Thursday, December 30, 2010

Prosperity and Migration

Last summer, I had the great pleasure to attend a week-long seminar offered by the Institute for Humane Studies. When I heard that my friend and professor Bryan Caplan would be attending one of them this coming summer, well, I just had to apply. It seems that most of my conversations with Bryan are about standard-fare nerd stuff, and not nearly enough about economics. It would be nice to have a week's worth of lunchtime conversation in a more relaxed atmosphere.

So most of these things have little essay questions to answer, usually centering on some question involving liberty in one way or another. I chose to field one question on poverty and one on immigration. I think the two are closely related, but the way the prompts were framed, there wasn't a good way to get that across in 400 words each. Here are the prompts (in bold) and my answers:

Why are average citizens in some countries – such as South Korea, Germany, or Chile – relatively wealthy while citizens in other countries – such as Zimbabwe, Haiti, or North Korea – relatively poor?

The greatest triumph of the Liberal Age is the great mass of people lifted out of poverty. Freedom of contracture, so mundane an assumption to us in the comfortable West, helped deliver us from the misery of self-sufficiency. The rule of law, crafted over centuries in open access court cemented those rights to property that permit the prudent exercise of risk. Large, liquid capital markets, often the butt of scorn from legislator and pundit alike, allow entrepreneurs the opportunity to transform dreams into reality. Freedom to enter into and exit from business arrangements discourages institutional atherosclerosis, rewarding vigorous competitors and punishing sluggards. These basic preconditions of prosperity are historically rare and notoriously difficult to reproduce by art or artifice.

There is a canard that prosperous countries are wealthy for similar reasons, but poor countries are each destitute in their own way. Vicious tyrants and petty tinpot dictators flaunt citizens’ natural rights, confiscating treasure along with attendant opportunities in self-indulgent exercises of arbitrary power. Politically connected cronies capture monopoly privileges at pennies on the dollar, while the State runs printing presses day and night, knocking the legs from under holders of the sovereign currency. Frustrated citizens, knowing they lack equal protection under the law, refuse to challenge the status quo in stacked or indifferent courts. Persistent social arrangements hinder wealth mobility, generating chronic underclasses. Foreign policy administered from afar by comfortable bureaucrats, well-intentioned or otherwise, acknowledges and legitimizes corrupt regimes, while often harming innocent civilians as a result.

Zimbabwe, Haiti, and North Korea are more straightforward than some of the more marginal nations. Zimbabwe has the worst monetary policy since the Weimar Republic. Haiti is hobbled by climate, disease, the legacy of the Duvaliers, the aftermath of failed public works projects from the 1950s, and persistent regime uncertainty. North Korea is in the grip of a ruthless autocrat bent on the unrelenting exploitation of his subjects. Under such illiberal conditions, it would be folly to expect any of these countries to flourish. It is even more depressing to realize that the exceptionally well-to-do in these kleptocracies are often no better off than the median trial attorney in the United States. Other poor countries are more difficult to explain. Instead of being statistical outliers, they simply chronically sit in the boggy bulge on the left side of the distribution. These countries are of the greatest empirical interest, and should be studied more.

Proponents of open or greatly liberalized immigration often argue that residents of an impoverished country should have the right to enter can peacefully work in wealthier countries. Supporters of restricted immigration counter that the current citizens of a nation have the right to limit, through legislation, the number of people seeking to enter their country for economic reasons. Which, if either, of these arguments do you find more compelling? Why?

In my estimation, the only plausible argument against free and open migration concerns public health. Some filter is needed to prevent the spread of drug-resistant tuberculosis, exotic influenza strains, cholera, or other (communicable) airborne pathogens. Even this argument is shaky, since much of the disease afflicting poor countries is related to tainted water supplies and poor sanitation. Rotavirus is all but unknown in the United States, and we have the miracle of the flush toilet to thank for it. By imposing arbitrary migration barriers on people, political leaders are effectively dooming millions to the agonies of diarrhea, blood poisoning, parasitic invasion, malnutrition, and other myriad ailments that have been effectively conquered in the developed world.

The common economic arguments against open immigration are pure balderdash. Labor markets are emphatically not zero-sum; new workers create new opportunities for specialization and trade. If it were true that economic activity were somehow crystallized into static patterns, it would make more sense to bar recent graduates from entering the labor market, since they are more likely to be in direct competition for incumbent positions than immigrants who lack cultural capital and country-specific tacit knowledge. Luckily for freshly-minted 22-year old professionals, there is no such crystallization, and having access to the products and services provided by others, regardless of their national origins, allows them to avoid the curse of self-sufficiency and to focus on their own productive advantages. Trading with others is mutually satisfactory, even (and I think this can be easily overlooked) if the trade is between third parties. More productivity means we generate more surplus, and people tend to avoid packing their things and moving under the expectation that they are going to be less productive. Current citizens are, simply put, wealthier by dint of having access to the enhanced productivity of others. The issue of rights is a red herring. Even if exclusion rights exist, the exercise thereof limits the opportunity set of all parties. Draconian immigration policy makes everyone poorer, even Draco.

The balance of the arguments are either easily debunked with some simple fact-checking (such as claims that immigrants are more prone to committing crime… hint: they are not), countered with the realization that some problems are caused by other policy (drug trafficking, for the most obvious example), or addressed with efficiency criteria (the probability that severe political externalities could manifest are trivial compared to the boon to the economy.


I think if I had any marginal insights while writing this, it's that I probably chronically underestimate the implications of economic activity. Here I sit, fingers on a machine that lets me communicate almost costlessly with people all over the world. It's the dead of winter, and I'm comfortable with rolled-up sleeves in a brightly-lit building. I have shoes on my feet, Bill Leeb crooning to me through headphones I picked up for the equivalent of ten minutes' work (it's Noise Unit at the moment, off Strategy of Violence, probably his second or third best studio album next to Tactical Neural Implant and maybe Tenebrae Vision), and a notable lack of mud, smoke, and feces anywhere near my person. In any historical or geographic sense, from behind the veil of ignorance, I could not reasonably expect to have landed in such amazingly lucky conditions. As a humanitarian, I want to extend my luck to those who don't have it, and this urge becomes stronger when I realize that I can improve my own lot by doing so (though I must admit I'm comfortable enough so that the selfish reasons for doing so are pretty close to insignificant). It's probably true that free and open immigration won't magically lift the world's destitute out of their miserable conditions, but it could have a host of consequences unrelated to direct productive efficiency gains.

I'm prone to the conceit that ideas have power, and that good ideas germinate in fertile soil. In addition to importing good ideas together with foreign labor, we are able to export good ideas as remittances. Who knows but that some inventory control scheme created in the United States could catch on in Botswana, reducing shrinkage and permitting more food to find their way into the mouths of hungry kids (to leverage a popular heartstring-pulling tactic). The simple act of welcoming strangers isn't just morally right, it's efficiency-enhancing, and here's the kicker that often gets overlooked, for everyone. Germans who invite Turks to rebuild Munich mean that I'm able, should I so desire, to buy a better Mercedes-Benz than would be available in the counterfactual.

Of course, I didn't do much to delve deeply into the drawbacks of immigration in my answers above. I've seen, firsthand, the dynamics of Turkish life in Germany. I've even briefly been an expat myself, so I can appreciate anti-foreigner bias, and I have to conclude that while plenty of it is in-group bias, there's a fair share that stems from shitty labor policy. If I'm in a heavily regulated industry, with high barriers to entry and abundant protection, I doubt I'd be thrilled with welcoming competition that played fast and loose with my society's rules, no matter how much it needed to be shaken up. I might even see how parents might not want their kids to be "contaminated" by contact with bizarre cultures. Such contact tends to generate uncomfortable questions that parents haven't approached in their own thinking yet. I would still maintain that all these little frictions are piddling compared to the overall efficiency gains, and that rough spots tend to get smooth over time. Ethnic groups that don't breed into the local population usually end up finding a comfortable niche (usually) and plug along with the rest of us.

Hm. I've been mulling over my feelings on the dragon sleeping at the foot of the bed. My next post will probably be on that topic, but I might return to this. Growth is an important subject, and I think the Jones/Kling/Hayek milieu has perhaps more to offer on the topic than has been adequately explored yet.

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