Krugman and Cowen on immigration; or, rallying the economic profession around open borders

Co-blogger Joel Newman recently authored a fine post calling out Paul Krugman on his seeming endorsement of unjust immigration laws. Joel notes that Krugman eagerly endorsed excessively restrictive immigration laws introduced in the US in 1924, without even mentioning or criticising their basis in primarily racist and empirically-unfounded bigotry. Krugman essentially endorsed closing the borders because, in his own words,

The New Deal made America a vastly better place, yet it probably wouldn’t have been possible without the immigration restrictions that went into effect after World War I. For one thing, absent those restrictions, there would have been many claims, justified or not, about people flocking to America to take advantage of welfare programs.

Furthermore, open immigration meant that many of America’s worst-paid workers weren’t citizens and couldn’t vote. Once immigration restrictions were in place, and immigrants already here gained citizenship, this disenfranchised class at the bottom shrank rapidly, helping to create the political conditions for a stronger social safety net. And, yes, low-skill immigration probably has some depressing effect on wages, although the available evidence suggests that the effect is quite small.

The chief problem with this argument is Krugman’s implicit assumption that it would have been impossible — whether for fairness or politically practicable reasons — to design a welfare system that excludes non-citizens. Limitations on benefits access for non-citizens are what we call keyhole solutions, policies aimed at solving a particular problem by targeting it in a keyhole fashion — using a swatter instead of a nuclear bomb to kill a fly.

We know Krugman’s assumption of unworkability is unjustified because  many welfare systems, including that of the US, already exclude immigrants from most benefits. Don’t take it from me; take it from the federal government. If you need a one-sentence summary, here it is:

With some exceptions, “Qualified Aliens” entering the country after August 22, 1996, are denied “Federal means-tested public benefits” for their first five years in the U.S. as qualified aliens.

“Qualified Aliens” basically refers to what we colloquially might call “legal immigrants”. Unauthorised immigrants never qualify for federal benefits unless and until they become legal immigrants and pass the five-year waiting period.

What of universal, non-means-tested benefits, like Social Security, which is often seen the crowning jewel of the New Deal? Or of Medicare, the crowning jewel of Lyndon Johnson’s “Great Society” follow-up to the New Deal? Well, anyone half-familiar with the economics of these laws knows the answer: citizen or not, virtually nobody can qualify to receive benefits from either of these programmes without working for at least 10 years (see this report from the conservative Heritage Foundation for more). You would never see a flood of immigrants bringing their aged and infirm to cash in on American universal social benefits, because unless these aged and infirm worked for a decade, they would never qualify.

Are these limitations on immigrant welfare access immoral, or politically infeasible? That doesn’t seem to be the case to me. Obviously they are politically feasible; if anything, it would have been quite politically impossible to enact some of these programmes without such restrictions! And although every government decision is fraught with moral trade-offs, it seems more immoral to deny anyone, native or foreign, the right to go where they please in peace than it would be to allow them liberty of work and travel at the expense of higher bars for them to access state funds for the indigent. I tend to think Krugman would agree; to my knowledge he has never criticised bars on immigrant access to welfare as fundamentally unjust — while he has routinely deplored in the past efforts to deprive foreigners of jobs and opportunities that they can and want to seize.

Krugman is certainly a terribly smart economist, so I believe he understands all these issues I raise, possibly much better than I do. That’s why his wording is so careful. He says that “absent [immigration] restrictions, there would have been many claims, justified or not, about people flocking to America to take advantage of welfare programs.” (emphasis added) He never says these claims would have been justified or valid, but he also never calls them out as clearly unjustified and invalid either, even though such assertions clearly would have been completely baseless by design in the very New Deal that the US got!

It is quite uncharacteristic of Krugman to essentially surrender to bigotry and ignorance in a policy debate. He is basically saying: “A bunch of stupid bigots would have made some false claims about a good policy if we didn’t forcefully exclude immigrants from our shores, so it’s a good thing we catered to these bigots’ unfounded prejudices.” The Krugman I’ve been reading for almost a decade would never have said anything close to this — except, alas, on immigration.

I don’t think Krugman needs to be persuaded of the economic feasibility of keyhole solutions like benefit access limitations. After all, he links to this fantastic review of the economic literature on immigration, which finds that thanks in no small part to the limitations on welfare access which virtually every country has enacted, the average immigrant to the developed world is a fiscal breakeven. Immigrants don’t tax social welfare systems anywhere as much as the typical non-economist might expect, because social welfare systems are perfectly capable of serving citizens while limiting immigrants’ access.

It is very unlike Krugman to notice such a gaping economic fallacy, and refrain from exploiting or belittling it. The only explanation I can see of the issue is that, like most centre-left moderates on immigration, he has fallen prey to a series of mistakes leading him to underrate the importance of the issue. I can only hope that Krugman eventually listens to reason — that he listens to himself.

Just look at Paul Krugman discussing the topic of domestic migration — now here is the Krugman I know, lambasting unfounded economic thinking. Within the US, domestic migrants have mostly moved to “Sunbelt” states like Texas. Their politicians boast of business-friendly policies and low taxes. But, Krugman astutely points out, these policies don’t seem to be showing up in the productivity or wage figures.

From wage data, it seems that migrants to Sunbelt states are actually leaving more productive climes for new homes in a less productive region! Krugman argues the data has to lead us to conclusion that the main reason they move is because they actually take home more money, despite earning less. The cause of this?

Because living there is cheaper, basically because of housing. According to the Bureau of Economic Analysis, rents (including the equivalent rent involved in buying a house) in metropolitan New York are about 60 percent higher than in Houston, 70 percent higher than in Atlanta.

In other words, what the facts really suggest is that Americans are being pushed out of the Northeast (and, more recently, California) by high housing costs rather than pulled out by superior economic performance in the Sunbelt.

And this, in turn, means that the growth of the Sunbelt isn’t the kind of success story conservatives would have us believe. Yes, Americans are moving to places like Texas, but, in a fundamental sense, they’re moving the wrong way, leaving local economies where their productivity is high for destinations where it’s lower. And the way to make the country richer is to encourage them to move back.

Migration is an extremely important issue because it is the primary way that our societies make better use of scarce human talent. A mind is a terrible thing to waste — so it would be particularly sad if the innovator behind the next Facebook or Tesla was forced to live in the boondocks because he or she just couldn’t live where all the other innovators are, because of laws designed to exclude people like him or her from the places where those innovators live.

But the same logic applies to less-skilled workers too: if we need more housing and services for smart people who want to live in cities like New York, Chicago, or San Francisco, then we also need more construction workers and bus drivers and baristas and barbers. You can’t have a city that’s purely populated by high-skilled workers; it would be inefficient if every barista in town had a PhD. So it would be just as much of a shame if baristas with just a high school education couldn’t live in New York, Chicago, or San Francisco.

Again, I don’t need to explain any of this to Krugman. He clearly gets it. But he strangely ignores the importance of this productivity problem when it comes to international immigration. All he needs to do is listen to himself, and apply the identical productivity insights to movement across international borders.

The wage gaps Krugman talks about are, as he says, a measure of inefficiency and impoverishment: that people are forced to work in less productive jobs, earning lower wages, ultimately impoverishes everyone. People’s talents, whatever they may be, are not being put to their fullest use. But the immigration restrictions Krugman supports have exactly the same effect as the strict land use laws he laments.

And although the effects are conceptually the same, the magnitudes are not. The wage gaps Krugman discusses are on the order of 10 to 20%. But the wage gaps created by restrictions on movement across international borders are on the order of 100 to 1400%! These wage gaps are immense, and they have never existed in regions with unified labour markets, where workers are legally allowed to move across borders and work.

See the seminal economic paper by Michael Clemens, Lant Pritchett, and Claudio Montenegro for more — but trust me, the effects are huge. No matter what assumptions or methods they use, economists studying the issue virtually always conclude that the inefficiencies resulting from our laws restricting the movement of workers between countries are on the order of 50 to 150% of world GDP: trillions of dollars. Simply put, they dwarf the problems Krugman complains about when it comes to the inefficiences created by policies that drive people to migrate from Massachusetts to Texas.

Don’t get me wrong: I completely agree with Krugman that strict land use laws, which aim to prevent the “wrong” types of people from being able to live in certain areas, are inefficient and reprehensible. I applaud him all the more for drawing attention to them. Unconscionably strict land use policies are deeply-entrenched in American law; so deep that Krugman’s fellow pro-immigration economist and New York Times columnist, libertarian Tyler Cowen, has declared he cannot support open borders because it would not be politically feasible to let so many poor people live in rich countries — because the only way to truly allow poor people to come would be to repeal and overcome the strict land use regime prevailing in much of America.

The parallels actually are quite striking; both Krugman and Cowen neglect to think of, or at least discuss, how keyhole solution-type policies could ameliorate the political costs of immigration that they worry about. After all, as Krugman himself has observed, immigrants gain immensely from being able to put their labour to more productive uses, in more productive regions.

They would be willing to pay a lot for the ability to live and work legally in a country like the US; that’s why they shell out thousands in fees to smugglers when the law, unjustly and inefficiently, bans them from coming legally. It would be far fairer and efficient to let immigrants compensate their new neighbours for the costs (even if these might be purely psychic costs incurred by those with anti-immigration prejudices) of living near immigrants. Both Krugman and Cowen know this — and even if it doesn’t fully comport with their sense of propriety, it is surely fairer to give immigrants some choice in the question of how to appease these bigots with political power, rather than to just ban most immigrants from coming altogether.

Both co-blogger economist Nathan Smith and myself have politely criticised Cowen before for his odd and inconsistent thinking about immigration, so I suppose it’s only fair that we hold Krugman to the same bar. And I can think of no better articulation of that bar than Cowen’s own, in one of his New York Times columns:

Often, economists spend their energies squabbling with one another, but arguably the more important contrast is between our broadly liberal economic worldview and the various alternatives — common around the globe — that postulate natural hierarchies of religion, ethnicity, caste and gender, often enforced by law and strict custom…

One enormous issue is international migration. A distressingly large portion of the debate in many countries analyzes the effects of higher immigration on domestic citizens alone and seeks to restrict immigration to protect a national culture or existing economic interests. The obvious but too-often-underemphasized reality is that immigration is a significant gain for most people who move to a new country.

Michael Clemens, a senior fellow at the Center for Global Development in Washington, quantified these gains in a 2011 paper, “Economics and Emigration: Trillion-Dollar Bills on the Sidewalk?” He found that unrestricted immigration could create tens of trillions of dollars in economic value, as captured by the migrants themselves in the form of higher wages in their new countries and by those who hire the migrants or consume the products of their labor. For a profession concerned with precision, it is remarkable how infrequently we economists talk about those rather large numbers.

Truly open borders might prove unworkable, especially in countries with welfare states, and kill the goose laying the proverbial golden eggs; in this regard Mr. Clemens’s analysis may require some modification. Still, we should be obsessing over how many of those trillions can actually be realized.

In any case, there is an overriding moral issue. Imagine that it is your professional duty to report a cost-benefit analysis of liberalizing immigration policy. You wouldn’t dream of producing a study that counted “men only” or “whites only,” at least not without specific, clearly stated reasons for dividing the data.

So why report cost-benefit results only for United States citizens or residents, as is sometimes done in analyses of both international trade and migration? The nation-state is a good practical institution, but it does not provide the final moral delineation of which people count and which do not. So commentators on trade and immigration should stress the cosmopolitan perspective, knowing that the practical imperatives of the nation-state will not be underrepresented in the ensuing debate.

Economists have never let bigotry or prejudice get in the way of just and fair economic policies. That’s why Krugman worries so much about cost of living forcing engineers and construction workers to live in Dallas instead of New York: because the arbitrary exclusion of strict housing laws prevents these people from earning the wages they command in a fair market. It’s a problem of both social justice and economic efficiency. That people worry about new neighbours, or tall buildings, is not a good enough reason to arbitrarily exclude these people from living in places where they are willing to pay the market rent to earn their market wage.

After all, such excuses have often been cited in the past to exclude women, Jews, or blacks from the labour and housing markets by the force of law. That’s why, as Cowen observed earlier in his piece, economists were among the loudest and most consistent critics of slavery; the field’s derogatory nickname, “the dismal science“, originates from slavery advocates mocking economists’ at-the-time “absurd” view that blacks be given choice and agency in their work!

This long tradition of fighting for social justice and human prosperity should compel both Krugman and Cowen to seriously weigh the costs our immigration laws impose on the poor of the world, and the drag they impose on the productivity of the human race. Indeed, it should weigh on all economists. The consensus of the profession is that the current immigration regime is inefficient, and that most of the excuses given for maintaining it are unfounded.

Yet when they write about immigration, Krugman and Cowen often tiptoe about this consensus, and seemingly shrink from confronting the poorly-grounded rationales typically proffered in defence of immigration restrictions. It would be a shame for them to shrink from this, when their intellectual ancestors boldly placed themselves on the front lines fighting for social change, knowing that no less than fairness for broad swathes of humanity and prosperity for all humans stood at stake.

And should you doubt that both equity and efficiency are at stake here, I’ll defer to public policy student Daniel Kay Hertz’s words on the matter. He writes of zoning and land use laws, but with one or two modifications, his is just as eloquent a summation of the problem with modern immigration laws:

…the idea [is] that no one has a “right” to live in elite urban centers like San Francisco, and so affordable housing in those places isn’t actually a social justice issue…

But either way, applying this argument in favor of restrictive zoning is pretty ludicrous. After all, the reason that so many people can’t afford San Francisco isn’t because of the impartial workings of the market; it’s because the government is artificially inflating prices. If the government decided to impose supply restrictions on, say, milk, causing prices to go up to $20 a gallon, and people asked the government to stop doing that, it wouldn’t really make any sense to shrug your shoulders and say, “Well, not everyone has the right to drink milk.”

Or, more pointedly, it’s as if you lost a race because someone was holding onto your ankles the entire time, and when you complained they responded, “Well, somebody had to lose.” Yes, of course. But the game was rigged.

Moreover, this kind of argument assumes – without saying so – that residents of wealthy neighborhoods do have another kind of right: the right to expect that their neighborhoods will stay the same forever. They don’t. Nor do they have the right to dictate where or how other people live. There’s surely some legitimate interest in incrementalism, to prevent the perceived chaos of massive and ubiquitous projects in a previously low-rise, quiet area. But that suggests that government should allow steady, even growth, not quash it altogether.

…What about, they say, the huge depopulated areas in Detroit, the South Side of Chicago, Philadelphia, the rest of the Rust Belt, and so on? What’s wrong with pushing people to live in those places?

There is a hint of sense in this – building more houses when we have these houses over there, sitting empty, isn’t ideal – but I don’t think it takes an awful lot of poking before it falls apart. If your plan to bring back economically devastated areas is to force lots of poor people to live there by denying them the option of living somewhere with, say, safe streets and decent schools, then…I’m not really sure what to say. That seems self-evidently like a disaster, both from a practical perspective – exactly what sort of renaissance do we expect to happen if we encourage lots of lower-income people to congregate in places that are already resource-starved, without an escape hatch? Has that ever worked out? – and from a moral one. Not to mention the legal one: remember, again, that the reason these areas are so expensive is because of government interfering in the market. The status quo isn’t neutrality; it’s a massive redistribution program to the wealthy from everyone else.

Zoning and land use laws are a serious problem, whether you look at them from the point of view of equity, or efficiency. But for all the reasons Hertz lays out, so are immigration laws. And the problems at stake with unjust, inefficient immigration laws are far bigger: literally, trillions of dollars bigger.

I first encountered Krugman as a young student in high school. One of my favourite pieces, to this day, is Krugman’s stirring defence of sweatshops. There is nothing noble in paying poor people a pittance for their labour, of course. But as Krugman pointed out, how can it be more noble to forcefully deny poor people even the choice  to be paid this pittance? How can it be right to deny people the chance to earn a wage of any kind, and to force them to live lives of subsistence farming, living literally hand-to-mouth, simply because we feel we have the moral authority to do so?

When he penned pieces like those, Krugman had no qualms calling out uncritical opponents of sweatshops on their bigotry:

The real complaint against developing countries is not that their exports are based on low wages and sweatshops. The complaint is that they export at all. And so the supposed friends of poor workers abroad are no friends at all. If they got their way the result … would not just be no sweatshop–it would be no job.

That’s the Krugman I fell in love with; that’s the Krugman who changed my life, convincing me to major in economics. We need that Krugman again more than ever, to speak out against the injustice and idiocy of immigration restrictions. Let me quote Krugman then to Krugman now:

You may say that the wretched of the earth should not be forced to serve as hewers of wood, drawers of water, and sewers of sneakers for the affluent. But what is the alternative? Should they be helped with foreign aid? Maybe–although the historical record of regions like southern Italy suggests that such aid has a tendency to promote perpetual dependence. Anyway, there isn’t the slightest prospect of significant aid materializing. Should their own governments provide more social justice? Of course–but they won’t, or at least not because we tell them to. And as long as you have no realistic alternative to [immigration], to oppose it means that you are willing to deny desperately poor people the best chance they have of progress for the sake of what amounts to an aesthetic standard…

In short, my correspondents are not entitled to their self-righteousness. They have not thought the matter through. And when the hopes of hundreds of millions are at stake, thinking things through is not just good intellectual practice. It is a moral duty.

Amen, Mr. Krugman. The hopes of millions remain at stake when it comes to immigration laws that unjustly ban them from earning the market wage they could command by moving. Laws that create wage gaps on the order of thousands of percentage points, and productivity losses on the order of trillions of dollars are unconscionable. The fates of billions of poor people hang in the balance. Thinking things through, and speaking economic truth to power, is not just good intellectual practice; it remains our moral duty.

I am grateful to Carl Shulman of the Open Borders Action Group for his comments and suggestions that were incorporated into this piece.

John Lee is an administrator of the Open Borders website. Liberal immigration laws are a personal passion for him. See all blog posts by John.


7 thoughts on “Krugman and Cowen on immigration; or, rallying the economic profession around open borders”

  1. Krugman and Cowen bring up great points regarding their ideas on immigration how ever I don’t think that they necessarily lacked further information. I believe that it was his intent to write with a certain amount of ambiguity so that the reader can directly define his message as they choose. Some of the best economists known in history make the best points without giving their ideas directly within their writings, rather they state the points that give the reader the opportunity to interpret it how they may.
    In reading the blog I was fascinated more by the issues that are arising with migration within the country, like the example of how living in New York cost 70% more than it would in Atlanta. Housing costs and regulations are forcing people to evacuate these densely rich cities like New York or places in California. It pose the threat to people who thrive on lower paying jobs and demands to much of them financially with these regulations. I think thats an interesting topic that I have never really thought about and should raise a higher point of discussion.

  2. This was a great article, it went with bashing the economists Krugman to agreeing with his changed mindset on economics. I agree with Lee’s point of view on immigration. People should be able to migrate without laws restricting it. But there are many factors that such as what type of people migrate over to other countries such as drug and human traffickers. But the US was built on migration and immigrants such as Italians, Africans, Polish, and the Chinese etc. Restricting people to migrate to places where there are more opportunities and a better life is morally wrong. Wasn’t the US built by immigrants and home of the free. Krugman made a good point about the sweat shops. Although the conditions working in these sweatshops can be horrible, it is immoral to deny people who need these kinds of jobs to make a living. I also liked the point of that restricting immigration restricts talent. Because of these strict immigration laws, talented people from poorer countries can’t come. Talent can come from all people rich or poor and these strict laws are preventing the next big thing to happen. I also enjoyed the analogy of a metropolitan city having all workers with a PhD but in service jobs. Overall I enjoyed this article very much; it used many references and was fun to read.

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