Robert Shiller on Open Borders

Nobelist Robert Shiller writes that the next revolution will be an anti-national revolution:

For the past several centuries, the world has experienced a sequence of intellectual revolutions against oppression of one sort or another. These revolutions operate in the minds of humans and are spread – eventually to most of the world – not by war (which tends to involve multiple causes), but by language and communications technology. Ultimately, the ideas they advance – unlike the causes of war – become noncontroversial.

I think the next such revolution, likely sometime in the twenty-first century, will challenge the economic implications of the nation-state. It will focus on the injustice that follows from the fact that, entirely by chance, some are born in poor countries and others in rich countries. As more people work for multinational firms and meet and get to know more people from other countries, our sense of justice is being affected.

Oddly, however, Shiller’s argument focuses not on immigration but on trade agreements. Trade agreements, he argues, will equalize wages through the factor price-equalization theorem but to do this we need a strengthening of the welfare state. The latter part of the argument and how it resolves with the former is, shall we say, underdeveloped.

Comments

In the future will focus on the injustice that follows from the fact that, entirely by chance, some are born in poor families and others in rich families. Nationalize all children. Actually, internationalize, since we're getting rid of borders too.

Brilliantly put, and exactly right. Bravo.

Perhaps we will some kind of large, all-powerful global government to distribute everything evenly. Because I'm not sure I trust the author's faith that "multinational firms" will be moved to simply give away all their wealth out of guilt and a sense of justice.

Shouldn't be a problem - we seem to have enough fans of that approach already! Maybe the climate police could do it in their spare time.

I thought it took a village, but I now know it takes a world. Villages, pffft.

I don't think Plato counts as the future.

Fascinating opinions by Shiller and Tabarrok. Let me express their unstated underlying assumption the best I can:

“We all agree that talents are equally distributed among populations. For example, the Pygmy people of central Africa (average height < 150 cm) are just as talented for playing basketball as the Dutch and the Latvians. The only reason there have not been any Pygmies playing in the NBA is the lack of opportunity and discrimination (in some parts of Africa, Pygmies are still occasionally hunted for food by the surrounding Bantu population).” Makes sense?

Is it fair that some people are born good looking and others are not? What incentive do people have to build anything if we don't accept the legitimacy of the nation state?

Pretty much the same we had prior to the nation state I would suggest.

Looking back at how little was built back in antiquity, I don't think that this is a great argument.

Hmmm. discovery of fire and the wheel. Discovery of how to find, refine and use metals and to create alloys. Basic building and construction techniques, basic irrigation. One might argue, I think probably fairly convincingly, that the existence of the nation state (as well as it's precursors in the forms of kingdoms, empires, and tribal town/city structures) could not have exists. That many of these developments have been refined and at least part of the incentive to do clearly benefit the nation state doesn't support the claim people simply didn't create prior to the state being there to get them organized, or educated or properly incented.

Does anyone proof-read?
One might argue, I think probably fairly convincingly, that the existence of the nation state (as well as it’s precursors in the forms of kingdoms, empires, and tribal town/city structures) could not have exists. That many of these developments have been refined and at least part of the incentive to do clearly benefit the nation state doesn’t support the claim people simply didn’t create prior to the state being there to get them organized, or educated or properly incented.
I tried to diagram these three "sentences" and could not.

Attributing things built after the rise of the nation state to the beneficence of the nation state is probably a careless analysis.

You mean super low taxation and private charity?

Before the nation state there wàs the 30 years war and then the holy r oman empire.

Before the nation-state, there were no world wars, and war was a much more limited affair that typically didn't involve the rest of society.

The 30 Years war caused far more death and destruction to civilian populations than WW I. 19th century nationalist wars - Prussia-Austria or Prussia-France - mostly avoided damage to civilians.

By Shiller's logic, no, any variation of circumstances of birth are unfair. They are not due to individual merit. This is a moral dispute with the premise of nation states.

Frankly, I think this is a good point to make when attempting to persuade people to be against income redistribution. I told asked my wife why she shouldn't be forced to have sex with some ugly/low status dude (yes, I see the jokes) periodically. Why is income distribution worth worrying about more than sex distribution?

"some are born in poor countries and others in rich countries"
A meaningless way to put it. Should be "some are born in poor people countries and others in rich people countries". It's not the physical space that makes the difference.

Actually according to Jared Diamond it is exactly the physical that makes the difference.

Then Diamond must perforce arrive at the same place the geneticists do: environment exerts selection pressures on the natives, who will evolve differently than homo sapiens in other locales. This was pointed out to him once, and I don't think he debates his Guns-Germs-Steel thesis in public any more.

Deadbeat Donald says Hitlery is for open borders. Does that mean all the libertaribros are gonna vote for her?

No, because Donald is a liar.

Isn't this an old idea? H.G. Wells disparaged the idea of nation-states in "Things to Come" in 1936, for just one example.

[obviously speculation, no data]

A great deal of the so-called nation state boils down to two things: language and racial characteristics. People feel closer if they speak the same language or if they seem from the same racial pool, however you want to define these.

In the future the issue of language is solved as we'll have automatic seamless translation pretty much integrated into our bodies and minds. The issue of race perhaps also, once augmented reality or other kinds of transformed realities become more important, perhaps even more important than what we know call physical reality.

So yes, the nation state will decline in importance as a way to organize the world. But nobody will be paying attention.

Are you sure that is the trend? English is the language of international trade, maritime and aviation but nationalism seems as popular as ever. If anything, places like Europe and the Middle East seem to be wanting to fracture even further. In the Anglosphere, the ideal of assimilation is being replaced by the ideal of multiculturalism.

The Olympics seem pretty popular too. Hard to imagine them without the existence of countries.

Were you paying attention in August? Way less popular lately...

@A-G: you're missing londenio's point. The singularity will make nation-states obsolete.

And nobody paid any attention to the World Cup in Rio in 2014. I hear that to revive interest in World Cup soccer, they are going to have corporations sponsor teams: Nike vs. Adidas, Coke vs. Pepsi. After all, nobody cares about nations anymore.

The singularity won't happen. And while we're engaged in wild speculation, I'll observe that breakdown of the demotic State will lead to private, mercantile agencies arising to offer a stable civil order in exchange for fees charged to their subscribers. Over time, leadership of these agencies will become hereditary.

History is cyclical, not linear.

@A-G: Take it up with londenio, I'm just translating.

It is not by chance that _my_ children were born in the country I inhabit.

Isn't that "by chance" characteristic somewhat appropriate for those unable to move elsewhere for simple bureaucratic reasons? But in your particular case, did you actually make a rational, calculated choice of the country in which you live for having children?

"Isn’t that “by chance” characteristic somewhat appropriate for those unable to move elsewhere for simple bureaucratic reasons?"

Isn't that begging the question? Not trying to be snarky.

If you point were merely that your children will necessarily be born in the country their mother is when they are born, well of course children are always (well just about as I think we've now done some cloning and fertilization of cells that can occur far from the biological "parent") born where their parents are seems to beg the question suggested. So what about my other question? Did you move to a specific country to have children?

If you answer no then I think we can says there is some change element to where any child might be born while clearly any specific child will be born in a very deterministic location. Perhaps we're making (on both side I suspect) too much of the phrase "by chance" in this context.

I think you misunderstand the point. One could postulate an alternative world where every 5 minutes people switched bodies and legal identities with each other. From that perspective, it is only "by chance" that I am me and get to benefit from my life history. But in the same way there is continuity of an individuals life over time, there is continuity across generations.

"One could postulate an alternative world where every 5 minutes people switched bodies and legal identities with each other."

I'm not an expert, but isn't this what Rawls does? Abstract away from the real lives of people, I mean moral agents?

I would assert it is equally "by chance" that some fetuses are executed through abortion. That some babies were denied life from spermicide or contraception. And that some babies were born as humans while others as non-human animals.

Most would dismiss these as flippant or daft and obnoxious assertions, but I genuinely don't believe they are any more outrageous than asserting that it is pure random chance where a baby is born.

https://www.youtube.com/watch?v=fUspLVStPbk

Wages will most certainly equalize.

In two directions

The people who have to follow the new internationalized rules will have their wages equalize downward

The people who make the new internationalized rules rules will have their wages equalized upward

Excellent.

And, I'll add, armies of economists will line up to legitimize the rules made up by the latter group.

'I think the next such revolution, likely sometime in the twenty-first century, will challenge the economic implications of the nation-state.'

But wasn't the Comintern a 20th century invention?

'It will focus on the injustice that follows from the fact that, entirely by chance, some are born in poor countries and others in rich countries.'

Yep, sounds like the Comintern - a select few are born into the capitalist class, but most are born into the proletariat.

'As more people work for multinational firms and meet and get to know more people from other countries, our sense of justice is being affected.'

Well, somebody hasn't been informed about Brexit yet, have they?

'Trade agreements, he argues, will equalize wages'

I'm guess he still thinks CETA, much less TIPP, will still be ratified by the EU.

"Yep, sounds like the Comintern"
Well, I guess Stalin was against national borders -- Poland's, Finland's, the Baltic states', etc.

+1

Only problem is that your list could go on, and on, Thiago.

The fervour of Communists for wrecking their own economies is only matched by their desire to export their unique brand of misery to their neighbours.

If Prof. Shiller would like to enjoy a cosmopolitan world, he is welcome to seek it out through self-deporting.

Did I mention that he is a Nobel Prize winner? Please bow before his genius and get in line.

Shiller isn't worth a post on this subject, even if the point is to poke gentle fun at him.

I admire Shiller for identifying a flaw (by some observers) in the system and proposing a solution. I suspect that Shiller's "flaw" is to others considered an opportunity: discrepancies in wages is a feature not a bug in the system. There are really two issues: (1) would the world be richer if wages are equalized or if discrepancies in wages continue to be exploited, and (2) would world peace (and cooperation) be promoted if wages are equalized or if discrepancies in wages continue to be exploited. Maybe Cowen has an opinion on (1). As to (2), we may soon find out with a clash between the U.S. led by President Trump (champion of American workers who lost their jobs to China) and China led by President Xi Jinping (champion of Chinese workers who are losing their jobs to Vietnam).

(1) would the world be richer if wages are equalized ...

World would definitely be poorer. Wages are higher in rich countries because a) workers there work with more capital b) higher human capital of workers in rich countries. Moving capital (plant and equipment) from richer to poorer countries has costs; workers with less human capital would be less productive, even when working with the same amount of capital. So, the world would be poorer.

We know what cultural and economic policies lead to growth and prosperity: objective rule of law, property rights, free markets, and minimal government regulation. Do you think the people in poor countries clamoring for the "right" to be as well off as those in rich countries will recognize these traits and want to implement them in their countries? Or do you think they will simply insist that they be "given" wealth in some kind of redistribution and not change their systems at all? What would be Shiller's answer to this? Who his answer even be relevant?

Some of the countries that have done best through trade have indeed succeeded on these metric. Take Taiwan for example. Rule of law is good, property rights, also good. Free market and a small government relative to the West, although it is sad to say they are now experiencing the same social justice / clamor for entitlements that we have in the West, so expect this to be the common trajectory.

If Shiller thinks trade is the answer, he is sort of assuming they will do what you state. The welfare part is isn't for the poor countries, its for the rich countries whose citizens can't compete, supposedly.

I think it may not be possible to have massive welfare states in the West. You will be faced by competition in higher and higher end products from the "graduates" of trading, and you will have low-skill immigration due to the safety net.

It seems just as likely that international trade will keep going until labor arbritage is over.

Then culture might become even MORE important because one incentive* to trade is gone.

*Buying products in China is not fun. I know of several US company CEO's who rejoiced the day they stopped doing that. The travel, the privation, the cost, the copying, quality issues etc.

What would be left of trade would be truly innovative products, possibly licensed production, raw materials, etc. (There would still be a ton of trade - it just wouldn't be based on low wages.)

"It will focus on the injustice that follows from the fact that, entirely by chance, some are born in poor countries and others in rich countries"

This is a moral judgement.

This crowd and Tabarrok in particular pretend the border/immigration debate is about "economics" driven by data, but the dispute is really purelly a moral one.

If you accept this basic belief in strict individual merit rather than family/cultural/group merit and believe that varying circumstances of birth are a grave injustice to be reduced, then open borders and an anti-national revolution is a completely logical and moral corollary.

Most of the world including almost all living societies never believed in anything close to such extreme individual merit. The idea of human family is a fundamental violation of individual merit. Inheritance too. As is child rearing by non state actors.

It's unfair that some people are born tall and unable to fly fighter jets-we should stunt the growth of children. It's unfair that some people are born more attractive and get more attention from the opposite sex-we should mutilate and scar children so no one is prettier. It's unfair that some people can run faster than others, we should ban foot races so no one feels excluded. It's unfair that some people can think up Uber and Farcebook- we should ban thinking!

Sounds like someone took Kurt Vonnegut's Harrison Bergeson short story as a how-to guide. Brilliant!

This might actually work. Expand the welfare state and open the borders. This incentivises welfare-seeking migrants to arrive who in turn vote for more welfare and open borders, creating a rapid self-immolation.

This leaves the states with defined borders and free market economies to thrive with fewer welfare-seeking people and less competition from the open-border states.

It's a devilishly clever flypaper strategy for filtering cultural attitudes to work and government.

"It will focus on the injustice that follows from the fact that, entirely by chance, some are born in poor countries and others in rich countries."

Can I ask, what chance is this?
Does he believe that before you are born there are souls waiting in a queue for for first available embryo?
Or is he saying that ALL of human history is chance? Surely a quasi-Marxist idea, no?

Schiller's argument would work if infants were transported to their new country immediately, instead of imbibing the same beliefs and practises that their forefathers pursued into the ground.

Schiller and the rest would get more traction with me if they acknowledged the large gap in achievement between migrants from China and those from Somalia.

People are different. They are not widgets.

Reason #3,221 for rise of Donald Trump.

Tone deaf, so called "elites".

THE YEAR WAS 2081, and everybody was finally equal. They weren't only equal before God and the law. They were equal every which way. Nobody was smarter than anybody else. Nobody was better looking than anybody else. Nobody was stronger or quicker than anybody else. All this equality was due to the 211th, 212th, and 213th Amendments to the Constitution, and to the unceasing vigilance of agents of the United States Handicapper General.

Some things about living still weren't quite right, though. April for instance, still drove people crazy by not being springtime. And it was in that clammy month that the H-G men took George and Hazel Bergeron's fourteen-year-old son, Harrison, away.

http://www.tnellen.com/cybereng/harrison.html

Genetic analysis and big data may do away with the moralisation of "merit" as anything other than a concept of healthy development and genetics.

And we wouldn't respond to appeals for the destruction of nationalism motivated by "Nationalism means that unhealthy people in the nation benefit before healthy people overseas!"

Schiller might see that as an injustice (the sick and old of the West benefiting from care not given the youth and healthy of poorer nations), but I don't think many would respond to it.

"Nationalism means that unhealthy people in the nation benefit before healthy people overseas!”

Watch it! Those unhealthy people are MY peeps, dude. And grandpa helped pay for my advanced degrees.

Injustice, he says, is now an act of God?

I'm skeptical of any social innovation that is qualitatively indistinguishable from mowing down the beneficiaries with a machine-gun.

Seems to me that the claim wages will equalize is entirely dependent on the underlying politics and legal settings in each of the countries.

It seems the point Shiller is making that as the world becomes more interconnected and as we interact more with people from other countries we will gradually come to see them as "more similar to ourselves" than "different from ourselves." In short, I think he's saying we'll gradually come to see each other more as simple humans and less as members of nationalities, and as such will want to see them treated similarly to ourselves in a trade framework.

I'm unsure if I agree to full extent, but I can see the trend moving that direction. The familiarity of easy cross-cultural contact makes it easier to see similarities than I expected.

You know..... Germany recently began a kind of open borders experiment..... maybe we should check out how well that's going before replicating it?

I live in Europe. This is about as much untrue as it gets.

Through intense and mostly unwanted contact with Muslim newcomers, native Europeans are becoming more and more nationalistic. Way more nationalistic. The differences between cultures are very real and can't be overcome without destroying parts of them.

To a Salafist, an infidel is Untermensch who should be subjugated, enslaved or converted, forcibly if necessary. Try building any mutual respect and tolerance around this attitude. No freaking way. And such ideas have made terrible inroads in the Muslim societies, including young Muslims in Europe, being tirelessly spread by Saudi/Wahhabist clerics paid from the Gulf.

I do not see any borderless utopia in the future. A very nasty tribal war, Syrian style, seems more likely to me. Certainly some locations of France (the notorious banlieues, the Calais Jungle) are already beyond rule of law.

Apples, apples, up on top! All of this must stop stop stop!

First we will need to brainwash everyone into a monoculture, a process which carries precisely zero risk of the mental enslavement of humanity, in order to reduce somewhat the risk of dischord in the process of integration on the other side of various borders.

Lots of savings in cultural production can be achieved by elimination of the superfluous cultural variation produced over the last tens of thousands of years. This will free us up to make more widgets, and we can watch the numbers grow higher and higher, and it will be very meaningful to us, because our monoculture can involve brainwashing to love lvoe love watching those statistics rise.

The assumptions are key to this argument of factor price-equalization theorem. Trade needs to be actual trade rather than multi-currency exchanges for this to work. Nation-states with developed economies have used policies to prevent this kind of race to the bottom when trading with lesser developed countries. In particular, restrictions on the export of technology (means of production), and tariffs on the import of high value added products. That is, ones with high profit margins that are typically produced by jobs that pay high wages and use high technology. See the seminal work by Friedrich List "The national system of political economy".

http://canonicalthoughts.blogspot.com/

A nation is an extension of tribe which is an extension of family. He thinks that somehow human beings will rise above this through what -- increase time spent with foreigners on video conferences? And factor-prize equalization is a goal to be achieved? For whom?

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