“Only high IQ immigrants” fails to understand comparative advantage

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.

And:

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.

And:

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.

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

25 thoughts on ““Only high IQ immigrants” fails to understand comparative advantage”

  1. Restrictionists such as “holier then thou” would probably argue that since you’re a high IQ person, you can’t really understand what it’s like to be a low IQ person or live around low IQ people.

  2. A couple points:

    “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.”

    Re wars in the past, given the Flynn effect, World War II was fought by millions of people who probably couldn’t make the IQ cutoff for the US Armed Forces today! One could argue that the Flynn effect also implies modern enemies have higher IQs today, and that modern warfare requires more IQ-intensive skills (driving a tank today is probably a bit different from driving a WWI tank), but none of that rules out finding uses for people of lower IQs. Notably, there are police departments in the US that have *maximum* IQs because they find beyond a certain point, it’s not worth hiring an overly high-IQ person as an officer.

    “Low-skill immigrants often manage to keep their costs of living very low, too.”

    And they do this by accepting living conditions which most people in the developed world find unacceptable. I often see disparaging restrictionist comments about “overcrowding” in immigrant homes, for example. Even those sympathetic to immigrants get distracted by this; here’s an interesting piece from The Guardian on immigrant living conditions in London, which takes a stance suggesting exploitation on the part of landlords (reminds me a bit of criticisms of sweatshop labour): http://www.guardian.co.uk/society/2012/may/09/london-landlords-desperate-tenants

    I’ve not been able to find good empirical reasons for the law to prohibit such living conditions, though. The substance almost always boils down to “It disgusts me that there are people who live like this.” Similar rationales drove various urban reforms in the developed world in the 19th and 20th centuries, many of which in retrospect have been deemed mistaken — especially with respect to how they treated “slum dwellers”. See e.g., http://places.designobserver.com/feature/jane-jacobs-and-the-death-and-life-of-american-planning/25188/

    1. “Re wars in the past, given the Flynn effect, World War II was fought by millions of people who probably couldn’t make the IQ cutoff for the US Armed Forces today! ”

      I think this is misleading.

      First, the technology of warfighting has changed enormously since WWII, in the direction of increased skill demands and interaction with complex devices.

      Second, when the military switched to the new more selective model they found productivity and effectiveness went up, there were plenty of conscripts who shouldn’t have been fighting in WWII and Korea and Vietnam and were a net drain on military effectiveness.

      Third and most importantly, the military data comes from, IQ tests re-normed over time, i.e. it is the Flynn-Effect adjusted score that has been found to be predictive of performance. The Flynn Effect is not an across the board increase in cognitive ability: it affects particular types of questions on IQ tests while leaving others untouched or declining. Flynn himself does not think that there has been a Flynn-Effect scale improvement in underlying cognitive function, so much as increase in what he calls the use of “scientific spectacles,” as more situations in education, entertainment, and everyday life resemble the problems in certain categories of questions on IQ tests.

      For issues of immigration and IQ, the Flynn Effect is most relevant for questioning some of the extremely low figures in the poorest and most isolated, least educated societies on Earth. For instance, the average level of intelligence in Africa is almost surely higher than Lynn claims (both because of bias in his meta-analysis, as identified by I believe Wicherts, and because of the possibility of differential Flynn Effect). However, the within country data on migrant groups which were not extremely unrepresentative is much more stable over time, predictive of real-world outcomes, and directly relevant.

      “I’ve not been able to find good empirical reasons for the law to prohibit such living conditions, though. The substance almost always boils down to “It disgusts me that there are people who live like this.”

      Very often in America the effect of local immigration restriction for the poor is considered a feature, not a bug in such regulations. Similar stories apply to much anti-development environmental regulation. Blogger Matt Yglesias has many high-quality posts on the subject: probably his biggest pet project is encouraging pro-building and high-density policies so that more people can migrate to the biggest and richest cities.

      Causes of such local/municipal restrictions often map closely to reasons for national-level migration restrictions: current residents of localities want to keep out the poor because of local inequality aversion, to avoid paying local welfare benefits to new people who take more than they contribute, to reduce crime, to keep the poor out of the local electorate (who might vote for redistribution), to isolate their kids from the poor in schools. There is also a lot of economic illiteracy at play, e.g. many people see the high prices of spots in new buildings, and so disbelieve that increasing housing supply can reduce price, or don’t notice the economies of scale with city size.

      As with migration, there seems to be great opportunity for wealth increase through pareto-improvement grand bargains, which is often hindered by norms that all residents must be voters and local inequality aversion, along with general political ignorance and irrationality.

  3. I find it funny you link to that Bryan post when he is the poster child for wanting to live in a bubble away form the icky low IQ people.

    And yes, I took the same eco 101 courses and learned about comparative advantage too. Then I actually went out into the real world where one of the first things that you learn is that the assumptions in eco 101 are bunk.

    “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 you could just take a paycut and let your janitor earn a living wage. But then you wouldn’t have more money to purchase a wide variety of ethnic foods or afford to live in income stratified gated communities where you are comfortable your janitor will never go. So let’s be straight about what this is all about. You wanting other people to be slave labor so that you have more discretionary income. (P.S. The world won’t miss you churning out more econ propaganda, I wouldn’t mind you taking some time away from that vital task to pick up the trash).

    “value transference industry. This is not a term economists use. They don’t use it because it’s bogus.”

    You don’t use it because your an aspie eco professor who makes a living producing propaganda to that effect. Meanwhile, I actually have worked in value transference industries most of my life and know exactly how they work. Of course I had to do some soul searching and realize what I was doing was evil and it was wrong to benefit by such actions. It was then I confronted my self serving aspie rationalizations for what they were. I understand how hard it was for me, I can only imagine how much worse it is for academics (which is like overdrive for this kind of cognitive deficiency).

    “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.”

    Creative destruction has a creative part as well as a destruction part. If the displaced workers don’t find new jobs (and contrary to aspie economic theory this is not a given and should be really obvious) then all you’re talking about is slamming down on wages for the same amount of productive work getting done. Yes, I have no doubt YOU benefit from that, but not others.

    I know this all sounds a little angry, but understand I consider the policies you’re advocating evil. I chalk it up to a mix of aspie cognitive deficiency and the circumstance of motivations, but its still very dangerous to me and my countrymen whether its conscious deliberate evil or not. I’ve watched people like you do immense damage to the country over the years and yet learn nothing. I would like to see you do something useful with your life and not make the mistakes I made, but if I can’t I at least want to stop you from hurting anyone else.

  4. One point of disagreement: in majoritarian democracies, the proportions, rather than absolute numbers, of people with the right political views matters. This brings us back to political externalities, the main thing that serious IQ-based restrictionists are concerned about. Even Jones has some reservations about political externalities, if I read him correctly. So I think my double-counting critique is necessary for political externalities and also crime. I agree that other than these two areas, comparative advantage takes care of most other IQ-based objections.

  5. Nathan, I think you are misinterpreting my comments.

    Workers working in the great majority of jobs (excepting certain negative-sum jobs like criminal or various kinds of regulatory abitrageur) generate value for their employers, and for customers of those employers. That’s why they get paid. Some of these wages are taxed by government, and some go to the immigrant.

    Migrants can also generate positive and negative externalities. If those externalities are net negative, then the migrant may still be increasing wealth overall through her wages (including the taxed portion). To find out we have to look at the size of the wage benefit. If wages are small, then a smaller negative externality can tip the scales towards an overall negative impact. But if wages are high, then bigger negative externalities can be tolerated.

    It so happens that measures like IQ, college degrees, immigrant source country, occupation, and the like are correlated *both* with the benefit generated in wages, and with externalities like crime and erroneous political beliefs (like disbelief in comparative advantage). Lower-skill migrants earn substantially lower wages, so there is less to offset negative externalities (especially political ones), and they seem to produce more negative externalities. Here’s Bryan Caplan making the point about the low economic contribution of the poor in the context of means-testing:

    “Third, to be brutally blunt, the lower deciles don’t contribute that much to the economy, anyway. Suppose means-testing led half of the second decile to stop working. That destroys a lot less value than higher overall taxes that lead to 5% less work effort across the entire income distribution.”
    http://econlog.econlib.org/archives/2010/02/means-testing_r.html

    In that context, Bryan thinks that conditions that reduce the work effort of the poor are relatively unimportant to the economy compared to significant across-the-board policy shifts and spending.

    In general, when attempting to estimate whether X+Y>0, even if we know that X>0 (but not that Y>0), it still makes sense to ask how much X>0.

    Your original comments about low-skill jobs in the military suggested that an exaggerated number of potential migrants could work in the U.S. military without actively hindering its productivity. If that suggestion was true X would be bigger than it is, given that the suggestion is false. I disputed it since I happened to know contrary information. There’s no misunderstanding of comparative advantage here.

    1. This is a great comment. I think it’s fair to say from this comment of yours that you don’t *misunderstand* comparative advantage. I think you’ve done a great job explaining the precise situation.

      I still think you may be *underestimating* comparative advantage. And I understand that you think Nathan (and I) may be *overestimating* comparative advantage. So we agree about where we disagree, so to speak.

      If only the average restrictionist were as articulate and clear-headed as you …

  6. “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.”

    This seems too harsh on the commenter. Say that we just translate “value transference” to refer to industries where the social returns fall short of the private returns. There are many legal industries that exploit government policy or consumer error to destroy or minimally increase social welfare while increasing GDP, or that represent negative-sum arms races.

    Very blatantly, many billions of dollars are spent annually on homeopathy, rhinoceros horn for male fertility, and other snake-oil cures. This is legal, but it extracting wealth from the customers through error without generating corresponding value. If you believe Robin Hanson regarding marginal medicine, much of this sector, which makes up something like a sixth of the economy has near-zero or negative social productivity, but is consumed because of competitive signaling and government mandates.

    If you buy Bryan Caplan on the importance of signaling and ability bias in education, then the social benefit of education is likewise much smaller than spending will suggest.

    Heavily subsidized industries can expand production beyond socially beneficial levels, and contributing to that is harmful, e.g. consider special visas to help the beneficiaries of ethanol subsidies expand production to claim more subsidies. The agricultural sector as a whole is heavily protected and subsidized in rich countries. During the housing bubble high migrant flows from Latin America enabled more rapid expansion of housing construction in response to aggressively pro-construction housing policy and errors by purchasers of mortgage-backed securities.

    In finance, many people have jobs dedicated to negative-sum conflict with government regulators: tax accountants and lawyers vs the IRS, investment bankers attempting to increase returns by taking on tail and systemic risk vs financial regulators, etc.

    Increased spending on legal services, lobbyists and military forces reflects a Prisoner’s Dilemma: everyone could be better off with global restrictions on the build-up of military forces or excessive legal teams to win battles or lawsuits at the expense of others.

    Industries with large unregulated negative externalities can have negative production, fairly obviously, e.g. climate change concerns make the availability of cheap labor for coal and natural gas exploration less obviously beneficial.

    GMU economists like Bryan Caplan are frequently at the forefront of identifying such sectors where private and social returns are misaligned, and at least halfway plausible cases can be made about much of the economy.

    Goods manufacturing, high-tech, pharmaceuticals, mass media (Hollywood) and science are some of the sectors where it is clearest that social returns are high: they generate large positive externalities in the form of new technologies, they compete in fiercely competitive global markets rather than being sheltered by protectionist governments, and they have demonstrated fast labor and TFP productivity improvements.

    To the extent that migrant flows disproportionately expand sectors where social returns are suspected of being below private returns, or vice versa, this will affect the social welfare impact of migration.

    1. BK, that’s a good point. I’m a little wary, though, of making clear-cut assertions about which industries create versus transfer value, though I would tentatively sign on to your (and Bryan’s) list of things that obviously create value. I don’t really think our understanding of what constitutes value creation is good enough for it to be useful in a discussion of immigration. I think it’s strong enough to refute arguments for *subsidies* to certain industries, and particularly good at refuting “positive spillover” arguments. I don’t really think a strong case has been made that any particular industry needs to be proactively discouraged due to its value destruction abilities. And even if so, restricting immigration (when we have no idea what jobs the immigrants or their descendants might take up) doesn’t strike me as the keyhole solution to this problem.

      Also, “value transference” is a poor choice of term. “Value destruction” might be a better choice of term for industries where work is done (i.e., resources spent) without creating value. And in case of value destruction, a clear story needs to be provided of the underlying market or government failure that is responsible.

      Holier then thou’s comment not seem to be making this point (if it did, then Holier then thou needs to be clearer at explaining it). My impression of the comment was similar to Nathan’s paraphrasing: ” It seems that holier than thou thinks the economic laws of capitalism ordain that some industries create value, others merely move it around.”

      Moreover, if we are talking specifically about low-skilled workers, almost none of them seem to work in the stereotypical value destruction industries that you list (some of them might work *for* these industries indirectly — e.g. janitors at colleges — but they could just as well shift their job to the other industries that might pop up in their place). All the value destruction industries that you list (and that Holier than thou suggests, through references to finance) are fairly high-skilled. So, if anything, this makes the case for more low-skilled and less high-skilled immigration. Clearly, making food, baby-sitting, working at a checkout counter in a supermarket, and taking out the trash create value. Since Holier then thou was trying to make the case against *low-IQ* immigration, talk of value destruction industries seems to be besides the point.

      [UPDATE: I see you do talk of agriculture and construction, which may have been popped by bubbles and subsidies. But these aren’t fundamentally value destruction industries, even if they were expanded artificially by government policy and other forces.]

      1. “of making clear-cut assertions about which industries create versus transfer value”

        Thus my use of “suspect,” but if you are going to be Bayesian about these things it will affect your estimates of costs and benefits.

        “(when we have no idea what jobs the immigrants or their descendants might take up)”

        Really? We can directly observe existing populations, and the performance of past waves of migration. For guest workers and such once can simply look what jobs they do.

        “though I would tentatively sign on to your (and Bryan’s) list of things that obviously create value.”

        We know that there are large differences by immigrant source country and ethnic group in participation in those industries, from existing empirical data. So that indicates a greater wedge than otherwise in benefits of immigration policies with different skill and regional biases.

        “”And even if so, restricting immigration doesn’t strike me as the keyhole solution to this problem.”

        I agree, it would be good to eliminate subsidies and regulatory mandates for destructive industries. Not easy though.

        “It seems that holier than thou thinks the economic laws of capitalism ordain that some industries create value, others merely move it around.”

        But isn’t this a pretty natural way of describing the homeopathic supplement industry? The industry transfers value, in that it gets paid by mistaken customers. It “destroys value” mostly in the form of opportunity costs, i.e. people are employed selling snake oil who could have been doing other more socially valuable work. Sending all of the snake-oil salespeople to counter-Earth and shutting down the industry wouldn’t add much wealth to the economy. So it’s natural enough for a layman to describe what’s going on there as simply transfer of wealth from the customers to the salesmen (like theft), and the deadweight losses as “people using their scarce time on ‘value transference’ instead of productive activity.” “Value destruction” suggests social costs beyond the opportunity costs of the workers in the industry.

        I agree that there is popular bias for people not to understand the contributions of back-office functions and services, but it’s the principle of charity in interpreting our interlocutors’ arguments (even if holier was not being terribly charitable in ad hominem attacks on open borders activists, that’s no reason to descend to his level) is important. Even if the argument isn’t clearly what he meant, it should be addressed as the best reconstruction of his argument. Do you think holier would endorse it as better expressing his intention than he did, or not?

        “Moreover, if we are talking specifically about low-skilled workers, almost none of them seem to work in the stereotypical value destruction industries that you list (some of them might work *for* these industries indirectly — e.g. janitors at colleges — but they could just as well shift their job to the other industries that might pop up in their place).”

        I agree that the most damaging industries per capita, and the most damaging positions per capita, are high skill: high-skill folk can simply do more, for better or for worse. However, for net effects we have to look at the positive and negative things people can and do work at for each skill level, and there is a lot of uncertainty. Finance, law and medicine do absorb a lot of smart people, but so do science, technology, and management and execution in high-productivity industries, and overall technological advance suggests the balance for the highest-impact industries still is positive.

        I did mention the heavily subsidized agricultural and housing construction sectors, which disproportionately attract Latin American unskilled migrants in the US, to expand production beyond where it would be without subsidy (or the errors of the housing bubble) and noxious anti-high-density housing regulations. It’s still nice to have the extra crops and houses, but the social value of those crops and houses was less than was spent on them, and the exacerbation of the housing bubble by enabling more exotic mortgage-backed securities was nontrivial.

        There is also the argument that science and R&D are less complementary with unskilled labor than other industries. If many unskilled laborers need accountants, managers, doctors, and so on, then wages for high-IQ people in non-science fields can increase relative to science (which is heavily funded by government, through public R&D funding, and patents in the pharmaceutical sector, and so hurt by new demands on government funding and less political support for science), although I don’t think that’s a very big effect.

        1. BK, you write: “it’s the principle of charity in interpreting our interlocutors’ arguments”

          I do subscribe to the principle of charity, and if I had written the blog post, I would have included both, and possibly even other, interpretations of Holier’s comment (assuming I thought through both of them). But I would also take a charitable reading of Nathan’s interpretation — he was taking what seems to me the most likely contextual implication of Holier’s comments, given that Holier’s comments did not demonstrate anywhere near the clarity that yours do. Charity is for both critics and allies alike, and I don’t intend to be uncharitable to Nathan for what I consider a good-faith (but not unique) interpretation of Holier.

          You make some points that are good on their merits. What I would reiterate is that the burden of proof regarding value transference/value destruction falls on the people making the claim, or using it to justify expanded or restricted immigration. I would certainly demand a high burden of proof from somebody who argues for low-skilled immigration specifically because low-skilled people are less likely to work in value-destructive industries. My goal with pointing out this implication of your/Holier’s logic was not to actually make a proactive argument of this sort.

          I will address some of your critiques further later.

          1. Point well-taken on charity. I may have been feeling a bit too snarky after being called out as “patchy.”

            I don’t weight the destructive differential industry impact considerations very highly, but the spillover effects of the clearly favorable sectors we discussed above, and their disproportionate need for high-skill and high-IQ labor seems more solid.

          2. “burden of proof regarding value transference/value destruction falls on the people making the claim”

            Such proof seems rather obvious, and BK’s given examples should be non-controversial. In fact for most non-economists the proof is common sense apparent. And you would have though that whole financial crisis from untold greed using zero sum instruments in a zero sum industry full of people who admit they steal for a living would have put a nail in this whole, “if someone pays for something it must provide that much value,” meme. Sadly, it hasn’t done so for people who don’t want to look at the evidence.

            Economist view people as rational economic agents who occasionally mess up and externalities become present, but that is generally “the exception to the rule.” That’s because their entire worldview is based on the basic rules holding up most of the time. Out in the real world though most people get there are gigantic sectors of economic activity where these externalities and “dumb monkey brains” are the norm rather then the rational economic man.

            In my own old sector of investment banking I would place the burden of proof on the person claiming their product/service was valuable considering that most things in that sector aren’t. The same would apply to many sectors.

            “I would certainly demand a high burden of proof from somebody who argues for low-skilled immigration”

            The U6 unemployment rate for U.S. citizens with only a high school degree is 29%! Dude, this isn’t even hard to prove. How about we make sure we don’t have 30% of a certain class of people unemployed before we start claiming we need to import a couple billion low IQ serfs to compete with them for jobs they don’t even have.

            Listen, we are trying to build a decent society here. The kind where all our citizens have dignity. That’s hard enough with the people we’ve got. We finally get to the point in technological development where we don’t need marginal physical labor and your plan is to import people whose IQ is too low to do anything else. I’m pretty sure the answer to massive unemployment in our lower classes and ever growing inequality isn’t the importation of a massive and permanent slave caste. That’s why I consider you guys evil. That’s what your advocating for. I don’t want a permanent slave caste in this country living on scraps and destroying any chance we have of a living in a decent society.

  7. In response to BK: You’ve convinced me that you understand comparative advantage, though I think I probably have much more optimistic view of the benefits of mass immigration than you do. Charity is probably a good principle, but impatient dismissal can occasionally have good effects too, either because (a) it provokes good comebacks, or (b) it can filter out the noise. Let people clarify if they can. At any rate, this is an interesting discussion!

    Economists like to think of production in terms of a “production function,” which maps vectors of inputs of “factors of production” into output quantity and/or quality. It seems to me you’re suggesting that in the military’s production function, the value of low-IQ workers is either negative or zero. That’s logically possible, but economists tend to be skeptical of claims of “non-satiety” and “zero marginal product.” You can’t do ANYTHING with a little more resources? It may take a bit of imagination and experimentation, but it’s usually possible to SUBSTITUTE different factors of production for one another: labor for capital, high-skill labor for low-skill labor, capital for land, one type of equipment for another, etc. Maybe you don’t want to entrust expensive equipment to someone dumb, or devote the extra effort to training them for a high-skilled task which a smarter soldier can learn quicker. But surely the military has a lot of logistical needs, and needs people to haul boxes or drive forklifts. Or maybe if you don’t want low-skill people in combat, they could still move prisoners around, or cook, or clean clothes… something. Anyway, even if the military’s production function has no use for low-IQ people, other industries do.

    Also, an IQ of 90 isn’t exactly “high.” Even if it’s above average globally (I’m not an expert in this area), there are certainly a lot of foreigners who would meet that standard. So let them in, you say, but not the dumber people? But often smart people and dumb people are attached. They are friends, spouses and other family members, they form ethnic communities that ease the transition. And there are enough (a) environmental effects, and (b) intergenerational randomness in IQ, that letting in a low-IQ couple might give you a high-IQ (or medium-IQ) child who could be an excellent soldier.

    Most basically, I would say LET THE MARKET DECIDE whether immigration to the United States will be predominantly of the high-IQ or low-IQ type, after setting immigration tariffs. Suppose your immigration tariff scheme is (a) 15% surtax, (b) 25% mandatory savings rate into an account withdrawable only in the migrant’s home country or forfeitable as part of a path to citizenship, (c) $50,000 threshold as the normal condition (exceptions might be made for family or special public-interest reasons) for initiating the path to citizenship. If unskilled workers really don’t have much economic value, then it wouldn’t be worth paying them much, and they might respond to 40% of their pay being docked by just not coming in the first place. If they did, the $50,000 threshold might seem impossible, and they would plan to stay a while and then return home with a lot of savings (mandatory and voluntary) and make a better life for themselves there. High-skill workers, meanwhile, could expect to earn a lot more and might find the $50,000 ticket to citizenship a pretty light burden. They would be more likely to come and stay. So you’d get much of what the “high IQ immigrants only” advocates want, but without empowering government bureaucrats to decide who gets in, a task they are certain to execute very poorly and inefficiently.

    For let’s not forget that while IQ may be a predictor of lots of kinds of success in life, it’s only a crude one. Many other factors affect how well people do in life. People are likely to know a lot more about themselves and their chances of success than can be revealed by an IQ test. There are probably a lot of high-IQ people who would be hardly any better off in the US, who might come if we make it easy to do so because of their IQ, but who’d hardly be willing to pay much for it, while other workers may be low IQ and “unskilled” yet because of drive or connections or virtue or niche skills could earn good money here and would be willing to pay a high tax to get in. Set the price and leave the decision to them.

    The value transference vs. value destruction debate is interesting. Certainly, I’d agree that there’s a good deal of rent-seeking in the economy, though it’s hard to quantify even when one knows a particular situation very well. (Are my attempts at academic publishing production or rent seeking? I’ve thought about it a good deal, but I really have no idea.) I like Vipul’s label “value destruction,” which is more accurate/intelligible. Two major points:

    1. It is not immigrants’ fault if they enter the country and get hired into a value destruction industry, the emergence of which regulation has somehow provoked. It’s up to domestic policymakers not to create value-destroying distortions in the economy.

    2. My strong priors would be that immigrants are a lot LESS likely to end up in value-destroying industries than natives. Natives know the system better and are much better equipped to find the sinecures. My priors would also weakly be that high-skill immigrants are more likely to work in value-destroying industries than low-skill immigrants. Rent-seeking tends to be a high-skill affair, unless you have votes. But I don’t think anyone is proposing open borders with instantaneous voting rights for new immigrants..

    Finally, while housing prices rose at an unsustainable rate by any standards, part of the reason the housing construction turned out to be surplus was that immigration enforcement was stepped up. And we could solve the housing surplus very quickly by opening the borders.

  8. In response to holier: Your use of the word “evil” intrigues. I hadn’t taken you for an ethicist! As many years of reflection and debate have tended to strengthen my conviction that all ethical roads lead to open borders, I’d be interested to know more about your point of view here. What are right and wrong, good and evil?

    I would question the intellectual ethics, however, of rejecting the venerable tradition of comparative advantage, supported empirically and theoretically by the research of professional economists for generations, on the basis of hand-waving indignation and long-since-refuted fallacies. A response to your suggestion, “Or you could just take a paycut and let your janitor earn a living wage,” well, first of all, I couldn’t afford a pay cut with my student loans, but never mind that. If we raised the janitor’s wages, that is, if we overpaid janitors relative to what the market will bear, a lot of people would queue for that job. This wastes resources, as we’d read extra resumes and conduct extra interviews just because we were overpaying. Ultimately, we’d probably end up with an overqualified applicant, who could be doing something else more productive, but would take our job because we were overpaying. If everyone in the economy paid a living wage (ignoring the fact that this term is ill-defined: some can/are willing to live much more cheaply than others), that would just raise unemployment, leaving the unemployed worse off. Or if they were held harmless through welfare checks financed by taxes, everyone’s incentives to work are diminished. Meanwhile, if the university paid me less than my marginal product, I’d get a poor signal about where I could be of most use. I’d probably move, but if I stayed on the grounds that I wanted to help the university pay the janitors a living wage, I might forego opportunities to move where not only my individual returns but the SOCIAL returns to my labor would be much higher. But all of this is just the Econ 101 which you’ve fooled yourself into thinking you’ve outgrown, but it’s quite clear you simply don’t understand. The first step is to stop mistaking your ignorance for disillusionment, and turn to people smarter than you– I don’t mean myself, but the economics profession as a whole– and learn. Possibly you have some real insights, but they’re useless when tangled up with so many fallacies. And once again, impugning people’s motives instead of answering their arguments does no one any good at all.

    1. “I couldn’t afford a pay cut with my student loans”

      Christ, this is worse then I thought.

      “if we overpaid janitors relative to what the market will bear”

      Funny thing. The market is determined by supply and demand. If you radically increase the supply (open borders) then your equilibrium wage will drop. But if you restrict the supply then the wage will go up. The market is based on all sorts of assumptions about the market, including immigration policy.

      See my comment about unemployment among the low skill.

      “that would just raise unemployment, leaving the unemployed worse off. Or if they were held harmless through welfare checks financed by taxes, everyone’s incentives to work are diminished.”

      If we truly are at the “player piano” stage of technological development for low skill workers then its time to start contemplating a citizens dividend. And that is sure as hell easier when there are fewer citizens!

      “Meanwhile, if the university paid me less than my marginal product, I’d get a poor signal about where I could be of most use. I’d probably move”

      At some point your going to need to grow up an realize pay and usefulness are only loosely correlated. I got paid a lot in IB and all I did was rip people off. And you draw a salary despite being totally useless. I’d say the two of us are all the evidence we need, I’m just a little ahead of the curve in soul searching.

      “and turn to people smarter than you– I don’t mean myself, but the economics profession as a whole– and learn”

      Wow, and argument from authority. Now we’re showing our true colors. I went to the same good schools and got the same sky high test scores. This isn’t going to work.

      The economics profession can’t come to a consensus because economics isn’t a science. It’s mostly propaganda and economist are mostly propagandists trying to make arguments from authority based on their credentials. At least the sell outs in corporate knew they were spouting propaganda. “Your gonna pay me $500k/year to tell people to load up on tech stocks in 2000 because its a ‘new normal’, ok.” At least when they did evil they were aware, unlike academics who do evil in ignorance for 25% of the price.

      “And once again, impugning people’s motives instead of answering their arguments does no one any good at all.”

      You’d make a terrible trader, or really doing anything that involves people. People’s motives are the best way to understand them.

  9. So holier than thou wants to achieve a “decent” society… how? Through mass deportation, through separating families by force? He wants to ensure that “all our citizens have dignity,” whatever that means– high living standards?– at the expense of denying same to foreigners. He won’t give a reason. He accuses US of advocating “a slave caste,” when of course no one did anything of the sort– open borders advocates are certainly advocating MORE freedom for foreigners, not less– but when he wants us to force people to stay in poverty under authoritarian and totalitarian regimes (at which point the term “slave caste” might not be inapt).

    Nonetheless, I’ll persist, and hope he’ll drop his rhetoric long enough to answer the question. You’ve given hints of a meta-ethics here. You talk of “human dignity.” What do you mean by that? You speak of a “decent society.” What do you mean by that? Define your terms. Is it simply that poverty is kept out of sight? Why do you consider that “decent?” You want a society where “all our citizens” have dignity. Do you mean *citizens* or *residents,* and what are your grounds for thinking that it’s morally acceptable to restrict your objective function to that small subset of humanity? Please explain yourself.

    1. Yes, I’m not trying to solve the world’s problems. These people need to solve their own problems in their own countries. If they can’t then maybe the solution isn’t importing a few billion of them into our country so we can turn out exactly like they are.

      In the long run institutions come to match the people that make them up. The problem in these countries isn’t temporarily bad institutions (which could be solved by bringing them here or removing the institutions). The problem is the people themselves. These societies are a reflection of the underlying raw product. And if we bring them here then our society will grow to be like theirs instead of like ours.

      All people are not created equal. They are not interchangeable substitutes. This is not controversial outside the west. If you go to Asia they completely understand this. It’s why countries like Japan have almost zero immigration. They are trying to preserve a Japanese society and a Japanese people. Over thousands of years governments and institutions will rise and fall, but if they remain Japanese it will always work out in the end. They consider what we are doing crazy and short sighted, and they are right.

      1. So Japan– which was on a military rampage until the US overhauled it and wrote a new constitution for it, after which it surged for a few decades, then went into decline, and now seems to have sunk into terminal stagnation, and which NEVER, even at its peak, matched American living standards– is held up as a model for the naive and misguided US to follow. Why, exactly, should I take Japan’s word for it that what America has been doing for four centuries with spectacular success, far greater than Japan has ever achieved, is “crazy and short-sighted?”

        You seem to want to preserve an American society and an American culture, yet you start by denying, point-blank, one of the founding premises of American culture. (“All people are not created equal,” you say.) Hmm..

        Your rejection of “the argument from authority” could almost serve as a textbook definition of ignorance. Yes, I give considerable deference to authority. If many renowned thinkers have agreed on a point, I give that point a great deal of respect. I may ultimately reject it, but I try hard to understand it thoroughly first, and I consider myself obligated to offer a thorough justification any time I dissent from it. That’s what it is to be an educated person. I feel sorry for you. I’d hate being such an intellectual nihilist.

        “Yes, I’m not trying to solve the world’s problems.” Or as Cain put it, “Am I my brother’s keeper?” Meanwhile, we ARE trying to solve the world’s problems, as every human being ought to do, in his or her own small way.

        No, the problem isn’t “the people themselves,” as their earnings and other behaviors when they come to rich countries shows. No, I don’t live in a gated community.

        1. Institutions rise and fall. Japan had fascism and still modernized. China went through Mao and is going in the right direction. You need to start thinking in the thousands of years, not one regime. In the 1000 year timeline its genes and culture that matter, not particular governments, fads, or circumstances.

          I’ve lived in Japan for awhile. They have their own issues, but this whole demise of Japan from the fact that they don’t have asset bubbles and inflation for two decades is silly. They have lower unemployment then us. They have almost no crime. They have almost no social problems whatsoever. If you go to Japan you will quickly find a functioning and noble society. I can’t even walk around a neighborhood a few blocks from where I live.

          The founding fathers didn’t consider all people equal. They considered a bunch of land owning white males equal. And that equality was a political or spiritual equality, not a complete equality. Nobody has ever been absurd enough to believe that. Many of them hated the idea of crowding this country full of immigrants.

          Yes, the people are different. Most of the third world is third world because of genetics. They have low average IQs. They have different cognitive profiles. They have different cultures. Sucks for them but its just the truth of evolution and HBD.

          This argument about charity ad absurdem is silly. You advocate open borders because it makes you feel good and it doesn’t require a lot of sacrifice. Things that would require real sacrifice, but still be within your ability to give, you don’t want to do. Open borders is a cheap way to feel good about yourself and gain status points rather then committing real acts of charity or tackling the really difficult problems in this country.

Leave a Reply