Bryan Caplan's Blog, page 151

How Diabolical is Unz's Proposal?, by Bryan Caplan

Ron Unz wants to raise the minimum wage to discourage illegal immigration.  The mechanism: The minimum wage raises unemployment for low-skilled workers, and illegal immigrants are very low-skilled.  His words:

In effect, a much higher minimum wage serves to remove the lowest rungs
in the employment ladder, thus preventing newly arrived immigrants from
gaining their initial foothold in the economy.

When I told Unz that I considered his plan "diabolical," he chuckled that he took my assessment as a compliment. 

To be "diabolical" is to be cleverly evil.  But Unz's critics often deny that he's even clever.  If employers are willing to break immigration laws, why does Unz think they won't break minimum wage laws as well?  The truth, though, is that Unz anticipated this objection:

The enforcement of these wage provisions would be quite easy compared
with the complex web of current government requirements and
restrictions. It is possible for business owners to claim they were
"fooled" by obviously fraudulent legal documents or that they somehow
neglected to run the confusing electronic background checks on their new
temporary dishwasher. But it is very difficult for anyone to claim he
"forgot" to pay his workers the legally mandated minimum wage.
Furthermore, the former situation constitutes something of a "victimless
crime" and usually arouses considerable sympathy among immigrant-rights
advocates and within ethnic communities; but the latter would
universally be seen as the case of a greedy boss who refused to pay his
workers the money they were legally due and would attract no sympathy
from the media, the police, juries, or anyone else.

Very stiff penalties, including mandatory prison terms, could assure
near absolute compliance. Virtually no employer would be foolish enough
to attempt to save a few hundred dollars a month in wages paid at the
risk of a five-year prison sentence, especially since the workers he was
cheating would immediately acquire enormous bargaining leverage over
him by threatening to report his behavior to the police.

Yes, Unz overstates.  People who employ a solitary illegal nanny, housekeeper, or gardener won't fret about the minimum wage.  Unless enforcement norms drastically change, your neighbors will effectively remain above the law.  But Unz's proposal would effectively shut illegal workers out the legal labor market - and that's where most of the jobs are.

Still, there is a way to make Unz's proposal even more diabolical.  I hesitate to reveal it, but I seriously doubt the nativists will listen.  The heart of darkness: Give a green card to any illegal immigrant who testifies against his employer for labor law violations.  You solve for the tragic equilibrium.



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Socialism Was Born Bad: The Case of Oskar Lange, by Bryan Caplan

Oskar Lange is arguably the most famous of the market socialists.  His fans often see him as a great spokesman for "socialism with a human face."  In the early 1990s, I attended a talk where Ken Arrow lauded Lange as a great friend of freedom.

While I always scoffed at this praise, I was still taken aback when I happened to read Lange's famous "On the Economic Theory of Socialism" (Review of Economic Studies, 1937).  His fans notwithstanding, Lange's views strikingly confirm my view that the socialist movement was "born bad."  Though Lange was an exceptionally economically literate socialist, his clarity of thought led him directly to a totalitarian vision that he gladly embraced.

You need not take my word for it.  Just read Lange's case against socialist gradualism - and remember that this is the era of Stalin.  [All italics original].

The opinion is almost generally accepted that the process of socialisation must be as gradual as possible in order to avoid grave economic disturbance. Not only right-wing socialists but also left-wing socialists and communists' hold this theory of economic gradualism. While the latter two regard a speedy socialisation as necessary on grounds of political strategy, they nevertheless usually admit that, as far as economic considerations alone go, a gradual socialisation is decidedly preferable. Unfortunately, the economist cannot share this theory of economic gradualism. An economic system based on private enterprise and private property of the means of production can work only as long as the security of private property and of income derived from property and from enterprise is maintained. The very existence of a government bent on introducing socialism is a constant threat to this security. Therefore, the capitalist economy cannot function under a socialist government unless the government is socialist in name only. If the socialist government socialises the coal mines to-day and declares that the textile industry is going to be socialised after five years, we can be quite certain that the textile industry will be ruined before it will be socialised. For the owners threatened with expropriation have no inducement to make the necessary investments and improvements and to manage them efficiently. And no government supervision or administrative measures can cope effectively with the passive resistance and sabotage of the owners and managers.

Why not compensate owners to forestall these problems?

[T]o be fully effective the compensation would have to be so high as to cover the full value of the objects expropriated. The capital value of these objects having been maintained on an artificially high level by monopolistic and restrictionist practices, the compensation would have to be far in excess of the value of these objects in a socialist economy (and also under free competition in capitalism). This would impose on the socialist government a financial burden which would make any further advance in the socialisation programme almost impossible. Therefore, a comprehensive socialisation programme can scarcely be achieved by gradual steps. A socialist government really intent upon socialism has to decide to carry out its socialisation programme at one stroke, or to give it up altogether. The very coming into power of such a government must cause a financial panic and economic collapse. Therefore, the socialist government must either guarantee the immunity of private property and private enterprise in order to enable the capitalist economy to function normally, in doing which it gives up its socialist aims, or it must go through resolutely with its socialisation programme at maximum speed. Any hesitation, any vacillation and indecision provokes the inevitable economic catastrophe. Socialism is not an economic policy for the timid.

Macabre words to write four years after Stalin's decidedly "untimid" collectivization program.  Is it possible that Lange was a concern troll trying to destroy revolutionary socialism from within?  Highly unlikely.  His conclusion, though mannerly, is vintage romantic socialism in the spirit of Lenin - or even Sorel.

Marshall placed caution among the chief qualities an economist should have. Speaking of the rights of property he observed: " It is the part of responsible men to proceed cautiously and tentatively in abrogating or modifying even such rights as may seem to be inappropriate to the ideal conditions of social life." But he did not fail to indicate that the great founders of modern economics were strong not only in caution but also in courage. Caution is the great virtue of the economist who is concerned with minor improvements in the existing economic system. The delicate mechanism of supply and demand may be damaged and the initiative and efficiency of business men may be undermined by an improvident step. But the economist who is called to advise a socialist government faces a different task, and the qualities needed for this task are different, too. For there exists only one economic policy which he can commend to a socialist government as likely to lead to success. This is a policy of revolutionary courage.

At least Lenin was honest enough to call his policy revolutionary "terror."  But it's just two perspectives on the same policies.  For Lange - like the other founding fathers of socialism - courage is the courage to practice terror.

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The Worst They Can Do, by Bryan Caplan

All modern governments do terrible things during wartime.  Most deliberately murder innocents; the rest at least recklessly endanger innocents.  Morally speaking, all sides in any serious military conflict are led by war criminals.

Unfortunately, however, these genuine insights often lead my fellow pacifists astray - and hinder the quest for peace.  The problem: People easily slide from the moral claim that "The people running government X are deliberately doing great evil" to the descriptive claim that "Negotiation with the people running government X is hopeless."  When we're talking about modern governments, the two claims have little connection. 

How is that possible?  Suppose government X bombs one village in your country, killing a hundred innocents.  Before you spurn negotiation, you ought to ask, "How does what X did compare with the worst X can do?"  If government X had enough firepower to level a hundred villages, the fact that they only destroyed one village raises a big question: How come they only did 1% of the evil that was in their power?

There are many possible answers.  Maybe they're saving their bombs for other victims.  Maybe they're trying to trick you into surrendering, so they can commit atrocities at their leisure.  Etc.  But the most obvious explanation is, "They feel at least a little bit guilty about killing innocents, so they're trying to kill the minimum number necessary to achieve their war aims." 

Morally speaking, that's a crummy excuse.  Pragmatically speaking, however, it's a great opportunity.  It's a chance to calm down and ask, "What exactly are X's war aims?"  "Would giving in to their demands really be so bad?"  "Would they settle for a bit less?"  Etc.  These seem like naive questions... until you compare what your enemy is doing to the worst your enemy can do.

Hawkish Americans should actually welcome these observations.  Since the end of World War II, the United States has plainly not done the worst that it could do.  Not even close.  Imagine how much the U.S. could have extorted by using its four-year nuclear monopoly to the hilt.  Picture what U.S. occupation forces could have done to the Communist Parties of France and Italy.  Think how easy it would have been for the U.S. to assume control of the British, French, Dutch, and Japanese Empires if it had been willing to summarily execute anti-colonial activists.  The fact that the U.S. government killed a few million innocent people rather than a billion is, to put it mildly, damning with faint praise.  But it strongly suggests that even abjectly appeasing the United States was not only livable, but preferable to the Cold War that actually happened.

Of course, some sides do approach the worst they can do.  Yes, the Nazis.  But focusing on the ratio of actual to potential evil-doing remains a powerful pacifist heuristic.  Why?  Because, thanks to in-group bias, human beings readily rationalize their unrestrained evil-doing as the only non-suicidal response to their opponents' infinite evil.  And if the rationalizers honestly tested their infinite evil hypothesis by picturing the worst their enemies can do, they would often have to reject the hypothesis.  This would deprive them of their own lame excuse for limitless evil-doing.  This could in turn undermine hawkish arguments on the other side, potentially starting a virtuous spiral.  That's hardly a guarantee - but war is no guarantee either.

Pacifists, I'm dismayed to admit, have often apologized for totalitarian atrocities.  Critics could claim that my "worst they can do" heuristic is a thinly-veiled apology for Western atrocities.  They should give me the benefit of the doubt.  I'm not apologizing for anyone.  My claim is simple: Peace requires negotiation, and the mere fact that one side has done great evil does not show that negotiation is futile.  If you seek to weigh the viability of negotiation, it is far wiser to compare the ratio of actual to potential evil.  Peace-makers of all parties should spread the word.

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Question for Scott, by Bryan Caplan

Scott writes:

Would you feel comfortable telling an accident victim in a wheelchair
that "his type of person" is disproportionately composed of drunks? If
not, be careful in making generalizations about the unemployed.

My question for Scott: Would you feel comfortable telling someone who drove drunk, got in an accident, and ended up in a wheelchair that, "You're to blame for your problem"?  Despite my views on desert, I personally would keep my mouth shut. 

But doesn't the search for truth require economists - like judges - to set etiquette aside and go wherever the evidence leads?

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Open Borders Day Roundup, by Bryan Caplan

Many good things about open borders for Open Borders Day via Open Borders.  Imbibe.

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A Curiously Uncurious Interview: The Nation, Unz, the Minimum Wage, and Immigration, by Bryan Caplan

My debate opponent Ron Unz says he's abandoning his California minimum wage initiative for lack of funds.  The Nation's Sasha Abramsky responds with a soft-hitting interview.  The low point:

You just mentioned undocumented migrants in the context of
your minimum wage proposal. You've been accused of being anti-immigrant
in the past--you successfully pushed a California initiative to roll back
bilingual education, attracting a lot of ire in the process--and you've
certainly framed your minimum wage proposal as being something that
could deter illegal immigration by creating more of an incentive for
legal residents to take low-end jobs. Are you anti-immigrant?

The immigration issue destroyed the Republican Party in California;
it wasn't a good thing to be the anti-immigrant party in a state where
half of the population is made up of immigrants and their children. I
have a very pro-immigrant orientation, but I do think it's important
that America shift back to the ideology of the melting pot and away from
ethno-separatist policies that we pursued over the last ten or twenty
years.

Abramsky's follow-up question:

Beyond the impact on illegal immigration, talk about what else raising the minimum wage would achieve.

The minimum wage is a much more effective means of solving many of
these economic problems in our society than many of the proposals that
have been more popular on the liberal and progressive side in the last
few years. Take social spending: a lot of social welfare programs tend
to be leaky buckets. One reason people don't want their taxes to be
increased is they have a sense a lot of the money will be burned up in
the system and will never really go to the beneficiaries. Well, with the
minimum wage the money goes straight to the person who has a paycheck.
At a stroke, so many workers are no longer so poor they no longer
qualify for anti-poverty programs--which makes conservatives much
happier. The minimum wage is basically people working at their jobs.
We're talking about raising income by $5,000 for an individual and
$10,000 for a couple.

The follow-up questions I would have been itching to ask Unz:

1. You favor a higher minimum wage in order to increase unemployment for illegal immigrants, leading them to self-deport or stay home in the first place.  Isn't this a reason for cosmopolitan progressives to oppose raising the minimum wage?

2. If raising the minimum wage is bad for illegal immigrants, wouldn't abolishing the minimum wage be good for them?

3. If raising the minimum wage will sharply increase unemployment of illegal immigrants, why won't it at least noticeably increase unemployment of natives?

4. If raising the minimum wage will noticeably increase unemployment of natives, why on earth are you so confident that raising the minimum wage will reduce social welfare spending?  Sure, raising the minimum wage modestly reduces social welfare spending on the folks who keep their jobs.  But it sharply increases social welfare spending on the folks who lose their jobs.  No?!

Returning to the actual interview:

Why did you, a self-proclaimed conservative libertarian, end
up championing what would be the nation's highest state-level minimum
wage?

My background is in the sciences. I'm a physicist by training. I tend to look at issues on a case-by-case basis.

If I'd been the interviewer, this would have been my "gotcha" moment.  What I would have said:

I've got a copy of your Intelligence Squared debate transcript right here.  In it, you say:

Now, you know, I'm laboring under a disadvantage in this debate because
not only am I not a trained economist, I've never even taken a class in
economics.

I've never even opened an economics textbook. I
personally don't claim to really understand most economics. I'm not
convinced everybody else understands economics that well either.

Ron Unz, is that what you learn in physics?  To pontificate on subjects before you even open the textbook?!

I'm pleased to hear that Unz is abandoning his initiative for lack of funds.  I would have been overjoyed, however, if Unz abandoned his initiative because he finally got around to reading an econ textbook.

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Would (Our) Open Borders Lead to (Their) Closed Borders?, by Bryan Caplan

My Facebook friend Anna Krupitsky asks a great question:

Let's imagine: if United Stated today opened its borders, how many countries and how soon would close theirs for people leaving?

There's ample evidence that ending emigration restrictions leads to more immigration restrictions.  Most notably: As long as Communist border guards eagerly shot anyone trying to leave their Workers' Paradises, the U.S. tended to welcome anyone who got out alive - like my wife's family who escaped Romania in the 70s.  Once Communist governments opened their borders, however, the U.S. swiftly changed course.  The new policy was to minimize the exodus from behind the former Iron Curtain - even if the successor governments remained deeply oppressive.  It's almost as if U.S. policy were motivated more by Cold War public relations than a deep-seated commitment to human liberty.

Anna's question, though, is whether liberalizing immigration restrictions would lead to emigration restrictions.  In countries that already restrict emigration, this scenario is easy to believe.  But what about the vast majority of countries that don't currently restrict emigration?  Would liberalization really lead more than a handful to this desperate and humiliating measure?  Think of the most unanswerable words a Kennedy ever spoke: "Freedom has many difficulties and democracy is not
perfect, but we have never had to put a wall up to keep our people in,
to prevent them from leaving us."

Your thoughts?  Please show your work.

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The Marital Return to Education: An Epiphany, by Bryan Caplan

Suppose college graduates out-earn high school grads by $30,000 a year.  Naive analysts will tell you, "Finish college and you'll get a $30,000 raise."  The clever, however, will warn you about ability bias.  The kind of people who become college grads usually have pre-existing advantages - intelligence, work ethic, conformity, and more.  Some of the $30,000 earnings gap reflects the pre-existing advantages college grads bring to the table, rather than their education.  In The Case Against Education, my best guess is that only 55% of the earnings gap is causal.  Given an apparent college premium of $30,000 a year, your true college premium is 55%*$30,000=$16,500.

Now suppose that as a result of going to college, you end up marrying a fellow college graduate.  How much does this raise your expected family income?  Assuming your spouse works, the tempting answer is, "$16,500 - the same as it does for me."

On reflection, however, this is a serious mistake.  When you marry a college grad, you wed the whole college package - extra education PLUS the pre-existing ability that typically accompanies that extra education.  So your family income doesn't rise by 55% of $30,000; it rises by 100% of $30,000!  Key insight: College graduation helps you marry into the high-education, high-ability pool, changing the identity of your spouse.

The precise mechanism is immaterial.  Maybe you
directly meet your spouse in college.  Maybe your college degree gets you a job where you meet fellow college grads.  Maybe college grads only
date their own kind.  As long as your education somehow causes you to
marry a college grad, you're in the money.

Notice: This argument for ignoring spousal ability bias does not apply if you are already married.  When you tie the knot, your partner's pre-existing ability changes from a variable to a constant.  So if your current spouse decides to pursue a college degree, you should only expect your family income to rise by $16,500 after graduation.

In the real world, of course, there's a large (but shrinking) gender gap in the marital return.  The average male gets a bigger absolute payoff in the labor market, and therefore gets a smaller absolute payoff in the marriage market.  The average female gets a smaller absolute payoff in the labor market, and therefore gets a larger absolute payoff in the marriage market.  As I've previously explained, though, switching from two one-person households to one two-person household saves so much money that even the higher-earning spouse normally profits from marriage.

In any case, most people plan to marry someone.  Given this preference, the marginal payoff of your education in the marriage market would be large even if marrying per se didn't save you a dime.  If you're going to split your income with another person, you want that person to be rich.  And in our society, extra schooling is one of the most effective ways to make that happen.

Lest I be misunderstood: I'm not claiming that gold-digging is a common motive for education, and I'm certainly not advocating gold-digging.  My claim, rather, is that regardless of their conscious intentions, the well-educated strike even more gold than you'd think.

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Immigration: My Eyes Work Fine, by Bryan Caplan

Critics of my open borders advocacy often accuse me of intellectual blindness, of living in a fantasy world of my own creation.  So rather than rehash any of my arguments or review the academic evidence yet again, I'm going to celebrate Open Borders Day by listing the facts about immigration I see with my own two eyes.

1. I see immigrants - legal and illegal - working hard, without complaining, struggling to make a better life for themselves and their families.

2. I see immigrants - legal and illegal - contributing far more to the world than they could possibly have done at home.

3. I see natives happy to hire and patronize immigrants - and rarely fretting about these immigrants' legal status.

4. I see that people call me out of touch because I live in Fairfax instead of in a poor immigrant neighborhood.  But they don't think themselves out
of touch because they live in America instead of the Third World.

5. I see that almost all natives break the law on a regular basis.  Almost everyone drives over 55 mph on the freeway, for starters.  But few natives feel guilty about breaking laws that seem unreasonable, and almost no one wants to crack down on natives who break such laws.

6. The typical illegal immigrant who "went back where he came from" would drastically reduce his family's standard of living and make the world a poorer place.  If following the 55 mph speed limit is unreasonable, so is following U.S. immigration law - to put it mildly.  But I see the same natives who break laws every day condemn illegal immigrants as criminals, and yearn to crack down on them.

7. If the typical low-skilled immigrant stayed home and tried to improve his political system, he would have near-zero chance of success.  But I see that natives are quick to condemn immigrants for failing to reform their polities.

8. Virtually all of the complaints leveled against immigrants also apply to many natives.  I see that native women who enter the workforce make life harder for native men competing for the same jobs.  I see that low-income natives who have children cost taxpayers money.  I see that young natives vote overwhelmingly Democratic.

9. These standard complaints about immigrants are widely viewed as a good reason to exile immigrants to their often wretched birth countries.  When the same complaints are leveled against natives, though, the standard reactions I see are apathy, fatalism, and even denial.

10. The standard complaints about immigrants are widely treated as good reasons to exile virtually all immigrants to their often wretched birth countries - even when the specific complaint plainly doesn't apply to many immigrants.  For example, when people complain about immigrant crime, I never see them say, "Since young males commit virtually all serious crime, this is obviously only an argument against young male immigrants."

11. Most arguments for immigration restriction are equally good arguments for government regulation of natives' fertility.  But I see that almost everyone favors immigration restrictions, and almost no one favors fertility restrictions.

12. I see that almost everything immigrants do makes their critics angry.  The critics are angry when immigrants work, and angry when they're on welfare.  The critics are angry if immigrants are visible, and angry if immigrants keep to themselves.  The critics are angry if immigrants increase housing prices and angry if immigrants reduce housing prices.

13. I see that human beings have a strong bias against out-groups - but partially restrain these biases to avoid social disapproval.

14. I see that, in our society, this social disapproval is unusually mild when the out-group is current illegal immigrants, and near-zero when the out-group is would-be illegal immigrants. 

Put it all together, and what do I see?  I see human beings without the good fortune to be born in the First World escaping poverty through honest toil.   I see these largely admirable people singled out for public scorn and legal persecution.  And I see that the reason for their ill-treatment is not that they're breaking the law, taking jobs, using welfare, or any other choice they make, but because the foreigners in our midst and the foreigners at the gates are the last easy outlets for out-group bias. 





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Open Borders Day is Starting, by Bryan Caplan

March 16 is Open Borders Day, an international holiday to raise awareness of the single most important policy issue of the modern world.  Open Borders Day is a time to reflect on the many immigrants - legal and illegal - that we see all around us - and to contrast their value with the callous and cruel treatment they endure in virtual silence.  More importantly, it is a time to reflect on the far more numerous immigrants you can't see.  Why not?  Because virtually every country on Earth considers being born in the wrong country a crime worthy of lifelong exile.

Blog, Facebook, Tweet, and otherwise publicize under #OpenBordersDay.  I'll do a round-up of the best of Open Borders Day when the day is done.

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