Tag Archives: BK

Open borders and the economic frontier, part 3

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Last fall I wrote two posts, Open borders and the economic frontier, part 1, and Open borders and the economic frontier, part 2, which were meant to be the first two parts of a three-part series, which sought to address the large macroeconomic question of whether open borders would cause the global economic frontier to move forward faster or slower. BK had made a loose empirical argument in the comments that the more productive ethnic groups seem to be most productive when they are in the majority, less so when they live as minorities among other ethnicities. In part 1, I gave the following reasons why I was skeptical of BK’s empirical analysis: (a) the weakness of the theoretical links between race, cognition, and GDP; (b) the fact that the poor/racially disadvantaged countries are concentrated in the tropics; (c) the pattern that the racial minorities BK’s argument focused on tend to have arrived under imperialist auspices as colonizers or settlers and are therefore particularly alienated from the population; and (d) the prevailing view in our culture that “racism” is scientifically erroneous. In part 2, I explained how, in my own theoretical work, growth is modeled as “exploration of the goods space” through an expansion of the “endogenous division of labor” as capital or population expands, and applied it to the data BK had highlighted. Using the EDOL model, I derived a new theory of relative growth and decline in the 20th century, namely, that the automotive revolution altered economic geography, reducing the economic distance between all manner of points connected by land, while increasing the distance between points separated by the sea: thus Britain and its empire suffered, while the United States and contintental Europe were big gainers, and the Soviet Union also benefited.

But let me step back a bit. Economic growth is very important because, in the long run, small changes in growth rates can alter the human condition enormously. If we can raise the long-run growth rate of per capita income merely from, say, 2% to 3%, that will make our grandkids 70 years from now twice as rich as they would have been if the slower growth trajectory had been sustained. In 700 years, this small change would make our descendants over a thousand times richer than they would have been. Lately, this important topic has become the subject of a large literature, mainly in economics though it spills over to other fields as well. I got a Masters in International Development and a PhD in economics and I’ve been exposed to a lot of this literature, yet I nevertheless feel inadequate to the task of summarizing it. Still, here’s a very rough typology of theories. Continue reading Open borders and the economic frontier, part 3 →

Open borders and the economic frontier, part 2

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In the first post in this three post series, I gleaned a theory of the economic frontier from some of BK’s comments and offered a few of my own responses. In this post, I’ll expound my own theory.

Two general points. First, how the economic frontier advances is both enormously important for human welfare and quite mysterious. It is important because long-run economic growth will determine how well we can mitigate world poverty and deliver ever-improving lives to future generations. A tiny increase in the rate of advance of the economic frontier, say from 3% to 5%, would make our descendants a century hence almost an order of magnitude wealthier. Second, open borders would likely affect the rate of advance of the economic frontier. Before reading BK’s comments, I had pretty much taken it for granted that open borders would boost growth, at least in the short run, as people move from low-productivity countries to high-productivity countries. Based on Clemens (2011)  and Kennan (2012), the modal result of formal studies so far seems to be that open borders would double world GDP, and the assumptions on which this result is based are actually conservative in some ways, e.g., they don’t assume that everyone would migrate to where their marginal product is highest. Negative institutional/productivity side-effects of open borders on frontier countries would have to be very large to offset this, but such effects are not beyond the range of plausibility.

My theory, which I’ll call the “Endogenous Division of Labor” or “EDOL” model, was the topic of the second chapter of my dissertation, Complexity, Competition and Growth (but don’t pay $103, it’s available here for free). More recently, and I think more accessibly, I published a new version as an SSRN working paper here, under the title “Development as Division of Labor: Adam Smith Meets Agent-Based Simulation.” All the data is drawn from a simulation I wrote, which is introduced in this video, and I’ll be happy to send the simulation (as a runnable JAR file) if you’re interested in exploring its properties on your own. It’s not that user-friendly, but I’ll even be glad to give you a tutorial via Skype. I’ll also be glad to present it at academic conferences or seminars or whatever. I think it would lend itself to public presentation quite well, though I haven’t got the chance to transfer. I’m trying to publish it. So far, the Journal of Political Economy rejected it, with some harsh but useful feedback. I plan to submit a completely rewritten version to the Journal of Economic Growth. Any feedback is welcome.

Continue reading Open borders and the economic frontier, part 2 →

Poor countries and IQ externalities

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BK helps make the case for open borders in poor countries:

Interesting point by Jones: if high-IQ people produce positive externalities well above their market wages in poor countries, then citizenists in poor countries should be willing to offer larges subsidies for high-IQ immigration:

“If IQ has the sizeable positive externalities posited here, then there may be room for a Coasian bargain between countries with low current LV IQ and higher IQ individuals in other countries.  One purely suggestive possibility: If the ratio of private to public benefits of higher IQ are even half as large as the 6:1 ratio suggested by Jones and Schneider (2010), a low LV IQ country could rationally offer a 100% subsidy for any wages a high IQ immigrant earns in excess of that nation’s median wage.  In practical terms, a 10 year income tax holiday for permanent immigrants with engineering degrees could accomplish the same goal of encouraging high IQ immigration. “

Favoring engineers seems too much like “picking winners,” and I don’t think the research is really there to support anything so specific (don’t forget that the most obvious externality of engineers, that they invent things, is global in nature) but a simpler policy recommendation to derive from this argument would probably imply that poor countries should simply open their borders to immigrants from rich countries. Rich countries generally have higher average IQ, certainly higher levels of education, and probably other traits– work ethic, perhaps, or trustworthiness– that make their home countries productive. I don’t have great data on this– go, IMPALA!— but I’m pretty sure it wouldn’t be very easy for an immigrant from the US or Western Europe, with or without an engineering degree, to migrate to India or Malawi or China or Russia and just get a job, never mind a tax holiday. Why don’t poor countries offer free immigration to holders of US, EU, Japanese or South Korean passports? I suspect that it’s some combination of (a) elite protectionism– a corrupt business elite makes the rules and doesn’t want the competition from capable Westerners or East Asians– and (b) global norms– rich countries have migration restrictions and they’re either blindly imitating or else retaliating out of pride against countries that exclude them. But it would be interesting to investigate further.

Related thoughts: (1) Would it be easy for rich countries to negotiate away restrictions against their nationals working in poor countries, in return for a bit more openness to migrants from those countries, or perhaps other concessions, e.g., aid or trade? (2) Would a high-profile open-borders movement in the US and/or Western Europe, even while unsuccessful domestically, change the climate of ideas and persuade poor countries to open their borders to migration, to gain the “moral high ground?”

Open borders and the economic frontier, part 1

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This will be the first of three posts on the topic of “open borders and the economic frontier.” 

I am indebted to commenter BK for making the major subject of my academic research, on the basis of which I hope to make my name as an academic economist, relevant to this blog. In a long series of comments at my post “The American polity can endure and flourish under open borders,” and previously at “Garett Jones responds…” BK digs up some numbers and makes a sort of loose empirical case, based on the experience of what Amy Chua calls “market-dominant minorities” in many countries around the world, that segregation of humanity based on cognitive ability, with race as a proxy, actually makes the world economy as a whole more productive:

Chinese-Singaporeans generate income almost twice as great in mostly Chinese Singapore as the large Chinese-Malaysian minority does in Malaysia (about $70,000 per annum vs about $38,000), even though there are less than 3 million Chinese in Singapore but almost 7 million in Malaysia. But the Chinese make up 75% of Singapore vs 25% of Malaysia…

There is a Chinese elite, but this isn’t enough to fix the institutions, which have to represent the general population. All this occurred in the context of strong legal discrimination in favor of Malay majority, racialized anti-business sentiment, and big gaps in political views between Chinese and non-Chinese Malaysians. Using the above statistics, if the Chinese-Malaysians could have done as well as Singapore by also seceding from Malaysia into Chinese-dominated countries, total GDP of the region would rise substantially just from letting the Chinese-Malaysians free of the Malaysian electorate, even if incomes back in Malaysia plummeted. But it gets even better: Singapore lets in millions of guest workers from non-Chinese Malaysia, among other places, who send back huge quantities of remittances. Singapore generates more innovations in science and technology with positive spillovers for the rest of the world.

Basically, patterns like this seem to suggest that total GDP and welfare are much increased by international segregation by IQ and other characteristics contributing to productivity and performance, and that giving every country in the world demographics representative of the world would be devastating…

I’ll try the analysis again for a different region, randomly selected to be Africa.

The obvious data are the economic evolution of Zimbabwe (formerly Rhodesia) and South Africa after universal suffrage and the end of apartheid. This is complicated by the fact that both countries were suffering economically from crippling sanctions before majority rule, as well as internal racial conflict which were then lifted and replaced with foreign aid as part of an intentional effort to make post-suffrage conditions better than pre-suffrage conditions. Continue reading Open borders and the economic frontier, part 1 →

The American polity can endure and flourish with open borders

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Very interesting discussion in a recent comments section. Let me start with a quote from an e-mail by Garett Jones to Vipul Naik:

I would emphasize a different conclusion: That the low-IQ immigrants will tend to worsen the institutions of the higher-IQ countries they move to. Low IQ immigrants will, to some degree, tend to make the country they move to more like the country they came from.

Partly this will be due to MRV and Caplan/Miller reasons: low IQ groups vote for bad policies.  Partly it’s because they will tend to elect individuals from their constituencies, which will, on average, tend to lower the average IQ of the legislature.  And partly it’s because the bureaucracy will tend to hire individuals from low-skill groups, which will lower government quality.

For these and other reasons, new low IQ citizens impose a tax on the nation’s institutions, and this institutional cost should be counted in a candid cost-benefit analysis.

*Shorter version: Good institutions are rare treasures, and institutions are endogenous with respect to (among other things) citizen IQ.  *

I would like to bracket the concerns in the second paragraph about voting, because I regard this as a solved problem, as far as the theory of open borders is concerned. Just because you let people in doesn’t mean you have to let them vote. There are already millions of Green Card holders in the US who can’t vote. The keyhole solution (Vipul’s term: I hadn’t thought of it at the time) which I advocate in Principles of a Free Society is open borders with (a) migrants preimbursing the government for their voluntary deportation if they become destitute (at least those under a new open-borders visa), (b) a surtax on (those) migrants, (c) mandatory savings, withdrawable only in the migrant’s home country, or forfeitable as part of (d) a path to “earned” citizenship once a migrant has saved a certain threshold amount in this mandatory savings account. Migrants would thus be given a substantial incentive to return home rather than to stay. Those who would choose to stay would presumably do so: (a) because their homelands were an especially bleak alternative; (b) because they foresaw high earnings in America so that forfeiting the savings account was worth it (these people would probably have relatively high IQs, on average); or (c) because they especially like, admire, and enjoy America (these people would presumably place a particularly high value on American institutions). To mix these migrants into the electorate is a very different, and doubtless much more favorable, prospect, than simply allowing anyone to come and vote. Of course, this is just one of many possibilities that would separate the right to come, live, and work from the right to vote. I made a similar point in the comments of the Garett Jones post, and added that “It’s even easier to maintain high hiring standards for the bureaucracy, which obviously doesn’t have to, and doesn’t, hire a representative cross-section of the resident population.” I also posed the question:

If I were to hypothesize that the maintenance of high-quality institutions depends mainly on the characteristics of an elite, and need not be much affected by adverse changes in the composition of the broad mass of the population, would the evidence that Garett has studied contradict me?

This was the jumping-off point for a very interesting debate between BK and John Lee. BK’s comments, in particular, are highly interesting and informative, yet I find myself unconvinced and dissenting at many points. BK answers my question:

Yes, if we are just referring to the overall demographics of a country. Note that across countries, smart people earn higher incomes as the proportion of smart people rises, not the absolute total.

Chinese-Singaporeans generate income almost twice as great in mostly Chinese Singapore as the large Chinese-Malaysian minority does in Malaysia (about $70,000 per annum vs about $38,000), even though there are less than 3 million Chinese in Singapore but almost 7 million in Malaysia. But the Chinese make up 75% of Singapore vs 25% of Malaysia…

There is a Chinese elite, but this isn’t enough to fix the institutions, which have to represent the general population. All this occurred in the context of strong legal discrimination in favor of Malay majority, racialized anti-business sentiment, and big gaps in political views between Chinese and non-Chinese Malaysians.

OK, but wait. There is a Chinese business elite in Malaysia, but the political elite is Malay. It is this Malay political elite that imposes “strong legal discrimination in favor of Malay majority, racialized anti-business sentiment,” etc. It is also important that (a) the Malays have deeper historic roots whereas the Chinese are relatively recent arrivals, and (b) the Malays are linguistically and religiously homogeneous (more or less, I think: BK and John Lee both know the region better than I do). If we’re looking for lessons from Singapore/Malaysia that cross-apply to a hypothetical open-borders United States, this argument would only be relevant if we’re supposing that voting immigrants would become the majority of the population, develop solidarity among themselves, and vote for “strong legal discrimination” and “racialized anti-business sentiment” against the offspring of today’s natives. With immigration tariffs and a gradual path to citizenship, you could more or less ensure that voting immigrants would never constitute a majority. Since immigrants would come from many different countries, it’s unlikely they’d develop solidarity among themselves except on wedge issues that related to them directly. Instead, they’d want to assimilate with American natives. Given that American society has a powerful absorptive capacity– if you’ve got fluent English and a college education and want to be a normal American, people will treat you like a normal American; and if you wereborn here, it’s taken for granted that you’re a normal American, never mind your background– any scenario resembling that in Malaysia is really quite implausible.

Also, I think the fact that immigrants would know they were immigrants makes a big difference. Malays in Malaysia think of the land as theirs. They’ve been there the longest. South Africa is in a similar situation, as far as I understand: black South Africans see themselves as the rightful owners of the soil, the whites as intruders. Russia, whose history I know better, stands in striking contrast to the 19th-century United States, because while they could both be described as multi-ethnic empires, in Russia the subordinate nationalities had never consented to be part of the Russian Empire, but for the most part had been simply conquered (it’s a little more complicated but never mind), whereas in the United States, the subordinate nationalities (if I may put it that way for the sake of the parallel) had in a real sense consented to rule from Washington by crossing oceans to immigrate. They were therefore much less inclined to question the legitimacy of the government and far more inclined to develop patriotic loyalty to the United States, superimposed on a lingering loyalty to their various mother countries. Continue reading The American polity can endure and flourish with open borders →