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Implications of embracing low-end estimates of the global economic impact of open borders

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Carl Shulman’s recent post on upward and downward biases in the double world GDP estimates, as well as Nathan’s (forthcoming) post proposing his own model, led me to start thinking about the extent to which the case for open borders is tied to uncertain claims about the economic effects, and whether pushing the “double world GDP” idea as a slogan is epistemically unsound.

One can make a case that high estimates of the global effect of open borders have value in getting people initially interested in the subject, and that once they’re sufficiently invested they will not change their mind even if they learn that the estimates were too high. Indeed, something similar seems to have happened with the growth of the effective altruism movement: initial estimates of the money you needed to donate to save a life were in the range of a few hundred dollars, whereas current estimates are over 2000 dollars, and still rising. Jacob Steinhardt described this in his critique of effective altruism:

The history of effective altruism is littered with over-confident claims, many of which have later turned out to be false. In 2009, Peter Singer claimed that you could save a life for $200 (and many others repeated his claim). While the number was already questionable at the time, by 2011 we discovered that the number was completely off. Now new numbers were thrown around: from numbers still in the hundreds of dollars (GWWC’s estimate for SCI, which was later shown to be flawed) up to $1600 (GiveWell’s estimate for AMF, which GiveWell itself expected to go up, and which indeed did go up). These numbers were often cited without caveats, as well as other claims such as that the effectiveness of charities can vary by a factor of 1,000. How many people citing these numbers understood the process that generated them, or the high degree of uncertainty surrounding them, or the inaccuracy of past estimates? How many would have pointed out that saying that charities vary by a factor of 1,000 in effectiveness is by itself not very helpful, and is more a statement about how bad the bottom end is than how good the top end is?

People who may have been attracted initially by the lowball estimates have generally tended not to leave, perhaps due to an endowment effect or status quo bias, or because they found more compelling and robust reasons to stay once they became effective altruists.

On the other hand, “too-good-to-be-true” estimates can also make it difficult to get people to take the cause seriously in the first place, and can also lead to people getting disillusioned once they realize the estimates won’t work, thereby throwing out the proverbial baby with the bathwater. As Carl Shulman wrote in the context of effective altruism estimates:

Mainly, I think it’s bad news for probably mistaken estimates to spread, and then disillusion the readers or make the writers look biased. If people interested in effective philanthropy go around trumpeting likely wrong (over-optimistic) figures and don’t correct them, then the community’s credibility will fall, and bad models and epistemic practices may be strengthened. This is why GiveWell goes ballistic on people who go around quoting its old cost-effectiveness estimates rather than more recent ones (revisions tend to be towards less cost-effectiveness).

I have listed above some of the strategic pros and cons of embracing overly optimistic estimates, but I am personally more interested in the epistemic question of the extent to which the case for open borders, or for migration liberalization in general, hinges on the magnitude of the estimates, and what a reasonable case for open borders, and for open borders advocacy, might be in the lowball scenario.

Let’s first look at the lowball scenario. Here is a back-of-the-envelope calculation that Clemens does in his literature review paper (Pages 84-85) (emphasis mine):

Should these large estimated gains from an expansion of international migration outrage our economic intuition, or after some consideration, are they at least plausible? We can check these calculations on the back of the metaphorical envelope. Divide the world into a “rich” region, where one billion people earn $30,000 per year, and a “poor” region, where six billion earn $5,000 per year. Suppose emigrants from the poor region have lower productivity, so each gains just 60 percent of the simple earnings gap upon emigrating—that is, $15,000 per year. This marginal gain shrinks as emigration proceeds, so suppose that the average gain is just $7,500 per year.
If half the population of the poor region emigrates, migrants would gain $23 trillion—which is 38 percent of global GDP. For nonmigrants, the outcome of such a wave of migration would have complicated effects: presumably, average wages would rise in the poor region and fall in the rich region, while returns to capital rise in the rich region and fall in the poor region. The net effect of these other changes could theoretically be negative, zero, or positive. But when combining these factors with the gains to migrants, we might plausibly imagine overall gains of 20–60 percent of global GDP.

This 20-60% comes under assumptions that I think would seem reasonable to many critics of migration. For instance, it largely accords with the assumption of no closing of the skills gap between migrants and natives. Also, it doesn’t consider the long term (the children of migrants getting better education and therefore having more human capital than their counterfactuals in the home country). So it does not rely on beliefs about the closing of skill level and achievement gaps, which are controversial among many critics of migration. In particular, if you believe in intergenerational persistence of these gaps, the above estimation exercise should still seem reasonable to you. The only thing the above doesn’t account for is a radical form of killing the goose that lays the golden eggs (note that the lower end of the 20-60% estimate already accounts for moderate forms of goose-killing, as the original point estimate is 38%). So, setting such radical goose-killing aside for now as an important possibility worth separate investigation, let’s look at the 20-60% estimate. What would it mean?

The pessimistic end of the estimate, 20%, is still more than three times the total of the highest literature estimate of the gains from removing trade barriers and the gains from removing barriers to capital mobility (4.1% + 1.7% = 5.8%) among the papers cited by Clemens. So, free labor mobility still has higher upside — even with these pessimistic assumptions — than free trade.

But even though there’s bigger upside, the margin isn’t that huge. If you had originally believed that open borders would double world GDP, but you then revised the estimate downward to 20%, that would mean that the extent to which open borders advocacy is a compelling cause would reduce, ceteris paribus. However, there are a few countervailing considerations, even if you embrace the lowball estimate.

To help explain this, let me look at my Drake equation-like estimate of the social value of open borders advocacy. I expressed the value as a product:

$latex \text{Utility of a particular form of open borders advocacy} = Wxyz$

Here:

  • $latex W$ is the naive estimate of the gains from complete open borders (using, for instance, the double world GDP ballpark).
  • $latex x$ is a fudge factor to represent the idea that “things rarely turn out as well as we expect them to.” If we set $latex x = 0.1$, for instance, that’s tantamount to saying that, due to all the numerous problems that our naive models fail to account for, the actual gains from open borders would be only 10% of the advertised gains. The product so far, namely $latex Wx$, describes what we really expect the gains from open borders to be.
  • $latex y$ is the fraction to which the world can realistically move in the direction of open borders. The product $latex Wxy$ is total expected gain from however far one can realistically move in the open borders direction.
  • $latex z$ is the extent to which a particular effort at advocacy or discussions moves the world toward open borders, as a fraction of what is realistically possible. For instance, setting $latex z = 10^{-4}$ for Open Borders the website would mean that the creation of the website, and work on the website, has moved the world 1/10,000 of the way it feasibly could in the direction of open borders.

Now, note that we have at least two ways that a decline in $latex W$ might be compensated for:

  • Compensating increase in $latex x$: This would be tricky to argue, because we need to show that our current belief of how realistically our new model accounts for stuff is better than our past belief of how the old model accounted for stuff. In other words, if our original estimate of $latex x$ was based on the knowledge that that model is as crude as it turns out to be, then when we adjust $latex W$ downward and thus make our model realistic, we can compensatingly adjust $latex x$ upward. The effects would approximately, though not exactly, cancel out.
  • Compensating increase in $latex y$: In the specific case at hand, in fact, these arguments do apply. The main source of overestimation in the models predicting huge gains in world GDP is the large number of people that would need to move. Adjusting those numbers alone would get us in the 20-60% range. But, to the extent that this is true, the fraction in which we can move in the direction of open borders might also increase: if open borders involves “only” 300 million people moving instead of 3 billion, then allowing 30 million people to move moves us 10% (0.1) of the way to open borders, rather than 1% (0.01). Again, whether or not $latex y$ gets compensated in practice depends on whether we were aware a priori of the large numbers of people that the model needs to move — if we weren’t, then the adjustment might not happen.
  • Compensating increase in $latex z$: If open borders, or partial moves in that direction, aren’t as radical as they seemed, maybe partial advocacy efforts in that direction are more likely to move us toward them. We should be careful not to double-count this against $latex y$, though — if we’ve already made the adjustment for $latex y$, we probably don’t need to make the adjustment for $latex z$.

A couple of additional notes:

  • All the estimates ($latex x$, $latex y$, and $latex z$) are highly speculative. Combined with the fact that these estimates are related to our estimates for $latex W$ and the methods we used to arrive at those estimates, there’s a lot of room for fudging and very little that can be said conclusively. The order of magnitude of decline in our gain estimate (from 100% of current world GDP to 20%) is only a decline by a factor of five, so our estimates of utility go down by only one order of magnitude, whereas the range of uncertainty is about three orders of magnitude (the range I gave in the original blog post for the Open Borders website was $50,000 -$50,000,000).
  • That said, it would be surprising if the decline in $latex W$ were accompanied by no decline in the overall utility of the form of open borders advocacy. That could happen, based on the considerations listed above, but we should have a prior against it happening. Remember the one-penny proof whenever you’re tempted to believe that a specific change in the estimate of one value will not affect the estimate of another value that it is in general related to.

UPDATE: Diaspora dynamics might reconcile low short-run estimates of how many would move with large long-run estimates of the same. For more, see here.

Public schooling for immigrants’ kids — why’s it a problem?

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One of the common complaints of critics of migration is the welfare state/fiscal burden objection, or more specifically, the observation that migrants impose a net fiscal burden on the receiving countries. In many countries, such as the United States, migrants’ access to means-tested social safety nets is restricted, and it could in principle be restricted further. Perhaps for this reason, one of the main items that contributes to the “cost” side of the fiscal ledger for migrants is the cost of free (i.e., government-funded) schools for the children of immigrants. In this post, I’ll take a closer look at the objection in light of a few different possible belief systems regarding how education must be funded.

In one important respect, however, the specifics of the belief systems are irrelevant to my broader point. In each case, I will consider a possible general principle, and then note the tension between that principle and a differential treatment of migrants and natives. In other words, for each position on the purpose and funding of education, I am questioning what Sebastian calls the moral relevance of countries while applying that principle.

Education as private good that should be funded privately

On this view, schooling and education should be paid for privately, either by the student, or the parents, or through private philanthropy, or educational loans. If you take this view, then it would be correct to view the cost of schooling immigrants’ kids in government schools as a subsidy from the government to the immigrants. But there is nothing in this view that distinguishes immigrants’ kids — the same rules apply for natives. People who take this view should be advocating the separation of school and state, not complaining about immigrant consumption of schooling alone.

Education as state investment or social investment

According to this view, which is more widely held, the state invests in the schooling of children, helping them acquire human capital, and then recoups its investment in the form of taxes when the children become adults. By this theory, it’s not immigration that we should be concerned about, it’s emigration — the worry should be that kids will consume schooling, then emigrate to other countries and enrich those other countries with the human capital they acquired (incidentally, this concern has been voiced, but largely in the context of brain drain from underdeveloped countries). As long as the kids plan to live and work in the same country after completing their schooling, the fact that they’re immigrants should not cause any worry (and incidentally, this also provides a purely pragmatic “cost-recovery” argument against deportation — why deport people after having invested in their education, before the investment can be recouped?). At any rate, comparing the money that the state spends on the kids with the fiscal contributions of the kids’ parents seems at odds with this theory. If one really believed that the money spent on children’s education should be related to their parents’ (rather than their own) fiscal contributions, one should probably revert to some form of the private parent-funded view of education.

Another related point is that in many places, such as the United States, educational funding is at the state and local rather than national (federal) level, so that even if people stay within the country, they may move to another state. This points in the direction of being concerned not only about immigrants, but also about natives who are likely to move between states. Given that a lot of natives, particularly those at higher skill levels (and hence, the people likely to have higher incomes and pay higher taxes), spend their adult lives in a different state than where they spend their childhood, this is a big problem for the “education as investment” theory.

Yet another point may be that educational investment for certain kinds of students simply doesn’t yield a good return on investment, and immigrants are disproportionately represented in those categories. But if you believe that, you should advocate curriculum reform, introduction of vocational education, an end to compulsory schooling, and/or more stringent performance criteria for eligibility for government-funded schooling, not complain about immigrant overuse of educational resources.

Education as moral right

This view is also widely held. According to this view, all members of the community deserve an education, regardless of whether it helps make them economically productive. However, there is a tension between the language of moral rights and the concern that people should coercively be prevented from using the resource. One has to have a very strong citizenistic view to believe that this right extends to citizens. However, even to the extent that it applies only to citizens, many of the children of immigrants whose schooling is considered a downside of immigration are either already citizens or are on a path to citizenship. Perhaps there is currently uncertainty as to whether they will eventually become citizens, or perhaps you believe that they should not become citizens. Nonetheless, childhood is a uniquely optimal period for providing education. This suggests that, if there’s a reasonable probability of their becoming citizens, and if education is indeed a moral right, then educating the children of immigrants is morally required.

Weekly links roundup 05 2014

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Here’s our weekly installment of links from around the web (see here for all link roundups). As usual, linking does not imply endorsement.

Deport All Troublemakers

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Bryan Caplan frequently draws parallels between open borders and natalism. The comparison is intuitive: If we accept the argument that more people are a boon to society, then it follows that we can enjoy that boon whether newcomers are infants or immigrants.

Critics of immigration, however, frequently cite sundry “differences” between locals and foreigners as reasons why immigrants qua newcomers might be less of a boon – and indeed, more of a bane – than babies qua newcomers.

One of the reasons that I, personally, find the critics’ reasoning unpersuasive is that any trait that might convince me to deny an immigrant entry into the country is a difference that likewise ought to convince me to deport any native who held the same trait. In other words, I believe that differences between populations ought to count as much as differences across populations.

Why so?

The first reason is a simple matter of prejudice: If you believe a low-IQ “Ruritanian” is more destructive to American life than a low-IQ American, then it’s hard to avoid allegations of overt racism. Perhaps “there is more to it than that,” but if so, then the real problem isn’t actually the person’s low IQ, but rather whatever “more” there might be “to it.” Low IQ becomes a red herring, and the real issue becomes a prejudice against “Ruritarians.” If the issue is IQ – or any other particular difference – then the issue must apply equally to natives and immigrants alike. If it doesn’t, that is strong evidence of prejudice.

Another reason is a matter of empirics: Before we can even consider designing immigration policy around the differences that exist between human beings, we must first establish the following:

  1. That the differences between people really do translate into a reduced quality of life.

  2. That locals are inarguably more different from foreigners than they are from other locals.

  3. That the government really is capable of testing for these proven differences in a way that does not threaten the rule of law for locals and immigrants alike.

Point #1 is often taken on assumption, but it ought not be. For one thing, it calls into question why any immigrant would choose to emigrate from his/her fellow natives in the first place, since the differences s/he will encounter abroad supposedly make life worse for him/her, not better. For another thing, while it’s easy to merely allege that “the immigrants” caused crime to increase in your neighborhood or property values to decrease, it is substantially more difficult to prove it. I leave the burden of proof for Point #1 on immigration’s critics.

Moreover, that proof of Point #1 must necessarily account for Point #2. We must not only prove that, say, “religious differences” adversely impact local life, but also that I am more religiously different from a Russian immigrant than I am from my neighbor. A proof for Point #1 must also account for the many positive attributes brought to a community by outsiders, including (but not limited to) cultural benefits like food, music, and literature; friendship; genetic diversity, which as a matter of pure biology strengthens the population of any species; comparative economic advantages; and so on.

Proving or substantiating Points #1 and #2 should be extremely difficult considering the high degree of cosmopolitanism in countries that are attractive to immigrants. Today, the United States, the United Kingdom, Australia, China, Spain, Singapore, etc. are more cosmopolitan than at any other time in human history. The extent to which we are different from our neighbors has never been greater than it is today. This suggests that differences have more positive effects than negative effects, and that the residents of immigrant-friendly nations don’t seem to let their differences get in the way of a high standard of living.

Point #3 is an extremely high hurdle to clear for practical reasons. It involves first proving Points #1 and #2, and then demonstrating that we can indeed detect these differences reliably and empirically. Once we’ve managed to clear this hurdle, we must wrestle with the problem that any power transferred to the state for legitimate reasons is power that can potentially be abused.

This brings me to my third and final reason why differences within a population must matter as much as differences among different populations. If, as some have suggested, social contract theory entitles a nation’s government to sculpt the cultural make-up of its citizens, then deporting native cultural chaff is no less logical a method of doing so than refusing to import foreigners who hold the same traits. Assuming we manage to prove that differences are problematic, and that we can reliably test for them, doesn’t this imply that we can take action against our fellow natives just as easily as we can against potential immigrants? Why not deport all troublemakers?

If this suggestion makes you uneasy, I can understand why. Historical examples, such as Stalinist purges and various acts of genocide seen throughout history, give us reason to think twice. I’m obviously not suggesting that we really deport people who don’t mesh well with the rest of us; I’m suggesting that if doing so is ridiculous, so, too, must it be to deny an immigrant entry under the same rationale. That, too, leaving aside the even more practical considerations of how “we” might go about determining what “our” culture is, and who gets to decide which of “our” attributes are worthy of inclusion. In terms of actual policy, outside the ambiguity of social contract theory, designing policy guidelines that result in a cultural homogeneity that even the locals would prefer over the status quo seems impractical to the point of the absurd. As Paul Crider writes:

Who decides which aspects of “traditional” society are worth preserving (at the cost of more focused and observable individual freedoms, let’s not forget) and which aspects are merely parts of inevitable cultural evolution? …Should a committee of bureaucrats be set up to decide which foreign influences are acceptable cultural adaptations, the way the French have circled their wagons around the integrity of their language? Even if such a committee were popularly elected, it’s difficult to see how that democratic mechanism would achieve any greater legitimacy than uncoordinated individual actions…. There are other influences that will impact culture, influences that cultural preservationists are less willing to stifle by coercion…. Culture, including language, social values, artistic (literary, musical, etc) expression, and political values can and do all change as a result of younger generations challenging the ideas and practices of their forebears. This process of change over generations may be exacerbated by outside influences, but it would be hard to deny that at its core it is a natural phenomenon at work even in closed societies.

Many critics of immigration base their case against open borders on the differences between groups of human beings. I have attempted to show why this problem is not unique to immigrants, that we are in fact different from other natives, too. Eliminating differences in a community of peaceful people presents prejudicial, empirical, and practical problems that most would find unsettling. Those critics who point to “differences” as a justification for restricting immigration thus have a steep burden of proof assigned to them. Until they meet it, I remain unconvinced.

Weekly links roundup 04 2014

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