Month: May 2006

Following on my Op-Ed from yesterday, one loyal MR reader asks me, in an email, a few questions about immigration.  Here is my first cut at answers:

–Is there no amount of unskilled immigration that is too high? In other words, do you advocate open borders?

I don’t believe in open borders for today’s America.  I would increase current immigration quotas for all groups and allow illegals to move back and forth more readily.  Many current illegals would prefer to spend more time in their home country than is currently possible.  I don’t know exactly how much we can boost immigration and of course I don’t expect political progress on the issue.  But we should start with a twenty percent boost in the yearly quotas.    And how about another twenty percent increase two years later?

–Why do you have faith that federal policy can address the regionalized problems [with immigration] when you don’t trust federal policy to correctly judge which immigrant skills we ought to give priority?

I think the federal government is capable of giving more money to subsidize emergency rooms near the border.  This is an easier task than judging what professions we will need thirty years down the road.

–You mention the success of second-generation offspring of most immigrant groups, but let’s get real, this whole issue is about Mexicans, mostly, not Canadian economists. How have their offspring done? Of course, it might not even matter; if you’re right that a growing supply of unskilled labor isn’t bad, then does it make any difference if the second generation is also unskilled?

David Card and others have plenty of data on how well the second and third generations of Latinos do in assimilating and entering the mainstream of American life.  I find the overall portrait a reassuring one.  I will look for data on Mexicans per se and let you all know if I find anything useful. 

N.B.: If the quality of current Mexican immigration is "lower than you would like," keep in mind the current mix is partly an artifact of current immigration law, which encourages the least rooted and the most desperate to cross the border.   Young male teenagers are those who least mind being cut off from returning home.  Allowing immigrants to come and go would raise the quality of the pool.

"The book is called judge and jury and it’s not just the juries that we put on trial."  That’s from the online video of AEI’s event on my book, Judge and Jury: American Tort Law on Trial.

The Mexican government has tapped international markets to issue a
special catastrophe bond to finance rescue and rebuilding in case of a
disastrous earthquake, finance ministry…

Swiss Re, the Zurich-based reinsurance group, issued the bonds,
which pay 230 basis points over the Libor benchmark interest rate.

"If
there’s no disaster in three years," the finance minister, Francisco
Gil Diáz, said, "the investors keep the premium and the interest" and
get back the bond.

But if a quake hits, the  government gets the full value of the bonds, and investors lose their money.

Catastrophe
bonds were started in the 1990’s, and have largely been issued by
private companies to cover losses from natural disasters. Taiwan is the
only other government that has issued such a bond against a quake, but
it covers damages from losses.

In Mexico’s case, the government
collects the $450 million in the bonds and the insurance payout if a
quake of 7.5 or 8 magnitude on the Richter scale hits specific regions,
regardless of damage. Mr. González Anaya said that meant the government
would have money for rescue operations immediately after a disaster.

Mexico has a special fund for natural disasters but the fund has only $80 million.

Last
year, the Mexican government spent $1.2 billion to cover rescue and
rebuilding operations after Hurricanes Stan and Wilma. Mr. González
Anaya hopes to issue a similar kind of catastrophe bond against
hurricanes.

Here is the full story.

Less is certainly not more for the American Economic Association. According to David Warsh’s latest column, Broader, Deeper, they have adopted plans to produce four more economic journals, all titled – prosaically enough – American Economic Journal. They will cover macroeconomics, microeconomics, economic policy and applied economics.

Here is much more information.  Is this good news?  I fear greater fragmentation in an already-splintering profession.  Could this mean fewer idea pieces and greater room for excess specialization?  I like the idea of whacking commercial journal publishers but is it wise to centralize so much influence in one centrally-chosen set of editors?

I am again writing with the excellent Daniel M. Rothschild.  Read it here, registration is free and (relatively) simple.  Excerpt:

Gianmarco Ottaviano of the University of Bologna and Giovanni Peri of the National Bureau of Economic Research have shown that immigrants and low-skilled American workers fulfill very different roles in the economy. For instance, 54% of tailors in the U.S. are foreign-born, compared with less than 1% of crane operators. A similar discrepancy exists between plaster-stucco masons (44% immigrant) and sewer-pipe cleaners (less than 1% foreign-born). Immigrants come to the United States with different skills, inclinations and ideas; they are not looking to simply copy the behavior of American workers.

Addendum: Here is a link without registration.

The Why Not? guys, Ian Ayres and Barry Nalebuff, have another great idea (Forbes, reg. req.).  Instead of earmarking lottery revenues to education (which is mostly a charade since money is fungible), why not earmark the revenues to private retirement accounts?

A lottery savings ticket would look just like
a lotto ticket, scratch like a lotto ticket, cost a buck and pay out
the same prizes. The only difference would be that half the revenue
would be earmarked for a personal retirement savings account rather
than for education. There would still be about a third for prizes and
the remainder for administering the game.

Setting up a personal retirement account would
be no more difficult than setting up a mutual fund. Players would
receive a swipeable card that would automatically credit a portion of
each losing ticket to the player’s retirement account…

Some 20 million Americans spend at least
$1,000 a year on lottery tickets. For these heavy purchasers the new
tickets would increase their personal savings by $500 a year. Invested
over 40 years, these savings tickets would generate an expected
retirement nest egg of $200,000. This is a lot of money for the mostly
not very prosperous crowd who buy lottery tickets every week.

The biggest defect of the idea is that by lowering the price of lottery tickets it will increase the quantity demanded.  Nevertheless, I don’t think the elasticity is that high and I am confident that savings would go up.

It is incredible that many poor people spend more on lottery tickets than on retirement.  My non-bleeding heart libertarian friend would point out that this shows how much poverty is due to irresponsibility and he would probably be right.

Nevertheless, Adam Smith said the goal of social policy is to create institutions like the market that channel self-interest in ways that redound to the social interest.  Call me a libertarian paternalist, if you must, but I like how lottery savings tickets channel failures of reason and prudence in ways that redound to the individual’s self-interest.

Thanks to Carl Close for the pointer.

Legislation creating the "H-Prize," modeled after the privately funded
Ansari X Prize that resulted last year in the first privately developed
manned rocket to reach space twice, passed the House Wednesday on a
416-6 vote. A companion bill is to be introduced in the Senate this
week….

The measure would award four prizes of up to $1 million every other
year for technological advances in hydrogen production, storage,
distribution and utilization. One prize of up to $4 million would be
awarded every second year for the creation of a working hydrogen
vehicle prototype.

The grand prize, to be awarded within the next 10 years, would go for breakthrough technology.

From CNN.