Politics

O Canada: Bastion of Western Liberty?

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Over the years, I’ve heard people of a certain political persuasion argue that the United States should be more like their northern neighbor Canada. And over the years, I’ve enthusiastically agreed, but mostly for different reasons. A recent article in The Economist captures a few of those reasons:

Donald Trump, the grievance-mongering Republican nominee, would build a wall on Mexico’s border and rip up trade agreements. Hillary Clinton, the probable winner on November 8th, would be much better on immigration, but she has renounced her former support for ambitious trade deals. Britain, worried about immigrants and globalisation, has voted to march out of the European Union. Angela Merkel flung open Germany’s doors to refugees, then suffered a series of political setbacks. Marine Le Pen, a right-wing populist, is the favourite to win the first round of France’s presidential election next year.

In this depressing company of wall-builders, door-slammers and drawbridge-raisers, Canada stands out as a heartening exception. It happily admits more than 300,000 immigrants a year, nearly 1% of its population—a higher proportion than any other big, rich country—and has done so for two decades. Its charismatic prime minister, Justin Trudeau, who has been in office a year, has welcomed some 33,000 Syrian refugees, far more than America has. Bucking the protectionist mood, Canada remains an eager free-trader. It was dismayed by the EU’s struggle to overcome a veto by Walloons on signing a “comprehensive” trade agreement that took seven years to negotiate (see Charlemagne). Under Mr Trudeau, Canada is trying to make amends for its shameful treatment of indigenous peoples, and is likely to become the first Western country to legalise recreational cannabis on a national level. 

The article acknowledges that Canada’s geographic location, history, and the like are important factors for its political decisions above, but it nonetheless makes an effort to find against the populist rhetoric within its own borders:

Canada not only welcomes newcomers but works hard to integrate them. Its charter of rights and freedoms proclaims the country’s “multicultural heritage”. Not every country will fuse diversity and national identity in the same way that Canada does. Indeed, French-speaking Quebec has its own way of interpreting multiculturalism, which gives priority to the province’s distinct culture. But other countries can learn from the spirit of experimentation that Canada brings to helping immigrants find employment and housing. Its system of private sponsorship, in which groups of citizens take responsibility for supporting refugees during their first year, not only helps them adapt but encourages society at large to make them welcome. The UN High Commissioner for Refugees has called on other countries to copy it.

Canada has been managing its public finances conservatively for the past 20 years or so. Now in charge of a sluggish economy, Mr Trudeau can afford to give growth a modest lift by spending extra money on infrastructure. His government has given a tax cut to the middle class and raised rates for the highest earners to help pay for it. These economic policies deserve to “go viral”, the head of the IMF has said. Canada has a further economic lesson to impart in how it protects people hurt by globalisation. Compared with America, its publicly financed health system lessens the terror of losing a job; it also provides more financial support and training to people who do. And its policy of “equalisation” gives provincial and local governments the means to maintain public services at a uniform level across the country.[ref]Large welfare systems have pros and cons when it comes to economic growth, innovation, and entrepreneurship.[/ref]

Perhaps most important, this mixture of policies—liberal on trade and immigration, activist in shoring up growth and protecting globalisation’s losers—is a reminder that the centrist formula still works, if politicians are willing to champion it. 

Of course, it’s important to point out that Canada “remains a poorer, less productive and less innovative economy than America’s.”[ref]However, scares over a “stagnating middle-class” in Canada are just as overblown as they are here in America.[/ref] Trade among provinces is still problematic and the “peace, order and good government” that is “enshrined in its constitution” may be “inadequate without an infusion of American individualism.” But when Canada outpaces the U.S. in economic freedom,[ref]Pg. 8.[/ref] it may be worth looking at the things they get right.

Fixed-Pie Fallacies and Tax Loopholes

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Closing tax “loopholes” has been a major talking point of both presidential candidates as of late. But this kind of language distorts the conversation from the get go. As columnist David Harsanyi explains,

Basically, all of life is a giant loophole until [politicians] come up with a way to regulate or tax it. In its economic usage, “loophole”—probably more of a dysphemism—creates the false impression that people are getting away with breaking the law. It’s a way to skip the entire debate portion of the conversation and get right to the accusation.

So when Hillary Clinton promises to close the loophole of corporate inversion, what she means to say is that Democrats disapprove of this completely legal thing that corporations do to shield their money from the highest corporate tax rate in the developed world. Loopholes are like giveaways, monies that D.C. has yet to double and triple tax.

…But Bernie Sanders, bless him, just skips the entire perception game and just comes out with it by tweeting: “The offshore tax haven network isn’t something that we need to reform or refine. It’s a form of legalized tax fraud that must end.”

“Legalized tax fraud” is a revealing statement about the progressive belief system. For progressives, taxation is moral. So when you fail to pay an imaginary tax that doesn’t exist but Democrats think should, you are by default engaged in fraud. The law has just to catch up with sin.

Megan McArdle has lamented the “regrettable tendency” of legislators “to view their citizens, and particularly their corporate citizens, as a species of tax cattle.” She points out that the first-time-homebuyer tax credit is morally no different than tax-exempt municipal bonds or your 401(k). She points out that if we were to, say, get rid of tax-free bonds, “[i]t would be more expensive for local governments to borrow money. Rich people are paying for that tax benefit by accepting a lower interest rate on municipal bonds than they would if they had to pay taxes on that money. The net effect is a federal subsidy for local spending. If we remove the deduction, local governments will find their budgets pinched[.]” She also points to charitable deductions and corporate tax rate shopping at the local and international level. “Unless,” she writes, “you want the kind of government enjoyed by the majority of the people of the world — and to ship most of your money to those places, while getting little in return — then stop complaining that other countries exist, and that their existence makes it hard to keep the local tax cattle properly penned in.”

When groups like Americans for Tax Fairness complain about tax “loopholes” and demand that we should “end tax breaks for corporations that ship jobs and profits offshore,” they are ignoring the points above as well as the following evidence. Harvard’s Mihir Desai has done extensive work on this subject. “When American firms grow abroad,” he writes in The Wall Street Journal,

Image result for fixed pie economicsthey also grow domestically, as demonstrated by research I conducted with C. Fritz Foley of Harvard and James R. Hines Jr. of the University of Michigan (published in the American Economic Journal: Economic Policy, 2009).

The data do not support the crude, fixed-pie intuition that firms either invest abroad or at home. Ten percent growth in American firms’ foreign investment is associated with 3% growth in their domestic investment. And when firms grow abroad, their domestic exports and R&D activities grow especially…Vilifying or penalizing American businesses for their global operations will only lead them to consider leaving the U.S.—or consider being bought by foreign companies. Such moves would hurt America by removing valuable headquarter jobs.

The fixed-pie fallacy breeds protectionism. And protectionism manifests itself in many forms.

The Consequences of Minimum Wage: Youth Edition

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Time for yet another study on the minimum wage, this time by economist Charlene Marie Kalenkoski from March of this year. Do minimum wage laws have negative effects on youth employment and income?

Wait for it…

…

Yes. Yes they do.

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Kalenkoski writes,

Policymakers often propose a minimum wage as a means of raising incomes and lifting workers out of poverty. However, improvements in some young workers’ incomes as a result of a minimum wage come at a cost to others. Minimum wages reduce employment opportunities for youths and create unemployment. Workers miss out on on-the-job training opportunities that would have been paid for by reduced wages upfront but would have resulted in higher wages later. Youths who cannot find jobs must be supported by their families or by the social welfare system. Delayed entry into the labor market reduces the lifetime income stream of young unskilled workers (pg. 1).

A few selections on employment:

There is a substantial body of empirical evidence on the effects of a minimum wage on youth employment. Most of the studies have found negative effects on youth employment. A 1992 study of youth employment in the US found that a 10% increase in the minimum wage led to a 1–2% decline in the employment of teenagers and a 1.5–2% decline in the employment of young adults. A 2014 study of youth employment in the US showed a decline of 1.5% for teenagers. Thus, the estimated negative effect of minimum wages on employment in the US has been fairly consistent over time. However, these estimates are national averages, which obscure regional effects. A 10% increase in the minimum wage has been found to reduce regional employment by as much as 7%. One study that looked at teenage unemployment rates in the US instead of employment found that minimum wages indeed increase teen unemployment rates, as the standard economic model predicts (pg. 3).

Minimum wages reduce US teenage employment

And income:

How might the imposition of a minimum wage affect whether grocery store employers offer on-the-job training? If the minimum wage were set at W1 in Figure 3, for example, grocery store employers would be unable to offer on-the-job training to their grocery bagger employees. Workers would find themselves on the horizontal age-earnings profile at W1 and would thus earn less income over a lifetime than they might have had they been able to receive on-the-job training (pgs. 6-7).

On-the-job training changes the relationship between age and earnings

Kalenkoski concludes,

Rather than using a minimum wage to increase youths’ current incomes, policymakers should consider policies that improve the labor market opportunities of youths but do not increase the cost to employers of hiring young workers. Policies that would achieve both goals include providing cash welfare payments to youth if their earned income falls below some guaranteed level and providing in-kind support, such as food or housing assistance. Such policies create their own distortions (for example, causing some benefit recipients to choose not to work) but would not reduce the total number of jobs available or create unemployment (pg. 9).

Check out the full publication.

What Are the Reasons Behind Late-Term Abortions?

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Trump has been catching a lot of heat for his rather bungled remarks about abortion. Clinton in turn defended late-term abortions by claiming that these cases are often due to the mother’s health being jeopardized or complications with the pregnancy. There was even a heartbreaking story by a Mormon woman going viral that relayed the horrific experience of late-term abortion due to pregnancy complications. It turns out that the majority of Americans would likely approve of abortion in her situation. Gallup has found that 50% of Americans think abortion should be legal only under some circumstances, while 29% think it should be legal in all cases and a mere 19% think it should be illegal in all cases. When specifics are given, they found that 82% believe it should be legal when the mother’s physical health is endangered and 75% believe it should be in cases of rape or incest. Even the official stance of the LDS Church would fall under the “legal only under some circumstances” category (though members should realize just how seriously Church leadership takes this subject).

Nonetheless, the American population of women has basically been split in half on this matter for over a decade. The latest Gallup poll found the percentage of pro-choice women to be 54 percent, though it’s averaged at about 48.5% between 2001-2015. This squares with Pew’s finding that 50% of women view abortion as morally wrong. However, a 2016 Marist poll found that 82% of women would restrict abortion to the first three months of pregnancy (this is much closer to a large number of European countries).

Why would so many women object to late-term abortions if these are so often due to complications as Clinton said? There are probably many reasons, but one of them could have to do with the fact that Clinton’s reasoning is misleading. Granted, the majority of abortions take place early on in the pregnancy. As The Washington Post reported,

One-third take place at six weeks or pregnancy or earlier; 89 percent occur in the first 12 weeks, according to the Guttmacher Institute, which supports abortion rights. Only 1.2 percent of abortions—about 12,000 a year– take place after 21 weeks. (The Supreme Court has held that states may not prohibit abortions “necessary to preserve the life or health” of the mother.)

On top of that, Guttmacher says that 43 states already prohibit some abortions after a certain point in pregnancy, such as fetal viability, in the third trimester or after a certain number of weeks. So this is already a rare procedure that is prohibited in much of the country.

So are late-term abortions mainly due to later complications? A 2013 study by the Guttmacher Institute may suggest otherwise. Writing at the pro-life Charlotte Lozier Institute, Elizabeth Johnson expounds on Guttmacher’s data:

For many years, abortion-rights advocates have asserted that abortions after 20 weeks are performed because of maternal health complications or lethal fetal anomalies discovered late in pregnancy. However, wider data from both the medical literature and late-term abortion providers indicates that most late-term procedures are not performed for these reasons. Previous survey studies of late-term abortion patients have confirmed that most late-term abortions are performed because of a delay in pregnancy diagnosis and for reasons similar to those given by first-trimester abortion patients:  financial stressors, relationship problems, education concerns or parenting challenges.

A recent paper entitled, “Who seeks abortion at or after 20 weeks?” supports these conclusions. The study, published in Perspectives on Sexual and Reproductive Health, a journal of the Guttmacher Institute, marks a notable departure from previous statements by abortion rights advocates that late-term abortions were rarely elective.  Authors Foster and Kimport highlight the characteristics of women seeking abortion at or after 20 weeks gestation.  The authors acknowledge that, in fact, wider “data suggests that most women seeking later terminations are not doing so for reasons of fetal anomaly or life endangerment.” The study explores reasons for delay in seeking abortion services, comparing first-trimester and late-term abortion groups.  While there are numerous limitations to the study, the authors suggest that the characteristics of women who seek both first-trimester and late-term abortions are substantially similar.

She concludes,

The characteristic similarities and delay commonalities observed across first trimester and late-term abortion groups suggest that women who seek abortion share similar characteristics across gestational ages.  The stressful circumstances of unprepared pregnancy, single-motherhood, financial pressure and relationship discord are primary concerns that must be addressed for these women.  However, these circumstances are not fundamentally alleviated or ameliorated by late-term abortion.  Indeed, late-term abortion places these women at greater risk of surgical complications, subsequent preterm birth, and mental health problems, while simultaneously ending the life of an unborn child. As a medical profession and society, we rightly seek alternative, compassionate responses for the women seeking late-term abortion procedures for such challenging yet elective reasons.

It is reasons like this that some fact checkers have called Clinton out on her previous late-term abortion comments. It is interesting that in Reason‘s useful rundown of late-term abortions in America there are no figures provided to support the claim that these abortions “are generally a last resort” and “involve situations where the mother’s life or health is in jeopardy.” The blog Secular Pro-Life Perspectives drew on a couple studies to further demonstrate the rarity of health problems as a reason for abortion:

This 1988 study surveyed 399 women seeking abortion at 16+ weeks. The study found women were obtaining late-term abortions instead of earlier-term abortions (i.e. reasons for delaying) because:

  • 71% Woman didn’t recognize she was pregnant or misjudged gestatio
  • 48% Woman found it hard to make arrangements for abortion
  • 33% Woman was afraid to tell her partner or parents
  • 24% Woman took time to decide to have an abortion
  • 8% Woman waited for her relationship to change
  • 8% Someone pressured woman not to have abortion
  • 6% Something changed after woman became pregnant
  • 6% Woman didn’t know timing is important
  • 5% Woman didn’t know she could get an abortion
  • 2% A fetal problem was diagnosed late in pregnancy
  • 11% Other

It continues:

According a 2004 study by Guttmacher, 1,160 women seeking abortion (not just late-term) gave overall reasons for obtaining an abortion at all stages (may list more than one):

  • 74% Having a baby would dramatically change my life
  • 73% Can’t afford a baby now 
  • 48% Don’t want to be a single mother or having relationship problems
  • 38% Have completed my childbearing
  • 32% Not ready for a(nother) child
  • 25% Don’t want people to know I had sex or got pregnant
  • 22% Don’t feel mature enough to raise a(nother) child
  • 14% Husband or partner wants woman to have abortion
  • 13% Possible problems affecting the health of the fetus
  • 12% Physical problem with my health
  • 6% Parents want me to have an abortion
  • 1% Woman was victim of rape 
  • <0.5% Became pregnant as a result of incest

The same Guttmacher study has statistics for later term abortion (13+ weeks gestation). According to Guttmacher, 21% of women who had abortion at or past 13 weeks were doing so for fetal health concerns, and 10% for personal health concerns. 

Abortion is a complex issue, especially when it comes to the legal aspects.[ref]This is why I’m currently reading through philosopher Christopher Kaczor’s The Ethics of Abortion.[/ref] But accuracy is important. While better data may indeed show that health complications are the culprits behind late-term abortions, the current evidence suggests that they are not.

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UPDATE: Thanks to Margot in the comments for pointing out this 2014 study. She summarizes: “A more recent study (published in 2014) on all women referred to the Yale hospital for late-term abortions from 2002 to 2011 found that 69% were for a poor prenatal diagnosis–fetal anomaly (41.6%), aneuploidy (15.7%) or multiple anomalies (12.7%)–and another 9.6% were for pregnancy complications or maternal disease. Just over 20% were for unwanted pregnancies, perhaps where the mother either didn’t know she was pregnant earlier or had problems accessing abortion.” This is the kind of evidence mentioned above that could help identify health complications as the main culprit. Good data are hard to come by, so this was an excellent find. For the pro-life crowd, the near 21% of late-term abortions performed because the pregnancy was “unwanted” will still be alarming. But if this study is generalized, it could provide more weight for Clinton’s remarks. However, it is worth pointing out that these numbers are taken from Yale New Haven Hospital between 2002 and 2011. Multiple demographic factors (income, education, marital status, etc.) are at play when it comes to the numbers of a single hospital, which should make us cautious about drawing broad conclusions from them. Other numbers tell a different story. For example, since 2012, 91% of 14-20 week and 80% of 21+ week abortions in Arizona have been elective (i.e., not due to maternal or fetal medical conditions). In Florida, 87% of 13-24 week abortions have been elective since 2013 (it’s even higher when you consider the fact that things like “emotional/psychological health of the mother” and “social or economic reasons” are filed under “non-elective”).[ref]Secular Pro-Life has made it easier on us by crunching the numbers from Arizona and Florida.[/ref] Diana Greene Foster–one of the authors of the 2013 Guttmacher study above–told FactCheck.org “that “[t]here aren’t good data on how often later abortions are for medical reasons.” She said based on limited research and discussions with researchers in the field that abortions for fetal anomaly “make up a small minority of later abortions,” and that those for life endangerment are even harder to characterize. This is because many of the women who fall into that category would be treated under emergent circumstances at hospitals rather than at a dedicated abortion clinic, making numbers harder to obtain, Foster said.” In other words, better data and research are needed.

The Importance of Consumer Credit

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I recently reread a 2014 Forbes article by GMU law professor Todd Zywicki and former Fed economist Thomas Durkin based on their Oxford-published Consumer Credit and the American Economy and thought it was worth sharing. The authors explain that despite the claims of people like Elizabeth Warren,

economists have long understood why consumers borrow. Although there are exceptions to any rule, for most it bears little resemblance to Senator Warren’s picture of hapless victims goaded into debt by rapacious credit card issuers. Instead, consumers borrow for essentially the same reasons that businesses borrow: for capital investments and to smooth disruptions in income and expenses. And paternalistic regulations that make credit more expensive and less available typically makes people poorer.

Zywicki and Durkin use the example of a washing machine:

A washing machine is no frivolous bauble; its value is in not having to schlep to the laundromat every Saturday with a pocket full of quarters. While a washing machine costs much more on the front end to acquire, it generates a stream of benefits over years. In that sense, it is no different from a construction company that borrows money to purchase a backhoe to dig a ditch instead of hiring ten guys with shovels. 

The “hand-wringing about how other people use consumer debt is as old as debt itself. For example, the New York Times warned in the 70s that American consumers were “borrowing trouble”—the 1870s, that is.” They point out that

40 years ago if you needed $400 for a car repair, you would visit your bank, credit union, or a local personal finance company for a loan to be repaid over 12-24 months. If you bought a refrigerator or new bedroom set, you would finance it through the appliance store or department store and repay it “on time.” Today, you likely would just put it on your credit card. In fact, even despite the astonishing surge of student loan debt over the past two decades (it now exceeds credit card debt), the non-mortgage debt repayment obligation as a share of income is actually lower today for the typical household, including the typical low-income household, than in 1980 (see chart below).

Finally,

while well-designed regulation can improve competition and consumer choice, economic history demonstrates that heavy-handed regulations that restrict product offerings frequently harm their intended beneficiaries. For example, who uses payday lending? Those who don’t have access to credit cards or would max out their cards if they used them. So what happens when well-intentioned regulators take away payday lending? Many payday lending customers shift to other alternatives, such as bank overdraft protection or pawnbrokers, which are often even more expensive. Eliminating options for low-income consumers (especially those options that they are actually using) doesn’t eliminate their need for credit.

The whole article is worth reading. Check it out.

The Future of Technological Advancement

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Not the most profound example, but it works.

Many critics today believe the notion that the days of economic growth and technological innovation are behind us. Yet, Oxford’s Ian Goldin and Chris Kutarna argue that these critics are mistaken.[ref]Economic historian Joel Mokyr also thinks the critics’ arguments are overblown.[/ref] The critics, they argue, imagine “technological innovation to be like pulling balls from an urn, each ball representing a new idea. In the beginning, the urn was full and the spheres were large, but each time we’ve gone back to the urn, we’ve had to reach deeper than the last, and the spheres have dwindled into marbles.” In their view, however,

this metaphor, while intuitive and compelling, is backwards (Goldin and Kutarna 2016). Innovation is more like mixing compounds in an alchemist’s lab. Each compound is an existing idea or technology, and in the beginning we had just a few – maybe some salt, sugar, and common liquids. But then we tried mixing them together, and some of them reacted with one another to form new compounds…This metaphor is far closer to the present experience in research laboratories. Across the sciences, the pace of discovery is generally rising, not falling. For reliable evidence, consider the pharmaceuticals industry (a good litmus test because it invests more into R&D than any other industry, except aerospace). The year 2013 set a new record for total drugs launched world-wide (48) – a record that was promptly beaten in 2014 (61). With another 46 drugs launched in 2015, the last three years have been the industry’s three most productive in its history. Recent major discoveries include new weapons against heart failure, which in an aging world is now the leading cause of death; immunotherapies, which help to defeat cancers by boosting the body’s own immune response; and a viable pathway to effective Alzheimer’s medications within a decade. In part thanks to the accelerating pace of pharmaceutical achievements like these, average life expectancy across advanced economies is now rising an unprecedented four to five hours per day.

Goldin and Kutarna defend their view in a way that would make Julian Simon smile:

The broader cause for these emerging paradigm shifts is the inflation in human brainpower that has taken place over the past 25 years. Thanks to giant medical successes against childhood disease and aging over the past quarter-century, the present global cohort of adults is humanity’s largest and healthiest ever. It is also the best-educated. In just a generation, illiteracy has fallen from nearly half to just one-sixth of humanity. In 30 years, we’ve added three billion literate brains to our ranks. Meanwhile, the rapid expansion of higher learning in Asia means that the number of people alive right now with a university degree is greater than the total number of degrees awarded in history prior to 1980. Most importantly, the present generation is history’s best-connected, thanks principally to a quartet of big events – the end of the Cold War, waves of democratisation across Latin America, much of Asia and sub-Saharan Africa, China’s emergence from autarky, and the advent of digital communications.

Neither history, nor the present-day pace of scientific discovery supports the notion of diminishing returns to technological innovation. The challenge for growth economists is that analytic models are poorly suited to capture, and set society’s expectations for, these impending disruptions…Growth economics is powerful. At its best, it is an empirical science that helps determine how to lift human wellbeing – one of civilisation’s most important tasks. But it is unable to capture the dynamism of our new age of discovery for a reason. Much that matters is still beyond its sight.

We need an economy and a government that support dynamism and provide fertile ground for innovation.

CBO on Trade

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How Preferential Trade Agreements Affect the U.S. Economy

The Congressional Budget Office (CBO) released a new report in September titled “How Preferential Trade Agreements Affect the U.S. Economy.” The report is timely given rising hostility toward trade among voters and presidential candidates. The report states the following:

International trade yields several benefits for the U.S. economy. Trade increases competition between foreign and domestic producers. That increase in competition causes the least productive U.S. businesses and industries to shrink; it also enables the most productive businesses and industries in the United States to expand to take advantage of profitable new opportunities to sell abroad and obtain cost savings from greater economies of scale. As a result, trade encourages a more efficient allocation of resources in the economy and raises the average productivity of businesses and industries in the United States. Through that increase in productivity, trade can boost economic output and workers’ average real (inflation-adjusted) wage. In addition, U.S. consumers and businesses benefit because trade lowers prices for some goods and services and increases the variety of products available for purchase.

Not everyone benefits from trade expansion, however. Although increases in trade probably do not significantly affect total employment, trade can affect different workers in different ways. Workers in occupations, businesses, and industries that expand because of trade may make more money, whereas workers in occupations, businesses, and industries that shrink may make less money or experience longer-than-average unemployment. Such losses can be temporary or permanent. Nevertheless, economic theory and historical evidence suggest that the diffuse and long-term benefits of international trade have outweighed the concentrated short-term costs.[ref]I address these short-term costs here.[/ref] That conclusion has consistently received strong support from the economics profession.

The rhetorical war on trade needs to stop.

An Old, Old Wooden Ship and Economic Institutions

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Last week, I made the unfortunate decision to engage in a political/economic debate on Facebook. I rarely do this because (1) it makes friends into enemies, (2) it sucks up a lot of time with continual responses, and (3) it slowly turns me into a hostile person. Nonetheless, one of the topics discussed was immigration. The concerns expressed by my debate opponent were that new immigrants may not be assimilating and could very well undermine the values and culture that make America work. Having already explained what the economic literature says about immigration, I reminded him that there has been surprisingly little research on the effects immigrants have on institutions. But the research we do have[ref]An earlier version of this paper can be found here.[/ref] suggests that immigrants not only have no negative effects on institutions, but may even have positive effects on institutional quality.

A brand new study published this August could lend support to the findings above. From the abstract:

Using several measures of diversity, we find that higher levels of ethno-linguistic and cultural fractionalization are conditioned positively on higher economic growth by an index of economic freedom, which is often heralded as a good measure of sound economic management. High diversity in turn is associated with higher levels of economic freedom. We do not find any evidence to suggest that high diversity hampers change towards greater economic freedom and institutions supporting liberal policies. The effect of diversity, moreover, is conditioned positively by higher democracy. Our results raise serious doubt about the centrality of social diversity for explaining economic failure, nor is there evidence to suggest that autocratic measures are required under conditions of social diversity to implement growth-promoting policies. This is good news because history and culture seem to matter less than rational agency for ensuring sound economic management.

While this is mainly discussing development economics, I think the correlation between high diversity and high economic freedom is important. Barring members of other ethno-linguistic groups and cultures from entering the country may actually be holding back higher-quality institutions.

You can see an older, ungated version of the paper here.

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Let Their People Come

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Earlier this year, The New York Times reported that “[o]ne of the strongest predictors of Trump support is the proportion of the population that is native-born. Relatively few people in the places where Trump is strong are immigrants — and, as their answers on their ancestry reveal, they very much wear Americanness on their sleeve.” In other words, those opposing immigration the most live in areas with very few immigrants (similar to Brexit voters). A new Gallup study supports these findings. The Washington Post reports, “According to this new analysis, those who view Trump favorably have not been disproportionately affected by foreign trade or immigration, compared with people with unfavorable views of the Republican presidential nominee. The results suggest that his supporters, on average, do not have lower incomes than other Americans, nor are they more likely to be unemployed.” However, while

Trump voters tend to be the most skeptical about immigration, they are also the least likely to actually encounter an immigrant in their neighborhood. 

Rothwell finds that people who live in places with many Hispanic residents or places close to the Mexican border, tend not to favor Trump — relative to otherwise similar Americans and to otherwise similar white Republicans.

Among those who are similar in terms of income, education and other factors, those who view Trump favorably are more likely to be found in white enclaves — racially isolated Zip codes where the amount of diversity is lower than in surrounding areas.

These places have not been affected much by immigration, and Rothwell believes that is no coincidence. He argues that when people have more personal experience of people from other countries, they develop friendlier attitudes toward immigrants.

All this makes yesterday’s outstanding article in The Washington Post all the more important. “For many economists,” the author writes, “it’s the simplest and most effective way to make the world richer and reduce poverty. For those in government, it’s a political landmine.” She goes on to present the case in favor of loosening immigration restrictions:

Some economists have suggested that allowing people to work where their labor is most highly valued — something that is hardly realistic, given the political environment in the developed world— could double the size of the global economy. More than a dozen studies reviewed by economist Michael Clemens, a senior fellow at the pro-immigration Center for Global Development, suggested that eliminating barriers to global mobility would increase world gross domestic product by between 67 and 147 percent.

Clemens says the benefits are huge even for a more modest loosening of restrictions on immigration. His research suggests that allowing just 5 percent of the people now living in poor countries to work temporarily or permanently in richer countries would add trillions of dollars to the global economy. The economic gains would be greater than those from dismantling every remaining barrier to trade and investment around the world.

While some critics like Harvard’s George Borjas reject this kind of optimism, the evidence leans in favor of those pushing for fewer restrictions:

First, the same worker can create more economic value in some places than in others, because of differences in factors that affect the productivity of businesses, such as natural resources, infrastructure, technologies and laws…Differences in productivity are reflected in the vastly different wages people can earn for similar types of work across the world. According to estimates by Clemens, Claudio Montenegro and Lant Pritchett, who examined a data set of more than 2 million workers, the average Peruvian can make 2.6 times as much in the United States as in Peru, while a Haitian can make seven times more.

Second, many economists say that an influx of immigrants can expand an economy, potentially even raising wages for the native born…An expansive study released by the National Academies of Sciences in September found that immigration has mostly helped the U.S. economy in recent decades and had little effect on the wages or employment of native-born Americans. According to the study, the main group negatively affected by newly arriving immigrants was actually earlier waves of immigrants with similar language skills. To a lesser extent, new immigrants also competed for work with the lowest-skilled Americans, such as high-school dropouts. But in general, immigration left the native population slightly better off.

The article concludes:

While Clemens says he is troubled by the idea of discriminating against people based on where they are born, he doesn’t advocate “openborders,”[ref]See his and Lant Prichett’s newest publication “The New Economic Case for Migration Restrictions: An Assessment.” While empirical evidence may not back complete open borders, it does support the relaxing of current restrictions.[/ref] a term that is often used as a synonym for anarchy — no background checks, no deportation and no restrictions on immigration. In reality, few politicians are advocating even moderately higher levels of immigration, and the world won’t see anything like open borders anytime soon. But he says people still should recognize the substantial trade-offs of the current system.

Clemens draws an analogy with the rights of women. In the United States, laws prevented women from owning property, inheriting wealth and entering many professions until the late 1800s. Although some male workers may have suffered from the entry of women into the workforce during the 20th century, no one would deny that it has provided enormous benefits to the country and the economy. Yet restrictions on women had still persisted for millennia.

To borrow the title from Lant Prichett’s book:[ref]Prichett’s book was really influential in changing my views of immigration.[/ref] let their people come.

2016 Presidential Endorsements

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For the first time in its 40-year existence, Foreign Policy endorsed a presidential candidate:

Image result for never trumpIn the nearly half-century history of Foreign Policy, the editors of this publication have never endorsed a candidate for political office. We cherish and fiercely protect this publication’s independence and its reputation for objectivity, and we deeply value our relationship with all of our readers, regardless of political orientation.

It is for all these reasons that FP’s editors are now breaking with tradition to endorse Hillary Clinton for the next president of the United States.

Our readers depend on FP for insight and analysis into issues of national security and foreign policy. We feel that our obligation to our readers thus extends now to making clear the great magnitude of the threat that a Donald Trump presidency would pose to the United States. The dangers Trump presents as president stretch beyond the United States to the international economy, to global security, to America’s allies, as well as to countless innocents everywhere who would be the victims of his inexperience, his perverse policy views, and the profound unsuitability of his temperament for the office he seeks.

The litany of reasons Trump poses such a threat is so long that it is, in fact, shocking that he is a major party’s candidate for the presidency. The recent furor over his vile behavior with women illustrates the extraordinary nature of his unsuitability, as does his repudiation by so many members of his own party — who have so many reasons to reflexively support their nominee.

This endorsement made me want to look at the state of newspaper and magazine endorsements thus far. As of now, there is not a single newspaper or magazine that has endorsed Trump. None. Zero. And the following have more-or-less broken tradition:

  • New York Daily News: pro-Clinton. Typically centrist; endorsed George Bush in 2004 and Mitt Romney in 2012 (Barack Obama in 2008).
  • Houston Chronicle: pro-Clinton. Third time in 64 years to endorse a Democratic candidate.
  • Tulsa World: No endorsement. Franklin Roosevelt in 1940 was the last Democratic candidate they endorsed.
  • Richmond Times-Dispatch: pro-Johnson. Have endorsed every Republican nominee since 1980. First endorsement of a Libertarian.
  • Dallas Morning News: pro-Clinton. First endorsement of a Democratic nominee since Roosevelt in 1944.
  • New Hampshire Union Leader: pro-Johnson. First Libertarian endorsement and non-Republican in over 100 years.
  • Cincinnati Enquirer: pro-Clinton. First Democratic endorsement since Woodrow Wilson in 1916.
  • Arizona Republic: pro-Clinton. First Democratic endorsement in its 126-year history.
  • Detroit News: pro-Johnson. First non-Republican endorsement in its 143-year history.
  • USA Today: not Trump. First time to take a position on the presidential election in its 34-year history.
  • San Diego Union-Tribune: pro-Clinton. First Democratic endorsement in its 148-year history.
  • Desert Sun: pro-Clinton. First Democratic endorsement in 90-year history.
  • Foreign Policy: pro-Clinton. See above.
  • Wired: pro-Clinton. Magazine’s first presidential endorsement.
  • Deseret News: not Trump. Has not endorsed a candidate in 80 years, but wrote an editorial saying Trump should drop out.

And much more. Check out the list here.