Month: June 2006

Chiswick refutes Chiswick

Barry Chiswick, head of the economics department at the University of Illinois at Chicago and a respected scholar of immigration, had a surprisingly poorly argued op-ed in the NYTimes.  Here’s the opening paragaraph:

It is often said that the American economy needs low-skilled foreign
workers to do the jobs that American workers will not do. These foreign
workers might be new immigrants, illegal aliens or, in the current
debate, temporary or guest workers. But if low-skilled foreign workers
were not here, would lettuce not be picked, groceries not bagged, hotel
sheets not changed, and lawns not mowed? Would restaurants use
disposable plates and utensils?

On the face of it, this assertion seems implausible.

… If the number of low-skilled foreign workers were to fall, wages would increase.  Low-skilled American workers and their families would benefit…

Bizarrely, the rest of his op-ed explains why these statements are mostly wrong!  First, the lettuce:

A farmer who grows winter iceberg lettuce in Yuma County, Ariz., was
asked on the ABC program "Nightline" in April what he would do if it
were more difficult to find the low-skilled hand harvesters who work on
his farm, many of whom are undocumented workers. He replied that he
would mechanize the harvest. Such technology exists, but it is not used
because of the abundance of low-wage laborers. In their absence,
mechanical harvesters – and the higher skilled (and higher wage)
workers to operate them – would replace low-skilled, low-wage workers.

In other words, if the number of low skilled workers were to fall the lettuce would no  longer be (hand) picked and low-skilled American workers would not benefit from an increase in wages!

What about lawn mowing and hotel cleaning?

Facing higher costs, some homeowners would switch to grass species
that grow more slowly, to alternative ground cover or to flagstones.
Others would simply mow every other week, or every 10 days, instead of

Few of us change our sheets and towels
at home every day. Hotels and motels could reduce the frequency of
changing sheets and towels from every day to, say, every third day for
continuing guests, perhaps offering a price discount to guests who
accept this arrangement.

And how about this for a pathetic attempt to get the environmentalists on board the anti-immigration bandwagon?

Less frequent lawn mowing and washing of hotel sheets and towels would reduce air, noise and water pollution in the bargain.

Note how reduction in services, denied in paragraph one, has now become a virtue!

Chiswick also points out that:

With the higher cost of low-skilled labor, we would import more of some
goods, in particular table-quality fruits and vegetables for home
consumption (as distinct from industrial use) and lower-priced
off-the-rack clothing.

That is correct, but this is another reason why restricting the immigration of low-skilled workers will not much increase the wages of low-skilled Americans.

Chiswick makes statements in his op-ed like the "increase in low-skilled workers has contributed to the stagnation of wages for all such workers."  But unlike my Open Letter he never tries to quantify these assertions.  Yet he surely knows that an 8% decline is on the high end of such estimates and a zero percent decline on the low-end.

Quantifying, however, would put the immigration and wages issue in perspective which is that immigration is at worst a small contributor to the decline in the wages of low-skilled workers.  Indeed, economists are agreed that technology, not immigration, is by far the more important force which is why any serious attempt to raise the wages of low-skilled workers must begin with efforts to raise skills.

In my TCS article I said:

Immigration makes immigrants much better off. In the normal debate
this fact is not considered to be of great importance — who cares
about them? But economists tend not to count some people as worth more
than others, especially not if the difference is something so random as
where a person was born.

Chiswick, however, lets the economists down.  He never once mentions the benefits of immigration to the immigrants.

Should we get rid of the penny?

Greg Mankiw says yes, and I am inclined to agree.  When I lived in New Zealand, they didn’t have Kiwi pennies and no one minded.  My problem, however, is that I don’t know what to do with sales tax (New Zealand had a General Services Tax [correction: Goods and Services Tax], akin to a VAT).  In essence we would have to abolish sales tax on "small" items.  That idea warms my libertarian heart, but what is then to stop suppliers from selling a car piece by piece, painted inch by painted inch?  (But of course they wouldn’t ring it up that slowly at the cash register.)  Must we eliminate sales taxes altogether?  Or can the law accurately specify what is the "natural unit" of a given commodity purchase?  Inquiring minds wish to know…

Here are some relevant links on penny elimination.  It is an interesting microeconomic (macroeconomic?) problem to figure out which prices get rounded up to the nearest nickel and which prices get rounded down.  A related question is why businesses do not already round to the nearest nickel; of course some do.

Virginia Postrel is Mad

No one is more familiar with the ethics of organ donation than Virginia Postrel so when she says that the National Kidney Foundation is behaving reprehensibly you can be damn sure she is right.

The National Kidney Foundation
is behaving reprehensibly, especially given its mandate. When I first
got interested in organ donations, I naively thought that the
foundation would be in the business of doing everything possible to
encourage kidney donations. I was terribly wrong. The group vehemently,
and successfully, opposed a bill that would have allowed tests of incentives for organ donors. (CEO John Davis brags
here, scroll to second item.)

So determined is the NKF that kidney donors should never, ever, in any
way be compensated for their organs–no matter how many kidney patients
current policy kills–that the organization is now trying to stamp out public discussion of the idea. When they heard that AEI is planning a conference
on the subject for June 12, they wrote a letter to AEI president Chris
DeMuth suggesting that the conference shouldn’t be held. The letter
from NKF chief Davis (PDF available here) opens:

The officers and staff of the National Kidney Foundation (NKF) were
surprised to learn that AEI has scheduled a forum entitled "Buy or Die:
Market Mechanisms to Reduce the National Organ Shortage" that will be
held on June 12, 2006. …we believe that the concept of financial
incentives has been adequately debated for 15 years, begining with the
National Kidney Foundation’s 1991 workshop on "Controversies in Organ
Donation," and culminating in the definitive Institute of Medicine
(IOM) report that was issued late in April 2006. We don’t see how an AEI forum would contribute substantively to debate on this issue. [Emphasis added.]

In other words, "We’d like to maintain our monopoly on the policy debate, so please shut up."

…For more background on the policy debate, see previous posts here, here, and here. Marginal Revolution blogger and GMU economist Alex Tabarok takes a detailed look at incentives here.

Goa ramblings

The monsoon is far less scary when they turn on their windshield wipers or for that matter when they have them.  For abandoned rusted tankers in the water, Goa is #1.  For non-abandoned rusted tankers, Goa also does well.  Many are carrying iron ore to China.  The Portuguese colonial churches are eerily like colonial Brazil, yet no one lives in old Goa any more.  My guide claims the state of Goa is 45 percent Christian.  My hotel practices Restaurant Apartheid and won’t let me sit with the Indian customers.  They try to talk me out of eating the Goan foods ("don’t you want the chicken breast Sir?  Very nice pastries…", etc.).  The white pumpkin curry is amazing.  Goa is far less densely populated than I had expected; the major city has only about 80,000 people.  One meal experience can involve being served by eight different people, none of whom ever stand more than ten feet away from you and each of whom you must say goodbye to.  Need I compare this to Bordeaux?  Cashews are the gift of choice.  When it stops pouring, which does happen occasionally, women flock to the beach in beautifully colored saris.  My taxi driver looked quite a bit like me; I believe he has Portuguese blood as I do.  I have read that the state of Goa has the highest per capita income in India; this appears to come from the entire distribution and not just from the peaks.  Malcolm Gladwell books are seen everywhere, as is Freakonomics, which has Angelina Jolie on the cover.  There is less here than I had thought but I’ve ended up liking it more.  Next is Hyderabad, and back to work.

Internet hunting in China

It began with an impassioned, 5,000-word letter on one of the country’s
most popular Internet bulletin boards from a husband denouncing a
college student he suspected of having an affair with his wife.
Immediately, hundreds joined in the attack.

"Let’s use our keyboard and mouse in our hands as weapons," one
person wrote, "to chop off the heads of these adulterers, to pay for
the sacrifice of the husband."

Within days, the hundreds had
grown to thousands, and then tens of thousands, with total strangers
forming teams that hunted down the student, hounded him out of his
university and caused his family to barricade themselves inside their

Here is the full story.  One Chinese hunter is happy to defend the trend:

"What we Internet users are doing is fulfilling our social
obligations," said one man who posted a lengthy attack on the college
student and his alleged affair. "We cannot let our society fall into
such a low state."  Asked how he would react if people began
publishing online allegations about his private life, he answered, "I
believe strongly in the traditional saying that if you’ve done nothing
wrong, you don’t fear the knock on your door at midnight."

Here is a previous post on comparable developments in Korea.

China Threat?

Fred Kaplan has a good piece in Slate on the role the China threat plays in American defense politics:

Every day and night,
hundreds of Air Force generals and Navy admirals must thank their lucky
stars for China. Without the specter of a rising Chinese military,
there would be no rationale for such a large fleet of American nuclear
submarines and aircraft carriers, or for a new generation of stealth
combat fighters—no rationale for about a quarter of the Pentagon’s
budget. In Secretary of Defense Donald Rumsfeld’s Quadrennial Defense Review,
released this past February, the looming Chinese threat is the explicit
justification for all the big-ticket weapons systems that have nothing
to do with fighting terrorists or insurgents.

Read the whole thing for an assesment of China’s true capabilities.  Even more important is that rich, capitalist nations are much less dangerous than poor, communist nations.  Consider how well China has treated Hong Kong.  Moreover, democracy will not be long in coming to China.

Thanks to Fred Hamden for the pointer.

How to get your kid into a better college

The only out-of-school activity that increased the likelihood of a
student ending up enrolled at an elite college was parental [sic] visits to
art museums.

That is correlation, not causation, but I believe you can thread out the implied lessons.  Read more here.  How about this?

Two types of participation made it more likely students would end up at
elite colleges: yearbook or school newspapers and “hobby clubs.”  …Numerous activities had no apparent impact on whether or not students
will end up in college – elite or otherwise. School plays,
interscholastic individual sports, intramurals, cheerleading, academic
honor societies, public service clubs – no impact is clear from any of

Here is one author’s home page, full of fascinating material.  Here is the other guy.  What do you all think of these results?

Is autocracy bad for growth?

Gordon Tullock frequently tells me there is no good economic argument for democracy, if we adjust properly for economic variables such as the absolute state of development.  After all, much of the European miracle occurred under non-democratic conditions, not to mention the golden ages of China or modern Singapore.  But now Kevin Grier and Mike Munger argue from the empirics that democracy is better for economic growth.  In particular:

New dictatorships grow very slowly, and very old dictatorships grow very slowly. But durable dictatorships in the middle years actually grow nearly as fast as democracies. A nonlinear specification fits almost exactly.

It is a tricky question which economic models of autocracy this is consistent with (try your hand at this in the comments).  Here is part of the paper’s abstract:

In this paper we study a large unbalanced annual panel of 134 countries covering the period 1950 – 2003. We show that autocracies grow almost one percentage point slower than non-autocracies, holding constant the effect of regime length on growth…

I usually tell Gordon that the costs of keeping out democracy are prohibitive for most contemporary societies; that alone should tip the balance in favor of democracy.  Sources of economic power and sources of political power have to stand in some sort of equilibrium relationship if stability is to persist.  Singapore is an exception because it is a) very small, b) disciplined by world markets to an extreme degree, and c) its citizens realize that its "democracy" would otherwise collapse into identity politics of the three major ethnic groups; they therefore do not demand so much democracy.

Gordon never agrees.  Here is the paper and further discussion.  More importantly, here is Kevin on stereo equipment and tubes.

Betting markets in (almost) everything

Spelling bees:

Will the winner be wearing glasses? Will it be a boy or girl? Will the final word have an "e" in it?

The odds on the former proposition are 4-7, but they won’t let you bet on the individual identities of the little demon tykes. 

In addition, here are some unusual insurance markets.

Addendum: The contest was decided by German words, here are the results.

India fact of the day

a large part of that [Indian fiscal] deficit goes to financing the losses of the electric companies. Two and a half percent of GNP goes into power subsidies [emphasis added]; only half the electricity that’s generated actually gets paid for. Some of the other half goes in unfortunate (we economists think) programs to give free power to the farmers. Unfortunately, the farmers who qualify for free power are the ones who are rich enough to be able to afford power in the first place. But having gotten free power, they let their neighbors tap into it. That’s another portion of the power goes that way. Then there are those who tap the lines. It’s dangerous, but people know how to do it. So half the power doesn’t get paid for even while there’s a big increase in the fiscal deficit, while one has very expensive power for those who do pay, which includes large industry. What do you do if you’re an industrialist with power that costs more to buy than you can generate it for? You buy a generator, which is socially wasteful. A lot of the investment in India is wasted by companies’ generating their own power so as to bypass the power system. So while there have been some attempts at privatizing the power sector and at imposing a regulatory system, there are still big problems at the moment.

Here is the longer article.

Blogging becomes life?

Imagine having to live out what you blog.  Have I stepped into this world?

Here is my post from August:

Monsoon vacations. They are held in India, often Goa, during the rainy season.  "Come Feel the Rain" is the slogan.  The main customers?  Citizens from the United Arab Emirates (annual rainfall 120 millimeters).  They worry if they don’t get enough rain during their vacation.  Here is a hotel ad.  Here is one colorful travel journal from such a vacation.  I like this bit: 

Let the rains plan
Don’t force the pace. Meticulously planned tour itineraries can be reduced to paper-boats for your children to play with in muddy puddles. Let the monsoons dictate your schedule."

If this trend holds up, economics will no longer be my preferred topic of blogging.

How to rile Alex

Get him in front of some other bloggers and say:

It’s liability per se that isn’t justified by libertarian standards.  Under Lockean property rights theory, you own physical things, not the values of those things.  It is for this reason that if you set up shop next to a competitor, you are not infringing his property rights, even if his business ends up being  worth less.  So let’s say I steal your painting.  Yes, you do deserve your painting back.  It is yours.  But say I steal your painting and lose it or wreck it.  That should be the end of the story.  You never owned the "value of that painting."  You simply owned the physical painting.  You are not due compensation.  If you take my money as compensation for your loss, that is simply another theft.  All this talk about the "doctrine of rights forfeiture" is handwaving.  The forfeiture doctrine is a convenient utilitarian fiction (which I will partially endorse), not libertarian theory.  Rights aggressors do not, in fact, lose their own rights in turn.  Why should they?  Evreyone in prison is there unjustly and yes that includes murderers.  I will, of course, accept many of these injustices for utilitarian reasons; I am a good pluralist.