edition of The Machinery of Freedom would be great!

It's the single most influential book I ever read, and if I was looking for such influences in some year other than 1989, it might not have been on the bookshelf for me to discover.

J. Daniel Wright writes:
I therefore include in my proposal the condition that new immigrants should face a fifteen year 'residency' requirement before they become eligible for welfare. I also suggest that the federal and state minimum wage laws be altered so as not to cover new immigrants, or, better yet, be repealed.

I'm not a lawyer but I doubt that these proposals would stand up to a Constitutional challenge on the grounds of equal protection under the law.

Tim Fowler writes:

RE: "I'm not a lawyer but I doubt that these proposals would stand up to a Constitutional challenge on the grounds of equal protection under the law."

If the recent immigrants are citizens perhaps not. You could try saying the requirement applies to all (not just immigrants) and its a requirement to live in the US for 15 years (most welfare spending goes to parents who have kids, not directly to the kids, but perhaps their still could be a problem), or if you don't like that or don't think it will pass court review, than you make all citizens eligible, but don't let people become citizens for 10 or 15 years. (They could become permanent legal residents with the right to work long before that.)

MikeP writes:

Such proposals have been in effect since the welfare reform of 1996 made all short-term noncitizen residents ineligible for targeted federal welfare. Since then some of the limitations have been watered down by subsequent acts of Congress, but the essential notion is well tested.

These restrictions stand up constitutionally against claims of unequal protection because all of government targeted welfare is a web of provisos, requirements, and conditions. Why would immigration status trigger something the other conditions don't?

Steve writes:

In British Columbia, teenagers whose total lifetime hours of experience are under a certain threshold have a lower minimum wage than everyone else.

Dog of Justice writes:

Rather than saying that legal immigration cannot be increased because it will overburden the welfare state, he notes it is at least as likely that freeing migration will so overburden the welfare state that it will be recognized as unaffordable and thus corrected.

If Greece (and perhaps California soon) is any indication, we're pretty terrible at recognizing things as unaffordable until they actually start to collapse...

I suppose the best hope for Americans is that some European welfare systems collapse spectacularly enough to shock us out of our complacency before the same happens to us.

Justin Rietz writes:

I think a better solution to the immigrant welfare issue is to require all immigrants to purchase "welfare insurance" before entering the country. This would avoid the moral issue of having to deny help to someone who has "only" paid taxes for 14.9 years.

A possible side benefit is that this might be a good starting point to phase in private coverage for immigrants and citizens alike, thus slowly reducing any need for publicly funded welfare.

Shaun the Sheep writes:

[Comment removed for supplying false email address. Email the webmaster@econlib.org to request restoring this comment. A valid email address is required to post comments on EconLog.--Econlib Ed.]

Ted writes:

A few points.

It's not entirely clear private enterprise would have funded a space program, even under the conditions Friedman describes.

The space program, particularly the moon-landing program, was incredibly speculative first on. It wasn't at all clear that it was going to be a success. Given the massive investment cost coupled with the massive uncertainty, it's not clear that any private enterprise would be willing to fund this research - the risk was arguably too great for such a large investment sunk cost. Furthermore, I'm not even sure a private company would have been able to raise the necessary capital to finance such a speculative investment. I suppose they could have tried pooling the capital though. But then again, even look at nuclear power plants. A lot of banks will not finance them because they aren't willing to commit that amount to such an investment. Often there has to be a government guarantee for a nuclear power plant for a bank to commit themselves. If private enterprise is unwilling to even finance nuclear power, would they have really financed something so speculative as a space program all those years ago ?? And if government was then going to be responsible for financing the whole thing, then they mine as well should has just done it themselves and skipped the intermediary.

But the point is Friedman's confidence is surely over-warranted. I suspect very, very few companies would be willing to make such a risky, high-cost investment - even if the gains were potentially large. The space program, and especially the moon-landing program, was just way too speculative at the time.

Also, the most successful attack on global poverty has surely been international trade, not immigration. Far more people have escaped poverty from increased trade than from increased immigration.

I also think it's difficult to know what the effects of welfare programs are on immigration since almost no country has open immigration. Until countries begin open immigration I don't think I can buy any sort of research on this.

Peter A. Taylor writes:

When libertarians discuss immigration, we need to say something intelligent about culture and political risk. If immigrants are going to be able to vote on how to dispose of my life, liberty, and property, it seems entirely appropriate to me to ask how many are coming and what their political views are.

Nationhood is analogous to a group marriage. I do not have secure property rights against my spouse. It therefore behooves me to be careful whom I marry.

mike shupp writes:

And were there media entrepreneurs scheming to make big profits televising The Conquest of the Moon before big government so precipitously interrupted their plans in 1957?

Gosh! Where are they now? Where have they been since 1972 -- an almost 40 year period in which opportunity to exploit the moon has been open to any ambitious capitalist?

Since you think Friedman is advancing serious ideas, I'd like to see serious answers.

Chris Koresko writes:

Speaking as a long-time spaceflight enthusiast, the comments about the Apollo Project are really interesting.

My personal view, which I suspect is better informed than most (though I can't claim real expertise) is this:

  • Apollo was mainly the sublimation of cold warfare into a technological stunt. Its principal goal was to build the prestige of the USA relative to the USSR. It's not clear that a moon landing by a private entity would have served that purpose.
  • Massive government spending on manned spaceflight in the 1950s through early 1970s pushed its development beyond its "natural" level set by the technology base and private demand. I do not believe anything like Apollo would have been done by private industry in the absence of the government program.
  • Once that government investment slacked off, our capability for manned spaceflight hardly progressed for the next several decades. Only now is the "natural" level of capability starting to catch up with what was developed with government resources.
  • Although the scientific payoff from Apollo was very significant -- most of what we know about the Moon today came from it -- the value of the science per dollar spent of the science was pretty low. On the other hand, the massive amount of technology developed by Apollo arguably paid for the program's cost by boosting economic growth.
  • The extremely high cost of manned spaceflight derives mostly from the fact that the underlying mostly-1960s technology base is barely sufficient to build working spaceships, and this must be compensated for by pushing very hard to get adequate reliability. This means vehicles are very close to structural limits (thin margins), with very careful design and lots of testing, and the pedigree of individual components must be carefully tracked. The resulting high intrinsic cost is exacerbated by the low flight rate (so that development cost is not amortized over a large number of flights, and not much is spent getting the recurring costs down) and the fact that only governments have been able to afford to participate (so the incentives for cost reduction aren't there).
  • The hope today is that the technology base (especially materials, metallurgy, electronics, software, and engineering simulation) is becoming advanced enough that newly designed vehicles and procedures can allow greater structural margins and greatly reduce the number of man-hours needed to build and fly a spaceship. We may be close to a "tipping point" in which there is a virtuous cycle of reduced per-flight costs leading to a higher flight rate per vehicle, more investment in reducing per-flight costs, and an increasingly market-oriented development process. The successful launch of the inaugural Falcon 9, a rocket being marketed at roughly 20% of the cost of its US competition, on its very first attempt, designed and built by a company less than a decade old and which has never designed or built a large launch vehicle before, supports this idea.
  • The recent abandonment of the Ares 1 / Ares V rockets, which were an attempt to build a new US manned launch capability on top of the early-1970s Space Shuttle technology base, also points in this direction. These vehicles were supposed to be cheap and easy to develop because they reused a lot of hardware and infrastructure, but as they progressed the original cost and schedule estimates turned out to be very optimistic. This is in contrast to the Falcon 9, which is a clean-sheet-of-paper approach and came a lot closer to its predicted cost and schedule.
Bruce Tufts writes:

Concerning David H's pointing out the section of David F's book regarding:

"In my opinion, the restriction on immigration is a mistake: we should abolish it tomorrow and reopen the most successful attack on poverty the world has ever seen"

I profess, I just don't get the enthusiasm for assumed success (lack of any unintended not-desired consequences to an open borders plan). If the goal is exporting the behaviors of the most successful capitalist nation, open borders is a poor way to do it - the most likely outcome seems to me to be an importation of woe that overwhelms the good: the assumption is that assimilation into US culture is a given (with the freedom loving you're-going-to-reap-the-benefits-and-downsides-of-your-actions-yourself school of culture as the target); this seems a quite over-optimistic basis for a national immigration plan. The risk is cultural dilution (a point made @Peter A. Taylor above) resulting in loss of support for the very target intended for 'export'.

If export is the goal, then the later part of @Ted's comments above seem much more promising.

As to private enterprise funding a moon shot solo - really? Really! So many problems; to name but two
1. litigation: how will you contain the tort risks?
2. Return-on-Investment: where is the profit? What, a single season's reality show worth of revenue? How do you pay-down all the infrastructure costs of the machinery and facilities you needed to do the moon shot? They don't disappear after Season One.

If these are the examples of a scintillating work, I can't see the sparks.

Peter A. Taylor writes:

@Chris Koresko:

I agree with most of what you say. We can't talk about manned space without talking about national prestige. Two quibbles:

1. Because of the Broken Window fallacy, we don't really know what the return on investment was on the Apollo technology money. See the Lord Chorley quotation in "Why do we have a manned space program".

2. I don't think we have a good handle on why launch vehicles are so expensive. I collect theories about this. My favorite is Maxwell Hunter's claim that costs are subtly driven by the nasty failure modes (lack of intact abort capability). See Why are launch costs so high?

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