A Political Economy Project Event:  Immigration: Economic Plus or Minus?

A Political Economy Project Event: Immigration: Economic Plus or Minus?

October 21, 2019 1 By Stanley Isaacs

– Good afternoon, I
guess we’ll get started. Welcome, all of you on
this rainy afternoon, my name is Hank Clark,
I’m the program director at the Political Economy Project. It’s a pleasure to see all of you here. Those of you who are not presently on our email distribution list,
but would like to be, I have a pad with me, you’re
welcome to come up afterwards and sign your name in. I’ll just mention a word about
a couple of upcoming events that the PEP is sponsoring. Right after this event, at
6:00 p.m. in Filene Auditorium, William Dartmouth, Lord Dartmouth, that’s the tenth Earl of Dartmouth, for those of you who are counting, is giving a talk entitled,
“Thoughts on Brexit.” And, it will be in Filene Auditorium, it’s free and open to the public. I don’t think I have to
define for you what Brexit is. And, you’re all welcome to attend. That event is co-sponsored
with the MLS program, the Master in Liberal Studies program, as well as the PEP. Then, on Friday and Saturday of this week, the PEP is putting on
its major contribution to the Sister Centennial
Celebration at Dartmouth, the 250th anniversary of the
founding of Dartmouth College. We have a conference called
“Dartmouth and the World: “Religion and Political
Economy, circa 1769.” It’s an all-star lineup of senior, junior, and mid-career people who will be speaking on various aspects of the life and times of the founding of Dartmouth College, looked at through a broadly,
sort of political economy lens. And so, some of you may be
interested in that event as well. Friday afternoon at 4:00
p.m. in Dartmouth Hall 105. That’s Friday at 4:00, Dartmouth Hall 105, is the sort of plenary
session in that conference, and it too is free and open to the public, you’re all welcome to attend. The program continues
on Saturday at 9:00 a.m. In the Renton Room in Sanbourn House. So, you’re welcome to that event as well. But, now to our event this afternoon. Ben Powell is with us. Ben is the director of
the Free Market Institute at Texas Tech University, where he also serves as
professor of economics in the Rolls College of
Business, as you can see. He’s also a senior fellow at
the Emmy Pendant Institute, and the North American editor of the Review of Austrian Economics. Prior to joining Texas Tech,
Ben was an associate professor of economics at Suffolk University, and then assistant professor of economics at San Jose State University,
as well as the director of the Center on Entrepreneurial Innovation at the Independent Institute. He became interested in
economics through the writings of Milton Friedman, Friederick Hayak, Redven von Mies and Murray Rothbar, earning his Ph.D from George
Mason University in 2003, where he studied Austrian economics and public choice theory. He is the author or editor
of at lease seven books that I am aware of, covering
topics as diverse as housing, sweatshops,
entrepreneurship in poor countries, and tonight’s topic, immigration. And, he is also the co-author
of the surprise best-seller, “Socialism Sucks.” (audience laughing) And, if you think that
that’s an eye-catching title, I like the subtitle even better, “Two Economists Drink Their
Way Through the Unfree World.” (audience member laughing) So, that leads to still
a third announcement, next Monday at 4:30 p.m., next
Monday the 30th of September at 4:30 p.m., Ben will
be with us to discuss this new and improbable best-seller. Stay tuned for that. It will also be, I believe, in Rocky 1, but don’t quote me on that, because we still have to finalize a room. In any case, it’s wonderful
to have him here with us this week, won’t you please join me in welcoming Ben Holland. (audience applauding) – Thank you very much, Hank. And thank you Doug, for hosting me here to spend a little over
a week with you all. It’s good to be back here. In fact, Mayor had me here last time, seven or eight years ago, maybe, when I did the book on sweatshops. So, the socialism talk
on Monday’s going to be totally different than this, it’ll be all pictures and stuff like that, and maybe I can even have
a drink while I’m doing it. (audience laughing) This one is, What I’m working on here
this week, and this semester, while I’m on sabbatical is
a new book on immigration. This talk is mostly
not about the new book, it’s about an edited volume
I did a few years back. The idea of this was, I’d
done a lot of public debates and radio and television
shows discussing immigration. What was really striking
to me is just how different the public debate is
versus the debate among social scientists and
economists, in particular, on the impacts of immigration. This isn’t to say economists all agree on immigration policy,
they certainly don’t. But, the ways in which we disagree, and the things we disagree
about are just a lot different than if you watch Fox News or CNN or MSNBC or any of those things. So, the idea with this volume was, the first half was kind of going
to distill the social science findings on economic
impacts of immigration. Then, the second half was
going to be social scientists who disagree about what
good immigration policy is, but who are aware of what
that social science is. So, for the first part of my talk, I want to run through kind of
basic economics of immigration, some of the myths
surrounding it in the public, and then I’ll think about
non-economic aspects of immigration that complicate
the base of what I would call the economic case for
unrestricted migration. And, I’ll end with talking
about the new book project that I’m working on, which is what I think the most serious social
science objections to freer immigration policies are, and what the evidence so far is on that. So, I’d start with, apologies,
not usually something I think of as not so controversial, which is the basic case for free trade. Or, at least, not so
controversial among economists. Then, what’s striking to me
is the passionate disagreement and the myths that surround immigration, that they’re a lot of the same ones that basic economics of free
trade would address. Except, now, of course,
in public discourse over these last few years,
we’ve seen all of these resurface with vengeance
on free trade as well. Just to get a feel for my audience here. How many of you all, the students here, have taken an economics course? Half, a little over half. All right, so what I’d
say is the standard case that economists make about free trade and goods and service,
based on comparative events, letting people specialize
and doing the things that they have a low-cost provider of, overall makes the pie bigger for both parties to the exchange. This is true when it’s trade
in goods across countries, but it’s also true when
laborers move across countries. And, I’ll tell you that the
basic case for free migration is kind of two-fold. One part it shares in common
with the case for free trade in goods and services, and
this is the part based on comparative advantage
and that specialization and division of labor, unlimited
by the extent of the market and thus extends the market. But, there’s a unique aspect to labor that’s a little bit different, too, is it’s not just the economics of trade that creates gain for both
parties from immigration, but it’s the fact that productivity
differs between places. And, even if we have a world
with only one type of labor and only one type of good, there your standard gains
from free trade disappear, but for labor they’d still be there, because there’s differences
in productivity at the places. When you move a human from
one country to another country with different rules, cultures, norms, their productivity
changes, often massively. Both of these things drive
the case for the gains that you can achieve through
international migration. And, I’d say, to some
extent, goods and service, capital mobility, natural
resources and labor, mobility in any one of these
can partially substitute for mobility of the other ones. But, of course, some things
like natural resources by their very nature are
kind of fixed in location. We have imperfect free
trade for goods and services and imperfect free capital mobility. And also, just when it comes to labor, when it’s services that
are provided in particular, but also agricultural products, it often has to be done on site. You know, I can’t outsource
my childcare to India. I suppose I could put a little webcam up and let a nanny in India watch my kid. I live in Texas now, not Massachusetts, they might not even
arrest me for that there. But, for the most part,
something like that has to be provided on site. Ditto, your lawn care can’t
be outsourced to Mexico. If it’s a Mexican who has
a comparative advantage in doing lawn care, they
need to be able to move where the lawn is in order to do it. Also, with agricultural
products, due to the fertility of soil and climate in different places, they’re best produced in
certain geographic locations. If, just by accident, the laborer that has the comparative advantage in
doing that doesn’t live there, they need to be free to
move to where it’s efficient to grow the crops. So, to some extent, they
substitute for each other, but even with the other ones, if they have free trade
with the other ones, you’d still need mobility for labor. So, this first part of
what I’m going to tell you, the size of it may be surprising, but the general thrust of it shouldn’t be. And that’s, that there’s
gains to global economy from free migration. This is pretty obvious, I think. But, what most people don’t appreciate is how massive economists’
estimate that they could be. So, if we believe surveys, something around 600 million people, or roughly 14% of the world’s population, would like to be able to
move to another country. For about 100 million of them, the United States is the
first choice destination. Comparing this currently to a
little over 200 million people living in a country other
than where they were born, about 40 million of them
in the United States, probably a little over a
quarter, about a quarter of that 40 million here in
the United States illegally. There are relatively small
literature estimating the global gains from
completely getting rid of immigration restrictions. The estimates that economists put on it are just jaw-droppingly massive. 50% to 150% of global GDP
is not unusual for findings in this literature. Let’s call it a doubling
of world up limit. Now, there’s a lot of
assumptions that go into that, that in the end I’ll
challenge, thinking about particularly whether
institutions remain unchanged. But, even if they’re anywhere
close to the estimates, think about whatever problem
it is that you imagine that comes from immigration,
’cause immigration does create certain problems, but if
we’re doubling world output, could we do better public
policy to capture those gains and use some of that gain to address whatever the problem is? I think for a lot of them,
the answer’s going to be yes. Even much smaller migration,
roughly a 5% migration, we get bigger gains than
eliminating all remaining tariffs on goods and services and capital. And, this part’s not surprising. The lion’s share of the
gains go to the poorest. So, if we were here, How many of you were
at the talk last night? Really, just a couple of you? All right. Last night was a great
talk, and it was about how capitalism was
helping the poorer people in other parts of the world. And, it was talking about lifting them out of extreme poverty. And, that’s certainly true,
and it’s been happening at a greater rate over
the last two decades than any other time in
human history, I think, if you look at just China and India alone. But, there’s virtually no anti-, There is no anti-poverty program out there that would be better than giving access to first-world labor markets to people in third-world economies. The process of economic
growth compounds over time, and makes people richer, allowing them to move across borders, (snaps fingers) does it like that. For a Mexican, to the
United States, on average, with nothing physical
about the Mexican change, incomes will go up 150%. For a Haitian or a
Nigerian, it’s about 1,000%. This is ending their extreme poverites. And, we’ll talk a little bit
later about origin countries and the effects on that. And, I put those two pictures
up there to illustrate, even if you’re doing the exact same thing that they were in their previous economy, they become much more productive. Why do they become much more productive? Part of it is, I think
a large part of it is, the institutions in the
destination countries are places with a better
degree of the rule of law, better production of
private property rights, generally more economic freedoms that allow them to make use
of what Julie and Simon call the ultimate resource,
their own creativity. But here, even when they’re
doing the same service, they also have more capital to work with, and they’re matching up with other labor that’s more productive. The value of moving somebody
down the street in Manhattan is greater than the value of
moving someone down the street in Nigeria, because the
person in Manhattan themselves is creating of more value. So, this raises the productivity of the least productive, when they move. So now, what I’d like to do, is talk about some of the objections. And, they’ll go with, “But what about us, in
the destination country? “Immigration’s great
for the immigrant, sure, “that’s why they moved, but
won’t they make us poorer?” Most popular economic one, one
of you guys want to tell me? They steal our jobs. I mean, it made it onto South Park. Next one, they’re going
to depress our wages. All three of these, none of
them are really true overall. We’ll talk about some caveats
on the wage when we get there. But, this is what you’d
believe if you watched Lou Dobbs on TV or something like that. So, U.S. economy, and I’ll
give a very U.S. centered talk, during Q&A we can do
more on European context or other countries, if you wish. But, even economists who are
critical of greater immigration generally find that there
are small net benefits to the destination country, excuse me, to the natives in the destination
country from immigration. So, George Morehouse is probably the most prominent economist
who, I think it’s fair to say, is critical of greater
levels of immigration. If you use his back of the
envelope of accounting on this, with current immigration
in the United States, it puts the net annual
gain to the native born at around $50 billion per year. And, $50 billion is small
as a portion of a, what, $17 trillion economy, but
it’s still a gain, not a loss. And, this is coming from the
side that’s critical of this. And, Morehouse has more recent estimates, I’ll mention it when we get into fiscal. He’s able to basically cook
the books, in my opinion, in order to come up with
some losses via fiscal policy that turn this around. But, when you use a standard methodology, even the most prominent
critic says it’s a net gain. Now, there’s some reasons why
these gains aren’t bigger. Most obvious is we have severe
quantitative restrictions on who can come into the country, more immigrants should create
bigger gain for the natives. We also have an illegal population that has a harder time
integrating in labor markets, so we get less out of their sweep als But, at most, we’re talking
hundreds of billions to the native-born population, in the trillion dollar economy. So, it’s positive, but small as a percent of the economy overall. Because the vast majority of the gains go to the immigrants themselves. All right. So, what about jobs? They steal our jobs. I’d do it in the South Park voice, but I can’t really. I think what we have
here is a classic problem of kind of the seen and the unseen. It’s true that immigrants
can displace natives. And, you can put a camera
on a construction site, and show a bunch of immigrants working, and then you can pan over and
have an unemployed American who can say, “I used to
work in construction.” That’s definitely true. But, that’s only the seen. What’s unseen is what jobs are created specifically because immigrants come. And in fact, but, we know
it’s got to be there, ’cause think about it. As we’ve added more people, we have a virtually limitless
desire for goods and services. Add more workers, we’re
going to create more jobs. There might be some little
temporary differences in unemployment at the business level. But, the long run pattern
of this should be, give us more workers, we’re
going to make more stuff. Just think about what’s
happened in the history since post World War Two years, what’s happened to the size
of the U.S. labor force. Massive entry of women, Baby Boomers, and post-1965 immigrant waves. That’s the size of the labor force, you can almost triple it. If we had some, like, fixed pool of jobs, what you should be getting is massive long-term structural unemployment. But, we don’t see this. Instead, if we were
graphing total unemployment, it’d basically track that
line with little whips down in the gray areas during recessions. But, we’ve roughly tripled
the size of the labor force, we’ve roughly tripled the number of jobs. Basically, all the scholarly work on this, this is kind of a long
paragraph from the book, says you find little to no effect, certainly in the long run,
of net employment effect. So, the next one that usually
comes up, that is wages, I debated one time the National
Chairmen of the Minutemen organization on the
radio, that was the group that was going down to
enforce the border themselves. And, I’ve never had anybody who was so easy to lead like this. I started by saying that
it’s a small net benefit to the economy, kind of the
way I talked about to you guys. But, of course that’s not
talking about jobs, he’s like, “That’s right, the problem’s jobs.” Okay, point out the tripled labor force. But, of course, we’re
not talking about wages. “That’s right, it’s wages,”
was the next thing he said. So, what about wages? So, there’s a huge literature
on debating the wage impacts of immigrants on natives
in destination countries. And, the debates raged for
30 years back and forth at least 30 years back and forth on this. And, it’s a very impassioned debate. Here’s where economists are
disagreeing with each other. Is there much of a
negative impact on wages on workers in destination countries? But, over the 30 years, my
reading of the literature is it’s basically
narrowed down to a debate, at least in the U.S. context, about do the wages of people
without a high school diploma in the United States,
do they go down, at all? or maybe as much as -7%,
if you believe one study, and how long does that last? Is it just for a year, or
is it up to five years? But, this is like what’s
got the economists all impassioned and
arguing with each other, and Morehouse and some
of the other economists, like Fival Clemens, they get online and debating with each
other very passionately, almost saying that the
other’s numbers are a fraud. But, what it’s boiling down to is a debate about a very small segment
of our labor market, and what I think of as a
pretty small effect on wages. Where, whatever your
answer to that debate, I’m not really sure it
would impact what my view of good immigration policy
is very much at all, as it’s potentially a
small, temporary impact on a small slice of it. And, also, possibly nothing at all. So, how can this be true? So, if you’re one of the
students who raised your hand, that you’ve taken economics,
supply and demand, right? In fact, one of the articles
in this debate was called, “The Labor and Demand
Curve is Downward Sloping.” Basically, almost challenging us to be, and, other economists,
if you don’t believe a labor and demand curve
is downward sloping. And, in fact, this has
been pointed out to me when I’ve written pop newspaper
columns on this before. Somebody who hadn’t taken
one economics course, I had to summarize some of this stuff, saying that we don’t find
much of an impact on wages. They’re like, “Not
possible, supply and demand. “You obviously don’t
understand supply and demand.” Which is an interesting thing
to accuse an economist of. I wrote him back, Actually, it started mostly
as just kind of hate mail, I drunkenly answered one night. Usually I just delete those. But then, the exchange
went on a few times, and they get more reasonable, and that’s basically what
his argument boiled down to. And so, I sent him some
different references on this, because he asked me that. He says, “Can we publish
our email exchange “on the website I run on immigration?” I had to go back to the
first email and make sure I didn’t say anything absurd in that one. And, once that was okay, I was like, “Yeah, sure, just put these sources,” I gave him some journal
articles to refer to. And, the article title, had
told him it was going to be, “Economist Denies the Laws
of Supply and Demand,” instead it became
“Economics Profession Denies “the Laws of Supply and Demand.” (audience laughing) So, it’s also, by the way, the only time at least to my knowledge,
that I’ve been featured on a neo-Nazi website. (audience laughing) But because it was a hack job, I mean, I kind of like it. All right, so why isn’t this true? So, actually, one of the
students in the room. Give me something that complicates this. What else is going on here? So, in the first part, shift
out in the supply curve, right? We added more immigrants,
we got a supply of workers. Add immigrants, more
workers in the economy. Nobody wants to play ball? We got a couple. – There’s two things I can think of. So one is that we don’t
necessarily know the elasticity of demand, so it may be flatter than that. And the second thing is
that demand would shift out ’cause you have more workers in the area, and they’re consuming. – Yeah, so we got, lets take
both of these one at a time, then we can do a little bit more too. So one, it’s not just a
shift in the supply curve. The immigrants don’t come
here and demand nothing. If they come here and
demand goods and services, well then someone has to supply them. That means people have to be
hired to do those jobs as well. Now, it’s an empirical question. Does the demand curve
shift exactly proportional to the supply? Less than proportional? More than proportional? Any one of these is
theoretically possible. But, that’s partially going to offset it. Next part, bump that labor/demand
curve in the slope of it. Well, it’s also the
case that capital forms in response to labor. Add more workers into your economy, you’re going to get more capital, and it makes them more productive. And, if that’s the case, we’re
going to start flattening the slope of that demand curve, and making it look horizontal. And, basically, by the
way, this is what we find, is that capital does come
in to match labor increases when you put more of it here. In fact, Professor Lugriss is in the room, he did a paper recently on this. Correct me if I’m wrong
in my brief summary of the Bresair article, right? – [Professor] Yeah. – The Prosaro program had roughly 500,000 Mexican farm
workers in the United States from post-World War Two till early 1960s, doing agricultural work. They shut down the
program, supposedly due to improve the wages of
the native-born working in agriculture in the United States. And, you investigated what happened, and basically, in my
memory of reading this, is that it didn’t do much to
change the wages of workers in farming in the states most affected. And, the main reason
was, the farmers invested in new technology and capital forked. Basically? – [Professor] That’s right. – Cool. So, that’s looking at
it from the other side. That’s looking at taking away
workers and what happens. And, we can also look at adding
workers and what happens. So, that’s two things. There’s also another
thing that’s wrong with this whole graph to start with. It’s not The supply of
labor, labor’s heterogeneous. It’s not all the same. The immigrants coming in don’t have the exact same skillsets as
the native-born population. Some may have different skillsets, they’re complements, not
substitutes for existing laborers. If they’re complements, that means they’re going
to make us more productive. Now, if we think about this
as just high skill/low skill, and we use education as a proxy for skill, we could think for the people who have no high school diploma,
high school diploma, college, advanced degrees. When we think of immigrants, and we’re going to kind
of put a shape to that, because they go from
low skill to high skill. How many know, what the
shape would look like? Its going to be really
fat on the bottom right? A lot of low skilled immigrants as a proportion of overall immigrants. But its also disproportionate in the case of high skill as well. I mean if you walk around
campus here at Dartmouth, I’m sure if you read the
names on the professor doors, you’re going to have a much
higher percent foreign born, then if you walk around Hanover more generally written
on peoples mailboxes, so something, its not like an hourglass, but something kind of hourglass shaped, disproportionately high and
low skills thin in the middle, if you think of the U.S labor market, or the U.S labor force, I think its something more like a diamond. Very small percentage that have PHD’s, a relatively modest percentage that don’t have a high school diploma. Whole lot of people with
a high school diploma or some college. But its not that this
characterization is accurate, that tells us just by educational level, a lot of these workers are
going to be compliments to us, not substitutes. And that means they
don’t have to be exerting anything negative influence
on wages right there. So, I think in the public discourse, way too much time is wasted talking about the impact immigrants are going to have on our economy, our jobs and our wages. Instead I think the
more interesting things are not narrowly just economic. One of them is back to what
happens in origin countries. So how are the ways that labors are different in business
services community, immigrants don’t take their
skills out of a poor country, They can’t consume
government or other benefits, so there’s not going
to be a fiscal impact. There’s no need for them to assimilate to a culture that they moved to. Can’t commit crime or acts of terrorism, at least not on their own. Or engage in political activism, that might change the
society they moved to. So lets take a peak at some of those, and just briefly consider
the origin of this. So the idea of brain drain, so sure its good to development for the person who moves
they become richer, but will it make their
country at home poorer? I think the overall answer
on this is, not much effect, maybe even a slight positive effect. Its true of course, they are taking their skills out of their own country, but often their skills
weren’t well utilized in their home country anyways. Precisely because its got
bad rules and institutions there that don’t let them
make the most of their skills. So their gain when they move
is not their country’s loss, its not this symmetrical
to start off with. Second of this, so some
aspect of Brain Gain people who get greater skills, precisely because they expect to
be able to immigrate, and their origin society benefits from their skills temporarily,
before they do move, but if they have no potential to move, they might not have never get those skills in the first place. And I think the bigger
one, the real deal here is Remittances, and that
figure is a little bit old now I think its a half
trillion dollars per year now. And remittance flows from
immigrants in the wealthier world back to their origin countries. For perspective, at the
time when I was doing this one, official development assistance, was 133 billion dollars,
so about four-five times the size of official development
assistance at World Bank, USAID aid to poorer countries, about five times the size, but I think importantly, it doesn’t go through
intergovernmental organizations and too often very corrupt governments in the origin countries, instead
its from people to people. People who have an intensive to make sure their money’s used well, people who actually care about the person they’re giving it to, and who have some sort of local knowledge about their situation. I also think, and this is kind
of the secondary consequences, is that you have a
greater immigration flows its going to facilitate
trade, in between countries, and that’s going to help enrich the origin country a little bit. And also transfer of knowledge and ideas that comes with people moving, will help enrich the origin countries too. Next one, Fiscal impact, sure
there might be economic gains, but there going to come
here and soon our welfare, our other government benefits, even if we don’t let them have access to the welfare state itself, they have children, their
children go to school, there’s going to increase cost of leasing when you have more immigrants
in your community possibly, there’s all these types of fiscal impacts. So I promised to have done
tons of studies analyzing the fiscal impacts of immigrants, and in fact if you just
google these things and look up on Think Tanks you’ll find any number of them and you’ll find any conclusion that the authors wanted to reach. What I’d say is when you
swarp into the good ones, there’s a couple of things that they do, there not static, so static
is the easy way to do this, just add up the taxes immigrants pay, add up the services they consume, figure out if they’re a
net gain or net drain. A net gain or drain. Its easy to do, but its
the wrong way to do it. I have a 10 year old boy,
should we use that boy when we count fiscal impact? I can tell you he goes to a public school, he consumes more tax
dollars than he generates. I call him a welfare queen when I was giving one of
these lectures one time, and he was in the audience and
he really didn’t like that. (audience laughs) So how do we estimate his fiscal impacts? What are the taxes he’s going
to pay over his lifetime? Lets discount that to present value terms, compare it to the social services, he’s consuming now, take social
security when he retires, discount that back to present value terms, if it still exists. And now we get a better
accounting of his fiscal impact. So doing this is generational over time. It also should be dynamic, in
terms of taking the account of the taxes that are
generated because of immigrants but not necessarily paid by the immigrant. For instance an employer
hires an immigrant because they expect to
make greater profits, if that employer makes greater profits, they pay taxes on those profits. Part of that is the fiscal
impact of immigrants. Did the immigrant literally pay the tax? No. But did they generate the tax revenue? Yes. So the good studies
try to be generational, and try to be dynamic. The problem with this
is, once your forecasting this stuff out into the future, you’re guessing about future policy. Note I said about my child, if
social security still exists. I don’t know if it will, it shouldn’t it certainly won’t by the time he retires in its current form. So the assumptions we make
about future economic policies, can cook our books and drive
results in fiscal impact now. That said my reading on most of these, the ones that seem to take existing policy and kind of projected out reasonably, and do these, some of them are negative, some of them are positive,
but they are all clustered around zero, it’s not very big. The outlier in this recently, was the National Academy
of Science’s study, they showed a big net drain to the economy from well, they have a number
of different scenarios, in a couple of them,
they were able to show net drains on the economy, via
a big negative fiscal impact. But the weird thing that’s in there, is under the only analysis they did when they came up with
the big fiscal impact, they included the increased
cost of public goods, because of immigration. You want the students in the room tell me the definition of a public good? Non-excludable, non-liable, kay? What’s this mean, when
we’ve gotten more people, what should happen to the
cost of a public good? – [Student] Shouldn’t change Shouldn’t change. Why is that in the National
Academy of Science study? Because somebody wanted certain numbers to come out of that study. In fact in writing else where, George Borjas even said “of
course if the impact cost-” by the way its not just a slip of language of saying public good, and
meaning government services, cause in his popular book
on this George Borjas said “if they increase the
cost of public goods, “like national defense, “then we have this big negative fiscal.” Do we need more aircraft carriers when we get more people in the country? I don’t see this, so when I
say most reasonable studies, they’re clustered around
zero or are not very big, I think throwing public goods in there is completely unreasonable. Also by the way, I also think its worth thinking about on this, is that even if you do find negatives, if our economic estimates of global gains from greater migration are anywhere close, fiscal policies changeable, change fiscal policy to address that. Its using a big blunt force of saying “no going to keep people
out of the country, “because we have a small fiscal drain.” instead of saying “lets
adjust marginal tax rates “or how we adjust how we provide “certain government funded services.” in fact even if you wanted
to make it a net gain, for the native born, I’m not necessarily in favor of this, but how ‘about an immigration sur-tax. Sure you can come into the country but you have to pay an
extra five percent per year, no income exemptions, no anything else, in addition to whatever
your normal tax rate is. I don’t think that’s right,
but if the real objection is were not going to let you in at all because you might be a tax strain that turns them into a tax gain. If five percent doesn’t work,
then make it seven percent, make it 10 percent, make it one percent, I don’t care what the number. Pick the number that you
need to make it work. And you can make them a net gain. In fact if you were using an exclusively native Well Fair standard, where all you care about is the Well Fair of the native born population. If economists are anywhere near right, then the size of the immigrant gains you’d have to be very
uncreative to figure out a way to not let immigrants in and tax them and give some of that money
to the native born population in a way that makes them a winner. Certainly you can do it
to address fiscal drains. In practice our fiscal drains, I think that we see in the United States, tend not to be on the national
level, its on the local level its individual school districts
and hospital district areas we have lots of immigrants
coming in where a lot of the tax revenue goes
to the federal level. Not as much to the local level. That’s where you see more of the drains, but again this is a
problem of fiscal policy, reallocate how we do that tax revenue, and you can make that drain go away. In the interest in time, I’ll
stop, skip over assimilation, just talk a little about
what I’m working on now, for the new book on this. So most of what I’ve said so far, I’ve kept repeating, if
the gains that economists say are any where near correct, I think that’s where the big stakes are in immigration economics right now. So George Borjas, and Paul Crollier are kind of half a dozen years ago
or so, each independently made claims about what’s going to happen if hundreds of millions of
people leave poorer countries, and move to richer countries, would those richer countries, what makes them productive
remain unchanged? In short, people come from
places with dysfunctional social systems that allow them
to not be very productive, might they in fact essentially, the destination company
some of the social capital that was responsible for making their origin country
poor in the first place. I think this is the
most important objection raised to immigration. If its true, then those
estimates that economist did before on the great global
gains, then they go away, because not only do the immigrants not become as productive as
they otherwise would be but the natives in the destination country become less productive too. As a result the big gains become smaller, or if bad enough, could even
become negative for the world. Now when Borjas did this, he did it with I think six
simulations in a journal article and no actual evidence
that it even occurs, just said if I does do this, how bad could it be under
different scenarios. Collier gives some
anecdotes in Great Britain, mostly about cuisine. So what I started was a research program about five years ago, trying
to investigate and measure this and look at empirically. That’s the new book I’m working on, its kind of pulling all of those together. And started off doing it on
the effect of economic freedom, so an index that basically
measures your rule of law, how frequent to trade you are, how big an intrusive your government is, how sound your monetary unit
is, how much you’re regulated, the index has been used
in hundreds of papers, being positively associated with growth and other good development outcomes. So if its the case it is that immigrants coming from a less free countries towards more free countries, which the studies basically showing that. If they bring some of the ideas
responsible for the poverty, in their home country, they can impact our economic freedom
and our policies here. I’ve looked at it a few different ways, across countries, using
like a 20 year time period looking at additional stocks, and subsequent flows of immigrants, don’t find any evidence of
economic freedom deteriorating in destination countries like that, in some cases I actually
find positive improvement in economic freedom, and I think part of what’s going on is the
selection bias of who migrates. Its not the people who want to replicate the institutions of their home country, instead they see a destination
country that’s doing better, and want to move to it. I can think of, and this
is an extreme example, but the voting block in the United States that’s least likely to
be in love with socialism is probably Cuban immigrants in Miami, they don’t flee Cuba and come
here and want Cubans order that’s an extreme example but I think there’s an element of that more generally in immigration. But of course, doing this across countries comes from a world of management, in fact I sent that paper to
Warhurst when I published it and he wrote back something
along the lines of “that’s all well in good, thanks, “but this comes from a
world of managed migration “with relatively modest stocks
and flows across countries, “I’m not sure how much
this speaks to a world of open boarders.” Then he said something like “what I’d like to see
is an actual experiment “with a large section of exogenous shock and what happens to institutions there.” and as I’m reading the email, I’m like yah Israel, lets look at it. Because economist who
do labor market impacts and housing impacts,
anything on immigration, a lot of them use a case study of Israel, because they have a kind of
unique immigration policy, in that world wide Jew’s
are able to come to Israel and instantly become citizens, they have open up immigration
to world wide Jewish people, but close migration for
most everybody else. But what happened is at the
end of the Soviet Union, their immigration restrictions went away. And it was a huge surge of Jewish people, or ethnically Jewish people from the Soviet Union into Israel. Increased the countries
population about 10 percent, within the decade of 1990’s, most of it being at the
beginning of that decade too. So 10 percent surge, of people coming from a communist country
to a democratic country, that instant ability to vote in elections. This strikes me as a good
candidate for an exogenous shock. What did we see in Israel? They went from something like
90 of the economic freedom in their rankings up to 45th. They improved on four out of the five big areas for the index, the one area they didn’t
improve in is size of government and that’s mostly
because transfers went up because the immigrants came
in and were immediately had access to Well Fair
state, policy didn’t change, just the net amount of
money being transferred that lowered the score in that area. A decade later that score back to where it was as they
assimilated economically. So I did something with
called the synthetic control on that to look at it from
various different counterfactual, and Israel with the immigration surge just gets big improvement in freedom. And in fact, by the way, when it come to like, do
we think this is causeal you can do the synthetic control things, there’s also something were time, where you just look at the
history of what was going, like the Labor Party, the
left leaning party in Israel, ceased using the color red,
in their campaign material, because they didn’t want
to turn off Soviet votes. Soviet people who moved there did not want to recreate socialism. Of course this is again, N equals one, its one country and its
particularly unique type ’cause while they weren’t
religiously Jewish, they were these ethnically Jewish coming from the former Soviet Union. But its one of these big exogenous surges, we also did it for the country of Jordan with immigrants from Kuwait,
during the first Gulf War, had similar size impact
on the labor market, and the size of the labor force there. Also an improvement in economic freedom, so we’ve done a few different
case studies like this, also looking throughout U.S. history, tends to be that, we
don’t have good measures of economic freedom back
when the United States had free immigration
policy, but we do have data on like government spending
as a percent of the economy, or spending per capita, and it tended to that be our big bouts of government growth in the United States, came at times of low immigration, at times of high immigration
were relatively modest. So also look at informal things, so measure of corruption across countries, and with immigration surges, and try to see if measured
corruption goes on. Don’t find any evidence for that, dido for terrorism, don’t
find increased terrorism coming from the east when we
have greater immigrant flows. The plan in the book is,
there’s no QED of immigrants can’t destroy (audience coughing) certainly they could be bilateral cases, where a particular immigrant flow might become harmful and spread. But what we’re saying is in
general, we’ve been looking far, and what people have asserted as what I think of is
the biggest objection to free immigration, just not finding much evidence
in favor of it so far, in fact finding evidence
mostly to the contrary. So with that being said, what do I think about
optimal immigration policy, I don’t know, optimal
levels of immigration are, Hank mentioned in my introduction that I’ve moved from Boston to Texas, I know we get roughly the
right number of immigrants from Massachusetts to Texas, Texas Tech makes me an employment offer, I take account of the
cost of living difference between there and Boston,
the money in both places, the fact that my employer there didn’t give me a massive
raise to keep me there. Weigh the psychic loss of
moving out of Patriots nation, but came to back to visit, by the way, I went to the game on Sunday,
if you can call it a game. (audience laugh) and then I’m free to choose, in the words of Milton Friedman and if you let everybody do that, you get roughly the optimal flow, and by the way when it comes
to the cultural impact, and other stuff, I’m probably
more Texan then Texas. In terms of loving Texas, and
their economic freedom there and a lot of Texans will
talk about the same thing, I don’t know ‘about all these crazies from California moving in here. But I actually think
that’s a big selection bias on who moves from California too. A whole lot of them are raising taxes when they’re coming here. But basically my punchline
is we need a market to figure this out. We need a competitive labor market, competitive housing markets, and without leaving people free to choose, there is no optimal plan system when people say the Canadian system works, its not working in the
sense of were getting an efficient international labor market, you can’t centrally plan your
international labor market for the same reason you
can’t centrally plan other markets in your economy. So with that I’ll wrap up and leave the last 10
minutes for questions that are anything related to this. Yes sir. – I’m curious that if your research or your thinking has factored
in global climate change, in particularly global climate change in food producing areas,
particularly deltas in producing rice, therefore
you don’t have economic, well you probably do have economic, but political refugees
you have a different kind of refugee coming into a state for many different
reasons, is that factoring in to your research at all at this point? – You’re saying in the
event of climate change that impacts poor countries, your going to have climate refugees. – [Man Asking The Question]Yeah
I think that the refugees who are not necessarily looking
for economic opportunities, – Yeah – [Man asking question] But they may be survival opportunities. – Yah I’d say that
since we just don’t have that massive movement right now, its not in the new
research, in the new book, the closest we have to it is probably the case when we do Jordan, and there its not climate related but its clearly a war displacement, rather than economic
pull motive for refugees. Other questions, yeah. – So do you think, that free
boarders would be optimal? – I avoid the term open boarders, because its loaded with a
whole bunch of other stuff. – [Women Asking Question] Right,
do you think free migration – I think non quantitative restrictions, no quantitative restrictions
on immigrations would be best. So assuming we’re having
governments that have boarders, they can still check who comes in and out, and I have no objection
to having, you know, known terrorist, criminal threats, contagious disease limitations. But just note like a quantitative one, because we simply don’t
know the right quantity. Now that said, if we are
going to have a restriction, I think it would be best if we just had as a straight up quantity, and got rid of all of our categories, and just had a market
full of permits then, so you’re only going to
let 100,000 people in, your only going to let
1 million people in, your going to let two million, what ever the number
is, option the permits. All of them, ’cause if you do that, if you got the quantity wrong, because we don’t know the right quantity with out a free market in it, but we can at least
get the mix conditional on having the wrong quantity to be the most value
maximizing mixed boarders. And let anybody, let employers in the United States bu the permits, and give it to a worker to come in, let a worker in the third world save up money to buy a permit, let family members here who want to bring their cousin or nephew over save up money and buy that permit. Let nativist here by a permit
and burn it for all I care, (audience laughing) let everybody, and this
isn’t unique to me, I mean Gary Becker made
this proposal years ago, and many other economist have
done some version of this, but that would at least come up with a reconciliation mechanism of how you do you weight
the value of family or of reunification for one person against an extra engineer at Microsoft, there’s no way to do
that from a central plan, if we put a market to it, the people can at least
have competing bids, we have a scarce resource
immigration permits, now were going to use an
efficient alligation mechanism for our scarce permits. I think that would be better. Yeah Meg. – Generally the arguments you’ve made is sort of stock argument, you’ve got a stock of people in two places and it would be optimal to move some from one place to the other. But a lot of the costs
particularity social costs, depend on the flows, so okay
lets say it would be great to have an extra 100 million people here in the United States, would it be great to
have them in one month. – Clearly not. – So have you thought about that? – You know, I guess I’ve
thought of it over beers. Because to me it seems like its, were so far from getting an
immigration policy that says were really going to let everybody
that wants to come, come, now we just got to think about the timing. – But what I think a lot of the objections of things
that are very much effected by the rate of which they will come I mean people probably don’t care a lot about the total number
of people in Canada, how many are coming this
week, this month, this year. – Yeah so I mean if its
a big surge all at once all 100 million of them,
your public infrastructure, your homelessness, your
experienced inequality, all of this is going to massively impact, but if were talking about
tripling the current rate of immigration to the
United States right now, those things aren’t so big, its more probably
assimilation market right? Because assimilation
slows the larger the stock of an immigrant population in the country, because of simple cost benefit analysis. You know if your the only person who speaks Swahili in the United States, you’ll learn English really fast. If you speak Spanish, there’s not a need to learn English fast, that part, even if you limit the flow
over a number of years, that’s going to change no matter what. So is that the part you’re thinking about? Or you thinking more like- – [Meg] I think address the fact explicitly why not be a bad idea, I mean if you want convince the others its not a crazy idea – I guess I don’t know, – I think that is sort
of implicit in the story and you’re not mentioning it. It would be better if
you sort of bring it out and address it. – Yeah I guess I don’t
have an optimal solution at least of the top of
my head standing here. – (laughing) okay. – Have a suggestion of what
the right mountian at once. – Right. – Um yeah. – How do you think if you
do let everyone come in, how do you think housing
would be effected? – It would go up in price. – Just not massively? – Well I mean it depends,
a lot of these things are contingent on what
U.S policy does right? So if its, if we allow people to build, pricing increase on housing should be pretty modest in the long run. In the short run it could go up a lot. In the longer run, hoping
supply comes along, it would be fine. So where I live in Texas,
actually most of Texas, housing prices go up very mildly when we get lots of immigrants moving in from other parts of the country, because of we allow people to build. I would think California, as
Hank mentioned in my first job, housing prices massively spiked there, because what’s scarce there isn’t land, its permission to build. So I think a lot of it depends on what policies accommodate that. Dido with what literally 100’s of millions of very low skill ones in if you went to a 15 dollar
minimum wage nationally, that’s going to be a really
hard labor market integration, because a lot of those people
can’t command productivity for 15 dollars an hour when they get here. I think by the way a lot
of immigration problems we see in Europe, stem
not from differences in them being a predominately
Muslim moving to Europe, there’s some of that, certainly and culture
the European countries are a lot different than the melting pot that’s the United States. But I think a big chunk of
its labor market regulations in Europe that don’t do a good job of integrating immigrants. So you got high minimum wage
relative to productivity, you’ve go laws that say
if you hire a worker that you can’t fire them at least not with out severe financial penalties, which I mean is essentially, I mean you guy’s are mostly single, what if we created a new
rule where in Hanover, in order to go out on
a date with somebody, you first have to promise to marry them with no possibility of divorce. You wouldn’t be too keen
to go out on a date, and when you do, it would be
on the safest person possible. So now you’re in the position
of a French employer. So are you going to take a
risk on a young immigrant, or are you going to hire an older worker who’s more of a known quantity. So as a result, its hard for immigrants to get into the labor market there, but when they don’t integrate
into the labor market, then they turn to each
other and they enclave, and they resent the society
that’s hosting them, who then resents them. And you just kind of get this awful cycle. So I think the United States,
does relatively better ’cause our labor markets are more flexible then a lot of the ones in Europe. These are the things that
I’d be concerned with as were letting more people in, making sure housing policy
can allow for new construction and integrating into labor market. Yeah. – One of the things that
you mentioned earlier, that I couldn’t get out of my mind, is the fact that economist mostly agree and correct me if I’m wrong,
the economist mostly agree that there is some either zero or somewhat positive impact to having immigration continue
to flow into the country, at increased amounts, or
either relative amounts as to what it is like currently happening. Right there’s positive impact right from the immigration
flow into the country either at current rates, or- – I think you’re going
to have a lot harder time getting agreement among
economists on any topic, when you ask for the
policy they agree with, – [Man Asking Question] Okay – When you ask them about
the social science impacts, I think what you’ll get as a consensus is big gains for the immigrant, small net gains for the native
population for the most part, no effect on jobs,
maybe an effect on wages for a small sub-sized population, but its probably small and
its probably temporary. But we’d argue really
passionately about that. – Cool so, so why do you
think there are somewhat, I mean vastly different
arguments that are happening in the political realm
versus the economist realm, and what do you think the major impacts are if they’re, you know, so different. – Because the average voter, is not like the average economist. And good politics is not good economics, so instead you whoop up whatever fears the voters have and you
get more support that way than talking sense to them. And I think this is, we see
this in free trade right now, the past election, and we see
it with immigration stuff, we see it continuously for decades. And for T.V. it gets people all riled up, and then better for ratings, economists are boring, for the most part. Yeah. – I will preface my
question with two things, one, I’m not even sure if
you can answer this question and two, laugh at me
if its a dumb question, I don’t know that much about this field, or this specific issue, but talking about, you know, immigrants would largely compliment the workers in the United States, how would that change in
regards to not immigrants but refugees who are, I
guess, more forced migrants out of, you know, civil
war, or war torn areas, does the distribution of low
to high skilled workers change and if so how, and how does that change how the economic system
would I guess accept that influx of migrants. – Yeah I don’t think I have
a good answer off the top, its first of all I think
its a great question, so no laughing. But I don’t think I have a good answer off the top of my head on it. I’m thinking through as you’re saying it, like thinking about like Venezuela in its collapse right now, its a lot of actually middle class to middle upper class people
who are migrants out of there who are flowing to different countries. I don’t know of anybody
who’s study the impact of that flow specifically yet, but that would be a good candidate for looking at the type of
thing that you’re talking about. And its my casual empiricism
that’s thinking that, that labor flow is different, there have been other ones,
where they looked particularly, how they looked for wage impacts for high skilled differences, like those old paper on
immigration from the Soviet Union after the fall of the Soviet Union, what happened to the
wages of mathematicians in the United States, where you have more
substitutes for each other. I mean in that punch line basically, when you’re more of a
substitute for somebody, you’re more likely to push wages down. Yeah. – I’m wondering about, some of
the phenomenon you described or actually a consequence
of current migration policy, like for example the fact
there’s a high proportion of high skilled laborers
then average Americans, maybe that the result of how difficult it is to migrate to the U.S. right now, and even with remittances, like maybe the people are sending money back to friends and family in their home country, because their friends and family in their home country
can’t come with them, so whether you think those would change, if migration was freer. – Yeah that’s a great question
there would be changes but its not obvious to me exactly how, so with much greater
numbers of immigrants here, I suspect that the remittances
would go up even though they’re bringing more of
their family with them. Because there’d be so many
more here that still have, you always have extended
friends or family back there, I suspect it would go that way, but you’re certainly
right it doesn’t have to if literally Haiti emptied
out, there’d be nobody to send money back to in Haiti. But I’d say that’s
cool, because who cares? We care about Haitian’s escaping poverty, I don’t care about the GDP of any particular piece
of rock on this planet no one walks around going like, Antarctica doesn’t have
enough GDP, no one cares. But I suspect, well
along with us of course, if there is nobody left behind, there’s nobody left behind to worry about. But I’d suspect remittances
would probably go up. Ah yep. – So as you were saying the origin is a big gain for immigrants themselves and also a smaller net gain
for say U.S econo-society so where does this net gain go or like does it contribute
to the wealth cap, is the wealth cap going to expand we have like this net
gain from immigration. – The Wealth gain, do you mean inequality – Yes – Yes so global inequality decreases because the immigrants
earning go way up more compared to the native one
population and the destination however inequality within
country is likely to increase, if the immigrants are
disproportionally low skill, so you got a global decrease of inequality but localized increase and in fact if you did real mass migration of this comes to Mayors
point about flow too, lived inequality is going to go up massively in the foreground. So right now the worlds
poor are tucked away in other countries that
you don’t have to see, but when you let them move here, you’re going to see ’em
in your neighborhood. That’s going to be a short run impact that most people consider negative, even though you’re improving,
their lives are improving, now you’re seeing the difference between you and them in a way that was easier to ignore before. Last one probably. – [Audience Member] What are your thoughts on remittance taxes? – Remittance taxes, – In order to fund something, so there was debate as to whether or not you can attach remittances to
fund, for example the wall, that Trump is intending to build right, so remittance taxes to
for any federal program, what you mentioned just
raising the amount of money that’s going back to the
natives of the country. – Yeah I don’t think I’d put
it specifically on remittances, and the part about taxing
immigrants that I suggested, is really, only in the context of if were going to give
more permissions to come, and the reasons why you
wouldn’t give more permissions of a fiscal impact,
well let’s create a tax that gets around that fiscal impact as a way to solve your problem without stopping the people from moving. So I’m not just in favor of
putting a tax on for immigrants to come here or for them
sending money back home, I don’t think they should
be taxed in that differently than anybody else in the United States. So don’t leave here with the message, Yeah Ben’s in favor of taxing immigrants. No I’m in favor of letting
them all into the country, if the only way of to make
it a win for the natives of letting them all in
is to place a tax on ’em and make up for the fiscal impact then that’s a conditional second best. So with that, I’ll wrap up and
I thank you all for your time tonight on a busy schedule
that you have here, thanks. (audience clapping)