The Mighty Difference Between Immigration and Trade

What’s so great about international trade?  Economist’s standard answer boils down to two words: comparative advantage.  Specialization and trade increases total production, even if one side is more productive across the board.  A textbook example starts with a table that shows hourly productivity in two countries, such as the U.S. and Mexico.

Table 1: Trade and Productivity

U.S. Productivity Mexican Productivity
Cars/Hour 4 .1
Wheat/Hour 2 1

 

To see how specialization and trade raise TOTAL productivity, just imagine switching five U.S. hours from wheat to cars, and twenty Mexican hours from cars to wheat.  Total wheat production rises by (-5*2+20*1)=10, and total car production rises by (5*4-20*.1)=18.

When I teach the economics of immigration, I routinely tell students that immigration is trade in labor, so the same logic applies.  In fact, I just relabel the preceding table:

Table 2: Immigration and Productivity (simple version)

U.S. Productivity Mexican Productivity
Programs/Hour 4 .1
Childcares/Hour 2 1

 

When asked, “Sure, but what’s the point of moving the labor?,” my standard reply is: “You can’t export most services easily.  A Mexican nanny normally can’t perform childcare services for U.S. families unless she lives in the U.S.”

It’s a fine answer.  But on reflection, it deeply underestimates the economic benefits of immigration.  Why?  Well, international trade is a wonderful thing, but merely trading goods across borders has no blatant effect on the productivity of the workers who produced the goods.*  When a worker migrates from a low-productivity country to a high-productivity country, however, he becomes vastly more productive almost overnight.  To really show the economic effect of migration, then, you should imagine moving from the world of Table 2 to the world of Table 3.

Table 3: Immigration and Productivity (improved version)

U.S. Productivity Mexican Productivity
Programs/Hour 4 1
Childcares/Hour 2 2

 

Table 3 implies that migration raises productivity even if workers continue to use their time exactly as they did before.  Suppose you move twenty Mexican hours from Mexico to the U.S.  The workers continue to split their time evenly between programming and childcare.  Production still rises by (10*(1-.1))=9 programs and (10*(2-1))=10 childcares.  The mechanism can’t be comparative advantage, because the division of labor remains unchanged.  The world is richer, rather, because Mexican talent has moved from a production desert to a production oasis.  Once the immigrants arrive, of course, it makes great sense to specialize and trade; but immigration would have great economic benefits even if no one reconsidered his occupation.

Yes, I am well-aware that some researchers fear that immigration will transform production oases into production deserts.  My forthcoming book has a whole chapter on this topic.  The key point for now: Almost everyone – including me – has hitherto underestimated the gross economic benefits of immigration.  And until we accurately measure immigration’s gross benefits, we can’t accurately measure its net benefits, either.

* Though there could be a big non-blatant effect; see Bloom and van Reenen on the managerial benefits of multinationals.

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A One-Page Hop from Bleeding Heart to Mailed Fist

Sometimes the hop from bleeding heart to mailed fist is only one page wide.  From Oscar Lewis, Ruth Lewis, and Susan Rigdon’s ethnography Four Men: Living the Revolution: An Oral History of Contemporary Cuba.

p.105:

Illiteracy is at the bottom of juvenile delinquency because illiterate parents don’t understand the development of the Cuban Revolution.  I’ve always been an enemy of slavery and illiteracy… My dearest wish is that every person, not only in Cuba but in the whole world, should know how to write his own name.

p.106:

Drastic measures are needed to fight delinquency.  First, I’d give a juvenile delinquent good advice.  Second, if that didn’t help, I’d suggest going to the work farms, along with study.  That way I’d gradually try to perfect the individual’s feelings and conscience.  And finally, if the first two measures brought no improvement, I’d send him before the firing squad.  Or maybe I’d advise Fidel to have an incinerator dug about 40 or 50 meters deep, and every time one of those obstinate cases came up, to drop the culprit in the incinerator, douse him with gasoline, and set him on fire.  The incorrigible delinquent is a blot that can’t be washed out.  If he’s allowed to go on living in our society, his influence will carry into the future.  So it’s best to make an example of him for future generations.

(interview with Lazaro Benedi Rodriguez, 70-year-old Defense Committee President for his housing project)

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Sorry, Innocent Bystanders

The world is full of problems, and most people want government to solve these problems.  When government solves problems, however, they usually create some new ones.  If you’re lucky, the victims of the new problems are the very bad guys who created the original problems.  Serves them right!  Yet more often, the victims of the new problems are innocent bystanders.  They’ve done nothing wrong; they’re just caught in the crossfire.

Like who?  Let’s start with babies in Nazi Germany.  The babies didn’t start the war.  They’ve never hurt a fly.  But it’s hard to kill the Nazis without putting the babies’ lives in grave danger.

You don’t have to be a pacifist to realize that this is a tragic situation.  Imagine trying to justify it to the babies: “You’re totally innocent.  I get that.  But Nazism is so horrible that I’m going to put your lives in grave danger anyway.  I’m so sorry.  I hope you can find it in your heart to forgive me.”  This is an intellectually honest position, but oh so bitter.  It’s far sweeter to invoke collective guilt, say “They had it coming,” and kill indiscriminately.

You might reply, “Well, the intellectually honest position is demotivating.”  But that’s not quite true.  Yes, acknowledging innocent bystanders demotivates indiscriminate killing.  But it strongly motivates the search for an approach with lower collateral damage.  Given humans’ ubiquitous in-group bias, this is a feature, not a bug.

Wartime naturally highlights the most gruesome abuse of innocent bystanders.  But many peacetime policies have the same structure.

Take gun control.  Suppose strict gun control would eliminate all mass shootings.  Who could oppose such a policy?  Most obviously, the vast majority of gun owners who never have and never will murder anyone.  Gun control supporters will naturally be tempted to demonize them.  The intellectually honest thing to say, however, is: “99.99% of you gun owners are perfectly innocent.  I get that.  But mass shootings are so horrible than I’m still going to take your guns away.  I’m so sorry.  I hope you can find it in your heart to forgive me.”  Demotivating?  Well, it demotivates the promotion of strict gun control, but motivates the search for ways to reduce violence with lower collateral damage.

Or take refugee policy.  Suppose banning all refugees would eliminate all terrorism.  Who could oppose such a policy?  Most obviously, the vast majority of refugees who are not and never have been terrorists.  Opponents of asylum will naturally be tempted to demonize them (remember “rapefugees”?).  The intellectually honest thing to say, however, is: “99.9999% of you refugees are totally innocent.  I get that.  But terrorism is so horrible that I’m going to refuse asylum anyway.  I’m so sorry.  I hope you can find it in your heart to forgive me.”  Intellectually honest?  Check.  Demotivating?  Well, it demotivates indiscriminate rejection of refugees, but motivates the search for anti-terrorism tactics with lower collateral damage.

War, gun control, and refugees.  I deliberately chose three radically different illustrations.  I suspect that readers will angrily object to at least one of them.  But I really don’t see how.  Denying the existence of innocent bystanders is convenient; if they don’t exist, we don’t have to fret about them.  Denying the existence of innocent bystanders is also pleasurable; what fun it is to unequivocally unleash your full arsenal against the forces of evil.  Yet denying the existence of innocent bystanders is, above all, blind.  Innocent bystanders exist.  They have rights.  You should think long and hard before violating them.  And if you find no alternative, at least have the decency to tell them, “I’m so sorry.”

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A Short Hop from Bleeding Heart to Mailed Fist

When Hugo Chavez began ruling Venezuela, he sounded like a classic bleeding-heart – full of pity for the poor and downtrodden.  Plenty of people took him at his words – not just Venezuelans, but much of the international bleeding-heart community.  By the time Chavez died, however, many admirers were already having second thoughts about his dictatorial tendencies.  Nicolas Maduro, Chavez’s handpicked successor, amply confirmed these fears.  Almost everyone now plainly sees the mailed fist of the brutal dictator Chavez II.

Which brings us to two facts about the political world.  Let’s call them Strange and Meta-Strange.

The Strange Fact: This transition from bleeding heart to mailed fist is common.  Almost every Communist dictatorship launches with mountains of humanitarian propaganda.  Yet ultimately, almost everyone who doesn’t fear for his life wakes up and smells the tyranny.

The Meta-Strange Fact: People rarely describe the Strange Fact as “strange”!

What’s so strange about the Strange Fact?  Most obviously, the extreme hypocrisy.  Governments that vocally proclaim their compassion for the meek – most obviously the Soviet Union and Maoist China – commit a grossly disproportionate share of mass murder and other violations of human rights.

What’s so strange about the Meta-Strange Fact?  Well, picture the most vocally compassionate person you personally know, the person who seems most obsessed with the interests and feelings of others.  Wouldn’t you be shocked to discover that they burn babies with cigarettes when you’re not looking?  It’s one thing for people to fall short of saintly ideals; it’s quite another for people who uphold saintly ideals to be downright wicked.

What’s going on?  Here are some possibilities:

1. Politics is a brutal game.  When bleeding hearts take over a government, brutal outsiders smell their weakness, force their way in, bully their way to the top, and unleash hell.

The obvious problem with this story, of course, is that the bleeding hearts and mailed fists are usually the same people, though sometimes at different stages in their political career.

2. In this wicked world, the best way to pursue bleeding-heart policies is with a mailed fist.  Sure, it would be nice if we could harmoniously adopt bleeding-heart policies.  But in the real world, the forces of reaction and selfishness will try to obstruct and reverse bleeding-heart policies with every step.  Unless, of course, you terrorize them into submission.

The obvious problem with this story, of course, is that countries that pursue bleeding-heart policies with a mailed fist look like total disasters.  Most of them face horrifying civil wars; and even when the dust settles, the common man’s quality of life remains very low.

3. Hostile foreigners force bleeding hearts to adopt the mailed fist.  When countries pursue bleeding-heart policies, evil countries like the United States try to isolate, punish, and overthrow them.  The best way to protect your noble bleeding-heart experiment, sadly, is to prioritize the military and internal security.  Then the international community has the effrontery to call these unwelcome defensive measures “the mailed fist.”

The obvious problem with this story: One of the quickest ways to anger countries like the United States is to blatantly use the mailed fist (especially if you combine your mailed fist with anti-Western rhetoric).  Furthermore, if extreme bleeding-heart policies really were prone to provoke powerful foreigners, a sincere bleeding heart would moderate enough to appease these foreigners.  “You don’t like my total war against illiteracy and disease?  Fine, I’ll just do a half-war against illiteracy and disease.”

4. The bleeding-heart rhetoric is mostly propaganda; the main goal is the mailed fist.  Even the most abusive romances usually start with a honeymoon period.  Similarly, dictators rarely gain total power by growling, “Give me total power.”  Instead, they woo the people with flowery words and symbolic gifts.  Part of the goal, of course, is to trick your victims until you get the upper hand.  But the flowery words and symbolic gifts are also effective ways to inspire gratitude in both recipients and bystanders.

This story often seems right to me, but it does implausibly downplay the bleeding hearts’ ideological fervor.

5. Bleeding-heart rhetoric is disguised hate speech.  When activists blame the bourgeoisie for causing hunger, disease, and illiteracy, perhaps their main concern isn’t actually alleviating hunger, disease, or illiteracy.  While they’d like these problems to disappear, the bleeding hearts’ top priority could be making the bourgeoisie suffer.  The mailed fist systematizes that suffering.

It’s tempting to dismiss this story as cartoonish, but it’s more plausible than you think.  Human beings often resent first – and rationalize said resentment later.  They’re also loathe to admit this ugly fact.  Actions, however, speak louder than words.  People like Chavez and Maduro can accept their failure to help the poor, but not their failure to crush their hated enemies.

6. Bleeding-heart policies work so poorly that only the mailed fist can sustain them.  In this story, the bleeding hearts are at least initially sincere.  If their policies worked well enough to inspire broad support, the bleeding hearts would play nice.  Unfortunately, bleeding-heart policies are exorbitantly expensive and often directly counter-productive.  Pursued aggressively, they predictably lead to disaster.  At this point, a saintly bleeding heart will admit error and back off.  A pragmatic bleeding heart will compromise.  The rest, however, respond to their own failures with rage and scapegoating.  Once you institutionalize that rage and scapegoating, the mailed fist has arrived.

This story also seems pretty solid.  It downplays the self-conscious Machiavellians, but only by recasting them as childish fanatics.

If you don’t know much about the actual history of radical bleeding-heart regimes, I’ll admit that stories 4-6 sound overblown and unfair.  But I’ve devoted much of my life to studying this history.  All I can say is:  If your story isn’t ugly, it isn’t true.

P.S. Hugo Chavez is a really boring speaker, so if you’re curious about the general phenomenon I’m discussing, start with this little bleeding-heart speech by the murderous Che Guevara.

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Government Needs No Money to Curtail Pollution

People often complain that government isn’t spending enough money fighting pollution.  Even many economists repeat this complaint.  That’s very odd, because standard market failure theory tells us that governments don’t need any money to fight pollution.

Why not?  Simple: In standard market failure theory, governments are supposed to tax pollution!  Such taxes simultaneously reduce pollution and collect revenue.  As a result, fighting pollution is one of any efficiently-managed government’s top profit centers.

If you object, “Virtually no government pays attention to standard market failure theory,” I couldn’t agree more.  But I still don’t understand why activists keep asking for taxpayer money instead of loudly advocating the negative-cost remedy that appears in every intro econ textbook.

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Why I’m Optimistic About Venezuela

If there were mass protests against the government of Saudi Arabia, and the U.S. decided to recognize the opposition as the legitimate government of Saudi, I would expect disaster.  Why?  Because…

1. Supporters of the Saudi monarchy remain powerful and confident enough to aggressively fight back, plunging the country into hellish civil war.

2. If the monarchy loses, it’s most likely replacement will be a revolutionary Islamist dictatorship.

3. Even if the new Saudi government sticks to democracy, the median Saudi voter probably favors even worse policies than the Saudi monarchy now imposes.  In particular, government enforcement of Islamic fundamentalism would tighten, and economic policies would move even further toward socialism and populism.

And now you know why I am optimistic about the constitutional crisis in Venezuela.

1. Supporters of Maduro are too weak and demoralized to aggressively fight back, so I put the risk of hellish civil war below 10%.  (Indeed, since there’s a high base rate for civil wars in situations this dire, it’s quite possible that the risk of civil war has actually fallen due to the crisis).

2. If the Maduro regime loses, its most likely replacement will be a moderate pro-Western democracy.

3. If the new Venezuelan government sticks to democracy, the median Venezuelan almost certainly favors better policies than Maduro now imposes.  In particular, government enforcement of socialist ideology will crumble, and economic policies will move sharply away from socialism and populism.

If you’re too young to remember the collapse of Communism, this is a tiny taste of the sweetness of 1988-1991.  When’s the last time you had reasonable hope of dramatic peaceful pro-freedom change in the world?

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