A key thread in this discussion has been the entrepreneurial expression that responds to institutional incentives. Institutions that are adaptively efficient tend to incentivize market entrepreneurship which stimulates innovative, wealth creating activity. This is in contract to formal institutions that attempt to impose a set of rules upon society. This is illustrated well in the discussion of the labor market in the US, specifically in protection of jobs and limits to immigration.
Russ Roberts directs us to the NPR story - The Jobs Of Yesteryear: Obsolete Occupations. This multimedia presentation reflects the absurdity of a centralized, tops down imposition of workplace/occupational protection - the kind we see today in the US in the auto and textile industries.
The familiar limit on labor mobility is discussed over on The Coordination Problem.
The impact of institutional efforts to dominate free choice are seen above. I tend to find the blogger's reaction intriguing and convincing as an example of the constrained vision.
Ending minimum wage laws is one of four planks in Horwitz's Urban Renewal Program:
1. End minimum wage laws
2. Legalize drugs
3. End occupational licensure laws
4. School choice/competition
I think even more important to the discussion of opportunity, choice and liberty is the issue of immigration. A new NBER - The Effect of Immigration on Productivity: Evidence from US States by Giovanni Peri speaks to this issue and, I think, provides fruitful ground for a debate about the role of liberty and freedom when thinking about immigration.
Much like the atmosphere during the Great Depression when the populism of Coughlin and Long found a receptive audience, the atmosphere of the Great Recession brings Limbaugh, Beck, Olbermann replaying the totalitarian, fascist tune that is the heart of the intolerant opposition to freedom and responsibility. Benjamin Friedman points out the regularity of this intolerance in The Moral Consequences of Growth and I can't help but wonder, when this predictable and threatening 21st century cacophony of populist fear and intolerance which echoes Father Coughlin in the 20th century and the aptly named Know Nothings of the 19th century will inevitably fade away
Or am I being unreasonably sanquine in my expectation that, once our economy recovers, Friedman's analysis will hold, and a greater sense of tolerance resulting not from increased awareness, but from a perceived advancement of standard of living will dampen the populism.
Peri reports a number of distinct findings. First, immigrants do not crowd-out employment of (or hours worked by) natives; they add to total employment and reduce the share of highly educated workers, because of their larger share of islow-skilled relative to native workers. Second, immigrants increase total factor productivity. These productivity gains may arise because of the more efficient allocation of skills to tasks, as immigrants are allocated to manual-intensive jobs, promoting competition and pushing natives to perform communication-intensive tasks more efficiently. Indeed, a measure of task-specialization of native workers induced by immigrants explains half to two thirds of the positive effect on productivity.
Third, Peri finds that inflows of immigrants decrease capital intensity and the skill-bias of production technologies. The decrease in capital intensity comes from an increase in total factor productivity; the capital-to-labor ratio remains unchanged because investment rises coincident with the inflow of immigrants. The reduction in the skill-intensity of production occurs as immigrants influence the choice of production techniques toward those that more efficiently use less educated workers and are less capital intensive.
Finally, Peri finds that for less educated natives, higher immigration has very little effect on wages, while for highly educated natives, the wage effect of higher immigration is positive. In summary, he finds that a one percent increase in employment in a US state, attributable only to immigration, is associated with a 0.4 to 0.5 percent increase in income per worker in that state.
In a time of economic stagnation the emotional populism of totalitarians outweighs the traditional adaptive efficiency of a free and open society. Our history suggests that this destructive force ebbs and flows with the business cycle, perhaps we have suffered the apex of the populism reacting to the Great Recession. Pera suggests that it would be in the interest of society if we did.
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