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Guest post: The Global Economic Impact of Open Borders (Nathan Smith)

On my blog I mostly writes about monetary policy issues. However, I from time to time I venture into other areas. Among the areas I would like to give more attention to is the economics of immigration. I used to teach immigration economics at the University of Copenhagen and have done research on the topic while working at the Ministry of Economic Affairs in Denmark 15 years ago. However, I have not worked professionally with immigrations economics for well over a decade and I have only followed the new research in this area from a bit of a distance.

However, since I started my blog I have had a tradition for inviting economic scholars and others to write guest posts on my blog. I am now continuing the tradition as I have invited Nathan Smith to write a guest post on a very interesting paper that he has been working on.

Nathan in his paper is trying to give an assessment of the Global Economic Impact of Open Borders. His results are extremely interesting and in my view illustrates just how big the economic potential benefits are if we moved towards a world of free movement of labour across borders.

This obvious is a very controversial topic so it is very welcomed that professional economists are contributing to a better understanding the topic. It is certainly about time that we start basing immigration policy around on a sound economic understanding of the topic rather than on emotions and populist rhetoric. I am therefore tremendously happy that Nathan has accepted my invitation to contribute to my blog on this very important topic.

Nathan would like to use this opportunity to welcome comments on his ideas and his paper. I would very much suggest that everybody interested in Nathan’s work and the economic of immigration in general leave comments here at the blog or drop Nathan a mail (see e-mail address below). You are obviously also welcome to drop me a mail (lacsen@gmail.com). It would be great if we could make this an example on a ‘real-time peer review’ of an academic paper.

– Lars Christensen

Guest post: The Global Economic Impact of Open Borders

by Nathan Smith (nathan_smith@ksg03.harvard.edu)

First, a little about me. I’ve been an open borders advocate for nine years now, first publishing in an online journal call Tech Central Station (see here, here, here, here, here, here, here, here, and here), then in my 2010 book, Principles of a Free Society, and most recently at the blog Open Borders: The Case and The Freeman. My work experience includes the Cato Institute and the World Bank. My education includes a Masters in International Development from the Kennedy School of Government at Harvard (2003), and a PhD in economics from George Mason (2011). Now, I teach economics (macro, public finance, investments, international trade, research methods) at Fresno Pacific University, a small Christian college in California. The website Open Borders: The Case was founded by Vipul Naik and is dedicated to describing and developing the case for open borders in a rational and balanced way.

Open borders is a question both of ethics and of positive economics. There are non-utilitarian arguments that deportation of illegal immigrants, exclusion of peaceful migrants, forcible separation of families, or other aspects of border enforcement violate human rights, are morally impermissible, and must cease regardless of the consequences. But even those who accept these arguments will be curious about what the consequences of doing our moral duty are likely to be. For utilitarians, the whole question will turn on what would happen under open borders. Others may accept that there are such things as rights, and that they may forbid some policies that would be adopted on the basis of a merely utilitarian calculus, but think that a substantial amount of migration restriction is consistent with rights. Open borders would then be evaluated on the basis of its consequences. So, putting my knowledge of development economics to work, I’ve just finished a draft of a paper, “The Global Economic Consequences of Open Borders,” in which I’ve been trying to guess what would happen if all migration restrictions were abolished. Lars was kind enough to offer me the chance to give a glimpse of my methods and results here.

Under the status quo, markets for labor and human capital clear at the national level. Under open borders, they would clear at the global level. At any rate, that is how I model the main difference between the status quo and open borders. Everything else, initially, is either held constant—total factor productivity (TFP), country risk premia on investment capital, the total world population, the total world human capital stock—or changes because of the way global labor and human capital markets clear—the population and GDP of different countries, the global stock of physical capital, the wages of raw capital and the premium paid to human capital around the world. But before solving for a new global equilibrium in the labor and human capital markets, I had to develop a description of the world under the status quo. That is, I had to develop a stylized description of the current world economy, which was consistent with a theoretical model that could subsequently be solved for a new, open borders equilibrium, and which, at the same time, fit tolerably well with the data.

At the heart of my description of the status quo are the factors of production. I follow Mankiw, Romer, and Weil (1992) in explaining international income differences primarily by differences in physical and human capital per worker. TFP still plays an indispensable role, but it varies across countries much less than does average human capital. It is indispensable because—as was pointed out by critics of Mankiw, Romer, and Weil (1992) such as Paul Romer—to explain international income differences entirely by international differences in physical and human capital per worker, requires one to claim that these differences are very large, with counter-factual implications for the marginal product, and therefore the price, of these factors of production across countries. As Lucas (1990) observed, if international income differences depended on physical capital alone, the marginal product and price of physical capital would be orders of magnitude higher in poor countries vis-à-vis rich ones, and if capital is internationally mobile, all new investment would occur in poor countries.

If international income differences depended on human capital alone, then human capital ought to have a higher marginal product and earn more where it was scarce, and we should see mass emigration of smart college grads from the US to India, rather than the other way around. But fairly small differences in TFP—say, a factor of three between the most and least productive countries—suffices to reconcile a factor endowments explanation of most international income differences, with plausible factor prices. Table 1 shows, for selected countries: average human capital and the country risk premium on investment capital, as imputed on the basis of data; TFP, a residual used to reconcile GDP per capita with average human capital and the risk premium; and the “wage of raw labor” and “human capital premium,” as predicted when national labor and human capital markets are solved for equilibrium.

table 1 Nathan Smith

Table 1 features very large differences in average human capital across countries. Some of the world’s least developed countries have less than 5% of the human capital of the average American. Average human capital was imputed on the basis of the UN’s Human Development Index (HDI), but the HDI was interpreted as (linearly related to) the log of average human capital. A possibly surprising, but on reflection plausible, feature of the status quo world as described in Table 1 and the underlying model, is that the wages of raw labor differ enormously across countries, but the human capital premium, though it, too, tends to be positively correlated with human capital, differs much less.

Lastly, it must be mentioned that there is a spatial model at work here. Working in Stata, I generate a data set of two million “settlements,” meant to fit major stylized facts about how the human population is distributed among cities, towns, and villages. I imputed TFP at the settlement level. I won’t try to describe the spatial model in detail here, but I do want to mention why it matters. A general problem for open borders models is that it’s hard to give strictly economic reasons why anyone would want to stay in unproductive places when they could move to productive ones.

To address this question, I start by noting that some domestic locations seem more productive than others, and asking why some people live in, say, Elko, NV, instead of New York. My spatial model is based on (a) increasing returns, (b) congestion disutilities, and (c) differences in local TFP. So, Elko, NV has lower TFP than New York, and ends up with fewer people and less physical and human capital per worker, but people still live there for the cheap land and lack of congestion. By the same token, why would anyone stay in Mexico, Indonesia, or Malawi under open borders, when they could live in the USA? Because the best city sites in the USA will get congested, and some places in Mexico, Indonesia, and Malawi may be better than some places in the USA.

So, what are my results? First, let me stress that these are preliminary. After some very helpful real-time peer review from my colleagues at Open Borders: The Case, I plan to refine the spatial model, and somehow I need to come up with better ways to deal with anomalies in imputed TFP, mostly arising from natural resource wealth. The paper describes two scenarios, “Scenario 1” which implements the model in the most literal fashion, and “Scenario 2,” in which I add in some other adjustments, such as human capital growth in response to the new incentives and opportunities of a world with open borders, falling country risk premia due to remittances and generally movements of people facilitating movements of money, and TFP adjustments due to cultural/institutional influences, positive and negative, and to the fact that TFP partly reflects congestible public goods.

In Scenario 1, over 5 billion people migrate, and the world economy comes to be dominated by a few “Countries of Reinforced Dominance” and “New Settler Societies,” while the largest western European countries become “Corridor Countries,” which see much of their native human capital emigrate as they absorb a flood of less-skilled immigrants, and most developing countries become “Countries of Emigration,” losing much to most of their populations to emigration, or “Ghost Nations,” in which less than 2% of the native population stays. While I actually find these large patterns somewhat plausible, the “Countries of Reinforced Dominance” and “New Settler Societies” include too many resource-rich countries like Qatar, East Timor, and Botswana. Since everything else is mobile, high TFP outliers have an outsized impact on global outcomes.

So, I’ll reserve judgment until I come up with a better way to get at “essential” GDP, reflecting the inherent productivity of a place’s institutions, deducting natural resource windfalls. For the record, unskilled workers’ living standards under Scenario 1 converge to 23% of the current US level; the human capital premium rises almost everywhere, converging to $66,535 per annum; average (but not necessarily median) incomes rise for natives of every country in the world; the global capital stock rises more than 100%; and world GDP rises by 80%.

As I say, TFP anomalies are the Achilles heel of the model, and I like Scenario 2 better in part because it deals with them, albeit in a somewhat rough and ad hoc fashion. In Scenario 2, immigrants from low TFP places to high TFP places raise TFP in the places they come from, and reduce it in the places they go to. This is less about negative congestion externalities, which the spatial model has already tried to take into account, as it is about social norms and institutions. Take littering. Citizens of developed countries tend to have a “no littering” norm pretty firmly imprinted in their minds. Citizens of many developing countries do not. So, immigrants from developing countries would probably make litter more common in developed countries, since at least some of them would bring their bad habits with them.

At the same time, the social disapproval and legal penalties they would face for littering in the West would change the habits of some of them, and return migration and letters home would facilitate the spread of a “no littering” norm back to migrants’ countries of origin. The same would apply to many other useful protocols and practices of developed countries, from tipping to not stealing napkins from food courts to not paying bribes to democratic tolerance to culturally valuing literacy and book learning, which open borders could be expected both to dilute at home, and to spread abroad. As it happens, these plausible assumptions about institutional transmission also tame the implausible ascent of high TFP outliers. Since “founder effects” are important, however, I give natives five times the weight of immigrants in determining the TFP, under open borders, of a country of (net) immigration, while emigrants have only one-fifth the weight of those who stay home, in determining the TFP, under open borders, of a country of (net) emigration.

Scenario 2 represents, for the moment, represents my “best guess” of what a world of open borders would “really” look like. Even then, a strange qualifier must be added: I am holding things like world population and TFP constant even as I project the end-point of a transition that would take decades to play out, so the results must be interpreted as if the transition dynamics to open borders are “fast-forwarded” while other changes underway in the world economy are frozen in place. Total migration under Scenario 2 is a little over 3 billion, about 44% of mankind. Interestingly, international geographic mobility under open borders would look similar to interstate mobility in the USA today.

The global human capital stock would rise by 50%, world GDP by 69%, and the global stock of physical capital by 88%. Most developed countries would turn into “host nations,” seeing immigrants from developing countries swell their populations, while most developing countries would see a large fraction of their populations emigrate. However, under Scenario 2, there would be no “ghost nations”: the worst-off countries would be “rescued” by the benign effects of their diasporas, and would see institutions improve, average human capital rise, and investment capital become more available. Some high TFP outliers would turn into “new settler societies,” but (setting to one side the special experience of the USA) these countries would end up with only about 10% of world population. The aggregate experiences of major geographic-cultural regions, shown in Table 2, give a pretty good description of how open borders would change the world under Scenario 2.

Table 2 Nathan Smith

 

The most striking feature of Table 2 is the dramatic rise of the West, defined as the EU plus the English-speaking USA, Canada, Australia, and New Zealand. The West’s population would soar to over 3 billion. It would be home to 43% of the world’s population, but about two-thirds of physical and human capital, and it would generate two-thirds of world GDP. Of course, the West might become less Western as it absorbed billions of immigrants, mostly from East and South Asia, so some might see this as, not the rise, but the end of the West. But polities that represent rival civilizations, such as India and China, would certainly see their relative power decline.

More important, though, is the impact on individuals. And it is here that the strength of the case for open borders really shines through. “The Global Economic Impact of Open Borders” is meant as a contribution to positive, not normative economics. Evaluative judgments are included to keep the prose from being too dry, but are not what the paper is really about. Yet for anyone who cares about the welfare of the foreign-born, Table 3 cannot but be a powerful moral argument. For under Scenario 2, it is precisely the world’s poorest who would benefit most from open borders. Natives of the benighted Democratic Republic of the Congo would see their labor incomes rise, on average, by +1801%. Natives of Ethiopia, Burma, Tanzania, Kenya, and many other very poor countries, would see their incomes rise several-fold, partly because tens of millions of them would emigrate, partly because human and physical capital would become more abundant, partly because the diaspora’s influence would improve institutions. Natives of middle-income countries would see smaller, but still substantial, gains.

Table 3 Nathan Smith

Natives of developed countries would have a more ambiguous experience. There, the wage of raw labor would fall. The living standards of unskilled workers worldwide would converge to 44% of the US level. The human capital premium would rise in most places, even in the West, but in the USA, it would actually fall. This would occur because (a) the USA would be such a powerful magnet for skilled workers that average human capital, already high under the status quo, would actually rise slightly, and (b) TFP would fall by about 9%. In the large countries of Western Europe, natives would become minorities in the countries where they were born, but their average labor incomes would actually rise, thanks to gains from trade with immigrants, even as national TFP fell. But the median worker, having below average human capital, would probably earn less than under the status quo, and earnings would become more unequal. But the USA, where even the average worker would earn less than under the status quo, provides an especially good test case for the status quo.

Whether Americans would really be worse off under Scenario 2 is tricky. Their labor incomes would fall, but those who own land—and most Americans are homeowners—would see its value rise more than three-fold. Also, the US government would enjoy a far larger tax base, which it might use to hold natives harmless in the midst of enormous changes. But if we think of open borders as a sacrifice by Americans for the benefit of the foreign-born, it has the merit of being enormously effective on a per dollar basis. Global open borders would reduce Americans’ labor incomes by 10%, while increasing by multiples the welfare of billions of the poorest among our fellow human beings around the world.

While these results are not, in my view, rigged to favor open borders, they are of course highly contestable at the level of positive economics, as well as open, if accepted, to many normative appraisals. Yet I hope they will nonetheless help to dispel the notion that open borders are a “utopian” proposal. Open borders would not free mankind from work, or death, or turn the sea into lemonade, as one early utopian socialist dreamed. There would be major changes, and winners and losers, but on balance the changes would be positive, as well as highly egalitarian. Open borders is probably best compared to the abolition of slavery: a radical but not revolutionary reform, which seems quixotic, but which reason shows is attainable, and which will harm certain powerful vested interests, but benefit most of mankind, especially the worst-off, while expanding human freedom and reducing the amount of violence and coercion in the world.

At any rate, that’s my best guess as to what would happen. But my results are preliminary, and I will be grateful for feedback and criticism.

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13 Comments

  1. Nathan:
    1. This is very impressive work.

    2. “Since “founder effects” are important, however, I give natives five times the weight of immigrants in determining the TFP, under open borders, of a country of (net) immigration, while emigrants have only one-fifth the weight of those who stay home, in determining the TFP, under open borders, of a country of (net) emigration.”

    That is, I think, the key assumption. Let’s explore it a little.

    By “TFP”, you really mean “economic/legal/social institutions”, I think. Or it is those institutions that determine TFP.

    A thought-experiment: assume two identical countries, except for TFP. Divine intervention moves all the northerners to the South, and moves all the southerners to the North, at exactly the same time. Does TFP follow the people, or stay with the land? I think you would agree it follows the people. What you call “founder effects” are really the minority adjusting to the institutions of the majority, more than vice versa.

    How long does it take for the minority to adjust to become like the majority, in terms of those institutions? And if migrants cluster, over what area do we define “majority”? We could get very different results from slow dispersed migration than from fast clustered migration.

    Could we use your model to support colonialism and imperialism, instead of migration? Carve out a chunk of the South, people it with mostly northerners, so it has northern TFP, wait a bit for the original natives to adjust to the higher TFP, then repeat. That way the higher TFP would apply to all the land, north and south, as well as to the people. Southerners wouldn’t like it, of course. But hey, it could make everyone richer, just like open borders, only more so.! 😉

    Reply
  2. Thanks Nick!

    On TFP, yes, I think it’s *mainly* about economic/legal/cultural institutions, though I wouldn’t completely discount geography. My old professor, Jeffrey Sachs, would say that western Europe and the Pacific Rim of Asia benefit from their remarkably sinuous coastlines and abundant access to the sea, as well as from their temperate climates, and the excellent package of useful crops that civilized man has bred for that climate over the last few thousand years. Crucially, Central Asia and sub-Saharan Africa have the disadvantage of being landlocked, or relatively so: sub-Saharan Africa has coasts, but not sinuous ones, and the largest concentrations of population live inland, and there are few navigable rivers. Sub-Saharan Africa has the added disadvantage of a tropical climate, ill-adapted to the Eurasian crop package, and an intractable burden of malaria, due to the types of mosquitoes that live there. I think there is considerable force in these arguments, especially as *deep* causes of development, fundamentally exogenous, whereas institutions are entangled in webs of multicollinearity.

    Still, I’d interpret the proximate causes of TFP differences as mainly consisting in cultural/legal/social institutions.

    Whether colonialism is a good substitute for open borders depends on what you think about the mechanisms of institutional transmission. The Victorians embraced your argument, embarking in a spirit, at least sometimes, of genuine idealism, on a project to govern the benighted majority of mankind for its own benefit. The results were not, all in all, as bad as is sometimes alleged. There were some dazzling successes, such as Hong Kong and Singapore, and who can doubt that the democratic institutions of modern India owe a huge debt to the British Raj? But there were also horrific catastrophes, such as King Leopold’s reign in the Congo. History has not been kind to the Marxist notion that colonialism was about “exploitation.” If it were, why would the end of colonialism have seen a swift economic ascent by the former colonizing powers, even as most of the newly independent countries stagnated or backslid? But by the same token, judged by the lofty standards of the Victorian idealists, the “civilizing mission” was not very successful. With some exceptions, the colonial powers didn’t raise subject nations to the freedom and prosperity they themselves enjoyed. The project ignominiously faltered, and left the colonized peoples, not demonstrably worse off than they were before, but usually not much better off, either. Meanwhile, wave after wave of immigrants to the USA quickly came to enjoy the full complement of freedom and prosperity that the USA’s founding population enjoyed. What was the difference?

    It lies, in my view, in consent of the governed. Immigrants to the USA in the age of open borders had not literally signed a social contract, but they had made themselves subject to the US government by their own choice. My guess is that most immigrants to the USA, in the 19th century and today, would agree to the proposition, perhaps enthusiastically, that in coming to America they had/have consented to be ruled by the Constitution and democratically passed laws of the United States. By contrast, even an Indian passionately devoted to the British Raj could hardly have claimed that it governed him by his own consent. Consequently, the colonial empires enjoyed meager legitimacy even when they were unprecedentedly honest and enlightened– had India ever been better governed than under the Raj?– whereas in all of history it would be hard to point to a regime which enjoyed more uncontested legitimacy than the 19th-century American Republic, outside the South.

    I’d probably be more sympathetic than most to proposals for a new colonialism. I supported, and support, the invasion of Iraq, as a means of exporting better institutions, and as much of a mess as Iraq is today, it’s better than Saddam, so in that sense it worked. I think (tentatively) that the World Bank does quite a bit of good in the world, precisely because it *is* neocolonial. Unlike the British Empire, it operates with the consent, if not of the governed exactly, of whatever national government circumstances happen to have thrown up, but like the British Empire at its best, it tries to spread good institutions and thereby freedom and prosperity. See my article “The Case for the World Bank.”

    Still, it’s probably for the best that a comprehensive new colonialism is obviously not in the cards. Nor is open borders, for the present, but that’s a cause more worth promoting. Open borders and new colonialism would both lead to many more people being ruled by the West, but under open borders, it would be by their own choice.

    Reply
  3. Thomas

     /  August 13, 2014

    Thats wonderful.

    If only these inferior races could be moved to places controled by the superioer white people, they would suddenly be a lot richer. Clearly it cant be done in Africa – to few whites.
    Isn’t that kind of the implicit racist argument.

    “Open borders and new colonialism would both lead to many more people being ruled by the West, but under open borders, it would be by their own choice.”
    But surely not leaving any choice to be made by the westernes. Maybe it would means westernes being ruled by “the many more people” – but hey, your’e a serious economist, so just make an assumption about nothing bad, and then everything works out.

    What I think is most funny about your extremist viewpoints, is the following; Howcome most economist believe it is a good idea with property right – people can own houses and companies. (egalitarianism is not a big issue)
    But a country. Oh, that something completely else. Nobody owns it. Not even the people who created the institutions, paid the taxes, fought in wars. No benefits comes from property right when we talk about a nation.

    Reply
  4. Property rights are sometimes defended in Lockean terms: you own something because you have “mixed your labor with it.” Economists tend to prefer an efficiency defense: property rights should be recognized because to do so creates incentives for people to work, save, trade, invest, invent, and do other useful things.

    Neither defense of property rights applies if we’re trying to defend some kind of collective property right of a nation in its territory. Indeed, what is it but communism to say that, say, a house I built with my own hands does not, actually, belong to me, but, because it is part of the territory of the nation, belongs to the nation collectively?

    That citizens have some special joint stake in a country’s territory, I do not deny. I would deny that it allows governments justly to claim an absolute prerogative to decide who shall and shall not reside that territory. But it is not essentially valid, and is rarely useful, to analogize sovereignty to property rights.

    Reply
  5. As for the charge of racism, as an open borders advocate I’m not too worried by such charges, they’re too implausible. The answer to your question is that of course it isn’t racist, because the advantages the West enjoys reflect not its majority-white racial composition, but institutions, culture, history, perhaps to some extent geography, and in short, a variety of advantages, which happen to be correlated with race in the present world by historical accident, but which essentially have nothing to do with it. The West would cease to be majority-white under open borders, but it does not follow that it would cease to be Western, still less that it would lose the freedom and prosperity that have long distinguished the West vis-a-vis the rest of the world. Rather, many non-white peoples would come to enjoy it. At any rate, I regard that as the most likely outcome. You may well have good reasons to doubt it, but if so, I’d ask you to do more than hint that “something bad” would happen. What are you afraid of, and what kind of evidence should we look for, to try to determine whether your fears are justified?

    Reply
  6. Under the status quo, markets for labor and human capital clear at the national level. Except that markets for labour notoriously don’t clear very well at all.

    A working principle of regulation is that regulation tends to benefit incumbents. Land regulation and labour regulation are particularly inclined to work like that. The former tend to create either highly unstable asset prices (Irish, Spanish housing markets) or very expensive ones (Australian housing markets) or very expensive and unstable ones (Japanese, California, UK housing markets). The latter entrenched unemployment (most of the EU).

    So, these entrenched institutional rigidities seem likely to get in the way of reaping all the alleged benefits. (Would the US repeal its minimum wage laws, for example?)

    Living in a very high migrant intake country (Australia) where the infrastructure where I am (Western Melbourne) is not keeping up with the inflow of people, due to institutional rigidities, makes me dubious that your model is anywhere near incorporating actual likely congestion costs.

    More generally, barriers to entry (aka border controls) are also regulations which tend to benefit incumbents, as your results make clear. Which suggest it will be politically fraught to try and tackle such broadly based incumbent interest. (Relying on governments to compensate folks perhaps does not inspire folk. Especially as congestion costs would not be evenly distributed.)

    It is also noteworthy that there are countries where the citizens have “voted” to be economic minorities in their own countries (oil-states of the Gulf). Voting to be political minorities in one’s own country is a very different matter. Which, as far as I am aware, no polity has done. (Something close to that was done in gold rush Australia, but we were part of a larger imperial polity and voting was not yet full male suffrage.)

    Underlying the model seems to be a somewhat implausible assumption of almost infinite institutional elasticity: that no level of population inflow would “swamp” the institutions which generate the benefits in the first place. In particular, that there would not be any substantive change in basic rules.

    But not everyone wants to get along with other folk, as ISIS is currently demonstrating in the Middle East. Where there are folk who have, for example, what they regard as divinely mandated rule preferences that they are entirely happy with imposing violently, the issue of institutional integrity/persistence and “congestion costs” in the broadest sense become particularly fraught.

    There may be more to popular scepticism about open borders than your “everyone is in the gains-from-trade game/institutions cannot be swamped” model captures.

    Reply
  7. Thanks Lorenzo, this is great feedback!

    Minor points first. Re: ISIS, open borders advocates generally recognize an exception for terrorists and other genuine national security threats. Re: infrastructure not keeping up with growth, I concede in the paper that my rent-maximizing cities (which would build infrastructure as long as the growth it accommodated created more value than the infrastructure cost to build) may be too optimistic. If so, I’m not sure how that would affect aggregate and distributional results. Re: Gulf countries… but they didn’t vote, right? At any rate, the Gulf emirates aren’t democracies. The irony is that, in my view, wealthy non-democracies are systematically more enlightened than wealthy democracies when it comes to migration policy. Re: people don’t vote themselves into political minorities… Who says they should? Open borders doesn’t mean open citizenship. Already, democracies don’t give votes to anyone who happens to be on their territory. No reason you can’t have open immigration, while restricting voting rights to natives plus people who have gone through a naturalization process lengthy and rigorous enough to ensure that most immigrants have absorbed the civic values you’re trying to preserve.

    The key point seems to be:

    “Underlying the model seems to be a somewhat implausible assumption of almost infinite institutional elasticity: that no level of population inflow would “swamp” the institutions which generate the benefits in the first place.”

    That’s not quite right as a characterization of the model, but it does come pretty close to describing my actual opinion. The results I’ve focused on reporting are from Scenario 2, which does include TFP decreases in host countries that can be interpreted as institutional swamping. Perhaps you think TFP should fall more than in Scenario 2? What rules for TFP adjustment would you propose to incorporate into a theory like this? Or would you have another way of framing the question?

    My reading of history is actually that “almost infinite institutional elasticity” seems true. I was a bit reluctant to incorporate downward TFP adjustments into the model at all, because I don’t see any historical reason to think they would occur. US history, in particular, seems to illustrate the principle of almost infinite institutional elasticity. Take the principles of religious freedom and separation of church and state, the quest for which motivated the Puritan migrants to New England. This was a revolution in human affairs. England didn’t have it. For that matter, England doesn’t have it even today. It was the Puritans of Plymouth and Boston who separated church and state, realizing their own religious principles. This tiny band of founders has been swamped by immigration over four centuries to the point where their genes’ share in the current US population must be negligible… yet separation of church and state remains. Wave after wave of immigrants arrived on American shores and embraced American ideas of church and state, and this distinctive feature of the little colonies of 17th-century Massachusetts is now a distinctive feature of a mighty American nations a thousand times more populous.

    For comparison, consider German-Americans. They may be America’s largest immigrant group, by blood. Millions of them arrived in the 19th century, and they’ve grown by natural increase, integrated, prospered, risen to the highest levels of American society. But if you should therefore suppose that brought with them some sort of German institutional DNA, and introduced a kind of Germanness into American institutions, you would be wrong. The history and development of American institutions has essentially nothing to do with that of Germany. Institutionally, America is British, plus native evolutions. A few tens of thousands of 17th-century Puritans in Massachusetts have had far greater impact on US institutions than millions of Germans who arrived later, after the institutional matrix of American society was already established.

    Even if this characterization of the US case is accepted, one might doubt whether it represents a rule or an exception. But while I would hardly claim that almost infinite institutional elasticity is an established fact, I actually don’t see much evidence to set in the scales against it. Is there any case in all history of peaceful individual immigrants causing a major degradation of good institutions? Contemporary California might be cited but (a) the decline of governance in California seems traceable to adverse native evolutions, such as the referendum process and public sector unions, in which immigration played little part, and (b) despite some intractable problems, California is still basically a prosperous developed society with great quality of life, and one of the greatest innovation hubs in the world. People tend to cite the Roman Empire but that’s nonsense. Rome’s republican constitution was in ruins by the end of the 1st century BC, and its virtue and genius had been degraded by centuries of despotism long before barbarian invasions became a problem. From the 3rd century AD its social and economic decline were unmistakable, and that was due to plague and civil war, not barbarians. It was a mistake to let the Visigoths enter the empire as an intact polity, but peaceful German immigrants were so far from being a problem for the empire that Rome’s last great defender, Stilicho, seems to have been German. Any other examples you’d like to suggest, to support the idea that peaceful immigrants might lower TFP?

    Reply
  8. Nathan: but you are proposing movements orders of magnitude greater in both scale and diversity than anything experienced before and into countries far more crowded than received before. So, the past may not be as great a guide as you think. Also, the C19th US experience is not as terrific advertisement for mass migration as folk suggest. Read Fogel’s Without Consent or Contract, specifically chapter 10. Peter Turchin has published a relevant graph in an online piece on inequality (in health and wealth) in the US.

    Russell Meade’s essay on Ferguson points to difficulties ethnic flows can cause governance even within a polity (the US).
    http://www.the-american-interest.com/wrm/2014/08/15/ferguson-a-fire-alarm-in-the-night/

    Reply
  9. Both the Ferguson incident and Fogel’s book about slavery pertain to American blacks. As such, they illustrate the same point about consent of the governed that I made in response to Nick Rowe. Most of the minorities in American history– some have been assimilated so that they no longer seem like minority groups– have come through voluntary immigration. The only exceptions are American blacks and the Amerindian peoples. And it is their integration which has been problematic throughout US history. In saying this, I cast no blame. I do not, in general, emphasize the duty of immigrants to assimilate, and to the extent that such a duty may exist for strictly voluntary immigrants, it would obviously be absurd to insist upon it in the case of people brought to America by force, against their will. That blacks and Amerindians did not fully integrate into American society was until recently largely a result of white racism. If today, blacks take pride in their culture and resist assimilation into the white-majority mainstream, that is natural, understandable, and in some respects praiseworthy. America has long been enriched by black cultural influences, especially in music. On the other hand, I’m not sure the best way of putting this, but there are some behavioral patterns among American blacks– higher rates of out-of-wedlock births, higher crime rates, lower academic achievement– which are less satisfactory, and here it would be a welcome development if blacks assimilated more to the white-majority mainstream. How the positives and negatives of black culture may relate to each other is a mysterious question. But that blacks are a special case is an unmistakable lesson of American history, and I think the reason is that they did not initially join the American nation by their own consent. Under open borders, only consenting people would swell the population of the West.

    On Peter Turchin’s piece, all I got out of it was that increasing inequality of wealth is leading, again, to increasing inequality of lifespans. That’s mildly troubling, but really, I don’t understand why we should be focused on inequality within countries at all. Open borders would probably lead to more inequality of wealth and lifespan within the West, but less inequality globally in both respects. Is that trade-off worth it? Of course it is.

    (Terminological footnote: What I call “Amerindian peoples” are sometimes called “Native Americans,” but I object to this because after several generations in the USA, I think I’m also entitled to call myself a native American. Canadians call them “First Nations,” which makes some sense but I think is unfamiliar outside Canada. I’ve seen the word “Amerindian” used in Latin American histories, and I like to use it for the pre-Columbian inhabitants of the Americas because it avoids awkward ambiguities and is, in my opinion, an uncommonly beautiful word.)

    Reply
    • No, the reference to Fogel’s book was not about slave imports, it was about his discussion of how rational nativist sentiment was because the level of migration was making things worse for locally-born Americans. (See the graph in Turchin’s piece.) So it was going to incumbent benefit/costs.

      Reply
  1. Another argument for Open Borders: It is good for the quality for football! | The Market Monetarist
  2. Guest post: What an Enlightened Immigration Policy Would Look Like (Nathan Smith) | The Market Monetarist

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