Good for Thee and Good for Me

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Economist Bryan Caplan (whom I have had the honor of knowing since he was an undergraduate at UC Berkeley) has an elegant refutation of those who argue against immigration on the grounds that immigrants are “pulling down our standard of living” by depressing per-capita income.



5 Responses to “Good for Thee and Good for Me”

  1. Charles N. Steele

    Caplan’s example is similar to one in Bjorn Lomborg’s “Skeptical Environmentalist”: data show that world per capita grain output is falling.

    So can we conclude the world is, on average, getting hungrier? No…

    Disaggregated, the data show that per capita grain production in the developed world — where population is stagnant — is constant. Per capita grain production is increasing in the rest of the world — where population is growing.

    The net effects are 1) less per capita grain production for the whole world, and 2) more grain consumed per person in the developing world with no change in consumption in the developed world. The world is better fed.

    Statistics don’t lie, but neither do they confess everything.

  2. Yes, if the assumption that “immigration makes both natives and immigrants richer” is correct. But is it? Is not the rate of capital accumulation vs population accumulation the key?

  3. Tom G. Palmer

    An interesting question. A few things should be kept in mind. First, there is no reason to believe that immigrants are not capital accumulators. In fact, they tend to have very high rates of savings (i.e., of capital accumulation). Also, remember that people accumulate human capital in the form of skills, as well. Second, remember that it’s averages that can be misleading. The immigrants might be better off, as they are now working with more capital than was available in the old country, but even without any diminution in capital available for those who are already residents, the average capital per worker might decline, hence a diminution in average product, although all of the products are as high or higher than they would have been otherwise. There would be a diminution in the marginal product of residents only if capital were fixed, say, as it might have been before the advances in agricultural productivity, so that what mattered was simply how much land was under cultivation, so that more extensive cultivation was the only option, and intensive cultivation were not possible. But with technological advances, we are able to engage in more intensive use of resources. I see no reason to expect that an increase in population under modern conditions and with relatively free-markets and security of property would lead to a diminution in the capital available per worker.

  4. Yes, it all depends. What seems to be missing from much of the for (and against) immigration arguments by free-market economists is what is the cause of economic growth and prosperity, with the implication in many cases being that it is a matter of more (or less) people coming into the country. If the argument was about how does a country grow rich and capital accumulation were omitted, most free market economists would presumably be worried; but when it comes to immigration, this key argument for the free market and (sometimes even) the institutions that sustain it seem to go missing. The impression is left that a country just magically becomes rich without capital accumulation or because it has a lot of cheap labour coming in. But labour may seem cheap when factors such as productivity (due to capital accumulation — through which much human capital can only be applied; the same goes for technology) are left out of the argument. Division of labour, comparative advantage and free trade within a country are important points in the discussion, but what state would a country be in without savings or capital accumulation to underpin them?

  5. Charles N. Steele

    This comment arrives a bit late, but…

    1. Julian Simon’s “The Economics of Immigration” develops a theoretical argument, with empirical analysis, that suggests that the overall effect of immigration in the U.S. is to raise the standard of living for the “natives” — the people already there. See esp. Ch. 10.

    2. New York Times just reported on research (I can email the cite to anyone wanting it) that shows that *illegal* immigrants are major contributors to U.S. Social Security and hence are helping stave off problems with it. They also pay substantial income tax.

    3. Simon’s book points out that immigrants use very few gov’t services, compared with natives…hence immigrants, and esp. illegals, do more than the average native to reduce federal deficits — a good thing if we are worried that continued deficits will harm the country.