In response to Tyler Cowen

Tyler Cowen explains, in a post about a new paper on the effects of migration, why he does not favor open borders:

And no I do not favor open borders even though I do favor a big increase in immigration into the United States, both high- and low-skilled.  The simplest argument against open borders is the political one.  Try to apply the idea to Cyprus, Taiwan, Israel, Switzerland, and Iceland and see how far you get.  Big countries will manage the flow better than the small ones but suddenly the burden of proof is shifted to a new question: can we find any countries big enough (or undesirable enough) where truly open immigration might actually work?

What Cowen seems to mean, is that any rich country that opened its borders to unlimited immigration would get swamped. As an advocate of taxing immigration, I find this objection easy to respond to. Israel and Taiwan are special cases because they face immediate national security threats from groups that contest the sovereignty of the government in the territory it claims, so I’ll set those to one side. In general, I do recognize threats of violence as a legitimate, albeit rare, reason to restrict immigration. But Switzerland and Iceland will serve as suitable examples. So, what would happen if Switzerland taxed immigration but eliminated all quantity restrictions, and while making it clear from the start, of course, that immigrants would not be eligible for public welfare benefits, and had to pre-imburse the government for the costs of deporting them if they became destitute (see DRITI for details). Answer: the living standards of native Swiss would skyrocket. Swiss entrepreneurs would thrive, building factories galore and scoring massive export success in Europe on the strength of their lower labor costs. The Swiss government would enjoy an enormous surge in tax revenue, and would pour out generous largesse on Swiss citizens, thus raising the living standards even of those who aren’t entrepreneurs, or for that matter even those who lose their jobs to immigrants, as many Swiss would. Swiss households would also enjoy an abundance of cheap domestic servants, who would raise their standard of living still further. Against this, the Swiss would see far more poverty in their country (against which the border currently serves as a blindfold), but if they are enlightened, this would trouble them no more than poverty in developing countries does now. In fact, it would trouble them less, because they would have the moral satisfaction of knowing that they were not exacerbating world poverty through the closure of their borders, but on the contrary, that, occasional mistakes aside, all those hordes of impoverished immigrants were bettering their condition relative to what it would have been at home, else they would not have come.

Cowen is smart enough to figure all this out for himself. The communication failure occurs because we mean different thing by “open borders.” I mean simply that immigrants will be allowed to enter the country physically, and allowed to work. Not that they will reside there on equal terms with citizens, subject to the same tax rules for example. Certainly not that they will have access to the vote, which is a separate issue, or to welfare benefits, which I would strongly object to. Perhaps he would favor the DRITI approach to open borders, I don’t know. It seems as if taxing immigration, and keyhole solutions generally, are not on Cowen’s radar screen. I don’t particularly blame him for that: it seems like the more sophisticated ways of talking about open borders which have been developed in the conversations at this site haven’t filtered out into the mainstream yet. But that’s a shame, because it would be much more interesting to hear Cowen’s response to the sophisticated case to open borders. I don’t learn anything from comments like those above.

Cowen continues:

In my view the open borders advocates are doing the pro-immigration cause a disservice.  The notion of fully open borders scares people, it should scare people, and it rubs against their risk-averse tendencies the wrong way.  I am glad the United States had open borders when it did, but today there is too much global mobility and the institutions and infrastructure and social welfare policies of the United States are, unlike in 1910, already too geared toward higher per capita incomes than what truly free immigration would bring.  Plunking 500 million or a billion poor individuals in the United States most likely would destroy the goose laying the golden eggs.  (The clever will note that this problem is smaller if all wealthy countries move to free immigration at the same time, but of course that is unlikely.)

It’s possible that open borders weaken the pro-immigration cause by making it look scarier. In several years of advocating open borders, though, I’ve never had the impression that any of my interlocutors actually came to favor more restrictionist policies than they had before. The worst that happened was that some people seemed to become more self-conscious and articulate in their opposition to open borders, but if anything they seemed to stake out policy positions on immigration far to the left of the mainstream, in their effort to fend off my open borders advocacy while still feeling they have some claim to the moral high ground. For example, someone might say: Yes, we should take in all the immigrants we can handle, but not open borders, that’s crazy! “All the immigrants we can handle” is major progress compared to the mainstream. In this case, open borders advocacy might serve to expand the Overton window. See the post “How persuasive are open borders advocates? The case of Bryan Caplan” for more analysis of this.

There are a number of ways that open borders advocates might be helping the pro-immigration cause. For one thing, immigration advocates like Tyler Cowen can attack us in order to make themselves seem reasonable and moderate, while still supporting greatly increased immigration! For another, people who are aware of the case for open borders, even if they don’t come out in favor of it themselves, may start to feel less of a need to say “… but we do need to control the borders” as the bookend of a defense of amnesty for undocumented immigrants, or more high-skilled immigrants, or whatever. The more we become known, the less people will be able to say “everyone agrees we need to control the borders.”

Mainly, though, Cowen’s remarks make me really wish we could raise the level of debate. It would be nice if we didn’t have to explain ad nauseam that the fact that “social welfare policies of the United States are, unlike in 1910, already too geared toward higher per capita incomes than what truly free immigration would bring” is of no relevance, because of course any plausible open borders policy would involve denying immigrants most or all access to welfare, and of course it’s stupid to object to that on humanitarian grounds, since immigrants wouldn’t come here unless it made them better off. It would be nice if Cowen would feel the need to clarify his attitude to taxing migration and keyhole solutions.

UPDATE: Welcome Marginal Revolution readers! Here’s Tyler’s post linking to us. His comment:

On open borders, Nathan Smith responds, but I consider it a surrender.  What he calls “open borders” I call “not open borders.”  Price and quantity are dual.

Do we agree then? Good!

The comment “price and quantity are dual” is a masterpiece of laconic insight-cum-evasion. Here’s a way of unpacking it that stresses the insight part. In trade economics, it is often claimed that quotas are equivalent to tariffs, because limiting the quantity of imports via quotas and raising the price of imports via tariffs have the same economic effects. However, this is true only if the right to import under the quota is auctioned off. The same logic can be applied to immigration. See my post “Auctions, tariffs, and taxes” for more analysis of these distinctions.

I added “-cum-evasion” because a reader might, just possibly, get the impression that what Cowen calls my “not open borders” position is the same as the status quo. In fact, not only is DRITI not the status quo, but the policy of auctioning visas, which could arguably be considered equivalent on the ground that “price and quantity are dual,” is also very far from the status quo.

At any rate, if you’re interested in parsing these distinctions between “open borders” and “not open borders,” in defining and refining the concept of open borders, and classifying the arguments for it and the objections to it, you’ve come to the right place! I daresay that no one on the web does that better than we do.

Nathan Smith

Nathan Smith is an assistant professor of economics at Fresno Pacific University. He did his Ph.D. in economics from George Mason University and has also worked for the World Bank. Smith proposed Don’t Restrict Immigration, Tax It, one of the more comprehensive keyhole solution proposals to address concerns surrounding open borders.

See also:

Page about Nathan Smith on Open Borders
All blog posts by Nathan Smith

16 thoughts on “In response to Tyler Cowen”

  1. Pingback: Assorted links
  2. For me, the best immigration destiny would definitely be Canada, even though their government has passed some serious restrictive immigration laws. Canada has right now one of the highest ratio of citizens, who were born outside of its borders. It depends massively on those people to be able to do low-wage jobs, and support the economy in bigger cities, which are being really expensive for Canadians to stay.

  3. Taxing immigration is equivalent to “taxing people who import foreign-born labor instead of foreign-made products.” That’s just a subset of protectionism, for some reason distinguishing between products assembled or provided domestically by foreign-born residents and products assembled or provided abroad.

    1. I completely agree. A minimal tariff regime still resembles free trade much more than any autarky, however. I put it to you that the modern international borders regime resembles autarky far more than it does any sort of even faintly permissive trade regime.

      For what it’s worth, given that immigration, just like trade, boosts native national income (even if a subsegment of natives won’t see a boost), I see no reason why standard tax regimes wouldn’t be able to collect some of the new income accrued by high-income natives and use that to fund any necessary redistribution to the affected natives.

  4. Isn’t the E-2 visa (for investors reasonably similar to a DRITI arrangement with a very high entry fee and restricted to 80 countries? Or – for that matter – Australia’s significant investor visa? The fee is a $500k or $5m investment respectively. But would we say these countries have open borders with the countries that are eligible for the visas?

    1. To add on to what Vipul said, in my mind DRITI simply refers to open borders for all, but requiring all non-citizens/non-“permanent residents” to pay some additional income tax beyond what is typically expected. Foreigners and their employers who did not comply would face penalties similar to those currently faced by tax evaders. The enforcement mechanism would be simple and easy to implement relative to policing thousands of miles of physical borders.

      1. Ok, fair enough. DRITI is different in significant ways. But in what significant ways are these visas different from an auction with a high reserve price, or an auction with a low quantity?

        1. See my post “Auctions, tariffs, and taxes” on this (http://openborders.info/blog/auctions-tariffs-and-taxes/). It explains the differences between auctions (pre-determined quantity, price determined in auction), tariffs (pre-determined price, quantity depends on demand), and taxes (unlimited quantity but “price” occurs ex post on the basis of immigrant earnings). You could, I think, write down a theoretical model in which the three were identical, but that would require assumptions like perfect information, no credit constraints, inequality for some reason nonexistent or irrelevant, etc. In practice, there would be big differences. For one thing, taxes would almost certainly raise more revenue because the government would take off immigrants’ hands the risk and the need to borrow that auctions or tariffs would tend to involve. For another, taxes would favor poor immigrants with good earnings prospects, where auctions and tariffs would tend to keep out a lot of people with good prospects but little ready cash and/or access to credit. Taxes might also favor those whose prospects in America were particularly risky, with large potential upsides, as well as those moved by love rather than money.

          The reason I call DRITI open borders is that essentially anyone could come. Of course, the actual cost of travel would be a barrier even under the purest open borders regime, and the deposit adds another up-front cost (albeit not a loss of net worth for the immigrant since the deposit is returnable), but these barriers are pretty trivial to what immigrants currently face. For people who bring money with them and don’t plan to work, the DRITI visa would be a very easy way to get into the country, and the taxes wouldn’t affect them. Current immigration policy often tries to allow students and tourists to enter while keeping out workers, but it can’t do so very effectively because immigrants have incentives to misreport the purpose of their visit. As a result, lots of bona fide potential students and tourists are excluded. DRITI would solve that problem, though of course some tourists and students might decide to stay later. Fine: more tax revenue! As far as enforcement goes, the key is that you don’t need to deport anyone because people have a right to be here: the logic penalty for “illegal immigration” is a fine. However, I would guess that undocumented immigration would essentially disappear, because there would be no reason to tolerate the difficulties, dangers, and disadvantages of entering the country illegally, if visas were easy to get. Probably there would be a good deal of evasion of the migration tax, but it would be more manageable than the current difficulties of enforcing border closure. Bureaucrats might find it easier, morally and legally, to levy fines than to deport people, though admittedly you’d sometimes be levying fines from people who are very poor, which might be hard.

  5. In reponse to nl7:

    Yes, DRITI is a protectionist measure, in the sense that it’s designed to protect native American (or more generally, host country) workers from the fall in wages that can be expected as a result of immigration. You may ask, why should native American workers be protected, given that they’re already a fairly privileged group. To clarify a bit, high human capital workers will tend to gain from more immigration, since their skills are globally scarcer and they will enjoy more complementarity with immigrants with generally low skill levels. It is low human capital workers who will (probably tend to) suffer wage declines in competition with immigrants. And they are already among the poorer natives. Still, from a global perspective they are quite privileged, so why do they need protection?

    DRITI would lead to situations in which two people working side by side, a native citizen and a DRITI visaholders, would do the same job for the same wages yet enjoy very different living standards. The citizen might have a suburban house and a couple of cars, paid for not only by his wages, but also by government transfers financed by migration taxes. The DRITI visaholder would live in a cramped flat, ride the bus, and eat a lot of rice, because not only would he get no transfers from the government, but DRITI-related taxes would take a large chunk out of his paycheck, some of it channeled into a savings account he officially owned though he couldn’t for the moment access it, but much of it lost to him forever, financing transfers to people like his better-off co-worker. Where’s the fairness in that?

    The answer is that it isn’t very fair, but it’s way more fair, and more welfare enhancing, than the current system of global apartheid. DRITI is designed to realize, at least approximately, the Pareto principle of making everyone better off. It seeks to hold native workers harmless. Indeed, you could say, if you like, that it is designed to maximize the welfare of middle-to-lower-class native workers, by realizing the vast surpluses to be gained from eliminating inefficient migration restrictions, and channeling a large part of these surpluses to middle-to-lower-class natives. Personally, I value the gains of the immigrants most, but I also value tradition, the stability and integrity of institutions that seem to work well, the Pareto principle, not giving people unpleasant surprises, not killing the goose that lays the golden eggs, etc. DRITI is designed to safeguard all that, while retiring noxious and indefensible practices such as deportation and forcible exclusion of peaceful migrants.

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