Immigration might be good, but does it look good?

One claim about liberalized immigration policy is that it will raise the incomes of immigrants and quite possibly natives, but that average incomes of First World countries will fall.

How is this possible? It’s a matter of averaging two groups together. Suppose you have Country A with 100 people each earning $50,000, and Country B with 100 people each earning $10,000. Then, everyone in Country B moves to Country A and earns $30,000 due to their higher labor productivity in Country A. And in this case, Country B’s labor complements Country A’s labor. So the people of Country A see their incomes rise to $60,000. Both groups benefit. But now the average income of Country A has fallen from $50,000 to $45,000, even though every single person is better off. This is an example of Simpson’s paradox.

So there is a political concern that, even if immigration doesn’t harm natives, it could look like it’s harming natives. What’s the solution? One possibility is publishing another set of income figures: not income per person in America, but average income of native-born Americans. (And average household income for households whose heads are natives, and average hourly compensation for native workers; a variety of measures would exist.) This is the “income per natural” idea developed by Michael Clemens and Lant Pritchett of the Center for Global Development.

Is this dishonest? No. The new figures would be published alongside the old ones, not as replacements. And the concepts these figures refer to are relevant: they reflect how well native-born Americans are doing. If people care about the welfare of native-born Americans, surely these numbers matter. Citizenists want to maximize the well-being of native-born Americans, and if they used numbers for all people living in America, they would come to policy conclusions that are not actually optimal for native-born Americans. Clearly that’s a failure for them.

I think natives probably would benefit on net from liberalized immigration, so I think publishing these statistics would politically help supporters of liberalized immigration. But either way, it would help better depict what’s happening to the welfare of natives.

The Problem with Divestment: Helping Wealthy Investors Instead of Victims

A lot of social movements call for divestment of the shares of firms which are opposed to their goals. In particular, many colleges and universities have faced student protests demanding that college endowment funds divest from fossil fuel companies. However, they should be concerned about divestment’s actual effects.

If a group decides to sell off its shares of some Company XYZ, the price of the shares will fall. However, nothing has changed about Company XYZ’s expected future cash flows. Therefore, nothing has changed about investors’ valuations of Company XYZ. So when the share price falls, other investors simply get an opportunity to buy the shares for cheap. Net result: no damage to Company XYZ.

Furthermore, by creating this buying opportunity for other investors, what divesting groups are actually doing is transferring wealth to said investors. This usually means transferring wealth to wealthy individuals in the First World.

Of course, one argument could be that divestments act as public statements and make action by others more likely. A Harvard Political Review article argues that this was the case with divestments from South Africa in protest of apartheid: they had little financial effect, but helped raise awareness.

But divestments are public statements that cost money. What if universities instead aimed for high investment returns and donated the difference to efficient charities? (Possibly charities aimed at helping victims of whatever is being protested.) The result would be transferring money to effective causes instead of wealthy investors. And universities could still publicize their donations to charity as a way of raising awareness.

Let me reiterate: the main impact of divestment is that a few wealthy investors benefit, while the offenders are unharmed. Is that really ideal?

Things that Make Us Cry

Steve Horwitz had an interesting post over at the Bleeding Heart Libertarians back in October that I just noticed now, where he addresses once again research that came up some time ago that purported to show that libertarians tend to be focused on logic at the expense of emotion.

Horwitz challenges this conclusion, pointing to a video male libertarian friends of his have told him drives them to tears. I watched it and I had the same reaction. I suggest you check it out:

To Horwitz’s observation, I will add my own about media that drives me to tears: Google’s yearly “zeitgeist” videos (“spirit of the times” – see 2013, 2012, 2011, for example), the “I, Pencil” video (explanation of spontaneous order), images of Christians joining hands to protect praying Muslims in Egypt, and Niemöller’s “First they came …” poem, off the top of my head.

For the zeitgeist videos, the moments that set me off most were the shots of the artificial hand, artificial leg, kid with cerebral palsy walking to greet his father returning from the war, various brief shots of amputees achieving their goals, the Red Bull space jump landing with the man holding up his fists, the US soldier coming home early to his mother, Steve Jobs’s advice to stay hungry, stay foolish, the 29-year-old hearing for first time, and the solider high-fiving a local kid.

From these experiences I can extract what I believe are the moments which affect me most:

Overcoming conflict with other humans – rejecting war and accepting cooperation

Spontaneous, unplanned order – voluntary cooperation that builds magnificent things we do not expect but we’re all part of

Overcoming conflicts with nature – fighting back the scarcity constraints of the world, fighting against the cold, uncaring universe and carving out a place for ourselves

and, maybe most importantly,

Unchaining of the individual to achieve his or her potential

I say that the last one is perhaps the most important one specifically because of my reaction to the 29-year-old hearing for the first time in her life. I felt that the moment represented the opening of an entire new door for an individual that she thought would be closed forever. The sheer intensity of the feeling of overcoming what you thought would be a handicap for your entire life – and the overwhelming emotions when tasting this entirely new sense – hearing- for the first time in your life is simply astonishing.

Can the bolded points above somehow be connected to libertarianism?

– Overcoming conflict with other humans – replacing coercion with voluntary cooperation (see self-ownership)

– Spontaneous, unplanned order – emergent properties of market systems – in the tradition of Hayek

– Overcoming conflicts with nature – pushing back the limits of scarcity – see the libertarian emphasis on capital accumulation and innovation

– Unchaining of the individual to achieve his or her potential – libertarianism places a strong emphasis on the individual as the centerpiece of society. This point is also a little strange, since libertarianism doesn’t specifically say that individuals must be required to achieve their potential, but could very well choose to do nothing with their life if they so wish. However, it’s possible that people tend to be drawn to libertarianism because they value the individual so much already, and also happen to understand that all rights are individual rights.

I would even argue that the above points can be folded up into two main points. The overcoming of conflict with other humans and nature are both an unshackling of the individual – free from both human coercion and the limits of nature. We are then left with a free individual and the result of this free individual – the spontaneous order of social cooperation through the market.

If I may make the unfounded assumption that I am a decent representative of libertarians, I can see that the elements that set us off most are indeed ones libertarian emphasize – on the moral side, emphasis on the voluntary and on the individual. On the pragmatic side, emphasis on innovation, capital buildup, and emergent order. If we examine the condensed case I made in the previous paragraph, then we have the moral side, the free individual, and the pragmatic side, the result of the free individual.

Perhaps it’s not the case that libertarians aren’t very empathetic, but instead that they can openly make emotional connections when they are presented with situations aligned with the spirit of libertarianism. It is then that the libertarian can place himself in the shoes of the character in the story and appreciate the beauty of the situation as if it were his own. If, on the other hand, we see situations that emerge out of coercive action, we do not emote as easily, because there is something at the back of our minds that reminds us that there’s a zero sum game being played, with hidden losers in the background we’re not being shown.

I also want to point out what I consider to be a fantastic quote from Horwitz’s article – one that I believe is strong competitor for being one of the best that combine practical and moral arguments:

Critics of markets sometimes say “you can’t eat GDP.” What they miss is that you can’t eat, or learn to read, or go to school, or leave a bad marriage, or do pretty much any of the basics that we might see as required for a flourishing life without the wealth and time created by the market economy.

This relates to the washing machine, as the invention and its adoption opened up time for women to both gain more education and educate their children more easily, and education unchains people and allows them to do anything up to… well, we don’t know the limits of our imagination and our creativity yet. Hopefully, we won’t ever know them.

Good job to the BHL for a solid post. Now I need to get some water – I’ve somehow gotten very dehydrated after those videos.