Reflections on the Krikorian-Caplan Soho Forum Debate

Thanks again to Gene Epstein and Reason for sponsoring last week’s immigration debate between myself and Mark Krikorian.  Thanks to Mark, too, for debating before an unsympathetic audience.  The resolution, you may recall, was: The current pandemic makes it all the more necessary for the federal government to tighten restrictions on immigration.

Here are my extra thoughts on the exchange.

1. I was stunned that Mark did not think we should limit immigration to help fight contagious disease.  While this position is deeply flawed, it has great surface appeal.  I have to think that most of his supporters would endorse it enthusiastically.  Hopefully he’ll strive set them straight, though I doubt it.  (Prove me wrong, Mark, prove me wrong).

2. Instead, Mark dusted off the classic populist argument that we should limit immigration to fight high unemployment.  Since he never argued in favor of immigration a few months ago when unemployment was at a 50-year low, one can’t take him too seriously.  As I keep saying, immigration restriction is a solution in search of a problem.

In any case, this is a textbook example of misguided recession policy.  Yes, deliberately restricting production during a recession can help some workers, but only at the expense of consumers (most of whom are workers in other industries).   When Roosevelt ordered the destruction of food during the Great Depression, he helped farmers, but only by depriving the rest of the population of affordable calories.  Excluding immigrants, similarly, helps competing native workers, but only by depriving the rest of the population of the goods and services immigrants produce.  Wise recession policy focuses on reviving production, not destructive redistribution.

3. Curiously, Mark granted that during this crisis, we should not exclude foreign agricultural workers.  His logic is hazy.  Today offers a prime opportunity to help native farm workers at the expense of native food consumers.  If you think that’s good policy in general, why not here and now?  The real story, I suspect, is that slashing the food supply during a crisis would be highly visible – and Mark wants to keep the costs of immigration restriction hidden.  I’d be amazed if Mark thought now was a good time to let in more foreign agricultural workers; if the existing number is temporarily good during this emergency, though, why stop there?

4. Mark combines this concession on immigrant farm workers with a bizarre long-run plan to wean U.S. agriculture off its “addiction” to cheap foreign labor.  Yes, a large fall in labor supply would induce mechanization.  But as long as human labor is cheaper, what’s good about switching?  Mark’s central argument is aesthetic; in this modern age, people shouldn’t be digging around in the Earth like “serfs.”  (His word).  This is economically absurd.  As long as the low-tech approach is cheaper than the high-tech approach, the low-tech approach is better.  Sure, we could force-feed mechanization.  If we taxed human-powered lawn-mowers, we’d switch sooner to robotic mowers.  The wise course, though, is to wait until upgrading actually makes us better off.

(Mark did vaguely allude to a technological path-dependence argument, but those are a dime a dozen even when fully fleshed-out).

5. Toward the end of our debate, Mark claimed that our fundamental difference is that he takes our obligations to fellow Americans seriously, while I think our obligation is to all mankind.  I agree that this is a difference, but it’s not fundamental.  Why not?  Because if I were an American nationalist, I would still favor open borders in order to maximize Americans’ standard of living.

6. What then is our fundamental difference?  I say it comes down to misanthropy.  Mark hears about a human being who wants to immigrate here – and presumes he’s going to make our lives worse.  Sure, he’s glad that we got Albert Einstein on our team, but negativity is Mark’s default.  My default is exactly the opposite.  When I hear about a human being who wants to immigrate here, I presume he’s going to make our lives better.  Yes, he could be the next Hitler, but the odds are astronomically against it.  The vast majority of human beings make valuable contributions to the world, even though some of us contribute far more than others.  That’s what the history of the U.S. shows, and what our future history is going to show.

7. Is Mark really a misanthrope?  Notice how he responds when an audience member asks him about government regulation of natives’ child-bearing.  He doesn’t try to argue that native babies grow up to be better people than immigrants.  He explicitly disavows the idea that we’re “superior” to people from other lands.  The concrete social effects of an extra native or an extra immigrant should therefore be comparable.  And since he deems the typical immigrant to be a negative, he should think the same about the typical native as well.  While Mark opposes government regulation of natives’ child-bearing, his rationale is not about consequences, but our “social contract.”  Americans are entitled to have as many kids as they want, even if they’re a burden on society.  Would-be immigrants, in contrast, are only entitled to burden their own societies.  So while we’re obligated to put up with burdensome Americans, we can and should refuse all those burdensome foreigners.

By the way, the misanthropy is palpable if you peruse the main page for the Center for Immigration Studies.  See for yourself; it really is monomaniacal collection of complaints about immigrants.  Assembling an analogous collection of ceaseless negativity about any human group – or humanity in general – would be child’s play.  Just let your inner pessimist fly.

8. The most intellectually solid case for immigration restriction is that natives are civilized, while immigrants are awful barbarians.  (Remember “rapefugees”?)  Why doesn’t Mark defend this position?  The charitable story is that he knows it’s false.  But if so, why doesn’t he try harder to disabuse his fellow restrictionists of their xenophobic pessimism?  The better story, I’m afraid, is Social Desirability Bias.  Calling immigrants “awful barbarians” makes you sound like a mean person, so Mark won’t endorse this position – or even engage it.  Social Desirability Bias elegantly explains why his organization puts the nonsensical “low immigration, pro-immigrant” motto on its masthead instead of a more honest slogan like, “Savages are at our gates!”

9. Suppose we accept Mark’s view that we have special obligations to our fellow Americans, just as parents have special obligations to their own children.  If you take this analogy seriously, you should still be very nervous that the United States is callously violating the rights of foreigners.  After all, parents’ sense of love and obligation for their children often leads them to mistreat strangers for their children’s benefit.  (Remember the quaint “College-gate” scandal of 2019?)  Shouldn’t we similarly expect nations’ sense of love and obligation for their citizens to lead them to mistreat foreigners for their citizens’ benefit?  It would be amazing if it didn’t.

10. Mark casually dismisses estimates of the massive economic gains of open borders.  It’s only a model; and the problem with models, as faulty coronavirus projections show, is: Garbage In, Garbage Out.

The real story, though, is that economists who work with trade models are well-aware of their potential limitations.  If immigration leads to bad economic policies, for example, simple models are overly optimistic.  However, that realization is only the first step.  The next step is to look at the data and measure how much immigration is likely to degrade the quality of economic policy.  That’s what I do in Open Borders, and I conclude that the effect if any is tiny.  The same goes for the other major challenges to the simple model.  And while we’re checking the model for excessive optimism, it’s also worth checking it for excessive pessimism; most notably, the standard Clemens model completely ignores the effect of immigration on innovation.

Further point: Even if Mark were right to reject predictions about the economic effects of extreme liberalization, he has no reason to dismiss predictions about the economic effects of moderate liberalization.  Maybe letting in a billion foreigners would destroy our institutions, but letting in ten million won’t.  Frankly, it seems like he’s more interesting in categorically dismissing a model with uncomfortable results than in figuring out the extent to which the model is true.

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Politics is Still Stupid

I don’t know how many times I’ve written about the stupidity of politics. Plenty.

I’ve given countless talks, podcast interviews, and most of my first three books were about how soul-sucking, distracting, useless, degrading, and pointless political involvement is. The combination of Public Choice theory, which explains how politics works and why it doesn’t, and understanding social change, plus lived experience of working in politics, policy, education, and finally entrepreneurship have made it abundantly clear to me that politics is at best a ridiculous spectator sport. At worst a terrible addiction that makes you an asshole and a moron all at once.

I’m a political atheist. I don’t acknowledge its power, because in my day to day life, I experience my own. It only matters when you believe it does. And I don’t.

Politics turns friends into enemies. It breeds fear. It creates mental blocks and blinders to reality. It indulges the most socially destructive vice, envy. It deceives us into downplaying our own agency and becoming victims. It makes us feel pressured to pretend to know and care about everything.

Doing nothing. Having no opinion. Not following the news. These are steps towards personal emancipation.

Building a life you want. Cultivating mindsets that add to your sense of life. Going about your business as if you own your outcomes. These are steps toward a creative and fulfilling life.

These acts of productive omission and commission are indifferent to politics. Best case it’s a distraction to the good life. Worst case it’s destruction of the good life.

To all my brothers and sisters mired in the struggle, try walking away. See if your life doesn’t improve.

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The Fault Is Not in Our Stuff But in Ourselves

Bruce Sacerdote‘s NBER Working Paper, “Fifty Years of Growth in American Consumption, Income, and Wages” provides a nice update on the measurement of CPI Bias.  The punchline should be obvious, but it’s great to hear such an eminent economist say it: “Meaningful growth in consumption for below median income families has occurred even in a prolonged period of increasing income inequality, increasing consumption inequality and a decreasing share of national income accruing to labor.”

Highlights:

Table 3 shows estimates of annualized growth rates in wages by decade. The first column shows growth in real wages using CPI deflation. This column show real wages fell by 0.8 percent per year during the ten years January 1975-January 1985 and fell by 0.6 percent per year during the ten years ended in 1995.10 In the subsequent two decades wage growth is positive 0.8 percent per year and 0.7 percent per year respectively.

The next three columns calculate growth in real wages using a) PCE adjustment, b) an assumption of 20% upward bias in CPI growth, and c) Hamilton/ Costa adjustment to CPI. The picture looks progressively more optimistic as we move from left to right. PCE adjustment still has negative wage growth in the first two decades (75-85 and 85-95) but the decreases in real wages are smaller. Hamilton/ Costa bias adjustment implies annual real wage growth of 1.4% during 1975-1985, .2 percent per year during 1985-1995, 1.4 percent during 1995-2005 and .8 percent in the most recent decade.

The table in question:

More:

Consumption for below median income families has seen steady progress since 1960. My preferred point estimates are based on CEX measures of consumption where the price index has been de-biased following Hamilton and Costa. These estimates suggest that consumption is up 1.7 percent per year or 164 percent over the whole time period. These estimates of growth strike me as consistent with the significant increases in quality and quantity of goods enjoyed by Americans over the last half century. And my conclusions are consistent with the findings of Broda and Weinstein (2008). Estimates of slow and steady growth seem more plausible than media headlines which suggest that median American households face declining living standards.

The bias adjusted estimates also provide a more positive outlook on real wage growth in the last 40 years than standard media headlines. PCE adjusted wages appear to have grown at .5% per year during 1975-2015 while the de-biased CPI adjusted wages grew at 1% per year over the same time period.

Key caveat:

Importantly these estimates do not tell us anything about why wages grew more slowly than GDP or why inequality increased. CPI bias does not explain decreases in labor’s share of income (Krueger 1999) or the associated rise in inequality (Pikkety and Saez 2003). Adjusting the price index downward leads to higher estimated real wage growth and higher estimated real GDP growth.

The big unanswered question:

What I do not address here is why Americans feel worse off if consumption is actually rising. There are at least four important explanations that may be at work. First, I am only examining consumption within very large sections of the income distribution and there may be specific groups (for example less than high school educated men) for whom consumption is actually falling. Second, it’s possible that the quality of some services such as public education or health care could be falling for some groups. Third, the rise in income inequality coupled with increased information flow about other people’s consumption may be making Americans feel worse off in a relative sense even if their material goods consumption is rising. Fourth, changes in family structure (e.g. the rise of single parent households), increases in the prison population, or increases in substance addiction could make people worse off even in the face of rising material wealth. A deep future research agenda would be to understand how America has lost its sense of optimism about living standards and whether the problem is one of consumption, relative consumption (relative to other people) or something entirely different.

My favorite candidate for “something entirely different”: false consciousness.  Most people embrace a dogmatic pessimistic ideology, and believing is seeing.  Hedonic adaptation amplifies the problem.  After all, it’s easier to deny that your standard of living is great than to admit that you’re unhappy despite your affluence.  The fault is not in our stuff but in ourselves.

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Instead of a US Peace Plan for the Middle East, How about a US Peace Plan for the US?

US Secretary of State Mike Pompeo describes the Trump administration’s plan for peace between Israel and Palestinian Arabs as “unexecutable.” President Trump says Pompeo “may be right.”

Good! As addiction counselors say, the first step is admitting you have a problem.  With addiction, the way out is not “if at first you don’t succeed, try, try again.” It’s admitting that the thing you’re addicted to will never solve your problems and giving up that thing.

The United States suffers from a long-term addiction, since at least the end of World War 2, to trying to run the world.

That addiction has cost American taxpayers trillions of dollars.

It’s cost the lives of hundreds of thousands of Americans and millions of citizens of other countries.

It’s empowered evil regimes to suppress human rights both at home and abroad.

And it has never, ever “worked” in the sense of bringing about lasting peace, any more than booze saves marriages or methamphetamine repairs mental anguish.

In fact, just like booze or methamphetamine, the US addiction to world “leadership” wrecks the lives of everyone around the addict too. Which means that if the US gets its act together, everyone else, not just Americans, will be better off.

Here’s a four-step peace plan that addresses the roots of the problem instead of just unsuccessfully trying to treat the symptoms:

First, the US should shut down its military bases on foreign soil and withdraw its troops from the foreign countries they’re currently operating in.

Second, the US should end economic sanctions on, and extend full diplomatic recognition and trade privileges to, all the countries it’s currently bullying.

Third, the US should end all foreign aid, especially military aid.

Fourth and finally, the US should dramatically decrease its so-called “defense” budget to levels consistent with actual defense.

Cold turkey withdrawal may be out of the question, but the US can and should wean itself off the damaging drug of foreign interventionism.

Let the Arabs and Israelis settle their own hash. Quit taking sides between Saudi Arabia and Iran. Stop pretending North Korea is or ever has been a threat to the United States. Step back and let Venezuelans, Syrians, and Libyans decide who’s going to run Venezuela, Syria, and Libya.

It won’t be easy, but it’s not complicated either. The US can continue drinking itself to death on the poison of foreign meddling, or not. Not is better.

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Gabor Mate: The Consequences of Stressed Parenting (1h19m)

This episode features a talk by Canadian physician and addiction expert Gabor Mate from 2012. He talks about the link between stressed parenting and the preponderance of childhood disorders like ADHD, autism and oppositional defiant disorder. Purchase books by Gabor Mate on Amazon here.

Listen To This Episode (1h19m, mp3, 64kbps)

Subscribe via RSS here, or in any podcast app by searching for “voluntaryist voices”. Support the podcast at Patreon.com/evc or PayPal.me/everythingvoluntary.

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Big Business: Recasting the Anti-Hero

Tyler Cowen’s previous book, Stubborn Attachments, is right in general, but wrong on particulars.  His latest book, in contrast, is largely right on both.  The world needed a new book to be pro-market and pro-business at the same time, and Tyler’s Big Business delivers the package.  I’m almost tempted to quote Keynes:

In my opinion it is a grand book … Morally and philosophically I find myself in agreement with virtually the whole of it: and not only in agreement with it, but in deeply moved agreement.

Highlights include:

1. A popularization of Bloom and van Reenen’s work on the power of management:

We must take a moment to appreciate the particular character of American business. By global standards, its overall performance is remarkably impressive. Stanford economist Nicholas Bloom and a group of co-authors studied and compared management practices in some of the major economies, including the United States. Their survey assessed how well a workplace uses incentives, the quality of performance measures and reviews, whether top management aims at long-term goals, whether top creators are well rewarded, and whether the firm attracts and retains quality employees, among other relevant metrics…

So at the end of all of these measurements of management quality, which country comes out on top? The United States is a clear first…

Management really matters. Let’s say we take two American plants producing comparable wares, but one of those plants is in the 90th percentile in terms of productivity, while the other is in the 10th percentile. The former plant will have a productivity level four times higher than the latter plant, due to superior management practices. It has been estimated that Chinese firms could increase their productivity by 30–50 percent and Indian firms could do so by 40–60 percent merely by improving their management practices up to an American level of quality.

2. Business practices and promotes good manners and civility.  Despite modern political hysteria…

the world of American business has never been more productive, more tolerant, and more cooperative. It is not just a source of GDP and prosperity; it is a ray of normalcy and predictability in its steady focus on producing what can be profitably sold to customers. Successful businesses grow dynamically, but they also try to create oases of stability and tolerance in which they can perfect their production methods and which help to attract and retain talent…

American big business in particular has led the way toward making America more socially inclusive. McDonald’s, General Electric, Procter & Gamble, and many of the major tech companies, among many others, were defining health and other legal benefits for same-sex partners before the Supreme Court legalized gay marriage… This push for tolerance shouldn’t come as any surprise. Big business has lots of customers and relies on the value of brand names. It doesn’t want any group of those customers to feel put out or discriminated against or to have cause for complaint…

3. Some deliberate (?) understatement on fraud:

Most of all, business is criticized for being fraudulent and ripping us off. While there is plenty of fraud in business, the commercial sector isn’t any more fraudulent than individuals in other capacities, and it may even be somewhat less fraudulent.

I’d say there’s no “may even be somewhat less fraudulent” about it!  Who wouldn’t trust Amazon or Uber or Airbnb over a random American who promised to provide the same product?

4. Business thinks long-term, usually:

It can be very difficult to distinguish between short-termism and an inability to see into the future. The failed Netflix competitors were mainly not venal rip-off artists; rather, most of them genuinely did not see that providing massive amounts of streaming content would prove to be a winning strategy. If half of the time businesses think too short-term and the other half of the

time too long-term, there will be thousands of valid examples and anecdotes about excessive short-term thinking and planning, and they aren’t necessarily related to CEO dishonesty.

And:

Of course, markets also think long-term when it comes to successes, and that long-term mentality is encouraged through CEO pay structures. Consider Amazon, which has a stratospherically high share price, even though the quarterly earnings reports usually fail to show a sizable profit. Whether you think that valuation has been justified or not, it is a clear example of how markets can consider the broader, longer-term picture. Circa 2018, Jeff Bezos ended up as the richest man in the world, and he achieved that status by sticking with some long-run goals.

5. Employment may not be fun, but it’s meaningful and prevents misery:

Another way to think about the non-pay-related benefits of having a job is to consider the well-known and indeed sky-high personal costs of unemployment. Not having a job when you want to be working damages happiness and health well beyond what the lost income alone would account for. For instance, the unemployed are more likely to have mental health problems, are more likely to commit suicide, and are significantly less happy. Sometimes there is a causality problem behind any inference—for instance, do people kill themselves because they are unemployed, or are they unemployed because possible suicidal tendencies make them less well suited to do well in a job interview? Still, as best we can tell, unemployment makes a lot of individual lives much, much worse. In the well-known study by economists Andrew E. Clark and Andrew J. Oswald, involuntary unemployment is worse for individual happiness than is marital divorce or separation.

6. Even much-maligned low-skilled jobs have unsung psychological benefits:

In contemporary American society, poorer individuals are more likely to have problems with divorce, spousal abuse, drug addiction in the family, children dropping out of school, and a variety of other fairly common social problems. These problems plague rich and poor alike, but they are more frequent in poorer families and, furthermore, very often wreak greater devastation on poorer families, which have fewer resources to cope with them. The workplace, however, is a partial equalizer here. At least in this sample, the poorer individuals found relatively greater solace in the workplace than did the richer individuals.

7. Employers’ alleged mistreatment of individual workers is often for the greater good of their whole team:

Along these lines, I hear so many criticisms that companies do not give workers enough personal or intellectual freedom. For instance, many critics have noted that companies have the right to fire workers for their Facebook or other social media postings. Surely that sounds like an unjustified infringement on freedom of speech. But on closer inspection, the stance of the companies is often quite defensible. Unfortunately, a lot of workers put racist, sexist, or otherwise discomforting comments and photos on their Facebook pages, on Twitter, or elsewhere. When employers fire them, very often it is to protect the freedom of the other workers—namely, the ability of those other workers to enjoy the workplace environment free of harassment and threats. It’s not always or even usually a question of the employer versus the workers, or the old story of a struggle between worker and boss struggle. Rather, the boss is trying, sometimes in vain, to adjudicate conflicting notions of workplace freedom among the workers. In other words, the firings are in part an employer attempt to take the overall preferences of the workers into account.

8. Big business is often the cure for monopoly rather than the disease:

[Y]ou can think of Amazon and Walmart as two big reasons a lot of collusive and price-fixing schemes don’t work anymore or don’t have a major impact on consumers. Amazon and Walmart are the two biggest retailers in America, and both compete by keeping prices low—permanently, it seems. Their goal is to become dominant platforms for a wide variety of goods and to use low prices to boost their reputation and their focal status as the place to go shopping. By now both companies are old news, and it is increasingly difficult to argue that their strategies are eventual market domination and then someday super-high monopoly prices. Instead, their strategies seem to be perpetually low prices, followed by taking in insanely large amounts of business and using data collection to outcompete their rivals on the basis of cost and quality service.

My main criticism: Tyler is so pro-business that he often forgets (at least rhetorically) to be pro-market.  He spends minimal time calling for moderate deregulation – and even less calling for radical deregulation.  So while he effectively calls attention to everything business does for us, he barely shows readers how much business could do for us if government got out of the way.  Above all, Tyler mentions the following only in passing – or not at all:

1. The evils of housing regulation.  Business is ready, willing, and able to build mega-cities worth of affordable housing in the most desirable places in the country – the moment land-use regulations permit.

2. The evils of immigration restriction.  Perhaps to broaden his audience, Tyler fails to mention the eagerness of business to provide international workers with the opportunity to use their talents for the enrichment of mankind.  If I were him, I would have highlighted (a) how much business has done to increase immigration, and (b) how much business has engaged in righteous civil disobedience by hiring workers despite our unjust immigration laws.

3. The evils of labor market regulation.  Tyler barely mentions the many awful side effects of much-loved labor market regulations.  This was a mighty missed opportunity to lambast the horrors of European labor market regulationBig Business was also a great opportunity to explain why discrimination is usually bad for profitability, making anti-discrimination regulations superfluous at best.  Indeed, Tyler could have used the ubiquitous employment of illegal immigrants to illustrate these truths.

Fortunately, it’s not too late for Tyler to correct his unfortunate omissions on his blog.  Big business has been miscast as an anti-hero, but populist regulation is a Thanos-level supervillain.

P.S. Exercise for the reader: Name a better book cover than Tyler’s!

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