Friday, August 17, 2007

This Jackass's Thoughts

Economists typically get bombarded with criticism for being arrogant, dispassionate, unrealistic, wishy-washy, abstract, misguided, and a whole list of other things, some of which I cannot list here. But usually economists have a strong reputation for being pretty smart guys and gals. Now, journalist Lou Dobbs has called economists "idiots" and "jackasses." How does one argue with someone so steadfast in his convictions that he categorically dismisses an entire field of science? Let me try.

First, let me apologize for the stooge who likened labor migration to trading apples. Clearly human beings are not to be treated as objects, but this was not the point of the comparison. The point was that when Factors of Production (machinery, workers, or other "stuff" that's used to produce the "stuff" households consume) move, society gains in a way that is similar to the way society gains when we are able to trade goods freely (both within our own borders and with other countries). The comparison was in the nature of the gain to society, not the ways in which they should be treated in a political, social, or moral sense. Economists are rational to a fault, and often ineloquent.

Mr. Dobbs asks, "Are there any empiricists among these idiotic economists?" Yo. Right here. In fact, the vast majority of the policy recommendations are based on careful empirical research that gets scrutinized by the sharpest minds in economic theory and statistical methodology before they see print. Trade (and movement of labor and capital) has two impacts: Aggregate gains and distributional consequences. When there is a change that lifts the restrictions placed on Rational Individuals, markets tend to function better and on average countries experience net gains. The net gains from trade are generally pretty big. But, some argue, trade is bad for labor and can lead to a loss in jobs. Still, if we count up every job that would be lost in the sectors dessimated by import competition, the average cost of US trade restrictions was estimated to be around $50,000 per job saved in 2000. The gains from immigration inflows has been estimated to be quite a bit smaller at around 0.25% of GDP per capita, but they are gains nonetheless. That means the median household (middle class American) is better off by $125 per year because of immigrants already here. War on the middle class? Hardly.

However, some individuals and groups will lose in the short run, and their transition to greener pastures in the long run may be a rocky path. Economists are not ignorant of that. Take for example Jim Richardson at Syracuse. He actively advocates for stronger Trade Adjustment Assistance programs that would include wage repacement stipends in addition to education credits.

Speaking to immigration specifically, Dobbs argues that since we have the strongest and best-funcioning economy, suddenly every person from a poor country will flood through our borders. Now who's being arrogant?!? First of all, immigration is difficult and costly (financially and socially), and there are a lot of people living in poor countries who simply cannot afford to come here, even if they wanted to do so. Second of all, not everyone wants to live here! Not only that, but almost one million illegal immigrants leave every year voluntarily! So let's not make up a number like, "4.8 billion people" that would suddenly flood our border once the gates open.

Finally, immigrants who come here looking to work and toil for a better life make our country richer and greater. To enact legislation that is largely designed to protect certain US labor interests at the expense of immigrants who are even poorer than the working poor here (not to mention to the detriment of the majority of native-born US citizens) is nationalist bigotry. It feeds on our basest prejudices against "outsiders." But even more than that, it is poor public policy. It is a lazy man's solution to a complicated problem. Immigration, like trade can benefit us all. Unfortunately, change causes socio-economic displacements that cannot be ignored, are difficult to solve, but must be addressed head-on rather than haphazardly. The solution to an infected papercut is not to chop of the entier arm.

2 comments:

  1. I particularly liked that bit about cutting off an arm to get rid of a paper cut!

    I wonder if the antipathy to trade and immigration is based on something more deep rooted than misunderstanding what they mean (though as gentle walk through the groves of academe -- after missing the econ "trees" -- would be enough to convince one otherwise)

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  2. Deep-rooted indeed. Mr. Dobbs gives us another example of how belief and convinction trumps science and logic.
    I think that these beliefs manifest in a couple of ways-there is a basic mistrust or prejudice of things and people "alien," and I think your blog does a better job than mine on that.
    More to my point, I think that Mr. Dobbs exemplifies the popular but misguided notion that Economic Theory exists in a vacuum-he and others seem to think that that Economic Theory is a normative position on how the world should be rather than how it is. People don't really take economic theory as something that comes, first and foremost, from a careful empirical observation of the world with the aim of explaining fact.

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