Good Politicians Still Make for Bad Government

There is a relatively common refrain/sentiment, on both sides of the political aisle, that goes something like this: "If we could just get rid of this bad batch of politicians and get the right ones then everything will be great." Usually, the person expressing this concern cannot point to a specific time when the right people were in office and things were great. Or, if they do point to a specific time, they are blissfully ignorant about the facts of that time. This feeling, that the problem is the individuals we elect, ignores the institutions that shape how individuals act.

I think very highly of humankind. I think most people are generally kind. I think most people do things to help others and merely for the sake of helping others. I also think government is generally harmful. How can it be that I think most people are good, and politicians are people, yet I dislike government? The problem is that well-intentioned people can make mistakes. When this human fallibility combines with the power to force decisions on others it is a recipe for harmful outcomes.

It is no secret that legislators from certain areas tend to vote for certain measures. Washington's politicians favor aerospace. Virginia's favor the military. West Virginia's favor coal. This is perfectly understandable. My guess is that these legislators are good people, and they are truly trying to help others. Unfortunately, they don't understand that they are doing more harm than good. Voting for a piece of legislation that helps Boeing also hurts Boeing's competitors and consumers. For a more specific example, consider Russ Feingold. I don't personally know him, but there seems to be every reason to think he is a very good person who went into politics to help people. However, he has a strong record of opposing free trade. By opposing free trade he forcefully limits the range of choices open to individuals, not just in the United States, but foreigners as well. Individuals who would freely opt to engage in some form of trade or exchange are prevented from doing so by limits on free trade.

The same pattern can be applied to any area of policy. Individual politicians with very good intentions and the genuine desire to help, hindered by their incomplete knowledge or understanding, make choices that limit the opportunities of others.

The Prohibition on Working for Less Than a Specific Amount

In what is blatantly stealing from Prof. Don Boudreaux, I shall call the federal wage floors what they truly are: a prohibition on people charging less than a given amount for their labor. The Economist, much to my disappointment, wrote several articles this week defending such legislation.

In the article "Raising the Floor" from the week of December 13, The Economist claims that prohibitions on selling labor for less than a given amount "...reduce the amount companies must spend recruiting new people." Yes! Great! This implies that, before such a prohibition, workers choose to leave. A worker takes a job, gains skills and experience, gains access to new and better opportunities, and leaves their current job for the better opportunity. This should be celebrated. The Economist should be elated about this. I am as excited as I can be, considering it is happening to anonymous people that I do not personally know. The Economist advocates wage floors because it reduces employer recruitment costs.? How about concern for the prospects of unskilled laborers? I would much rather that employers bear the costs of employee turnover than unskilled laborers remain unemployed with no prospects.

"Solving" the Brain Drain: A New Opportunity for Central Planning to Fail

I spend a little time now and then surfing economics discussion forums. Yesterday I contributed to an interesting thread about the brain drain. The original post was lamenting the awful impact of the brain drain on developing countries. Normally I would have responded to point out the weaknesses in that argument, and to try and show why the movement of skilled labor does not have negative effects on developing countries. However, I was distracted. I was more intrigued by the set of policies proposed by the original poster. These policies were:
Grants to pay the cost of return for skilled workers.
Top-up pay to make salaries more attractive and draw skilled workers back.
Subsidized loans for returning workers to start a business or build a home.

I hope the original poster did not see these policies in any list of pending legislation somewhere. My guess is that such legislation would be ineffective at best and destructive at worst. A quick analysis of each exposes the shortcomings.

1-Grants to pay the cost of return for skilled workers.
This implies that the cost of moving is what stops skilled workers from returning. It ignores the factors that caused workers to leave in the first place. If someone chooses to emigrate, it is strange to think that they would opt to return merely because their moving expenses will be covered. It is a safe assumption that moving expenses are the least of the reasons a skilled emigre would not return to their country of origin.

2-Top-up pay to make salaries more attractive.
Where would the funds for this policy come from? What reason is there to think that returning workers would create enough value to justify such top-ups? The fact that they left in the first place is strong evidence that the ability to create value in their home country is limited. Also, this policy is ripe for abuse. Many a corrupt, authoritarian ruler would love to be able to hand out top-up pay to "skilled workers". A better sounding program for gaining political support could nary be found.

3-Subsidized loans for returning workers to start a business or build a home.
Again, this ignores a fairly obvious question. Why didn't these workers decide to emigrate instead of starting a business and building a home? What caused them to think a business in their country of origin was a bad idea, and how does this policy do anything to address those causes? A cheap loan is no good if infrastructure is lacking, red tape is stifling, corruption is rampant, or property rights are insecure. Additionally, much like the proposal above, this is a kleptocrats dream policy. What better way to increase personal power than to hand out cheap money? Prospective supporters would line up at the trough.

Another proposal I've seen is to limit migration from developed countries to developing countries. The argument for this is that citizens of wealthy countries should not take work away from locals in poorer countries. This is another example of the lump of labor fallacy. There is not a fixed number of jobs. A talented Canadian architect who moves to Laos creates opportunities for many Laotians. An expert electrical engineer from Belgium who moves to Congo creates benefits and opportunities for many Congolese. Finally, this policy assumes that it is morally acceptable to deny liberties to one person that are available to another. When put this way, it is predictably hard to find anyone who defends such a proposal.

What's the take-away? The brain drain isn't a problem. Even if it was, drawing people back is not the solution. Developing countries do not dysfunctional institutions because skilled workers leave. Skilled workers leave because there are dysfunctional institutions.

Immigration: Why I Love It

I recently relistened to the October 4, 2010 episode of Econtalk. Bryan Caplan is the guest, and the topic is immigration. Caplan makes, in my view, an rock solid case for immigration. I revisited this podcast because I've found that immigration is an issue I feel increasingly strongly about. It is also an issue that seems to elicit glaring, painful inconsistency from people of all ideological and political stripes. Many of these inconsistencies center around financial impacts of immigration: Do wages go down? How big an effect to remittances have? Do immigrants contribute more or less in taxes than they receive in benefits? While these are certainly important questions, and I do think that the answers to all of these questions support the case for immigration, they don't get at the reasons why I am a strong supporter of free immigration.

I'm a mongrel - roughly equal parts Norwegian, Welsh, English, and Polish. Though, as I understand it, the area my ancestors came from in Poland has gone back and forth between German and Polish control, so maybe with current boundaries I'm German. The English and Norwegians have always been in the in-crowd. They were the 'good ones' when referring to immigrants. The Welsh and Polish, not so much. If those opposed to immigration had been successful in limiting the movement of Welsh or Polish migrants the United States would be dramatically different. What would Chicago be without the Polish? What would the upper midwest be without the Polish cultural influence? I was a history major in college, and in my senior year wrote my research paper on the history of Colorado mining. Much of western Colorado was dominated by Welsh immigrants because they had skills and experiences that made them particularly well-equipped for the harsh weather, high altitude, and specific technical demands of the region. Think about all of the groups that have made their mark on the United States, and the things their contributions made possible. This extends beyond the USA. Every country is richer in countless ways because of immigrants.

On an individual level, my life would not exist as I know it if the Welsh or Polish had been shut out. Furthermore, my wife is from the Philippines. Her mother was an American citizen at the time of my wife's birth, but my mother-in-law chose to deliver in the Philippines, and my wife didn't move to the USA until she was 5. Much like southern and eastern Europeans, Asians of all nationalities were undesirable immigrants. If my wife's grandfather had not been allowed to migrate (note: he wound up serving in the American military), I wouldn't be able to share my life with my wife. It doesn't end there, though. I met my wife in Cambodia. I was there to teach social studies, and she was there to work as legal advisor for a group that defends property rights in a country where the government can take anything it pleases. If she and I weren't able to move to Cambodia to work we wouldn't have met. She wouldn't have helped Cambodians whose lives were being stolen. From there we moved to Thailand so she could work as counsel to refugees going through the UN process (I taught social studies). The Pakistani, Iranian, Congolese, and Syrian refugees she worked with would have continued to suffer through atrocities and persecution, and quite possibly would have died. This, to me, is a far more important part of the immigration question than any effect on wages or national accounts.

When I encounter someone who wants to limit immigration or deport immigrants I cannot help but think about how ridiculously arbitrary their position is. Why is it a good idea to stop immigration now, but not in the past when their ancestors would have been the targets of anti-immigrant legislation? Why should imaginary political lines drawn in the minds of humans limit the opportunities of individuals? Why are people on one side of the imaginary line more entitled to opportunities than anyone outside of the line? Why should the UN, or any other entity, get to decide who escapes unthinkable suffering and who must persevere? No one can offer anything resembling a reasonable answer to any of these questions.