Fair is fair, Brad DeLong shall now name the forbidden candidate. Brad and I have reached agreement on sundry matters concerning immigration, liberalism, and the welfare state. Here is Brad’s response to my challenge:

“In response to my evangel, Tyler Cowen throws down the gauntlet:

Marginal Revolution: Brad DeLong tries to convert me: Finally, I’ll offer Brad a deal. I will refuse to vote for the Presidential candidate he specifies (guess who that might be), if he will write in his blog, with no subsequent irony or repudiation the following: “The classical liberal recipe of increased immigration is superior to strengthening the welfare state. I just don’t think it will or can happen, so I will advocate the next best thing.” As a pure freebie, I will in advance volunteer the concession that most tax systems should be mildly progressive rather than flat or regressive. [That’s Brad quoting me, if you are confused, now back to Brad.]

I can deal with the no irony or repudiation part, but there do have to be three clarifying footnotes:

Footnote 1: As Robert Waldmann has pointed out, you can’t be an economist without asking “how much?” How much immigration does an extra unit of social insurance crowd out? Marginal rates of transformation matter. If the answer is “almost zero,” the implications for public policy are very different from what they are if the answer is “a lot.” This is an empirical question on which there is some (but not a lot of convincing) evidence, and Tyler and I disagree. If I believed (as he does) that we would have a much more liberal immigration policy if we had a smaller social insurance state, I would reach the conclusions he does. This is an example of Milton Friedman’s dictum that in the end almost all disagreements between economists can be phrased as disagreements over matters of fact rather than matters of value.

Footnote 2: I’m not a cosmopolite: I care about myself and my family first; my friends second; my country third; and the world fourth. There are policies that would be good for the world as a whole and yet be bad for my country, and I would have to think long and hard before advocating such policies. I don’t think expanded immigration is one such (although I fear that totally open borders may be one such). But it is worth bearing in mind.

Footnote 3: When the share of commodities that can be cheaply traded across national borders is large, trade can effectively substitute for migration. To the extent that freer trade avoids (some of) the political problems generated by freer migration, we economists should concentrate our attention on the first rather than the second (and here too marginal rates of transformation matter).

But with those footnotes, then yes, Tyler is right: Increased immigration is superior to strengthening the welfare state. I just don’t think it will or can happen, so I will advocate the next best thing. From a cosmopolitan world perspective, almost all of the costs of maldistribution come from income gaps between nations and very little come from within-nation inequality. Development is far more important from a world welfare perspective than social insurance within rich countries. And immigration is a powerful tool for world development.”

Scroll down two posts on MR for background context, in case you haven’t been following the exchange.

The bottom line: This is fun, can we deal some more? (Do not forget the Virginia governor’s race, much is at stake. Perhaps Atrios will repudiate the Democrats in return for my vote.) And now Lynne Kiesling has to tell me whether I am the mutton or the lamb.

Yesterday on The Volokh Conspiracy I wrote that modern liberals should become classical liberals. Increased immigration is superior to increased spending on the welfare state, whether for the poor or otherwise; see the link for the full argument. Brad DeLong felt I was pointing in the wrong direction. He responded:

…Tyler should become a liberal, for where the rubber meets the road in modern American politics it is simply not the case that immigration and social insurance are substitutes. The labor side of the Democratic coalition doesn’t like large-scale immigration because it puts downward pressure on the wages of the unskilled. The nativist side of the Republican coalition doesn’t like large-scale immigration because… because… because it threatens “our” culture, because it makes terrorism easier, because it threatens to make America look not like America anymore. In the immortal words of Margaret Thatcher, immigration threatens us because we will be “swamped by people of a different race.”

Read Brad’s entire post, entitled “Yes, Tyler Cowen! You Really Are a Liberal! You Just Don’t Know It Yet!”. I have the not-so-secret fear that co-blogger Alex will agree with his title, though perhaps for different reasons.

On the substance of the matter, Brad’s response puzzles me. First, if we think increased immigration is a superior recipe, should we not try to make it more feasible through our advocacy? Why not think big and push for classical liberalism? (It’s actually far more complicated than this, here are forty pages of Cowen on the topic, but for the hard cores only.)

Second, we have had a huge immigration reform in the 1960s, another significant set of changes in the Reagan years, and Bush has proposed yet further immigration reform. The recent Bush plan appears stillborn, but the issue is hardly a dead one. Even if you don’t think we will take in more immigrants anytime soon, we may well take in fewer. The same is true in Western Europe. I don’t see current immigration levels as carved in stone, quite the contrary.

More directly, welfare/educational/fiscal issues appear central to the immigration question. Try reading these posts from PrestoPundit, or Victor David Hanson’s Mexifornia. Here is an [ugh] Pat Buchanan quotation, you don’t have to agree with him to know that many voters do. Both in reality and rhetoric, extensive welfare systems make it harder to accommodate more immigrants (noting that some welfare will ease their transitions). The Western Europeans face this constraint every day, it would not be an overstatement to describe it as an obsession of theirs.

Finally, I’ll offer Brad a deal. I will refuse to vote for the Presidential candidate he specifies (guess who that might be), if he will write in his blog, with no subsequent irony or repudiation the following: “The classical liberal recipe of increased immigration is superior to strengthening the welfare state. I just don’t think it will or can happen, so I will advocate the next best thing.” As a pure freebie, I will in advance volunteer the concession that most tax systems should be mildly progressive rather than flat or regressive.

Since Brad and I each think we are on the verge of converting each other, surely some huge misunderstanding is going on. That being said, I think this kind of direct written exchange is massively undervalued in academia (I would like to see an entire journal of direct written debates, for one thing). My compliments to Brad and to the blogosphere.

Update: Read Matt Yglesias as well. I’ll add that immigration is only one alternative to domestic welfare, why not a helicopter drop of dollar bills over Haiti? At certain margins immigration and welfare are or can be complements (we all agree on this), but at some point the modern liberal still must resort to anti-cosmopolitan intuitions.

The average full professor of economics has a salary of $135,000, the median is $138,000.

The sample is the top seventeen public universities in the United States. Here are the raw data.

On the other hand, Bill Gates has been earning an estimated $300 a second.

Nonetheless here are some other reasons to become a professional economist.

Thanks to Dan Houser for the pointer on the salaries.

In spite of the recent downturn, never-married mothers continue to stay off the welfare rolls. Kausfiles offers some cogent commentary, along with links to the data. Here is his bottom line:

What happened in the 2001-2002 recession, and the subsequent sluggish job recovery? Burtless says reliable figures for 2003 aren’t yet available, but he has the numbers for 2001 and 2002. “Astonishingly,” he says, “divorced, separated and never married mothers seem to have maintained [labor market] participation rates all through the recession” and the follow up. For “never married” mothers, the percent working dipped to 64.4 in 2001 but was back up to 65.8 in 2002. Essentially, it stabilized near its all-time peak, at a level about 20 percentage points higher than before 1996. Burtless thinks this happened at least partly because the recent recession was relatively easy on those at the bottom of the labor market (and relatively hard on those with college degrees). Maybe a different kind of recession–one that hit unskilled jobs the hardest–would produce a big increase in welfare rolls. Maybe not.

Either way, Burtless’ statistics suggest that welfare rolls didn’t fail to rise in 2001-2 because jobless single mothers were heartlessly denied their benefits and left with nothing. The rolls didn’t rise in the recession because single mothers kept on working. That’s a good thing. Advantage: Reformers!

The bottom lines: First, welfare reform has proved resilient and was a good idea. Second, the figures also illustrate why Bush isn’t a shoo-in for reelection. Many of the people spared by the current recession wouldn’t have voted for him anyway.

What happens if we extrapolate current trends to 2050? What will debt to gdp ratios look like around the world? A few estimates:

1. For 25 major OECD economies, the ratio will rise to 47 percent by 2010 and 139 percent by 2050. Most of these countries would risk eventual downgrading to junk status.

2. In 2050 Japan would have the highest debt to gdp ratio, namely 718 percent. The Czech and Poland would have the next most serious problems.

3. Among the current Eurozone countries, Germany would fare the worst with a ratio of 307 percent. The ratio in the US would be 158 percent.

4. For purposes of contrast, Great Britain, right before WWII, a fiscally pressed time, had a debt to gdp ratio of 188 percent.

5. The countries with the smallest future ratios include Luxembourg, the UK, Sweden, Spain, Ireland, and Australia. Those countries have more favorable demographics and smaller burdens from their pension systems. Those ratios lie in the range of 40 to 60 percent.

6. The fiscal impact of aging far outweighs the costs of German unification.

OK, this is crude extrapolation. But keep in mind that social security benefits are often fixed by law or politically hard to alter. Growth rates might improve, but on the other hand longevity could increase.

The estimates are from Standard and Poor’s, reported in The Financial Times of 1 April 2004, “Sovereign Ratings Under Threat.” Sorry I have no permanlink from this antiquated Parisian computer terminal but it is subscription only anyway.

Addendum: Alex suggests I could have titled the post “r>g,” don’t worry if you don’t get the joke.

I don’t trust the figures, but did you know that China’s per capita income has been estimated at $890 a year, circa 2002, well under that of Guatemala ($1670) or Morocco ($1180)? Guest blogger Russ Roberts cites a slightly higher and more recent figure of about $1000.

That being said, how might you expect growing trade between China and Japan to affect the Japanese economy? The wage differential for semi-skilled labor is about a factor of twenty. Russ also cites worries that trade with China will weaken or impoverish the United States.

Here are a few simple facts:

1. In 2003 Japan’s trade with China, including Hong Kong, rose by nearly a third to $162 billion.

2. Exports to China leaped 40 percent in this same year.

3. A few years ago accepted wisdom was that trade with China would destroy Japan’s manufacturing base. Now observers say that “Even Japan’s “old economy” industries, such as steel, pulp, chemicals, shipbuilding and construction equipment, have been handed a new lease of life.” (Financial Times, March 30, “Crossing the Divide” ($)).

4. Trade with China is widely viewed as bailing out Japan, which was otherwise stuck in more than a decade of virtually zero growth. Japan buys cheap Chinese inputs, and supplies the Chinese manufacturing boom.

5. It is estimated that only about 20 percent of Japanese and Chinese products compete in the same markets. For the most part the two countries produce complementary goods.

The information is from the Financial Times article cited, here is a related link with some roughly comparable statistics.

My take: Won’t any facts convince individuals of the merits of free trade? Surely if any set-up would lead to falling wages in Japan, trade with China should do the trick. In reality it has been a godsend to the Japanese economy. That being said, the Japanese should expect more volatility. In the long run I am bullish on China, but I expect a bubble to burst within the next five years. Has any country made the climb into modernity without a collapse along the way?