Immigration and liberty

One of the areas of legitimate discussion amoung libertarians (and all groups, I suppose) is the attitude toward immigration. There are any number of formal an informal institutions that develop that shape immigration - Benjamin Friedman in The Moral Consequences of Growth presents an interesting thesis that the short term attitude toward immigration and immigrants is shaped by both the level and health of economic activity and the perception of agents within the society regarding their relative position in the economy.

Voluntary exchange and processes are generally positive sum while contraints on the ability to use ones' own knowledge for ones' own aims in the absence of coercion generate perverse are negative sum and lead to unintended consequences and, due to the path dependent nature of change, long term threats to liberty and freedom, expansion of the state (the enforcement mechanism for limits on freedom) and reinforce the intolerance that undermines a civil society.

Tyler Cowen writes persuasively about this issue (Oct. 31 NY Times):

How Immigrants Create More JobsBy TYLER COWEN
Published: October 30, 2010

The campaign season now drawing to a close, immigration and globalization have often been described as economic threats. The truth, however, is more complex.

Over all, it turns out that the continuing arrival of immigrants to American shores is encouraging business activity here, thereby producing more jobs, according to a new study. Its authors argue that the easier it is to find cheap immigrant labor at home, the less likely that production will relocate offshore.

The study, “Immigration, Offshoring and American Jobs,” was written by two economics professors — Gianmarco I. P. Ottaviano of Bocconi University in Italy and Giovanni Peri of the University of California, Davis — along with Greg C. Wright, a Ph.D. candidate at Davis.

The study notes that when companies move production offshore, they pull away not only low-wage jobs but also many related jobs, which can include high-skilled managers, tech repairmen and others. But hiring immigrants even for low-wage jobs helps keep many kinds of jobs in the United States, the authors say. In fact, when immigration is rising as a share of employment in an economic sector, offshoring tends to be falling, and vice versa, the study found.

In other words, immigrants may be competing more with offshored workers than with other laborers in America.



The study referred to above:

http://papers.nber.org/papers/w16439

Immigration, Offshoring and American Jobs
Gianmarco I.P. Ottaviano, Giovanni Peri, Greg C. Wright
NBER Working Paper No. 16439
Issued in October 2010
NBER Program(s): ITI LS


How many "American jobs" have U.S.-born workers lost due to immigration and offshoring? Or, alternatively, is it possible that immigration and offshoring, by promoting cost-savings and enhanced efficiency in firms, have spurred the creation of jobs for U.S. natives? We consider a multi-sector version of the Grossman and Rossi-Hansberg (2008) model with a continuum of tasks in each sector and we augment it to include immigrants with heterogeneous productivity in tasks. We use this model to jointly analyze the impact of a reduction in the costs of offshoring and of the costs of immigrating to the U.S. The model predicts that while cheaper offshoring reduces the share of natives among less skilled workers, cheaper immigration does not, but rather reduces the share of offshored jobs instead. Moreover, since both phenomena have a positive "cost-savings" effect they may leave unaffected, or even increase, total native employment of less skilled workers. Our model also predicts that offshoring will push natives toward jobs that are more intensive in communication-interactive skills and away from those that are manual and routine intensive. We test the predictions of the model on data for 58 U.S. manufacturing industries over the period 2000-2007 and find evidence in favor of a positive productivity effect such that immigration has a positive net effect on native employment while offshoring has no effect on it. We also find some evidence that offshoring has pushed natives toward more communication-intensive tasks while it has pushed immigrants away from them.

Survey of knowledge

Like Boyes I begin my classes with a simple survey - I ask the following:

1. Who is the "father" of communisim?

2. Who is considered the "father" of capitalism?

In the 15+ years of surveying introductory students of economics (freshmen or sophomores) well over 50 per cent can answer Marx to the first question. Under 5 per cent answer Smith to the second and over two thirds cannot even venture a guess.

This tends to support Boyes, very, very few of our students have exposure or retention to the big ideas that shape the discourse of freedom, liberty and responsibility.

Tidbits

Watching the Obama Press Conference following the election a reporter asks "What can the government do to create jobs?"

If you have not done so go to youtube and find Linda McMahon asking Richard Blumenthal how you create a job. Amazing and to think Blumenthal won.

At the beginning of every MBA course (and often other courses) I teach, I have them fill out a survey. The survey is noted below:
Part 1
The following asks for your opinion. A scenario describing a problem is presented and four possible ways to solve the problem are provided. For each of the possible solutions to the problem listed under each scenario, choose which of the following five options best represents your attitude.
a. Completely agree
b. Agree with slight reservations
c. Neither agree nor disagree
d. Disagree with slight reservations
e. Completely disagree

SCENARIO 1:
At a sight-seeing point, reachable only on foot, a stand selling bottled water has been established. The bottled water is sold to thirsty hikers. The price is one dollar per bottle. Early each morning 100 bottles are carried up the hill. On a particularly hot day 200 hikers want a bottle of water. How do you evaluate the following means to distribute the water among the hikers.
Raising the price on the water until the number of hikers willing and able to purchase the water equals the water available.
Allocating the water on a first come first serve basis at $1 per bottle.
The government decides who gets the water.
Having the hikers enter a lottery to see who gets the water.


SCENARIO 2:
The normal number of consumers purchasing gas at the Mobil station is 1000 per day. The station could handle no more than 1200 per day. The day following a news report of possible gas shortages, 3000 cars show up to purchase gas. Using one of the five listed choices above, please indicate how you feel about the following ways to allocate the gas.
.An increase in the price until the number of people willing and able to purchase the gas equals the amount offered for sale.
Selling the gas at the same price on a first-come-first-served basis.
The government buys the gas and distributes ration coupons according to its own judgment.
Selling the gas following a random procedure such as a lottery to determine who receives the opportunity to purchase the gas.

SCENARIO 3:
Hot dog vendors at the local baseball stadium have limited ability to cook hot dogs and they keep running out of hot dogs before the 7th inning. Using one of the five listed choices above, please indicate how you feel about the following means to solve the hot dog shortage at ballgames.

Increase the selling price of hot dogs until sales drop enough so that the vendors stop running out of hot dogs before the end of the game.
Pass out just the same number of coupons as there are hot dogs to fans when they enter the stadium and require a coupon to purchase a hot dog.
Have the vendors start selling later in the game, that is, prohibit the vendors from selling hot dogs until the 5th inning.
Limit the number of vendors who are walking through the stands selling hot dogs.



SCENARIO 4:
A huge snowstorm in upstate New York causes the demand for snow blowers to increase dramatically. So many people want snow blowers that stores begin to run out and many people who say they really need this equipment are having trouble obtaining it. This problem should be solved by:
Allowing the price to rise so those who are willing and able to pay the highest prices get the limited number of snow blowers.
Require that snow blowers be sold only to those people who have snow blower coupons issued by the local government.
Require that stores selling snow blowers not raise prices and use a lotter to decide who gets to buy one.
Require that stores not raise prices and use a first come first serve rule until sold out of snow blowers.


SCENARIO 5:
A doctor is able to handle 30 patients per day on a normal day. One day the flu has sent more than 60 patients to the doctor. Evaluate the following ways to decide who gets to see the doctor.
the doctor raises the price until the number the doctor can see equals the number willing and able to pay the price.
the first patients to show up at the office get to see the doctor – later arrivals don’t get to see the doctor
the government decides who is to see the doctor.
a lottery takes place and the winners get to see the doctor.

SCENARIO 6
There are many more kidney patients needing new kidneys than there are kidney donors. Using one of the listed five choices above, please indicate how you feel about the following means to distribute the kidneys among the patients.
Allow the patients to pay donors a price sufficient to equalize the number of kidneys needed or demanded and the number provided.
Allocate the organs on a first-come-first-served basis.
The government pays for the operations and provides the organs according to its own allocation system.
Provide the organs according to a random procedure such as a lottery to see who receives the organs.


SCENARIO 7
The internet is becoming so popular worldwide that access is congested; many people are unable to sign on when they want. How would you evaluate each of the following solutions to the congestion problem?
Allow internet users to pay a fee to obtain access to the internet. The fee would rise or fall as the number of users rose or declined.
The government decides who gets access to the internet.
Each person simply attempts to get access – those attempting to obtain access first would get access while those attempting later might be denied.
A lottery is held and the winners receive access for a given period of time.

Part 2
Who is John Locke?



Who is Adam Smith?



Who is John Keynes?



Who is Milton Friedman?



What are natural rights?



What are rights? List as many as you can.


Try it and see what your outcome is. Out of 85 students none chose the market in every scenario and only 6 chose it when dealing with health care. Only 3 students got the second part correct.

No wonder a reporter asks "How does the government create jobs?"

The Theory of Moral Sentiments - Part 4

Podcast 4

This is a fascinating portion of the book and Klein's discussion is illuminating as he uses the twin concepts of: spectatorial and organon to understand Smith's cosmology. I really can't do justice to Klein's analysis - I recommend a listen of this podcast.

The Quiet Coup - Magazine - The Atlantic

This interesting article is referenced a an excellent blog post.

I follow this Russian blog and recommend it, like the Economist or the Financial Times, an outside persepective of the US is often insightful. This blog - Sublime Oblivion writes:

Introducing the Karlin Corruption Index (KCI)the scale is 10 (least corrupt) to 1 (Most Corrupt - interestingly North Korea is a 2 with 4 areas in the 1 spot.) and the blogger describes the US as an 8 trending to a 7


You might also click over to his Democracy ratings to see if you agree that on his 6 level scale the US is slipping rapidly toward illiberal democracy. (he says about the US - ■USA – highest prison population; corporatist surveillance state; runs transnational Gulag; increasingly arbitrary power structures, institutional groundwork being laid for Caesarism? (1, 2); but strong freedom of speech traditions relatively unmarred by PC & libel laws; strongly trending to Illiberal Democracy. ↓↓)


Writing about corruption:

These are countries where corruption begins to acquire big dimensions amongst the elites, but remains small at the lower rungs. The United States (↓) is here because privileged corporations enjoy extensive government largess, often at the expense of ordinary citizens (especially in the defense, oil, and financial services sectors). For the skeptics, The Quiet Coup by Simon Johnson is required reading.

The trends are negative. Corporate influence (disguised under Tea Party populism) is growing under the “socialist” (LOL) Obama administration: the overturning of corporate funding limits on political campaigns, BP’s requisitioning of Louisiana police to suppress freedom of speech, and the uncontrolled growth of the privatized anti-terrorism sector are just three examples that come to mind. Though these might not make it into the considerations of the experts and businesspeople gauging US “transparency”, I don’t think that makes it any less corrupt for all that.

Though the elites feed off the public trough, corruption is much less prevalent at lower levels. In countries like Russia or Mexico, corruption in institutions like the traffic police is the rule; in the US it isn’t even an exception – it’s practically unheard of. That’s because in rich, socially cohesive nations, corruption is simply too expensive for simple people. For this reason, I think the US is still above a 6 at the very least, and probably above a 7. But as the popular saying goes, the fish rots from the head. If the economy stagnates and corrupt elites continue misleading the public with “spontaneous” Astroturf organizations, then who knows, by 2020 you could be driving down Route 101 when a policeman pulls you ever and asks if you want to “reach an understanding”.

Other countries in this category include the UK (↓), France (↓), Japan and Israel (↓), where things are ostensibly all prim and proper but the elites live by different rules from the rest in the darker corners. US states like Texas, New York, California and Ohio are probably in this category.



Simon writes in the Atlantic:

The oligarchy and the government policies that aided it did not alone cause the financial crisis that exploded last year. Many other factors contributed, including excessive borrowing by households and lax lending standards out on the fringes of the financial world. But major commercial and investment banks—and the hedge funds that ran alongside them—were the big beneficiaries of the twin housing and equity-market bubbles of this decade, their profits fed by an ever-increasing volume of transactions founded on a relatively small base of actual physical assets. Each time a loan was sold, packaged, securitized, and resold, banks took their transaction fees, and the hedge funds buying those securities reaped ever-larger fees as their holdings grew.

Because everyone was getting richer, and the health of the national economy depended so heavily on growth in real estate and finance, no one in Washington had any incentive to question what was going on. The Quiet Coup - Magazine - The Atlantic

The Newfoundland lesson: during the 1930s, long before the IMF, the British Empire coped with a debt crisis in a small country. - Entrepreneur.com

As the frequency of developing country debt crises will testify, there is often a contradiction in the modern era between democracy and debt. Voters elect governments that pursue populist policies which lead to debt crises. The countries then turn to the International Monetary for help. The IMF attempts to impose conditions that set the stage for economic slumps. The governments became highly unpopular and sometimes suffer counterrevolutions. The recent histories of Indonesia and Argentina are case studies in such a process. But there are other less dramatic examples in Latin America, Africa, and Asia of tension between democracy and IMF-driven austerity.

The Newfoundland lesson: during the 1930s, long before the IMF, the British Empire coped with a debt crisis in a small country. - Entrepreneur.com

Acne Cream? Tax-Sheltered. Breast Pump? No.

No surprises here . . . after one stops laughing one might reflect on the unintended consequences of an expanding state sector coupled with an amazingly complex tax code.

From Oct. 26 NY Times

Denture wearers will get a tax break on the cost of adhesives to keep their false teeth in place. So will acne sufferers who buy pimple creams.

People whose children have severe allergies might even be allowed the break for replacing grass with artificial turf since it could be considered a medical expense.

But nursing mothers will not be allowed to use their tax-sheltered health care accounts to pay for breast pumps and other supplies.

That is because the Internal Revenue Service has ruled that breast-feeding does not have enough health benefits to qualify as a form of medical care.