Month: February 2012

How is immigration different in 2012?

Loyal MR reader V has a request:

1. Engage with the arguments by Sailer and his ilk that Mexican immigration is different than the waves of the 1920′s, 1880′s, etc.

Specifically, they cite the example of New Mexico, current Latin America, evolving California, etc. where class-based hierarchies that closely mirror IQ differences have proven remarkably stable to all sorts of interventions over the time span of centuries (whether peaceful in the case of NM or violent in the case of the Mexican revolution).

Also, they point out that communication differences as well as the changed nature of the economy now (i.e., many fewer blue collar manufacturing jobs that transition families between immigrant manual labor to white collar knowledge industry workers, fewer overall manual labor jobs such as garment factories, the presence of a welfare state, etc.) make assimilation a much harder proposition.

Interesting to see what Tyler and Alex have to say in response to these arguments…

To that list I would add that, related to TGS, the negative effect of immigration on U.S. educational norms has been more significant than it otherwise might have been.  On the other side of the ledger, here are a few relevant factors:

1. The slower influx of Mexicans (100,000 a year vs. a former 500,000 a year) means that assimilation will from now on proceed more rapidly, and certainly more rapidly than the critics had been predicting.

2. The effect of Latino communities in lowering crime rates and revitalizing neighborhoods and cities has been stronger than might have been expected twenty years ago.

3. The notion that Latino migrants to the U.S. might help seed and sustain a broader Latin American economic and democratic boom has become a reality, and this was not obvious twenty years ago.

4. The idea that “the New World” will become a major trading bloc to rival “Chinese Asia” is a more important idea than it might have seemed twenty or even ten years ago.  The United States needs extensive Latin connections to maintain its status as active leader of that bloc.

5. Outsourcing is more of a force than we had thought, and the possibility of outsourcing raises the (relative) gains from allowing immigration.  I will write more on this in the future, so I’ll leave the details for now.

Overall, the arguments on immigration have changed quite a bit in the last ten to fifteen years, but those changes have cut in both directions.

Robin Hanson’s theory of young consultants

The puzzle is why firms pay huge sums to big name consulting firms, when their advice comes from kids fresh out of college, who spend only a few months studying an industry they previous knew nothing about. How could such quickly-created advise from ignorant college students be worth the millions paid? Why don’t firms just ask their own internal recent college grads?

Some say that consulting firms use their access to collect data on best practices, data that other firms are eager to pay for. But while this probably contributes, I find it hard to see as the main effect.

My guess is that most intellectuals underestimate just how dysfunctional most firms are. Firms often have big obvious misallocations of resources, where lots of folks in the firm know about the problems and workable solutions. The main issue is that many highest status folks in the firm resist such changes, as they correctly see that their status will be lowered if they embrace such solutions.

The CEO often understands what needs to be done, but does not have the resources to fight this blocking coalition. But if a prestigious outside consulting firm weighs in, that can turn the status tide. Coalitions can often successfully block a CEO initiative, and yet not resist the further support of a prestigious outside consultant.

To serve this function, management consulting firms need to have the strongest prestige money can buy. They also need to be able to quickly walk around a firm, hear the different arguments, and judge where the weight of reason lies. And they need to be relatively immune from accusations of bias – that their advice follows from interests, affiliations, or commitments.

All three of these functions seem to be achieved at a low cost by hiring good-looking kids from our most prestigious schools. These are the cheapest folks you can buy with our most prestigious affiliations, they are smart enough to judge where reason lies, and they have few prior affiliations to taint them with bias. They can not only “borrow your watch to tell you the time,” but can also cow you into submission in accepting that time.

Yes the information contained in consulting advice can be obtained elsewhere at a lower cost. Firms could hire most any smart independent folks, or set up a prediction market. But alas those sources don’t have the raw strength of status to cow opponents into submission, opponents who in practice can block changes no matter what a CEO declares.

So mine is a signaling and status story (surprise surprise). The weight of status often decides outcomes, no matter what the CEOs commands, and so CEOs often need to bring out status ringers, to cow opponents into submission.

Here is a bit more.

Pennsylvania black markets in everything

After lifting a ban on porcupine hunting, the Pennsylvania Game Commission ran into a thorny problem: reports of a new black market for the rodents’ meat in Southeast Asia.

Intelligence reports indicated that people were seeking Pennsylvania porcupines to sell illegally for human consumption in Vietnam, commission officials said.

The eight-member commission responded this week by reversing course and ending a nine-month-old policy of virtually unlimited porcupine hunting during most of the year. Instead, it voted to impose a limit of 10 porcupines per hunter per year. The original limit had been six per day.

The story is here.  I enjoyed this sentence:

Commission spokesman Jerry Feaser said that he could not comment on specifics of any investigation resulting in the change, but that no known porcupine trading was taking place.

And I learn there is such a thing, legally speaking, as “nuisance porcupines.”

For the pointer I thank Jonathan Geeting.

Assorted Launching Links

Paul Howard of the Manhattan Institute talks with me about innovation in a fun podcast (mp3) and here is my earlier Econ Talk with Russ Roberts. I was also interviewed by Davin O’Dwyer for the Irish Times. Launching also has a new cover, shown at right. Here is one bit from the Irish Times:

The new normal is that we’re going to go back to where China and India are going to be playing huge roles. That definitely means that our relative status is going to fall. We’re not going to be, either the US or Europe, the powerhouse we once were. We’re not going to be the giant in the land of the Lilliputians. But, in an absolute sense, we can continue to do well and even better than before. I like to say that if you invent a cure for cancer, that’s great, that’s fantastic. If your neighbour invents a cure for cancer, that’s almost as great.


The new Charles Murray book

Kevin Drum offers comment:

…is it really true that back in 1963 the “upper tribe” and the “lower tribe” were more similar than they are today? It might seem that way in retrospect, but it sure didn’t at the time. It didn’t seem that way to Gunnar Myrdal or Michael Harrington, anyway. Overall, I can pretty easily buy the “Apart” piece of the title, but I’m a lot less sure about the “Growing” piece. For every example of a way in which top and bottom have diverged over the past 50 years, I suspect that you could also find an example of ways in which they’ve converged. It’s just that Murray wasn’t looking for any of those.

Perhaps electronic communications is one example, or maybe air conditioning, paging Don Boudreaux.  Sharing a greater number of absolute benefits is an extra commonality, for instance sharing “telephone plus internet” is more in common than just “everyone has a telephone,” even if the absolute number of differences is rising too.

This “mood affiliation” review is from a Rortybomb pointer I believe, excerpt:

Murray can’t tell you what really caused the class divide in marriage because the class-based changes in families he laments closely track the class warfare of the 1%. Up through the mid-’80s, upper class and working class divorce rates rose and fell together. Starting in 1990, the lines diverged, with the divorce rates of college graduates falling back to the level of the mid-sixties (before no-fault divorce) while the divorce and non-marital birth rates of everyone else continued to rise.

Do all the other social indicators follow this same pattern?  Did religiosity decline because of privileges for the wealthy and class warfare?  Are we supposed to think that broadly stagnant incomes for the lower classes caused more divorce for those individuals?  Didn’t stagnant incomes set in around 1973, with parts of the 1990s being relatively good times for the labor market?  In other words, those divorce rate and other social indicator changes are not the fault of the top one percent as this review would have you believe.  This latter point in the review makes more sense to me, though I don’t read it as contra Murray:

Third, women’s employment increased in the same period and women’s wages gained the most vis-à-vis men at the bottom of the income scale. As recently as 1990, women of all educational levels earned about the same percent of the hourly wages of men with the same education. To the extent the gendered “wage gap” varied, college educated women enjoyed slightly more parity with men than working class women. By 2007, the wage gap varied dramatically by class. College-educated women earned a smaller percentage of the hourly income of their male counterparts, while the wage gap between working-class men and women shrunk substantially.

…The result: a change in family norms. College-educated women postpone childbearing, invest in their careers, and conduct a long search for a compatible and reliable mate.

But does he have the stones to write “A hypergamy theory of changing social indicators”?

The liberation of American women also damaged the quality of public education, by removing the implicit subsidy of so many “captive” and smart female laborers.  I would say that the non-wealthy did not have good norms to deal with women’s liberation and maybe they could not have had such norms.  It’s time to come to terms with that history.  I am willing to embrace it, though I am not sure Murray is.

I’ve now read the book and I think it is very good, very well-written, and considerably more bulletproof than some of the critics are suggesting.  That said, not much in it surprised me or changed my views; admittedly these are areas where I’ve been doing a lot of reading lately.

The real unemployment rate?

Similar variations of this adjusted unemployment rate make headlines now and again. Our colleague Ed Luce, for instance, noted in December that “if the same number of people were seeking work today as in 2007, the jobless rate would be 11 per cent”.

But what is striking about the broken line above isn’t where it now ends — at 10.3 per cent — but rather the lack of any meaningful, sustained improvement for more than two years.

This alternative measure has remained above 10 per cent since September 2009, and aside from a bit of skittishness (some of which is down to uncaptured seasonality) has mostly just moved sideways.

That is from Cardiff Garcia, here is more.

Why is the quality of American governance so low?

Frank Fukuyama writes:

Conversely, I would argue that the quality of governance in the US tends to be low precisely because of a continuing tradition of Jacksonian populism. Americans with their democratic roots generally do not trust elite bureaucrats to the extent that the French, Germans, British, or Japanese have in years past. This distrust leads to micromanagement by Congress through proliferating rules and complex, self-contradictory legislative mandates which make poor quality governance a self-fulfilling prophecy. The US is thus caught in a low-level equilibrium trap, in which a hobbled bureaucracy validates everyone’s view that the government can’t do anything competently. The origins of this, as Martin Shefter pointed out many years ago, is due to the fact that democracy preceded bureaucratic consolidation in contrast to European democracies that arose out of aristocratic regimes.

The post is interesting throughout.

Human Capital

Nick Schulz has an interesting introduction to recent work on immigration and human capital that includes this figure:

The human capital stock is probably over-estimated since it imputes the value of non-market time at market wages but even counting non-market time at zero (not correct either) would give a human capital stock of $212 trillion, about 5 times the physical capital stock. Thinking about human capital reminds us that debates about immigration and education are debates about investment.

Youth unemployment across Europe

Here is more, hat tip goes to Greg Ip.

Addendum: Do read the excellent comment by Peter Whiteford, for instance:

The unemployment ratio – that is, the number of unemployed people over the population rather than the labor force is arguably a more consistent indicator across countries.

Have a look at,_2008-2011Q3,_%28%25%29.png&filetimestamp=20120127135533

This shows that while in Greece for example, the unemployment rate for youth was around 46% the unemployment ratio was around 10% – nearly half of those in the labour force were unemployed, but only a little over 20% of all the people in the age group were in the labour force.