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Introducing Paul Crider

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In our never-ending quest to find new interesting perspectives on open borders, we are happy to introduce a new blogger to Open Borders: The Case, Paul Crider!

Paul received his PhD in physical chemistry and has conducted post-doctoral research in Germany. He supports open borders with rare exceptions such as disease quarantines. He came to open borders through a naturally cosmopolitan attitude combined with support for bleeding heart libertarianism. He hopes to write on issues showing the compatibility of open borders with multiple political ideologies, while also arguing open borders as the next step in the civil rights movement.

We look forward to Paul’s contributions and hope to see a lot of good discussion arise from them!

REMINDER: If you’re interested in blogging for the site in any capacity, please fill out  our potential guest blogger

Understanding the place premium, or; building the economic intuition behind open borders

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There are plenty of misconceptions about the place premium — the arbitrary wage gap between different countries of the world. (The term “place premium” was introduced in a working paper titled The Place Premium: Wage Differences for Identical Workers across the U.S. Border – Working Paper 148 by Michael Clemens, Claudio E. Montenegro, and Lant Pritchett. See also our blog posts that mention the place premium). Some common ones include the mistaken beliefs that estimates of the place premium don’t account for purchasing power, or that the place premium doesn’t adjust for characteristics like job type or labour quality. But even if one avoids these missteps, it can be difficult to grasp the source of the place premium and the intuition around why labour mobility would erode the place premium by increasing real incomes worldwide.

Here’s the classic example of the place premium: the bus driver. You take the bus driver in Yemen and transplant him to the US. Same guy, doing the same job, driving the same bus, even. Just in a different place. You’ve just boosted that Yemeni’s income by about 15 times over, because now he’s ferrying highly-productive Americans instead of relatively unproductive Yemenis. He’s driving them between Boston and New York instead of between Sana’a and Aden. And yes, that 15x multiplier is real — it’s the actual point estimate from the seminal paper on the place premium, calculating the premium between Yemen and the US in terms of real wages, adjusted for all statistically-identifiable characteristics of the worker and the job.

Now, you might contend that the Yemeni bus driver isn’t himself being more productive. After all, he’s doing exactly the same job he was before. The extra income he earns now doesn’t represent any increase in his productivity; it just represents some income he’s siphoned away from Americans, who pay a Yemeni bus driver the wages of an American bus driver, even though he’s plainly less productive than the American who might otherwise drive that bus.

This intuition, I think, is related to why people make a couple of rather unintuitive (to me, anyway) conclusions about the place premium and its implications:

  1. Open borders erodes the place premium primarily, if not only, by redistributing the income of richer people to poorer people. The poor of the world do in fact benefit immensely from migration, but this is not because migration makes them more productive. They simply earn an economic “rent” by taking rich-world wages which are incommensurate with their actual poor-world productivity. World GDP does not actually increase from open borders, and rich-world GDP actually falls.
  2. People in poor countries are poor because they are innately unproductive. This is because of one or both of the following:
    1. Levels of productivity are endogenous to you as an individual, not the society you happen to be in. The value of your work is determined by you and you alone, not the society you live in.
    2. Levels of productivity are endogenous to your country of origin. The value of your work is determined by some combination of your personal qualities and the institutions you grew up in. The society you live in has little to no impact on your productivity.

These claims are incredibly unintuitive to me, because even if they might be true to some degree, there isn’t any economic theory or data to support the strong claim that where you live has no impact on productivity. The very fact that economists who study labour mobility consistently conclude that the gains from open borders would roughly double world GDP means that these conclusions are wrong. Moreover, there are plenty of reasons why your intuitions about the relationship between your environment and your productivity ought to run the exact opposite way.

If you lived in a society currently facing a civil war, or a natural disaster, you would be incredibly unproductive. An engineer isn’t of much use in a famine-ridden country; he has to spend most of his time looking for food, instead of designing bridges. The claim that the society you live in has no impact on your productivity is totally unintuitive; of course the engineer becomes less productive if you take him from his comfy home in an OECD country and plop him into somewhere like Somalia or the Congo. So vice-versa, if you find an engineer in Somalia or the Congo, and you take him with you to somewhere like France or Italy, you’ve immediately increased his productivity. He spends less time figuring out how to get food and shelter, and more time figuring out how to build bridges.

You might protest that this is a high-skilled immigrant, so let’s go back to the bus driver. Exactly the same intuition applies. Take an American bus driver and drop him down in Yemen. Would he still really deserve his American wages in Yemen? Sure, it’s no fault of his own that we’ve forced him to live and work in Yemen instead of the US. But the fact is that the Yemenis he’ll be driving around are less productive than his old American passengers. He used to drive software engineers and Starbucks baristas (you laugh, but baristas save productive doctors and executives plenty of time and money) in the US; in Yemen, he drives shepherds and hotel cooks. Given that the entire productivity of being a bus driver comes from ferrying valuable people around, it’s unsurprising that when the economic productivity of the people he transport drops, his productivity drops as well. So vice-versa, taking a Yemeni bus driver and giving him a bus in the US to drive makes him incredibly more productive. He used to support a small, relatively undeveloped economy; now he supports a much more prosperous economy. His taking that American job has directly lowered the transportation costs for quite a few highly-productive people.

You might protest that while this is true at the individual level, you couldn’t simply take every person from Yemen and put them in the US and expect to achieve the same result. You’d be right, which is why nobody that I know of seriously suggests forcing poor people to immigrate to the rich world. It’s the people who have a lot to gain from immigration — those whose potential productivity means they can reasonably expect a substantial wage hike from moving to a better society even just doing the same work they’re used to doing — that will migrate. People who aren’t productive enough to justify the large financial and non-financial costs of moving simply won’t move. Unless you subsidise migration, you won’t see unproductive people swarming highly-productive societies.

Still, on one level, it can seem intuitive to say that if you’re doing exactly the same job in two different places, your productivity doesn’t matter: you should earn the same wage for the same work wherever you are. But that’s actually incredibly unintuitive. Even if you’re just a farmer, your crop yields depend on where you are. If you can buy or rent land elsewhere that is more fertile, you can do the identical job on that piece of land and immediately become more productive. And that’s just the simplest scenario. If you’re a machinist, you are more productive working in a society with a functioning power supply than you are working in a society with frequent blackouts. If you’re a hairdresser, you are more productive working in a society where your clients are corporate executives instead of a society where your clients are subsistence wage-earners — because even if you save your clients exactly the same amount of time and effort, in one society your clients’ time is worth a lot, and in the other it is worth little.

It might be intuitive to conclude that open borders is simply redistribution, allowing unproductive people to claim wages meant for highly-productive people. But some basic economics suggests this can’t be true. If a Yemeni bus driver is 15 times less productive than a US bus driver, he basically will get his passengers lost or injured so often that the only way his employer can find it profitable to keep him on staff is if they slash his wages down to the levels he earned in Yemen — if they slash his high-productivity wages by 15 times. Something has to give: either he has to be productive enough to merit higher wages, or he has to go back to Yemen and back to his old job. Otherwise, he ends up jobless and destitute in the US.

Having travelled on public transport in different countries, I could swallow the claim that a bus driver from a poor country is only half as productive as a bus driver from a rich country (because of poorer driving habits, etc.), though I’d still be skeptical of it. But I’ve never met a bus or taxi driver who is so thoroughly incompetent that I would deem his driving skills worth 1/5th or 1/10th of his professional counterparts whom I’ve encountered in the rich world.

The place premium doesn’t actually mean all the gaps we see between rich and poor countries would disappear under open borders. Even in jurisdictions with open borders, such as between Guam or Puerto Rico and the mainland US, we observe a place premium where it seems the American bus driver earns 25% to 40% more than his statistically-identical counterpart in Guam or Puerto Rico. That probably is explained by true productivity differences (though some of it might also stem from xenophobia or other reasons making it difficult for a bus driver in Guam or Puerto Rico to undercut a bus driver on the mainland). But nowhere in the history of the world have wage gaps as big as the ones we see internationally today been observed. We can quite surely say that most of the place premium comes from arbitrarily coercing otherwise productive people into staying in unproductive regions or societies.

The intuition behind this is clear: your productivity does in fact depend on where you are. You produce more living in Australia than you do in Antarctica for a reason — just as you produce more living in South Africa than in Zimbabwe for a reason. Whether it’s a better geophysical climate or a better political climate, some places just make us more productive citizens and human beings than other places do. We need a damn good reason to arbitrarily force people to stay unproductive — especially when it means consigning them to a life of grinding poverty that would shock just about anyone reading these words.

The photograph featured in the header of this post depicts Italian immigrants laying tram tracks in Springfield, Massachusetts circa 1900.

Are the linguistic externalities of open borders important?

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One of the most obvious, automatic arguments against open borders is that people won’t be able to understand each other. “They don’t speak English,” is one of the knee-jerk complaints about (some) immigrants. People will tell anecdotes about how they went into the grocery store and wanted to ask where the soup was, and the employees couldn’t help them because they were only Spanish-speaking. I don’t think I’ve seen the movie  Now, as our linguistic assimilation page points out:

To the extent that the problem [of the failure of linguistic assimilation] is genuine, a keyhole solution to it is to impose linguistic and cultural fluency requirements as a precondition for migration.

And a billion people or more speak English, so that still opens up a huge amount of immigration. Of course, more would learn. But let’s set that aside for the moment. Suppose we’re thinking about the immigration of non-English speakers.

Let me respond first of all to the supermarket anecdote. The supermarket could presumably hire English-speaking employees. The supermarket would presumably have to pay more to English-speaking employees, reflecting their greater economic value and the greater opportunity cost of their time. The supermarket would pass through the costs associated with their higher wage bill to customers. So customers face a trade-off: English-speaking staff, or higher prices. The question is not, would you rather have English-speaking staff in the grocery store, but, is it worth it to pay 1% or 5% or whatever more for your groceries to have English-speaking staff? If most customers think it is worth it, the supermarket, to remain competitive and maximize profits, would presumably give customers what they want by raising prices and hiring English-speaking staff. So, the fact that the supermarket has hired non-English-speaking staff is evidence that most customers prefer lower prices. Maybe you’re not most customers. Maybe you’d be willing to pay 5% extra for your groceries so that the supermarket staff would be able to tell you where the soup is in English. But why should the government use force to make your preferences prevail over other consumers’ preferences? Notice, by the way, that the conflict is not, for the most part, between English-speakers and non-English-speakers, but among English-speakers with difference preferences over grocery prices versus ease of communication with supermarket staff.

Moreover, the customer who wants English-speaking help may not have to do more than drive down the street to a different grocery store. Typically, free -market capitalism offers a wide variety of goods and services, catering to all tastes, and even minority and niche markets get served. It’s quite possible that the customer who complains about the non-English-speaking staff is actually, at the same time, revealing his preference for non-English-speaking staff plus low prices, by shopping at the supermarket that employs them when other supermarkets, who insist on good English, are available, albeit they charge more. In that sense, it’s improper to regard the lack of linguistic assimilation as a downside of open borders at all. I should be careful not to exaggerate here. Real world markets are imperfect, and the rough-and-tumble of markets probably will see some consumers’ welfare fall, more or less randomly, because of the interaction of these imperfections with their preferences. If you live in a small town with only a few shops, the arrival of immigrants really might deprive you of your preferred shopping environment as other people’s preferences create a new, less English-speaking equilibrium. In the same way, if white hats become fashionable, black hat lovers may suffer as stores don’t bother to carry the unpopular item. But such effects will be small, and society as a whole will enjoy gains from trade with immigrants.

A certain misunderstanding is worth guarding against at this point. Suppose we compare two worlds, in the first of which a country’s 300 million people speak a few dozen languages and have no language in common, whereas in the second, the country’s 300 million people speak those few dozen languages plus they all speak another language which is the common language of the country. Clearly the second situation is better. But that’s simply because the second country has been given, ex hypothesi, a large endowment of extra human capital. In reality, there is an opportunity cost to acquiring human capital. So this is the wrong thought experiment with which to evaluate the effects of open borders.

The starting point of an economic analysis of the effects of linguistic diversity must be that (a) linguistic human capital is valuable, but (b) immigrants who come to a country despite their lack of the appropriate linguistic human capital reveal that they gain thereby, and (c) natives who do business with immigrants despite their lack of the appropriate linguistic human capital reveal that they gain thereby. Markets and prices should accurately value linguistic human capital, and should efficiently resolve the question of whether it is worth it for this or that non-speaker of a country’s dominant language to immigrate or not. The only case which is definitely an exception to this market efficiency argument is when people use language for non-market cooperation, e.g., when you go up to a stranger on the street and ask him for the time, or for directions.

Now, being able to ask strangers for directions and rely, not on getting them since they might not be able or willing to help, but at least on having a common language, certainly has some economic value. The inconvenience of asking two or three people for directions and finding that they are non-English speakers, thus wasting one’s own time and theirs, is certainly a negative externality likely to be associated with open borders. Given the rarity of the event in question, however, I am inclined to rate the importance of the negative linguistic externalities of open borders as low to the point of being trivial. But since this argument pops up again and again, am I, perhaps, missing something? Are the negative externalities of lacking a common language somehow much more important than I suppose? Why? How could this be measured?

Why I Am Not An American

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Aaron Swartz, taken from us too soon, wrote a piece that really spoke to me. As someone who wishes for equality yet avoids labels (especially on myself), I felt this piece captured my thoughts exactly. It also inspired me (with a small nudge from a good friend) to write a similar piece on the subject of immigration.

Until relatively recently, most travel in the world was limited by actual, physical factors. The incredible time it took to make long journeys was also fraught with danger and expense. Months of travel could be required to go even a short distance; and with those months came the price of equipping and feeding the travelers. Ships sank, horses died, and (if video games played in middle school taught me anything) lots of people died of dysentery. Despite these difficulties, people DID travel, to all corners of the Earth. However, while these intrepid travelers of yore overcame rivers and oceans, mountains and deserts, they rarely had to contend with a group of soldiers keen on preventing them from moving around.

People have, throughout the ages, had all sorts of “identities” based on all sorts of criteria. People have identified themselves with clans and families, with religions and ethnicities, with movements and beliefs, even with diets and movie franchises. The phrase “I am a…” is ubiquitous today. How many times do you hear someone say “I practice a vegetarian diet?” or “I ascribe to the Catholic belief structure?” Rarely, if ever. People define themselves by these groups – it’s not just an action or a belief, but a group to belong to. Maslow in action. People ARE Catholics or Vegetarians or Trekkies or what have you. But the modern age has given us a new identity as well: Nationality.

Nationality is often aligned with ethnicity, but certainly not always. It’s become vogue to identify with your nationality, though Nationality has some major differences with other identity groups. For one, Nationality is entirely an accident as far as you’re concerned. Maybe your parents were wealthy and savvy enough to make a conscious choice to have you in the country they did, but chances are good it was just where they happened to be. Unless you happen to be a naturalized immigrant, then you didn’t join this club, and nothing you could do (or fail to do) would make its leaders kick you out.  In fact, you’d have to try really hard to leave voluntarily – which would make you think that the club really hungered for members.  Yet most importantly, unlike nearly all other clubs, this one actively tries to prevent others from joining. Different factions within the club want to make it harder than others – and some want to make it downright impossible – but few want to launch a massive recruitment campaign.

A major goal of the Catholic club as a whole is to convert others into it. A major goal of Vegetarians is to convince other people that they should also be Vegetarians. While some elitism is natural among many groups, it’s mostly directed at those who have tried and failed to get in, or those who never tried at all. Members of one religion or belief structure or whatever kind of group might think they’re better than outsiders, but they don’t usually try to prevent outsiders from joining. Most clubs follow the pattern of setting criteria for membership and then letting the chips fall. Catholics have to follow Catholic doctrine, Vegetarians have to avoid meat, and Trekkies have to occasionally dress up like a Starfleet Officer. But Americans? The only criteria for default entry are that you were born in America or to Americans – and that’s that.

While people can pose all of the arguments they want in terms of whether borders should be open, closed, or somewhere in between, does it make sense to have Nationality as an identity? Imagine if the only way you could be a Catholic was if your parents were Catholics, but if that were true, you didn’t have to do anything else. You didn’t have to obey any rules, you didn’t have to attend church, you didn’t have to even believe in the teachings – yet you got all the benefits of a vast social support network and prime seating in the afterlife. Would it make sense to take pride in that identity anymore? Would it be just and right to make laws benefiting only those people, and harming all others?

Of course, in the real world, many people DO identify with groups that are nothing more than accidents of birth. People take pride in their ethnic cultures. Sometimes it makes sense, too – if you appreciate a particular kind of behavior associated with that ethnic culture. I like being an Italian – but to me, that means I value good wine, family loyalty, and minding your own business. If I knew nothing of the actual culture of Italians, I would think it silly to be proud of being one. However, I’ve also made plenty of my friends over the years “honorary Italians” if they ALSO loved good wine, were good to their mothers, and knew when to keep their mouths shut. In short, I turned my ethnic identity into a voluntary club.

When most people say “I’m proud to be an American,” they don’t mean that they’re proud of having been born between a certain latitude and longitude. They mean they’re proud of a certain set of characteristics. I could even imagine a subset of those characteristics that I would guess few Americans would disagree with: Bravery, hard work, the willingness to sacrifice for others, and perseverance. Those are all spectacular qualities – but Americans don’t have a monopoly on them.

In fact, those sound EXACTLY like the set of qualities it would take to leave your homeland, taking impressive risks for the sake of a better life for you and your family, and put in the effort to overcome the grueling task of making a life for yourself in a new land.

So that’s why I’m not an American. I don’t identify with the cowardly, the lazy, the selfish and the quitters – even if they were born inside the same arbitrary lines I was. But I do identify with, sympathize with, and long to help the brave, the diligent, the selfless and the driven – wherever they were born, and wherever they’re going.

Rolf Dobelli on Citizenism

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I am currently reading The Art of Thinking Clearly by Rolf Dobelli, which gives a summary of the many cognitive errors that human beings are prone to make, errors that inhibit our ability to think clearly and logically. The book also gives advice on how best to overcome some of these biases. One chapter in the book struck me as being relevant to the debate on the moral relevance of countries and the ideas around citizenism, a debate to which my co-bloggers Sebastian Nickel and Nathan Smith have recently made contributions (see here and here). The chapter is called “Why You Identify With Your Football Team: In-Group Out-Group Bias” and it appears as Chapter 79 in the book. Below I reproduce, with the author’s permission, the entire chapter (I have added hyperlinks):

When I was a child, a typical wintry Sunday looked like this: my family sat in front of the TV watching a ski race. My parents cheered for the Swiss skiers and wanted me to do the same. I didn’t understand the fuss. First, why zoom down a mountain on two planks? It makes as little sense as hopping up the mountain on one leg, while juggling three balls and stopping every 100 feet to hurl a log as far as possible. Second, how can one-hundredth of a second count as a difference? Common sense would say that if people are that close together, they are equally good skiers. Third, why should I identify with the Swiss skiers? Was I related to any one of them? I didn’t think so. I didn’t even know what they thought or read, and if I lived a few feet over the Swiss border, I would probably (have to) cheer for another team altogether.

This brings us to the question: does identifying with a group — a sports team, an ethnicity, a company, a state — represent flawed thinking?

Over thousands of years, evolution has shaped every behavioural pattern, including attraction to certain groups. In times past, group membership was vital. Fending for yourself was close to impossible. As people began to form alliances, all had to follow suit. Individuals stood no chance against collectives. Whoever rejected membership or got expelled forfeited their place not only in the group, but also in the gene pool.  No wonder we are such social animals — our ancestors were, too.

Psychologists have investigated different group effects. These can be neatly categorised under the term in-group-out-group bias. First, groups often form based on minor, even trivial, criteria. With sports affiliations, a random birthplace suffices, and in business it is where you work. To test this, the British psychologist Henri Tajfel* split strangers into groups, tossing a coin to choose who went to which group. He told the members of one group it was because they all liked a particular type of art. The results were impressive: although A) they were strangers, B) they were allocated to a group at random and C) they were far from art connoisseurs, the group members found each other more agreeable than members of other groups. Second, you perceive people outside your own group to be more similar than they actually are. This is called the out-group homogeneity bias. Stereotypes and prejudices stem from it. Have you ever noticed that, in science-fiction movies, only the humans have different cultures and the aliens do not? Third, since groups often form on the basis of common values, group members receive a disproportionate amount of support for their own views. This distortion is dangerous, especially in business: it leads to the infamous organisational blindness.

Family members helping one another out is understandable. If you share half your genes with your siblings, you are naturally interested in their well-being. But there is such a thing as ‘pseudokinship‘, which evokes the same emotions without blood relationship. Such feelings can lead to the most senseless cognitive error of all: laying down your life for a random group — also known as going to war. It is no coincidence that ‘motherland’ suggests kinship. And it’s not by chance that the goal of any military training is to forge soldiers together as ‘brothers’.

In conclusion: prejudice and aversion are biological responses to anything foreign. Identifying with a group has been a survival strategy for hundreds of thousands of years. Not any longer; identifying with a group distorts your view of the facts. Should you ever be sent to war, and don’t agree with its goals, desert.

*Henri Tajfel’s classic paper on the behaviour of groups is Experiments in Intergroup Discrimination.