Tag Archives: Ghost of Christmas Past

The story behind the “double world GDP” estimates

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[UPDATE: I have added a new blog post titled gains from migration: GDP versus surplus that covers an issue that I didn’t adequately address in this blog post: that even though the contribution to GDP is largely made directly through the migrant, the “benefits” of this, in terms of the social surplus, are captured more broadly.]

Critics of immigration generally spend very little effort critiquing the strongest quantitative argument in favor of open borders: that they would result in a one-time increase in world GDP by 50-150%, or, in short, slogan form, double world GDP (the canonical literature review is this paper by Michael Clemens and the slogan “double world GDP” seems to have first been used in this blog post by Bryan Caplan). Many of these critics are citizenists, and frankly couldn’t care less about world GDP. But others have scoffed at these estimates without providing a clear-cut argument against them.

To my knowledge, the best critique of these estimates is expressed in a series of blog comments by Ghost of Christmas Past, a commenter on EconLog. The most complete versions of the critique are in this comment by Ghost of Christmas Past on Caplan’s “National Egoism” post and this comment by Ghost of Christmas Past on Caplan’s persuasion bleg post. I would like to provide a detailed point-by-point response to Ghost of Christmas Past’s critique. Prior to that, however, I need to establish more clearly just where the “double world GDP” estimates come from and what I think are the weaknesses of these estimates.

The first question: how are these world GDP estimates calculated?

One of the things that Ghost of Christmas Past glosses over in his/her critique is that the “double world GDP” estimate is not simply the estimate made by Michael Clemens. Rather, Clemens does a literature review and considers the many different estimates, showing that they are in a range of 50-150%. The back-of-the-envelope estimate by Clemens is more of a sanity check of the following sort: okay, assume that gains are half of what we observe today, how much can that give us? Then, Clemens goes over the various aspects that go into computing these estimates and the degree of uncertainty behind each of these factors. For those who don’t have the time to read Clemens’ paper, a quick list of the factors that would need to be considered, solely from the migration of labor, are: the effect on migrants, the effect on competing labor, employers, and consumers in the target country, and the effect on competing labor, employers, and consumers in the source country. Of course, when people move, it’s a migration of both labor and consumers, as well as, possibly, a migration of capital. This would further complicate the analysis.

The overall story behind the double world GDP estimate is that the first-order effect on migrants — aka the benefit to migrants — is huge, thanks to the place premium. In other words, migrants gain a lot by migrating. What they do with these gains (for instance, whether they send part of the money to their home countries as remittances, or save and invest in businesses in the country they migrated to) is not directly relevant to the GDP gain estimate.

What about the gains and losses by others, including competing labor, employers, and consumers, in the source and target countries? These gains and losses could both be important, but they are quantitatively likely to be substantially smaller than the gains to migrants. There could be considerable debate about the sign of these effects. For instance, the debate surrounding the suppression of wages of natives is about the extent to which competition in the labor market from immigrants drives down native wages. Pessimists believe that the driving-down effect from three decades of immigration to the United States has been about 4.8% for high school dropouts in the United States, and closer to zero for other categories of workers. Optimists see the effects as zero or slightly positive at current levels of immigration to the United States (more US-specific stuff at the link). Both optimists and pessimists believe that substantially more open borders would probably lead to a bigger decline in native wages, though less so in the long term than the short term. The overall magnitude and sign of the effects is up for empirical debate. Note: Even with a modest wage decline, natives may still be better off if price declines and the expansion in the range of consumption options makes up for this decline. They may also be better off as employers and land-owners. It’s only a small fraction of natives who are unambiguously likely to be worse off — those who depend primarily on wages (i.e., don’t own land), work in unskilled jobs that directly compete with unskilled immigrant labor, and don’t value the expanded range of consumption possible through immigration.

So how does this fit in with the “double world GDP” estimate arguments? The crux is that these gains and losses figure as rounding errors compared to the huge gains experienced by migrants. Continue reading The story behind the “double world GDP” estimates →

Open borders, moral egalitarianism, and blank slatism

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Co-blogger Nathan already did a good job responding to critics in the comments on Bryan Caplan’s blog post Vipul Naik and the Priority of Open Borders, which in turn was a follow up to my blog post Open borders and the libertarian priority list: part 1. Fortunately for me, he chose not to critique one of the commenters that I was planning to critique, namely, Ghost of Christmas Past. It’s a long comment, laying out a cogent one-stop shop version of the economically literate restrictionist position. Responding to the comment in its entirety is beyond the scope of this blog post — rather, such a response is the scope of the entire Open Borders site. However, there’s a particular part of Ghost of Christmas Past’s post that I wish to comment upon. Ghost of Christmas Past begins with a strong claim:

Actually, Brian’s arguments for open borders have been absolutely crushed in the comments to his earlier posts on the subject (read them from the links in the side column).

Fundamentally, the problem is that Brian and other open-borders advocates are relentlessly anti-empirical on this question, which I think a “libertarian economist” should be ashamed of. Brian’s writings about immigration resemble sophomore Marxism more than anything else.

I’m interested in the second point on Ghost of Christmas Past’s list:

Second, his oft-repeated and empirically-wrong assumption that all humans are the same, their behavior simply molded by the nearly-immutable “institutions” which happen to govern society in one geographic place or another. This too, is crudely Marxist. Brian claims that immigration to the US would have no effect on US “institutions,” therefore no effect on the society which current Americans have built and enjoy, apart from driving down wages for a small segment of the population. This is nearly insane. “Institutions” are produced by the people who live under them. If you alter the people you alter the institutions. All the analyses showing that world GDP would double or whatever if there were no restrictions on migration are based on the idiotic assumption that advanced societies can instantly absorb all the world’s low-productivity people while maintaining constant marginal productivity. Such analyses are much less intellectually defensible than the “static analysis” of effects of changes in Income tax rates (raising rates will raise revenue without affecting behavior) which libertarian economists always deride when American leftists proffer them.

Apart from the empirical objection (which seems largely an objection regarding the characteristics of immigrants that harm immigrant-receiving countries, combined with concerns about political externalities, culture clash, and assimilation problems), Ghost of Christmas Past makes an interesting assertion about the beliefs that underlie open borders advocates. He/she argues that open borders advocates believe in a form of “blank slatism” — that all human beings are essentially the same, and that differences between human beings are due to their surroundings (in this case, institutions).

Even if this attack applied to some open borders advocates, Bryan Caplan is definitely not among them. Caplan has attacked blank-slatism and environmental determinism from at least two different angles: he has argued for the heritability of a number of traits, i.e., the role that genes play in explaining the variation among individuals. He has also argued for the role that free will plays in individual decisions and used it to argue against the desert of the poor. In fact, Caplan has gone farther than most by using a free will-based paradigm to study mental illness (see here). Caplan may not top the list of people who are the antithesis of environmental determinist or blank slatist, but he is definitely there on the list.

Is Ghost of Christmas Past right that Caplan foregoes his skeptical stance and embraces blank slatism on issues of immigration? Probably not. Caplan doesn’t assume that immigrants are identical to natives, or that institutions explain all the differences. He argues for specific postulates based on the evidence — in this case, evidence based on such things as the place premium, which shows that the exact same worker with identical skills can earn more in some countries than others. And Caplan doesn’t blithely sidestep the political externalities concern; he carefully tries to address it.

The extent of Ghost of Christmas Past’s confusion regarding Caplan’s views suggests a possible deeper communication problem. Upon some reflection, I think there is one plausible candidate for this communication problem. Namely, most arguments for open borders, including those espoused by Caplan, are based on what my co-blogger Nathan Smith has called “moral egalitarianism.” Moral egalitarianism is not limited to the usual egalitarian meta-ethical framework as usually understood, but also includes libertarian and utilitarian frameworks that treat all human beings symmetrically. Continue reading Open borders, moral egalitarianism, and blank slatism →