Bryan Caplan  

Trillion Dollar Bills on the Sidewalk: The Borjas Critique

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George Borjas' new Immigration Economics contains the first intellectually serious critique of the increasingly mainstream view that open borders is a big stack of "trillion dollar bills on the sidewalk."  Borjas begins by clearly explaining what's at stake.
[W]hat types of gains would accrue to the world's population if countries suddenly decided to remove all legal restraints to international migration and workers moved to those countries that afforded them the best economic opportunities?  In contrast to the immigration surplus calculated for the receiving country's native population in the previous sections, it turns out that the "global immigration surplus" is huge and seemingly could do away with much of world poverty in one fell swoop.
The critical variable is R, the First World/Third World wage ratio for equally-skilled labor:
As in the original Hamilton-Whalley (1984) study, the exercise reveals that the gains to world income are huge.  If R=2, for example, world GDP would rise by $9.4 trillion, a 13.4 percent increase over the initial value of $70 trillion.  If R=4, world GDP would increase by $40 trillion, almost a 60 percent increase.  In fact, if R were to equal 6, which may be near the upper bound of the range of plausibility suggested by the available data, world GDP would rise by $62 trillion, a near-doubling.  Note, moreover, that these gains would be accrued each year after the migration occurs, so that the present value of the gains would be astronomically high.
The Borjas critique:
Even putting aside the political difficulties in enacting such a policy [open borders], this argument in favor of unrestricted international migration glosses over two conceptual obstacles.

First, the calculation assumes that people can somehow start at a specific latitude-longitude coordinate and end up at a different coordinate at zero cost... The absence of legal restrictions prohibiting the movement of people from one country to another does not circumvent the fact that it would be very costly to move billions of workers.

As noted in chapter 1, large wage differences across regions can persist for a very long time simply because many people choose not to move.  In a world of income-maximizing agents, the stayers are signaling that there are substantial psychic costs to mobility, perhaps on the order of hundreds of thousands [sic] dollars per person... Kennan and Walker (2011 p.232) for instance, estimate that it costs $312,000 to move the average person from one state to another within the United States...

Although these costs seem implausibly high, moving costs must be around this order of magnitude to account for the observed fact that people do not move as much as they should given the existing regional wage differences.  If moving costs were indeed in that range, it is easy to show that the huge global gains from migration become substantially smaller and may even vanish after taking moving costs into account. [emphasis original]
Borjas then does some back-of-the-envelope calculations and concludes:
The "breakeven" cost of migration given in the last row of Table 7.3 is around $140,000.  In short, the entire present value of the global gains is wiped out even if the costs of migration were only half of what is typically reported in existing studies.
Qualitatively, Borjas' argument is entirely true.  Human welfare rises by less than GDP because of material and psychic relocation costs.  But quantitatively, Borjas' argument is ludicrous.  Yes, he's seriously using the average valuations of Americans to estimate the marginal valuations of Third Worlders!  Yet any decent econ undergrad can tell you that:

1. The marginal migrant minds moving less than average.  Indeed, given the strictness of the current regime, many marginal migrants would probably take a wage cut to exit their homelands.  Think of every Iraqi Shiite who can't sleep tonight because the Sunnis are coming, and every Iraqi Sunni who can't sleep tonight because the Shiites are coming.

2. Third Worlders are almost certainly willing to pay vastly less than Americans to stay in their homelands because location is a normal good.  Indeed, location is probably a luxury.  Does Borjas really think that most Haitians would forego $140,000 in income because they're in love with Port-au-Prince?

An excellent econ undergrad might add that:

3. Due to diaspora dynamics, psychic relocation costs endogenously fall over time.  The more migrants there are, the easier it is to say adios to your country of birth.  Forget the Maine, but remember Puerto Rico.

Points #1 and #2 are so basic that I reviewed all of Borjas' attendant footnotes to see if he addresses them.  He grudgingly accedes to #1 in footnote 22:
Only a subset of persons in the data are actually observed to move, so that the subsample of movers may have moving costs that differ substantially from (and may be much lower than) the "average" estimates for hypothetical movers.
But to the best of my knowledge, Borjas never even hints at #2 - a bizarre omission given his childhood flight from Cuba.  He does however further undercut his critique in footnote 20:
It is worth noting that a disproportionately large fraction of the global gains can be accrued even if only a fraction of the potential movers migrate to the North.  For example, global GDP would increase by around 17 percent when 10 percent of the potential movers move (assuming R=4).
At this point, you may be asking, "Wait, didn't Borjas promise us two 'conceptual obstacles'?"  He did.  Sadly, his second is a throwaway objection with a single citation.
[T]he gains reported in Table 7.3 depend crucially on the assumption that the intercepts of the labor demand curves in the North and South are fixed.  However, the North's demand curve lies above the South's demand curve, not simply because that is just the way things are, but because of very specific political, economic, institutional, and cultural factors that endogenously led to the development of different infrastructures in the two regions...

As the important work of Acemoglu and Robinson (2012) suggests, "nations fail" mainly because of differences in political and economic institutions.  For immigration to generate substantial global gains, it must be the case that billions of immigrants can move to the industrialized economies without importing the "bad" institutions that led to poor economic conditions in the source countries in the first place.  It seems inconceivable that the North's infrastructure would remain unchanged after the admission of billions of new workers.  Unfortunately, remarkably little is known about the political and cultural impact of immigration on the receiving countries, and about how institutions in these receiving countries would adjust to the influx.
That's all Borjas has to offer.  Is he really unaware that plenty of research on the political consequences of immigration is already out there?  (See Gochenour and Nowrasteh's literature review for starters)  Is it really so difficult to picture major mitigating and countervailing factors?  And why would one of the world's foremost immigration scholars bemoan our "unfortunate" ignorance of "the political and cultural impact of immigration on the receiving countries" instead of rolling up his sleeves and investigating the issue?  Yes, we all have a limited time budget, but isn't the prospect of "doing away with much of world poverty in one fell swoop" slightly more pressing than, say, measuring the effect of migrant Soviet mathematicians on academic mathematics?

To be blunt, I suspect that Borjas prefers to remain agnostic about the political and cultural effects of immigration.  That way, no matter how mighty the economic case for open borders, he'll never have to say, "Good God, how could I have been so blind?  There's a whole stack of trillion dollar bills right there on the sidewalk!"

P.S. I've scheduled my first Open Borders Meet-Up at my house on August 3.  All friends and fellow travelers of open borders are welcome to email me for an invitation.  Pursuant to my writings, avowed immigration restrictionists may only attend with my explicit permission.



COMMENTS (35 to date)
Eelco Hoogendoorn writes:

I know you wish there wasn't such a thing as collective property, but all the vast assets owned by the government, both material and immaterial, are a form of collective property. Many of the gains of open borders would accrue to the immigrants, but the dilution of collective property is a cost for the natives.

As such, avowed immigration restrictionists would prefer that immigration only happens with their explicit permission... And they would see a kind of irony in your closing paragraph. To clarify your position: do you deny that there is such a thing as collective property, or do you feel, as a sort of anti-collectivist Proudhon, that collective property is a form of theft from the out-group?

Aside from that; given the high cost of moving an American to a different environment, one may expect that similar costs are imposed on him by such a radical transformation of his environment as implicated by open borders. After all, it typically isn't the angle to the sun or the quality of the soil that binds us to a place, but rather having become rooted in a social network in a way we are comfortable with. Those living on a quaint farm would probably object to the tune of many hundreds of thousands of dollars to a new LA rising up around them. And that's only partially about the view and air quality, but mostly about all the people they wish were not there.

Le Happy Anti-Merchant writes:

Things on the sidewalk I can pick up. There is no trillion dollars for the West, unless you consider the ultra-rich.

Tiago writes:

Borjas first argument seems strange. It appears that he believes that since there would not be as much migration as originally thought under open borders, then countries should restrict it. Well, if there is not going to be that much migration, then there's nothing to restrict in the first place. He can't have it both ways.

Dan R writes:

Immigration is an option, not a requirement. Transition costs might decrease the magnitude of the effect, but it does not change the direction.

Basic economics and revealed preferences points out that for those who move the benefits outweigh the costs. At best, Borjas might argue the benefit goes from amazing to "meh". It still must be admitted to be an improvement.

Further, comparing the marginal cost to marginal benefit in equilibrium will by default show no benefit, and is meaningless to the calculation of benefits. Do we deny that aggregate consumer and producer surplus exist due to the fact that marginal cost equals marginal value and marginal surplus equals zero?

Mathew Knudson writes:

I'm not quite sure how people in the US are spending 312,000 dollars to move. Assuming they buy similar housing in their destination, that should net out to zero, give or take a couple grand. So where are these costs coming from? Even assuming the entire family takes a plane to the new location, hires someone else to move all their possessions, hires a tax accountant to change all their paperwork, hires a personal assistant to handle mail forwarding and setting up new utilities, I really don't see how one gets even close to 312,000 to move, Even including the time costs of looking for a home, moving, and getting situated.
And for a worker trying to leave, say, mexico, there are millions of illegal immigrants in the US who were willing to leave everything behind and walk here. While obviously they paid a high time cost, and there's risk involved, their explicit costs are very low, and they only pay the time-cost once; The return on their voyage is a massive increase in lifetime income, and assuming even a little altruism, a much better life for their family and children.
If we use Mexican GDP per capita in PPP, 140,000 works out to 8.6 years of income for that individual; Somehow I doubt a few months of forgone income will create that high an implicit costs. Using World GDP per capita, that works out to 11 years of income; even if they made the journey on Conastoga wagon, we don't even come close to that amount of time.

Michael Clemens writes:

We dealt explicitly with Borjas' first point in this paper six years ago, co-authored by a Kennedy School colleague of Borjas', and presented in a Kennedy School seminar. Thus I'm not sure how Borjas missed it.

We estimate several wage gaps that persist within markets that have no policy barriers to movement: 1) across US states, 2) US-Puerto Rico, 3) US-Guam, 4) US-Micronesia, 5) Metropolitan France-Guadeloupe/Martinique.

We show exactly what you write here, Bryan: First, yes the qualitative point is correct that there exists a compensating differential for the disutility of movement. Wage gaps do exist in all five settings above.

Second, as you say, they are all extremely small compared to the wage gaps that exist between countries with binding policy barriers. In all of the above cases the largest wage ratio (destination/origin) we find is 1.6, except in US-Micronesia where it's around 2.0.

That is light-years away from the ratios above 10.0 that we find for several countries that do face enormous policy barriers to movement. So in quantitative terms, yes this claim by Borjas deserves the ridicule you heap on it. There is crystal-clear evidence that the global labor market is extremely far from full spatial integration.

As I point out in 'trillion dollar bills', it's outlandish to start from the null hypothesis that the global labor market is fully spatially integrated at this moment. Anyone who declares that claim plausible needs to explain the fact that the US Diversity Visa lottery is oversubscribed by a factor of 200-300 for each available visa. They need to explain the 1,000-2,000 deaths in the Mediterranean each year estimated by UNHCR. They need to explain the waiting lists for green cards to the United States, the longest of which is currently 24 years long (yes, twenty four years). They need to explain the findings of the Gallup World Poll revealing a vast unmet demand for international mobility. And many other empirical facts.

'Agnosticism' is a convenient way to avoid thinking seriously about these things, but that does not make it a position tenable for academic researchers. It's time for a new generation to make progress on this research agenda.

lemmy Caution writes:

" All friends and fellow travelers of open borders are welcome to email me for an invitation."

No party crashers allowed at the first Open Borders Meet-Up.

Nacim writes:

@Eelco, can you be more specific about what you mean about collective property? You're hinting at taking into account the dislikes individuals have of other people, but what I don't understand is why should that dislike only be respected when the out-group is foreigners. If a group of Virginians want to move to Minnesota, do you think they should first seek the explicit permission of anyone in Minnesota that objects? Why not?

Some people obviously prefer less people around them (otherwise cabin retreats wouldn't be popular) but you're presenting a false dichotomy. There's a plethora of ways of dealing with congestion/pollution/etc than discriminating wholesale on the basis of national origin. Some areas, like Atlanta and Houston, will continue to be accomodating to new construction and wouldn't mind new expansion. Other areas, like gated communities and San Francisco (America's largest gated community) will maintain strict entry requirements into their property. Both systems seem to exist concurrently just fine, why draw the line around the entire country?

@Mathew, I did a double-take when I read that too but you have to understand that the $312k figure isn't the actual money spent on relocating but the cost, which include intangibles like psychic costs. I recently moved to the West coast and spent $200 on a plane ticket and $500 on shipping all my belongings. While it's true I only spent $700, I also incurred other costs including losing my familiarity, my old friends, my family, etc. The $312k is arrived at by considering the gains of moving and then wondering why more people don't move. Logically, it's because there has to be a cost preventing them from doing so. I agree that the cost would obviously be far less for a poorer individual.

RPLong writes:

We should not underestimate the impact of an improved international wage equilibrium. It's true that migrants would be the first-round winners of a global open-borders policy, but think of the extent to which 3rd world wages would increase in response to the downward pressure on 1st world wages.

Also: The fact that there may be high migration costs to would-be immigrants is not an argument against open borders at all. It's simply a mitigating factor on price parity. We Americans wouldn't increase foreign automobile quotas under the argument that it's expensive to ship Japanese cars to North America. Right?

RPLong writes:

Correction to my previous comment: I think I said "increase quotas" when I meant decrease. The point is, we wouldn't make it legally harder to import Japanese cars just because it's expensive for Japanese producers to ship them here.

Barry "The Economy" Soetoro writes:

Why economists think of humans as commodities I will never know.

If the US imported 300M of the poorest middle eastern people next year, does the US GDP double? Or does the new population have different values and goals than the current population, and civil war break out?

Open borders on a 2-d econ graph might make mathematical sense, but here in reality, it is suicide.

Arnie Kriegbaum writes:

Assuming he would still be interested after reading the above, would Borjas be welcome at your meet-up or not?

Hugh writes:
The critical variable is R, the First World/Third World wage ratio for equally-skilled labor

Is R considered fixed at 2/4/6/whatever? Surely R will decrease rapidly as 3rd world immigrants depress first world wages.

Also imported goods (e.g. from China) would sky rocket in cost as the workers still left in China demand more money for putting together first world iPads etcetera.

Open Border enthusiasts need to show a win win for both first and third worlders - and I'm not seeing it.

Eelco Hoogendoorn writes:

@Nacim

I refer to two forms of collective property; material and immaterial. Material collective property are things like aircraft carriers, national parks, the statue of liberty, offshore mineral rights, the vast amount of real estate owned by the state, and so on. Many of those are rivalous goods. In a nightwatch state this component might be insignificant; but we don't live in any such state. Even if open borders are a net plus to 'the economy', that does not imply it is a net plus to those who get to vote on the matter.

On the non-material side, there are things like shared culture. While most people prefer some degree of diversity, there is a reason I don't live in Pyongyang or Baghdad, and coincidence is only a small part of it. I would gladly incur a lifetime cost of hundreds of thousands not to live in Baghdad, and I feel similar about Baghdad coming to me.

As for where to draw the line: note that I do not wish to present the current state of affairs as an ideal; indeed the current way in which immigration is organized is highly arbitrary, and far from my ideal.

Personally, I would prefer a more city-state oriented approach to these matters, where temporary visas would be easy to come by, but permanent residency would require strong evidence of permanent ties to the community, as supported by multiple independent witnesses (as opposed to by bureaucratic lottery, the way these things are usually decided in most countries).

WT writes:

Borjas' estimate of the cost of moving is probably wrong. But even more delusionally wrong is any claim that we could use immigration to "do away with much of world poverty in one fell swoop." There is absolutely no evidence or reason that would suggest that the economic benefits from relatively tiny immigration patterns would linearly scale to massive worldwide relocations. Massive immigration seems obviously far more likely to just re-create the institutions and conditions that the immigrants brought with them.

J.D. writes:

So you need an invite and/or ideological agreement to be invited to your party, but neither to come into our country. Got it.

JA writes:

@Hugh I agree R should go down dramatically as vast numbers of unskilled workers immigrate (assuming no price floor, minimum wage). I have no idea how many workers are already working below minimum wage.

Also, I may have missed it, but no one mentions the high cost of living in areas with higher wage rates. I would think most Americans could earn more by moving to New York City, but I don't think that would be true if you adjusted for cost of living. People in cities always have smaller homes and live on less land than what they would if they lived outside a city.

Further, it is not possible to obtain housing in the USA that is not hooked up to electricity and running clean water. For many foreigners, maintaining the same low cost lifestyle would be impossible when relocating here. Moreover, the cost of living may increase significantly in diaspora areas as the number of people would increase dramatically.

I agree with the critique of Borjas that many people leave the third world countries for safety reasons. Look at the tens of thousands of unaccompanied children (~50K this year alone) spending thousands of dollars to cross the border to the USA.

Also, for migrants don't forget the factor of wanting a better life for their children. While an unskilled laborer who doesn't speak enlglish's R value may be 2-6, the children of that laborer have the potential to have a significantly higher R value if they spend their whole lives in the USA vs some third world country (at least the parents may see it that way).

A more direct way to estimate the numbers would be to ask Americans who want to move to another state (but haven't), and use that as a factor to correct for the >50% of Latin Americans who claim they'd move to the USA if given the chance.

I'm generally skeptical of the claims of rioting and general institutional dissolution, but Paris has had a great deal of problems. I find it hard to think the situation in France would not be more frictious with more immigration.

Nacim writes:

@Eelco, those are very easy to remedy. If you're concerned about new immigrants taking up more rivalrous goods, you can either prohibit them entirely, limit them significantly, or levy a higher tax on this new class of people. For example, you can allow an unlimited number of natives at Yellowstone, but either cap or charge a higher price for migrants. Problem solved. Things like aircraft carriers will probably be only solvable through higher taxes which does raise the question on why we should discriminate on the basis of national origin instead of capacity to contribute to the public treasury. If we're worried about too many resources being used up, it seems more logical to be discriminate on the latter.

Still, if you're concerned about more people using up more resources, that seems as much of an argument for proscribing native birthrates as it is about regulating migrant numbers.

Similarly, if you're concerned about maintaining a shared culture (however defined), a more effective policy to ensure that is to implement mandatory tests for all residents, native or otherwise. That way we can either kick out or delegate to a lower status any native that loves bollywood movies a bit too much, and allow in people like the new lead singer of Journey from Macau. Again, if your concern is maintaining a shared culture it makes more sense to test everyone (not just foreigners) to ensure compliance. If allowing "ultra-american" foreigners would help further maintain the shared culture of this country, that sounds like something you would support, correct?

Please note that I am not disputing any of the objectives you laid out (maintaining collective resources and maintaining shared culture). I am failing to see how a border solution is anywhere near the best way to address those concerns. It seems like more strictly regulating the use of collective resources (including discriminating against classes) and implementing a mandatory culture exam are far more efficient methods of achieving your objectives. Do you agree?

Eelco Hoogendoorn writes:

@Nacim

Quantitatively, it is an interesting question, what a fair price of buy-in into a nations rivalous goods should be. My intuition is that the vast majority of would-be immigrants would change their plans, upon being presented with the pricetag, but it wont be an easy thing to quantify.

Wrt you argument concerning native birthrates and cultural 'testing'. No, they are not equivalent at all. They are only equivalent from the universalist position, considering what is good for 'the economy', what is 'logical' or what maximizes 'net utility'.

Such arguments however, only carry weight with the choir. If you are interested in changing immigration policy, you don't need to appeal to 'net utility', but to the utility of the in-group that gets to decide on the matter. For reasons which shouldn't be too hard to understand, people are generally more open to the notion of placing burdens on an out-group than on their in-group. Even if they don't really care that much about the in-group as a whole, if nothing else, they are a part of it themselves by definition.

Taking a step back, your idea of bureaucratically administered 'cultural tests' to decide upon matters of association would be hilarious; if not for the fact that this is in fact how matters of association are typically decided in the modern world, which makes sadness a more appropriate emotion. Any such test is of course easily gamed, and is a pitiful measure of the existence of any underlying mutual desire for association.

Nacim writes:

@Eelco, the political feasibility of the proposals is a separate discussion (which I grant you are likely correct), I'm only addressing the direct merits. If your concern is maintaining a shared culture, I still don't see how a bureaucratic test for all residents (including natives) isn't preferred to arbitrarily closing the borders and discriminating on national origin. Again, I'm not disputing your goal of shared culture, I'm only questioning what you think is the most effective means of promoting that goal and where you think the current system ranks.

albatross writes:

Are there any examples of wealthy countries that have started picking up those trillion dollar bills and gotten rich doing so? ISTM that one example would be more illustrative than a lot of arguments about what we'd expect to happen. And also, ISTM that I'd like to see someone *else*'s country to run the experiment first. If it goes as well as you expect, then probably most other countries in the world will follow. If not, then we'll know your model was wrong or at least incomplete.

Brian Holtz writes:

Here are five propositions about human migration that cannot all be believed simultaneously:

  1. Technology will continue to drive the costs (in money as well as social disconnection) of emigration dramatically lower.
  2. Societies with significantly more economic liberty will continue to grow dramatically more prosperous than other societies, increasing their attractiveness as immigration destinations.
  3. People living in such prosperous societies are reasonable to expect something better than the subsistence labor markets and ubiquitous squalor typical of economically unfree societies.
  4. Charity (whether public or private) can and should maintain America's current effective minimum living standards (which are extravagant by global standards).
  5. Immigration of peaceful honest people to America should be unrestricted.

Nobody can seriously dispute (1) or (2). If you accept (5), then you have to reject (3) and/or (4). I've never heard of an open-borders advocate with the courage to explicitly do so.

Unless you walk daily past homeless beggars (e.g. here in San Francisco), to be an open-borders advocate in modern America is to free-ride on the willingness of others to defend your quality of life.

Eelco Hoogendoorn writes:

@Nacim:

Although I do not see any such institutionalized testing as having any utility, more generally speaking; yeah, I am sympathetic to almost any secessionist movement, if indeed it is carried by a group of people with a genuine and credible plan to dissociate in a peaceful manner. Although my full views on the matter are too long for this comment section, perhaps it is best summarized by saying I am very much a seasteading enthusiast.

Note that I am not merely talking about political feasibility, but I would like to challenge your implicit moral axioms. What do you mean by 'direct merits'? You appear to reason on the basis of some form of universalism inspired by a 'net utility function', which frowns upon any unequal weighting of said utility function. But you are talking to a guy who just ate 5euros worth of chocolate that he could have spent saving an unborn baby from AIDS instead; so clearly, any arguments based in such universalism are aimed at deaf ears here.

To which I would like to add: this isn't really anything very much particular to me. People are very blatantly not utilitarians, and making arguments on the assumption that they are, or ought to be, probably isn't going to get you very far. The selective recognition of this fact by some libertarians has always stuck me as strange. Its ok to be selfish, but everybody who isn't you ought to be treated on the basis of strict egalitarianism? Most people may not like to reveal the precise weighting of their utility function (even to themselves), but that doesn't mean they are buying your argument.

JA writes:

@Albatross: Singapore seems to have done a pretty good job picking up the money, it was a very poor country in 1960.

@Brian Holtz: I don't think Caplan would disagree with you, just argue that you can insulate yourself from seeing the squalor. This is my biggest issue with unrestricted immigration, do you have to accept that people living near you will be living in squalor? Even many purely selfish people would pay to alleviate dire poverty so they themselves would not have to look at it.

Richard Besserer writes:

I recently heard George Borjas present recent work of his on how emigration of mathematicians from the former Soviet Union affected hiring and publication records of native mathematicians.

(Short version: natives publishing in areas which were the specialty of Soviets published less often and in less prestigious journals, and got tenure less often after the fall of the Soviet Union.)

He had begun thinking about these issues, he claimed, because a Polish friend, a math PhD, blamed Soviet immigration for the fact he had never found a tenure-track job in his field.

Asked whether (for example) his Polish friend might have been well advised to take a deal with the devil in which he got tenure but the Soviet Union (and Poland) remained communist, Borjas smiled and said: "I try very hard to avoid the policy implications of my work!"

This was an excellent example, I admit, if one wanted to avoid the question of the consumer surplus generated by immigration entirely. The marginal product of the skill set of the Soviet mathematicians is very hard to measure.

Not impossible, though. Skilled natives are not constrained to a single line of work. His Polish friend was not some poor emigre living hand to mouth selling hot dogs to students in Harvard Yard. He was a Wall Street quant, and was probably much richer than he could have ever become in academia.

Peter Schaeffer writes:

Sorry folks, but Borjas wins this one cold. Let me quote

"As the important work of Acemoglu and Robinson (2012) suggests, "nations fail" mainly because of differences in political and economic institutions. For immigration to generate substantial global gains, it must be the case that billions of immigrants can move to the industrialized economies without importing the "bad" institutions that led to poor economic conditions in the source countries in the first place. It seems inconceivable that the North's infrastructure would remain unchanged after the admission of billions of new workers."

This is a testable theory. The most obvious test is a trivial examination of the world. Why exactly is Latin America (relatively) poor in spite of easy access to world markets, finance, technology, etc.? The countries in question are all democracies and have been for years. The institutions of these countries reflect the people of these countries. Moving these people to the U.S. won't change the values that produced the dysfunctional institutions and societies of Latin America.

Actually, we have an even more powerful test. Puerto Rico has American institutions that reflect our values, rather than just the values of Puerto Ricans. Puerto Rico also has unlimited access to U.S. markets, technology, finance, etc. and considerable financial support from the mainland. How well is Puerto Rico doing? Per-capita GDP is almost identical to Mexico. Education is far worse than Mississippi.

The bottom line is that people matter, and importing billions of poor people into the first world will simply turn the first world into the third. Of course, Caplan and the rest of the Open Borders crowd know this already. They understand full well, that Open Borders is just a cheap labor scheme for corporate exploiters and a way for (some) poor people to take advantage of the superior productivity of some countries.

If Caplan and the rest of the Open Borders crowd believed that third world poor people were capable of creating prosperous societies, they would be talking about the $10 trillion bills lying on the sidewalk from economic development in the third world.

They don't.

Ghost of Christmast Past writes:

Wow! Michael Clemens showed up here! Hey, Prof. Clemens, would you kindly answer my critique [spread across two or three comments], which I suggest is "intellectually serious"?

Please, what about diminishing marginal returns? How can you assert that 3/7 of the world's people can move from low wage to high wage countries without a serious diminution of the available wage gains as more people move, since the migrants won't bring any capital (apart from their trivial-on-average human capital) with them?

Prof. Caplan wrote: "the critical variable is R, the First World/Third World wage ratio for equally-skilled labor." Why would we think R is fixed? It is virtually certain that R will decline as people migrate. That decline will probably be worse than linear with numbers of migrants, because the demand in rich countries for laborers who are "equally skilled" with the laborers expected to migrate from poor countries
is empirically low already (low wages indicate low demand). Regardless of the present R for any occupation, once labor competition increases R will decrease rapidly.

Stephen Landsburg published a chart taken from David Weil's book showing a nearly linear relationship between capital stock and wages across many countries.
Take a look at the chart! It's very striking, and completely consonant with standard economic theory that wages follow productivity which follows capital density.

If 3/7 of the world's people migrate, they will end up in their new homes with little more capital than they had in their old homes (on any usefully-short timescale), so they will end up with little more income! Quadrupling the populations of rich countries (the effect of the proposed mass migration) means cutting capital-per-worker by 75%, which means cutting wages by (at least*) 75% too.

Rich-country workers are entirely rational to resist mass immigration since it would greatly impoverish them.

And if the capital problem isn't enough, consider the very solid evidence that worker productivity is also related to (genetically determined**) intelligence. The inescapable fact is that today's rich countries have fairly high-IQ populations. The average IQ of prospective
poor-to-rich-country migrants is much lower, so their predicted wages in rich countries are also lower than a simple calculation of fungible-people vs. capital base might suggest.

*As I explained to Prof. Caplan and everyone else here earlier (link above) it is not likely that mass-migrants would immediately accede to a population-proportional share of rich-country wealth. Indeed, citizens of formerly-rich countries would go to some lengths to preserve part of their current wealth, leaving much less than an "even share" for migrants.

*See JayMan's masterfully assembled summary, with references.

Peter Schaeffer writes:

“Why free trade in goods but not in labor?”

Imported toasters don’t consume handouts, undermine public education, demand racial quotas, impose linguistic divisions, bring a 50%+ illegitimacy rate, raise crime rates (a lot), make housing unaffordable, increase gridlock, consume scarce natural resources, etc.

People are not goods. Its an easy point (we fought a Civil War over this very subject). However, the market mania (and dominant cosmopolitan elitism) of our time has obscured this lesson. In the words of the late Swiss writer Max Frisch:

”We wanted workers, we got people.”

Max Frisch had something else to say that’s just as important. He wrote a play, “THE FIREBUGS,”

The play is a classic cautionary drama from 1958 in which a city is terrorized by unknown arsonists. Frisch compares the advent of the arsonists to the Communist takeover of Czechoslovakia and to Hitler’s rise to power.

A quote from Frisch

“What everyone could see coming for so long duly came in the end: stupidity, never to be extinguished, now to be called fate.”

One of the best condemnations of Open Borders, ever.

Evil Racist Bigot writes:

Your objections to Borjas's concern over immigration altering wealthy nations such that they no longer retain the characteristics that make them wealthy seem weak. I havent pursued all the links you gave on the subject, but from what I did read:

"I've addressed these "social and political realities" before. The crime complaint is off-base; despite any IQ deficit, immigrants commit much less crime than natives."

But you dont address the fact that immigrants have children, which, whilst they will not be classed as immigrants, are none the less an obvious consequence of immigration.

Your own account of why immigrants commit little crime is:

"Personally, the most plausible story to me is that immigrants feel lucky to be in the U.S. and don't want to forfeit their "big break," so they try extra-hard to stay out of trouble."

Well perhaps so, but this is not going to apply to their children born here. They wont fear the prospect of deportation when committing crimes, and I doubt they are going to feel much gratitude for belonging to any economic underclass, separated by race, culture and neighbourhood from their wealthier counterparts, when unlike their parents, they havent experienced any enormous gains in income from relocating to the country in question.

We can be fairly sure that under open boarders, the proportion of the population that is Hispanic and black will rise significantly. We know that these demographic groups commit a substantially disproportionate amount of crime at present. What reason is there to believe that, beyond the first generation, an increase in the proportion of the population that these groups account for as a result of immigration will not produce and attendant increase in crime?

As for the voting patterns of immigrants, your argument in brief is:

"Immigration has a considerably smaller effect on the median voter than it does on the median resident."

and:

"the presence of poor immigrants makes natives turn against the welfare state."

I accept that both of these points are valid, but all they amount to saying is that the tipping point at which the electorate starts to vote for radically more redistribution would be reached only after a significantly larger influx of immigrants than we might expect if poor immigrants voted as reliably as the incumbent population, and the incumbent population's voting preferences didnt shift to the right as a consequence of immigration.

But neither point changes the fact that at some point, poor immigrants and their descendants will hold enough electoral influence that they will radically shift the politics of America to the left.

Blacks also are more apathetic about voting and as you say have made Americans as a whole more hostile to the welfare state. But that hasnt stopped blacks having a stranglehold over politics in areas where they are demographically dominant, like in Detroit. It just means that they need to account for a higher share of the populations than would otherwise be the case.

As you know perfectly well, with an open boarders policy, immigration would SOAR. The electoral influence of white Americans would be reduced to insignificance in a matter of decades. It wont matter if all whites start block voting republican or if the per capita rates at which Hispanics and blacks vote are substantially lower than those of whites, they will simply overwhelm the electoral process by weight of numbers.

Evil Racist Bigot writes:

Also, I am not sure if Caplan has addressed this point, so if he or someone familiar with his ideas could clarify I would be grateful, but isnt the issue of massive immigration rather more than just an issue of economic output?

It may be less convenient to quantify, but social cohesion is rather important to human happiness. The good of a nation is surely not defined simply by how much we consume. Obviously economic prosperity matters, but so too does shared values, interests, customs and identity. I want my neighbours to speak my language fluently, be interested in the same things I am, share my sensibilities and for me to feel like I belong to a community, not simply own a property in a particular residential area.

lee.r.piazza writes:

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Eric Rasmusen writes:

Has someone studied the effect of immigration before 1920 on US growth? There was a big negative effect on US political institutions--- the big cities were notoriously corrupt. I don't know how much that hurt prosperity, though. I would imagine that wages were much lower than they would have been, too. The counterfactual is what would have happened if immigration had ceased in 1800 and all population growth was internal. (One interesting question: how much population growth *was* internal?0

Eric Rasmusen writes:

The big question is whether if we move 300 million people from China, India, and Mexico to the US, their incomes rise to the previous USA level, or the Americans' incomes fall to the old China level. I don't see a clear answer.

It is noteworthy, though, that moving capital is another way to equalize capital/labor ratios, and people with capital have been unwilling to risk much of it in poor countries.

Greg Heslop writes:

@ Evil Racist Bigot,

"It may be less convenient to quantify, but social cohesion is rather important to human happiness. The good of a nation is surely not defined simply by how much we consume. Obviously economic prosperity matters, but so too does shared values, interests, customs and identity. I want my neighbours to speak my language fluently, be interested in the same things I am, share my sensibilities and for me to feel like I belong to a community, not simply own a property in a particular residential area."

Unfortunately, I cannot recall the details, but if you can obtain a copy of Richard Layard's 2005 book Happiness, and look for "immigration" in its index, you will find pages referencing some of the studies you want.

Layard's impression from those studies is that immigration should be restricted due to its negative effects on happiness ("stable communities are important", he says). I have read none of those studies (that's why I don't recall any authors at present), but I would also imagine these things are methodologically very difficult to study.

In my opinion, Happiness is a really terrible book (incidentally, I reviewed it recently), so if you are interested and can manage to check the index etc. without buying it, I recommend doing so.

Floccina writes:

I am mostly pro-immigration but there is a none zero chance that open boarders would lead to civil war. I would like for Bryan to try to quantify that chance in a post.

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