“Only high IQ immigrants” fails to understand comparative advantage
October 30, 2012 22 Comments
Post by Nathan Smith (regular blogger for the site, joined April 2012). See:
OK, it’s time to give some strong back talk to this meme of “only high IQ immigration is good” which we’re getting in the comments. The simple rebuttal to “only high IQ immigration is good” is that this fails to understand comparative advantage and commits the maximize the average fallacy. But in a recent post, Vipul partially defends the high-IQ-only preference:
Not so fast, restrictionists would say. As Richard Hoste puts it, the comparative advantage argument works in the context of pure economics, but once we bring in crime and political externalities, it starts to falter. If crime rates go up, then your chance of being a crime victim goes up, all else equal (there are caveats to be added, but I’m using a simplistic picture of crime). Comparative advantage doesn’t come to the rescue here. And if low IQ means voting for bad policies (something that’s supported by Caplan’s research) then low IQ immigration would lead to negative political externalities.
So, I don’t think the comparative advantage argument is quite the right way to tackle the IQ deficit concern. So what is? I think we need to step back a bit and be clearer about how IQ matters to the moral and practical considerations that come up with respect to immigration and its effect on natives and immigrants. Does IQ matter in and of itself (as some indication of moral worth or desert), or does it matter because of its correlation with things like crime or political beliefs or social capital or what-have-you? It’s only the rare IQ elitist who argues that IQ is morally significant in and of itself. Most people who believe in the importance of IQ believe in it because it’s correlated with a lot of other things like crime, political beliefs, etc.
Vipul goes on to argue that people who make the “only high IQ immigrants” case are double-counting the harms of low-IQ immigration, and that IQ doesn’t give an extra reason for restrictionism, once one has taken possible effects on crime and politics into account. But I think Vipul is giving the “high IQ only” restrictionists too much credit. There may be subtle externalities arguments for why low-IQ immigration is worse, though I think they’re highly tenuous and have little empirical support (I’ll come back to that). But mostly, people are just failing to understand comparative advantage.
Consider the following comment from holier then [sic: should be "than"] thou:
I will say in this case I’m In total agreement with Silicon Valley. People in Silicon Valley are supporting high IQ immigrants, often with unique skill sets. They tend to add value to the nation in the short and long runs. Also, because programming is generally a value creation, rather then value transference industry, the addition of new labor can actually increase the wages of natives. A foreigner who starts a new company adds to the demand for labor. And programming is one of the few industries where smart people with little financial capital can still become job creating entrepreneurs.
For this reason I’m far more open to the case of supporting high levels of immigration of the high IQ, especially those that have skills in key industries. However, you’ll note that this is far different from being “open borders”. Open borders, in practical real life terms, means mostly supporting the mass immigration of low IQ low skill workers who will mostly compete for the existing pie rather then increase it.
This is just economic illiteracy. A foreigner who starts a new company doesn’t necessarily add to the demand for labor. He creates a few jobs directly, but if he competes successfully with existing domestic companies, he’ll destroy jobs elsewhere. If his new company is more productive than the incumbent firms he is grabbing market share from or perhaps driving out of business, he’s likely to destroy net jobs in that industry. Not that that’s a bad thing. To think it is is to be guilty of what Bryan Caplan, in The Myth of the Rational Voter, calls “make-work bias.” Productivity increases tend to hurt workers in particular industries while making consumers and investors better off. And the workers may not be harmed either in the long run, as the market recycles them into other industries. But there’s not much reason to think that foreign entrepreneurs are particularly likely to add net jobs to the economy.
Meanwhile, low-skilled immigrants can also create jobs. Suppose a lot of low-skilled immigrants come and are willing to work in restaurants for low wages. They don’t have the business skills to run restaurants, but they can wait tables and slice carrots and man the cash register. Meanwhile, a lot of hungry people in a hurry would be happy to pay $5 or $10 or $15 for a meal cooked by someone else, rather than having to do it themselves. Native-born foodies with a knack for business have an opportunity to raise some capital, set up a restaurant, hire the immigrants, while carving out a nice job for themselves running it. Of course, customers and investors benefit too. Again, I live in Fresno, and all around the city are orange orchards and vineyards. They need workers to pick the fruit. Native farmers, agronomists, irrigation engineers, etc., who have jobs in the agricultural sector depend on these workers to do the “low-skill” (it’s actually not that low-skill, I hear, but at any rate it doesn’t require much education) work that makes profits possible. Again, I work in a nice clean office building (except for the clutter on my own desk). Who keeps it clean? Not my fellow professors! We hire a janitorial service, which hires a lot of people for the low-skill work of emptying trash cans. Yes, I could take out the trash myself. But I have better things to do! Immigrants who take such tasks off my hands are “increasing the size of the pie.”
Or are these immigrants “competing for the existing pie” because other, less-skilled natives could have taken out the trash for me instead? No. That’s the wrong way of looking at it. Capitalism features competitive markets in almost every industry, but the people who are competing with each other are doing so by being productive, by creating value. To oppose “competition” to “increasing the size of the pie” is a mistake here. Some less-skilled natives probably do see their wages fall because of competition from immigrants (though even that’s controversial: less-educated natives may be able to exploit their comparative advantage in fluent English and being in the American cultural groove, and benefit from immigration just like higher-skilled natives). But if immigrant janitors do reduce the wages of native janitors, they’re still growing the pie. And the university benefits from cheaper housekeeping services.
Let me draw attention, by the way, to holier than thou‘s phrase “value transference industry.” This is not a term economists use. They don’t use it because it’s bogus. There is no phenomenon in the real world which it is sensible to refer to in this way. You could, if you liked, call theft a value transference industry, but that would be inappropriately neutral and non-judgmental. We don’t call theft “value transference,” let alone a “value transference industry,” we call it crime. Social Security might be called a value transference program, but it’s not an industry, precisely because it’s merely transferring, not creating value. It seems that holier than thou thinks the economic laws of capitalism ordain that some industries create value, others merely move it around. That’s just not how markets work. I advise holier than thou to delete this fallacious phrase from his vocabulary.
A small point:
Academics and Silicon Valley types mostly deal with agreeable high IQ immigrants they respect. However, the vast majority of immigrants are the low IQ type they live in expensive areas to avoid.
Note that if the sole motive of academics and Silicon Valley types for living in expensive areas was to “avoid low IQ types,” they’d have very little reason to support low-IQ immigration. After all, living in expensive areas is expensive, and they wouldn’t need to do it if the low IQ types hadn’t been admitted to the country in the first place. In general, there’s nothing wrong with supporting low-skilled immigration while preferring to live in places where low-skilled immigrants can’t afford to live.
JayMan, author of several comments at Vipul’s post, also seems not to understand comparative advantage. Most of the discussion there I found hard to follow. My knee-jerk reaction is that it’s the kind of statistical confusion and speculation that people get sucked into when their theories are inadequate. But a sarcastic last shot from JayMan gives the game away:
Fair enough. I look forward to seeing evidence of the benefit low-IQ immigrants have bestowed upon the high-IQ countries that have received them.
When I read this, everything became plain. “So that’s his problem,” I thought. “He just doesn’t get comparative advantage.” JayMan seems to think it would be surprising or paradoxical for low-IQ immigrants to benefit host countries. No one who understands comparative advantage could think that way. Of course low-IQ immigrants benefit the countries that receive them, unless policy gets in the way somehow. Natives can outsource low-skill tasks to them and save our own time for more interesting and productive work. I experience the benefits of uneducated immigration every time I eat a bunch of grapes grown in the Central Valley, or buy a burger in a fast-food joint staffed by immigrant employees.
BK‘s comments are generally of high quality, but his understanding of comparative advantage also seems a little patchy. I’ll take his recent comments on the military as a case in point.
A high-ability-focused migration policy would capture most of the gains of these sorts. The two big military powers with the most tension with the liberal democratic order are Russia and China. Immigrants from both countries do very well in the West. Countries with populations that are less successful overseas tend also to be less powerful at home. And migration from these sources simultaneously increases the military power of recipient countries while reducing that of the senders (although increasing potential for espionage), for a disproportionate benefit along the military dimension.
The military found that it improved performance greatly when it set a de facto minimum standard of IQ for enlistment (barring extraordinary circumstances), about 90. The IQ test is part of the Armed Forces Qualifying Test. In fact, much of best-quality literature on the effects of IQ on job performance in large-scale studies comes from military recruiting. Low-IQ recruits are much more expensive to train, and the damage they cause by mistakes outweighs the utility of the work they can do, i.e. they have negative productivity. This is one of the reasons the armed forces give for preferring a draft over conscription…
I said most of the benefits could be obtained by taking high-skill folk, not all. Low-skill workers don’t generate much GDP, and they generate even less surplus for taxation after accounting for cost of living.
As Vipul points out in his response, while high IQ is useful in any job, high IQ people don’t have a comparative advantage in every job. If the military can fill its recruiting quotas with people of IQ 90 or above, naturally they will. It doesn’t follow that they couldn’t find uses for less-skilled people. Armies have certainly done so in the past. War has become a much more capital-intensive business, but that’s partly because labor has become a lot more expensive. More to the point, we’re much more concerned to save soldiers’ lives than in the past. That would probably change in the unlikely event of a large war for national survival.
As for “low-skill workers generate much GDP,” (a) that’s not true if there are a lot of them, and (b) don’t forget that low-skill immigrants can raise the productivity of high-skill natives through comparative advantage. The “surplus for taxation after accounting for cost of living” is also suspect reasoning. After all, the IRS doesn’t ask people “What’s your income? What’s your cost of living? How much is surplus?” and then tax only that part. Low-skill immigrants often manage to keep their costs of living very low, too. And as for how much we tax them, that’s where immigration tariffs come in.
Meanwhile, is there evidence for the alleged negative externalities of low IQ immigration? A Jones and Schneider paper on “IQ in the Production Function: Evidence from Immigrant Earnings” explicitly omits externalities considerations. It shows (argues) that one-sixth of international income inequality can be explained by IQ, but in a quite conventional way, entirely consistent with ordinary competitive markets and comparative advantage. It does suggest that low IQ immigrants might lower average GDP in a host country, but not that it would lower average wages for natives. It is wholly consistent with Pareto-superior but average-reducing open borders. By contrast, in this paper, Garett Jones develops the “hive mind” hypothesis which I believe will be the topic of a forthcoming book.
Within Asia, average intelligence quotient (IQ) scores differ dramatically across countries, from only around 80 points in South Asia to nearly 110 points in East Asia. This span is large: within a country, one standard deviation is defined as 15 IQ points. This paper argues that this is no mere epiphenomenon. Building upon conventional results in psychology and economics, it will be argued that intelligence matters far more for national productivity than it does for individual productivity and that group intelligence—a Hive Mind—is more important than individual intelligence. If true, then development policies that can increase average national intelligence should have much larger effects than one would predict from routine wage regressions.
To fully respond to this argument is beyond the scope of this post. Suffice it to say that Jones is not committing a simple maximize the average fallacy or failing to understand comparative advantage. Some of the theoretical mechanisms that Jones offers to explain the IQ-development correlation, such as “The O-Ring Sector and the Foolproof Sector,” do not imply that low-IQ immigration would harm natives. (Rather, in this model, you just want to have as many intelligent people as possible, and are indifferent to how many less intelligent people you have. More high-IQ people raise the average, and explain the correlation, but low-IQ people don’t do any harm.) But we need to distinguish very carefully between Jones’ IQ hypotheses and a simple failure to understand comparative advantage. The latter seems to me to explain most of the special resistance to low-skilled immigration.