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Open borders and world government

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One of the concerns that some (not many) restrictionists occasionally express regarding open borders is that by weakening national boundaries, open borders put us on a slippery slope toward world government. See here and here for instance. While this concern seems mistaken to me, I think it highlights a few important things.

There are two ways of getting rid of vast disparities in the price of a good across different parts of a region. One is to fix a single, uniform price across the entire region and enforce this through regulatory fiat. If, indeed, this is possible. The other is to reduce, as far as possible, the barriers that prevent the good from being transported between the different parts of the region, and then rely on the market’s law of one price to cause the prices to converge. While the law of one price doesn’t work perfectly, it does lead to some convergence in prices and reduction of the vast disparities. Its main advantage over regulatory price-fixing is that it’s better at yielding a correct, efficiency-enhancing choice of price point, and avoid the problems of surplus or shortfalls inherent in regulatory price-fixing.

You can probably see where I am going with this. There are vast disparities in the price of otherwise identical labor across the world (see place premium). These price differences are due to the differing legal and regulatory frameworks, infrastructures, and cultures across the world. One way of trying to fix the problem is to try to fix the issues with different legal and regulatory systems one by one. The most elegant (for some) way of achieving this is world government: have a single government on top that enforces a legal and regulatory framework and promises a certain infrastructure across the world. Another way of trying to fix the problem is to massively reduce the restrictions and barriers placed on migration. While neither will lead to complete elimination of the place premium, the latter approach, when tried, has led to labor market convergence.

The main advantage of freedom of motion rather than the imposition of a uniform standard is that laws and regulatory frameworks cannot be determined by fiat. Like prices, laws need to be discovered through an exploratory process where some things are tried, then altered based on feedback, or borrowed from elsewhere, then adapted. A single world government would mean a single point of failure. The effect of bad laws would be hard to see because there is no control group to check against.

So now, getting to the question of whether open borders will lead to world government. This is very similar to the question of whether unfettered free markets lead to monopolies. I think the answer to the second question is, generally speaking, no, and by analogy, the answer to the first question should also be no. It’s obviously possible to construct arguments that there are various efficiencies of scale with government that make it a “natural monopoly” but it isn’t clear that these arguments carry more weight than the arguments that cut in the other direction — namely that governments that deal with smaller populations tend to be more responsive to the needs of the populations and the populations themselves tend to participate in government to a greater degree and with higher rationality (because they have a higher probability of influencing the outcome).

That being said, there may be a role for various international agencies and advisory bodies to help govern and coordinate international labor flows. In his article Open Borders with Migration Taxes are the Best Policy (which he blogs about here), Nathan Smith proposes the creation of a World Migration Organization which would play a role analogous to the World Trade Organization.

More on IQ and immigration: Collins, ParaPundit, LGDL

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A while back, I blogged about Lynn and Vanhanen’s book Intelligence in a blog post titled intelligence, international development, and immigration. L&V’s earlier books have been important references in many restrictionist arguments based on the alleged IQ deficit of immigrants, so critiquing L&V’s work is crucial to the immigration debate. My basic thesis was that whereas IQ might be quite important in explaining the creation of technology, sustaining and benefiting from technology is less sensitive to IQ, and low IQ people can benefit from new, improved technologies quite well. I asked Garett Jones, a researcher on the nexus of IQ and economics, to comment on my blog post, and I subsequently published another blog post including his response and my further thoughts.

Since then, I’ve discovered some other writings on the web that touch on this issue. I’ll mention them briefly.

  • Immigration externalities, a blog post by Jason Collins where he lays out the key points of contention between competing hypotheses: the intermediating role of institutions, and the debate about whether it is the high IQ fraction or the low IQ fraction that is more predictive. I recall that some of Heiner Rindemann’s results suggest that the high IQ fraction may be more predictive, but I don’t think anything definitive can be said yet.
  • Benthamite Libertarian Collectivists Wrong On Open Borders, a blog post by Randall Parker (for ParaPundit) that offers a number of standard arguments against immigration, including the welfare objection, cheap labor leading to a technological slowdown, crime, and political externalities. The post also links to many other standard restrictionist IQ-based arguments, so it’s worth a read.
  • Smart Fraction Theory II by La Griffe Du Lion, which posits an explanation for how national IQ differences lead to differences in the trajectories of nations.

IMF/World Bank Conditionality and Open Borders

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Suppose a country can’t pay its bills. It has a lot of outstanding debt coming due, and it doesn’t have sufficient reserves to pay it. Nor can it find lenders willing to buy its debt. Without money, it will have to stop paying social security checks, interest on bonds, or salaries of civil servants, teachers, and doctors. The problem may take the form of a currency crisis, if the country is trying to maintain a pegged exchange rate which is under attack by forex traders, or simply a debt crisis. It could try to raise taxes, but that would be likely to depress the economy further. Catastrophe looms.

A lot of countries have found themselves in this situation. It’s basically where Greece has been for the past few years, and more recently Ireland, Portugal, to some extent Italy and Spain. Asian countries found themselves in a position like this in the late 1990s. So did Brazil and Argentina. Typically they go to the IMF, which is the official fire-fighter for these kinds of situations. The IMF will provide money, conditional on some reforms that are expected to improve the country’s ability to pay in future. In return, the IMF provides an immediate injection of cash to pay creditors and dispel the crisis. Often the reforms the IMF imposes are unpopular. They may also be necessary and/or beneficial. Asia recovered strongly after the IMF’s intervention in 1997-98, though whether the IMF deserves much or any credit for that is controversial.

Anyway, I doubt this has ever entered the IMF’s collective head– though possibly I’ve blogged about it before, I forget– but in principle, one of the reforms the IMF could demand in return for assistance during crises is an opening of the borders to more immigrants. Though no one thinks about it this way, every country in the world is foregoing a perhaps substantial revenue source by not allowing foreigners to come and receive working visas in return for paying either just ordinary taxes or perhaps special surtaxes of one sort or another. If the IMF were to demand that a country permit more immigrants to enter, it would be operating very much within the proper scope of its responsibilities as a creditor. It could then offer technical assistance to help the countries set up the institutional means to register guest workers and establish credible legal protections for their rights going forward. The policy would be somewhat counter-intuitive in countries which are going through crises and probably have high unemployment. But foreign workers are likely to be complements to, rather than substitutes for, domestic workers. Some may be entrepreneurs, bringing investment capital and know-how with them, and creating jobs upon arrival. If the policy is unpopular, well, imposing unpopular but wise policies and taking the heat for them is what the IMF is for.

The World Bank isn’t a crisis fire-fighter in the same way the IMF is, but it, too, might be able to play a role in liberalizing the world’s borders. It could encourage to be hospitable to immigrants, both to help the immigrants– “Our dream is a world free of poverty” is the World Bank’s motto– and to facilitate economic development in the host countries. It could monitor inter-ethnic frictions that arise and look for ways to ameliorate them. In some cases, migration might mitigate existing inter-ethnic frictions by giving societies more of a “melting pot” character. As I’ve previously suggested, it could promote and administrate passport-free charter cities.

The World Bank and IMF are staid, groupthinky organizations that don’t pioneer radical ideas. They strive for internal consensus, the content of which they derive from the views of global elites seasoned with bright ideas from academia and from NGO activists. They’d only do this if the tide of ideas swung strongly in the direction of open borders. Not that open borders would have to become standard policy for the IMF and World Bank to make them part of the development agenda, but that there would have to be powerful, widespread, deep-rooted sympathy for the goal of liberalizing migration.

New paper on open borders by John Kennan

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John Kennan has come out with a NBER paper titled Open Borders (ungated PDF). The paper is heavy on mathematical economics, and adds to a growing literature that indicates that relaxing immigration restrictions would have massive utilitarian benefits while the negative effect on native wages would be small. I haven’t had time to go through the paper in detail, but here’s the abstract:

There is a large body of evidence indicating that cross-country differences in income levels are associated with differences in productivity. If workers are much more productive in one country than in another, restrictions on immigration lead to large efficiency losses. The paper quantifies these losses, using a model in which efficiency differences are labor-augmenting, and free trade in product markets leads to factor price equalization, so that wages are equal across countries when measured in efficiency units of labor. The estimated gains from removing immigration restrictions are huge. Using a simple static model of migration costs, the estimated net gains from open borders are about the same as the gains from a growth miracle that more than doubles the income level in less-developed countries.

While you’re reading the literature on open borders, check out the pro-open borders reading list on this site, which includes a mix of web articles, research papers, and books. If there’s one research paper on open borders you should read, it is Michael Clemens’ “trillion dollar bills on the sidewalk” paper (ungated PDF).

H/T: Arnold Kling

“The Right of a Nation to Exist”

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Open borders is sometimes attacked as a threat to “the right of a nation to exist.” I seem to remember this phrase from various arguments, but I don’t recall any linkable example off the top of my head, however, a critic of Bryan Caplan quoted in Vipul’s recent post says something close to it: “You have to be a special kind of genius to fail to understand basic points like: nation-states exist, and have borders, and have a fundamental interest in controlling those borders, meaning, ideally, via law enforcement.” Of course, an interest is not the same thing as a right– I may have an interest in taking your car, but not a right to do so– so this commenter isn’t articulating the notion of a “right of a nation to exist” which I wish here to critique. However, he seems to implicitly assume this. After all, if it is not presumed that nations have a right to control their borders, to assert that they have an interest in doing so is irrelevant.

Now, I would assert that rights belong only to individuals, or at least that they belong most fundamentally to individuals, and the rights of collective entities such as nations are derived from individual rights. I won’t attempt to prove that in this post. Rather, I will point out some problems with the notion of “the right of a nation to exist.”

Suppose that 99% of the residents of Germany express an intention to emigrate to friendly countries, say Britain, France, and the USA, which agree to accept them as immigrants. Suppose further that the 1% of the German population which will be left behind is too small to sustain national life. To sustain basic services and cultivate the land, they will have to let in English-speaking immigrants, and the German language will soon become nearly useless and probably extinct in a couple of generations. Does this decision by individual Germans violate the right of the German nation to exist? Could Germany justly prohibit the emigration of these people, in order to secure the continuance of its national life? Continue reading “The Right of a Nation to Exist” →