Tag Archives: Tyler Cowen

Tyler Cowen’s not too convincing argument against open borders

Tyler Cowen’s capacious mind prioritizes input over synthesis. He is a compulsive moderate, happiest in the mainstream, always glad to have an excuse not to rock the boat. I respect him tremendously. I am a happy user of his Principles of Economics textbook, and his blog, Marginal Revolution, is in my top five. Better yet is MR University. I haven’t listened to all of it yet, but I listened for hours last Friday to their brief profiles of many development economists, while doing the more mechanical parts of exam grading. I’ve rarely encountered such great content in a course distributed online, and never in economics. It’s amazing that this stuff is free. Three cheers for Cowen and Tabarrok’s two-man crusade to educate the world in economics. Cowen isn’t as dazzlingly lucid as Bryan Caplan as his best, but his judgment is probably more reliable precisely because of his prejudice for moderation. I sympathize with Cowen’s conservatism, his deference to consensus views. But of course, that’s also why I wouldn’t expect him to favor open borders, though he is pro-immigration. Open borders is too radical an idea for him. Still, he’s not one to dismiss a position without argument. Here’s Cowen on “Why open borders won’t work”:

The first issue is to pin down what we mean by open borders.

Land use restrictions are often a more important “”immigration policy” than border control per se.  It is not just how many people getin at what cost, but who can afford to live here.  This includes zoning laws, restrictions on the number of people allowed to live in an apartment, policies toward “squatters,” and rules for the homesteading of public property.  So by “open borders” I mean also liberal land use policies; nominally open borders would matter far less if unskilled laborers couldn’t also afford to live in the U.S.  (Note to anti-immigration types: you are focusing too much on the ease of crossing the border and not enough on the costs of living here.  How much the best immigration restrictions involve land use policy or border policy is a curiously underexplored question.)

Now, it’s true that immigration could be controlled indirectly through land use policies. But I think these questions are more separable than Cowen implies. Even if land use restrictions placed an absolutely binding ceiling on how many people could live in the US, so that even under borders no net immigration were possible, open borders would still make a huge difference. Land values would soar, and many US citizens whose value of living in the US is relatively low would sell out and emigrate. Since some of those who don’t own real estate would, I suppose, find themselves effectively evicted from the country, which is bad, but of course this whole scenario is counter-factual. In practice, whatever limit land use regulations notionally place on the number of people who can live in the US are not even close to binding, and if they threatened to become binding, they could be relaxed. A few metropolitan downtowns might be blocked by law from increasing their populations, and open borders would just drive up rents, but plenty of other places would allow developers to house the new people.

If both the border and land use were free, markets would be very powerful in organizing mass migration.  Consider Hyderabad.  Many of the very poor live either at or right next to garbage dumps.  They live in tents or ramshackle lean-tos.  Their jobs often involve scavenging the garbage dump for potentially useful scraps.  Why do they live there?  Do they like the short commute?  Is it because they love the Indian culture one finds right next to the garbage dump?  No, no, and no.  They live there because they will put up with almost anything to have a chance of survival.

How many of these people would book passage on a slow ship to Baltimore, with the hope of living in a richer garbage dump?  The ship would serve cheap rice and lentils, make them sew garments while sailing, and collect further payment five years after arrival, tagging them with GPS if need be or “monitoring” relatives back home.  Or perhaps the Indian government would pay their way.

How about the nine or so million Haitians — almost all living in extreme poverty — who face a much shorter and cheaper boat trip?

I like Cowen’s imaginative filling out of the picture of what open borders would look like. I think it would turn out something like this. But he hasn’t gotten to the downside yet. After all, probably these people would find a richer garbage dump to live on, and since he hasn’t given any reason to expect natives to be harmed by it, the changes envisioned may be Pareto-improving.

I can imagine the U.S. staying a high-quality capitalist democracy with some percentage of the population living in garbage dumps and shantytowns.  While I think we are underinvesting in shantytowns, the permissible percentage is not very high and almost certainly falls short of fifteen percent.  (Btw, there is much complaining about the Mexicans, but in fact we share a long land border with a relatively wealthy third world country; this is rarely appreciated.)

OK, but given how important the issue is, I’d appreciate a little more theory here. What exactly would prevent the US from being a high-quality capitalist democracy with 20% of the population living in shantytowns? Would the shantytown dwellers stage a revolution? Would they vote for redistributionist politicians? But of course, that assumes they’re given the franchise, and that doesn’t have to happen automatically. Cowen would be the first to agree that the golden age of US-led innovation was the golden age of open borders. Capitalist democracy was thriving then, too. Things have changed a lot since then, and yes, global income gaps are larger and the relative poverty of immigrants might be more severe than in the 19th century. But the world is also more Americanized, democratic, English-speaking, etc., than it was in the 19th century, and anyway, is there any evidence that America was pushing the limits of its absorptive capacity in 1914? With all due respect to Burkean conservatism and the precautionary principle, the humanitarian stakes are very high here. It’s fair to ask for a clearer argument of what exactly Cowen means by “high-quality capitalist democracy,” and how it’s threatened by open borders, and if so, whether “high-quality capitalist democracy” in Cowen’s sense (whatever that is) is really so valuable as to justify shutting out so many tens or hundreds of millions from a great chance at a better life.

That is why I do not favor unlimited immigration.  To the extent that nominally “open borders” would be tolerable, it is because we already impose implicit immigration restrictions through land use policies.

That all said, I will reiterate my view that we could take in many more immigrants than we are doing now, both skilled and unskilled.

Maybe Cowen and I aren’t so far apart. Cowen’s not sure what the upper bound on absorptive capacity is, but it’s certainly higher than what the US permits now. Raise it, see what happens, repeat. I wonder if he could be persuaded to position himself as an open borders skeptic rather than nailing his flag to “open borders won’t work.” Also, I wonder whether he’d endorse my DRITI scheme, which seeks to safeguard natives’ living standards and the integrity of existing institutions while retiring discretionary migration restrictions.

What do open borders advocates really want?

How do we translate the cause of open borders into specific policy recommendations? The range of policies entailed by “looser border controls” is wide — and the range of policies which might be mistakenly attached to the “open borders” idea is even wider. It is important to be clear on definitions when we discuss the idea of open borders, lest we waste time on proposals which few actually support.

Before I continue, note that I speak only for myself; not for Vipul, not for Nathan, and not for any other advocate of open borders, even though we all support greater immigration. In fact, immigration supporter Tyler Cowen declares himself opposed to open borders, even though I suspect under my definition of “open borders”, he may be one of our greatest advocates.

It is crucial to be clear about what “open borders” really means in terms of end goals. Being vague about the meaning of “open borders” makes it easy for restrictionists to attack straw men, while ignoring the strongest arguments for open borders. So when I seek open borders, here is what I want: people to be able to cross international borders at will, insofar as this is administratively practical.

Continue reading What do open borders advocates really want?

Response on Charter Cities and Extraterritoriality

This post is a response to Tyler Cowen’s recent post on the topic of charter cities and extraterritoriality, prompted by the recent charter city experiment in Honduras (more background on immigration and charter cities here). Cowen is sympathetic to the idea of charter cities, but he has some concerns. Cowen:

It would be a mistake to equate charter cities with extraterritoriality.  For one thing, a charter city has its own laws and governance, possibly enforced by overseas courts, rather than imposing foreign courts upon domestic governance, a’la Shanghai through the early 20th century.  Still, the history of extraterritoriality gives us some sense of what it looks like to have foreign courts operating outside their usual domestic environment.

The problem with extraterritoriality, as I read the literature, is not the Chinese courts had a superior system of commercial or criminal law which was tragically pushed out by inferior Western ideas.  The problem was that the foreign courts were not supported by comparably strong domestic interest groups and there was a clash between the foreign courts, national symbols, fairness perceptions, domestic rents and the like, all in a manner which led to eventual talk of foreign devils and violent overreaction against the influence of outsiders.

The history of extraterritoriality focuses one’s attention on the question of who has an incentive to support the external system of law, when such a system is transplanted abroad.  This question does seem relevant to charter cities and related concepts.

Hong Kong worked because the UK and USA were able to exert enough control at a distance, at least for a long while, and because China was weak.

One vision is that a charter city works because a dominant hegemon — perhaps at a distance — supports the external system of law.

A second vision is that a charter city works because the external system of law serves up some new and especially tasty rents to domestic interest groups.  In the meantime, avoid Tongans.

A related question is what it means for the external legal system to be “invited” in, and how much such an invitation constitutes prima facie evidence of real domestic support.

I would like to see these topics receive more discussion.

Happy to oblige! Continue reading Response on Charter Cities and Extraterritoriality

Did Border Closure Cause the Productivity Slowdown?

By “the productivity slowdown,” economists have generally meant the slowdown in GDP per capita growth rates that occurred after 1973 (e.g., see here). Note that the word “slowdown” is a bit misleading: it doesn’t mean that we’re getting poorer, just that we’re not getting richer as fast. Still, it’s an unwelcome change, and calls for an explanation. There was then a productivity acceleration in the 1990s, but not a return to the “halcyon days” of the 1950s and 1960s.That productivity slowdown can’t have been caused by closed borders, because the borders were already closed in the 1950s and 1960s.

However, Alexander Field’s A Great Leap Forward: 1930s Depression and US Economic Growth casts a different light on things. Field’s most surprising finding is that the 1930s actually experienced the highest rates of productivity growth in the 20th century. Manufacturing, whose productivity rose at its highest-ever pace in the 1920s, slowed down a bit in the 1930s, but fast productivity growth spread to other sectors. The fast productivity growth of the 1950s and 1960s was actually a decline relative to the 1930s, and the post-1973 productivity slowdown a further decline.

I am not always convinced by Field’s analysis. He often seems insufficiently suspicious of aggregate numbers that have to be calculated on the basis of market prices which change over time and can’t easily be adjusted for quality changes. Still, Field altered my view of 20th-century economic history, and my tentative best guess would now be to defer to him. Let me now tentatively and speculatively extend his analysis a bit. The post-1973 productivity slowdown that attracted so much attention was something of an accident, in the sense that the oil price spike and macroeconomic conditions created a kind of “joint” in the path of GDP, but the lasting productivity slowdown had to do with long-run trends and not really with anything that happened in 1973 per se. In the “halcyon days” of the 1950s and 1960s, two non-technological factors masked an ongoing slowdown in the pace of technological innovation. First, demographically, the US population was quite young, and it’s characteristic of young people to learn and become more productive at a faster rate than their elders. Second, competent monetary policy and much reduced political uncertainty relative to the 1930s contributed to investment and capital formation, enabling the macroeconomy to exploit much more fully the space of technological possibilities that had already been opened up by the innovative 1920s and 1930s. Productivity growth slowed down in the 1970s because the exploitation of the technological backlog from the Depression and war years, as well as the demographic boost from the youthful post-WWII population, had played themselves out. Continue reading Did Border Closure Cause the Productivity Slowdown?