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Powell – What Is An American?

Assistant Professor of Economics at San Jose State
Director of the Center on Entrepreneurial Innovation at the Independent

National Meeting of The Philadelphia Society
What Is An American?
April 30, 2005
Miami, Florida

“I am honored to
speak to you today about immigration. You
just heard an argument to restrict immigration and even close our borders from
Peter Brimelow, a man with strong free market credentials.
Unfortunately, Peter’s proposals will fail to save American
culture and values and may serve to undermine them.
His problems stem not only from faulty economic estimates but
also from a failure to address the underlying problems that America faces.
The problems we observe with immigration are only symptoms of our
perverse institutional environment not the underlying problems themselves.

want to be clear from the outset that I do not support America’s present
immigration policy. Our current
immigration problems stem from both our mixed interventionist economy and our
current system of immigration rules. I
agree with Peter that the 1965 law and subsequent acts create problems and
should be eliminated. However,
instead of restricting immigration completely, I favor opening the borders to
all immigrants, in any quantity, from any location, so long as they are free of
disease and demonstrated criminal activity, and that some private party is
willing to provide a place for them to stay.

do not advocate this because I believe in any special “right” to
immigration. For that matter, I
don’t believe that “multiculturalism,” “diversity,” and other
politically correct buzz-words that liberals use are necessarily good.
I favor open immigration because it is the right policy for
Americans who live here today.

me begin with some economic reasons. Peter
bases his economic consequences of immigration on the work of George Borjas.
Borjas uses what economists call a Harberger triangle to estimate the
gains from immigration. His latest
estimates in David Henderson’s Concise Encyclopedia of Economics find
that immigration increases GDP growth by about .2 percent, or $22 Billion per
year. While .2 percent sounds
small, compounded over time this is still a significant gain for our economy.

advocates try to trivialize the size of the gain, but there are hundreds of
government regulations in our economy that conservatives and classical liberals
oppose that have much smaller effects. I
doubt anyone in attendance would be against abolishing rent controls in
Berkeley, California, even though the economic gains would be far smaller than
those from immigration. Virtually
every estimate agrees that immigration has some positive economic impact.
Even if the gain is $22 billion, a gain is a gain, and it’s a heck of a
lot better than a loss.

and Brimelow, however, grossly underestimate the size of the gain.
The Harberger Triangle method they use is also used by economists to
measure the net loss to society from monopolies.
In the 1960s some economists estimated these losses and found that the
triangles were relatively small and began to conclude that government sanctioned
monopolies do not introduce too big of an inefficiency into the economy.

took the public choice economist, Gordon Tullock, in a 1967 article that he is
still awaiting his Nobel Prize for, to point out that it was not just the
triangle that could be lost but the area economists previously considered a
transfer. Since a grant of monopoly
privilege is a political favor bestowed upon a producer, producers have an
incentive to engage in economically unproductive activities such as lobbying to
try to obtain the transfer. Some
of the value of what economists previously considered a transfer from consumers
to producers would also be a net loss to society.

that article was published a large literature in public choice has emerged that
describes the various conditions under which the rectangle (transfer) will be
exactly dissipated into loss, over dissipated and under dissipated.
The one conclusive result is that under all of their plausible models,
there will be very significant deadweight costs in addition to the triangle.

completely leaves this out of his estimates of the benefits of immigration.
He assumes all that will be lost is the triangle and that the rectangle
you see would be transferred from U.S. workers to U.S. owners of capital and
For this to be even partially accurate immigration would have
to move from current policy to his vision of complete restriction with
essentially no political fight. How
likely is that? Quoting from his
book Alien Nation,
“It will be resisted hysterically. It
will be sabotaged in every possible way. It
will probably require repeated legislation. It could quite easily destroy the
present political party system.” P.267.

going to be a big cost.

trade policy, an article in the Journal of Political Economy estimated
that once you count the political lobbying costs of trade restrictions, the
losses to the economy increase by a factor of 10 compared to just the triangle.
That would make the $22 Billion loss from immigration into $220 billion.
This is not at all unreasonable given the passion of the
fight that will likely ensue.

is not to claim some workers won’t lose, some who compete for the same jobs as
the immigrants could lose at least in the short run.
Though a survey of the economics literature published in the Journal
of Economic Perspectives
concluded that “Despite the popular belief that
immigrants have a large adverse impact on the wages and employment opportunities
of the native-born population, the literature on this question does not provide
much support for the conclusion.”

even if it could be shown that wages of some groups of native-born workers
decrease, I don’t think conservative and classical liberal supporters of
markets should abandon support of immigration. Virtually any policy that
restricts competition benefits some workers at the expense of the vast majority
and overall efficiency. Unless we
can conclusively argue that these displaced workers had some special positive
“right” to a job or particular wage that no one else does, a classical
liberal should not advocate restricting competition.

immigration has overall economic benefits there are also costs that current
tax-payers bear. The most obvious cost occurs when an immigrant receives

of immigration point out that immigrants are more likely to go on welfare than
the general population. Some even
claim that this trend is increasing, though research by Vedder, Gallaway, and
Moore shows that these claims are grossly overstated.
Once they control for other factors, they find little change
in the proportion people on welfare who are immigrants since 1970.

this, there clearly should be concern about people migrating here to receive
welfare. A two child family in
California is eligible for a $7,200 welfare cash benefit, an additional $3,000
in food stamps, and up to $6,500 in Medicaid for a total benefit of over
$16,000. These benefits exceed the
average per capita incomes in many countries around the world by a substantial

Friedman has said, “It’s just obvious, that you can’t have free
immigration and a welfare state.” Conservatives
and classical liberals should agree with a resounding “here, here,” and
it’s time to abolish the welfare state.

doubt there are many supporters of the welfare state in this room.
But it is a mistake to take the welfare state’s existence for granted
and use it as an excuse to condone government interventions in immigration.
This is the problem Ludwig Von Mises famously pointed out in his book The
Dynamics of Interventionism
. One
government intervention in the economy produces undesirable and unintended
results and planners are confronted with the choice of making further
interventions or repealing prior ones. All
too often, government chooses the former.

points out that we must fight to roll back existing interventions, so that the
economy will not keep tending down what Hayek famously called “the road to

everybody in this room is opposed to rent control.
But if rent control exists, land lords have an incentive to
turn apartments into condos and sell them off at higher prices, leaving the poor
with even fewer apartments available. Clearly
this is an undesirable result. But
almost no one here would advocate restricting the ability of land lords to
convert their property to condos as a solution.
We would instead focus our efforts repealing the first intervention, rent
control, that caused our problem in the first place.

same should be true of the welfare state and immigration.
Conservatives and classical liberals should focus energy on rolling back
the welfare state instead of trying to limit immigration.
If a case to eliminate immigration is to be made, it must be independent
of the existence of the welfare state.

may reply that it’s not politically likely that we can eliminate the welfare
state right now. Well, it’s also
not politically likely that immigration can be completely restricted right now.
If we are going to have a political fight, it might as well be for real
conservative and classical liberal value, not a marginal step away from
classical liberalism by restricting immigration.

if the political situation were different, I don’t think we should advocate
restricting immigration. In The
Intellectuals and Socialism
, Hayek wrote, “The main lesson which the true
liberal must learn from the success of the socialists is that it was their
courage to be Utopian which gained them supportÖWe need intellectual leaders
who are willing to work for an ideal, however small may be the prospects of its
early realization.” This is the
position we should be fighting for on immigration, not one that assumes a
welfare state.

course, there are other spillover costs of immigration in our economy.
Public schooling, especially with bilingual education, is one example;
crowding on public roads is another. But
here, too, we have features of our economy that are not consistent with free
Our fight should be to eliminate public schooling and to
privatize roads by allowing owners to charge for their use directly, not to stop

every economic cost of immigration is a product of an interventionist government
and a welfare state, or a tragedy of the commons.
In either case, the solution to the problems is private property reform
and free markets.

fact, immigration restrictions not only create a new intervention, they fail to
reform these underlying problems at all. Restricting
immigration doesn’t change all of the spill over costs that current native
citizens place on each other. Immigration
puts pressure on us to reform underlying problems and therefore should be

the correct institutional setting immigration is an unambiguous economic gain
for existing citizens. Reform
towards those institutions are what we need to agitate for.

beyond economics — what about our culture?
American valuesÖ self reliance, hard work, individual initiative?
Couldn’t bringing in people from other cultures undermine those values,
or — even worse — pervert our politics?

values have changed over the last two hundred years.
Most of the public has moved away from these traditional
values and come to believe that our nanny state is necessary.
People have learned that instead of serving consumers to get ahead they
can lobby the government for transfers; use the court system for fraudulent law
suites; beg the anti-trust regulators to limit their more efficient competitors;
take government handouts between jobs or, even worse, take handouts nearly

have changed as our institutional environment has changed.
As acts of congress and court decisions have eroded our original
constitutional environment they have distorted the incentives facing people in
our economy. As the benefits to
unproductive entrepreneurship — what economists call rent seeking, or
basically seeking transfers of wealth — have increased, more people engage in
transfer seeking. This has eroded our culture.
The costs and benefits people face have influenced our cultural values
over time. This is true of both immigrants and natives.

post-1965 immigrant wave IS different than prior immigration waves.
It is partly distorted by government policy that prevents Europeans and
others from coming, but it’s also different, NOT because the immigrants
are fundamentally different, but because OUR culture is different than

immigrants assimilated into a culture of hard work and self reliance.
Those who failed here often had to go home.
Few go home today because of failure today.
Instead, they are taught to assimilate into a system of government
reliance where failure and laziness are not punished.
The post-1965 immigration wave is the first that has come once we had a
welfare state in place. Unfortunately,
that welfare state not only makes them less productive, it also teaches them to
undermine our old culture that made America successful.

problem is not unique to immigrants though.
All American culture is being perverted by the welfare state.
Culture is influenced by the economic incentives facing actors — it is
not something wholly determined by place of origin or ethnicity.

at the many natural experiments: China, Taiwan and Hong Kong; North and South
Korea; Ireland and Northern Ireland — places with essentially the same
geography and ethnicity where the political and economic cultures are completely

each case, one group was able to adopt a system of free market principles like
those of the U.S. Their economy
flourished and their culture grew to support it, while an otherwise similar
group of people adopted different institutions and stagnated.

both cases, the cultures have carried on. Ethnicity
alone doesn’t determine what values a group will support.
Culture evolves to respond to costs and benefits over time.
We need to focus on creating the right institutional environment in the
U.S. so the immigrants who come here will assimilate into the old American
values, not our new perverted ones created by the nanny state.

concern is security. What about a
wave terrorists trying to immigrate? Just
because we should have an open immigration policy doesn’t mean we can’t
exclude criminals and known terrorists. People
with criminal records should not be free to roam our streets, immigrant, native,
or otherwise.

moving to a system of open immigration we would slow the flow of the current
illegal border crossings. As long
as it was predictable that we would let anyone immigrate who enters through
legal checkpoints and who does not have a criminal record, most immigrants would
come through these channels. This
would free up our resources devoted to monitoring illegal crossings so that they
were concentrating on a smaller group, most likely criminals and terrorists, so
they could better prevent them from entering.

now we do a horrible job of preventing illegal crossings because there are just
too many attempts relative to enforcement resources.
If we completely cut off immigration there would likely be
even more illegal attempts. By
opening our borders and concentrating resources on the fewer attempts that
occur, we would actually be more safe, not less.

I think there is an important ethical argument that needs to be considered in
immigration policy: The rights of
current American citizens to freedom of association.

fundamental American cultural values were a right to life, liberty, and
property. Those rights imply a
freedom to sell or rent your property, to associate in business with, or to have
as a guest on your property, anyone you desire.

have no special “right” to come here just as I have no special “right”
to walk on your private property. The
right is with our property owners in the U.S. to associate with whomever they
please, be they an American citizen or not.

immigration policy unjustly puts a filter on our own right of freedom of
The government has no just reason to place a blanket filter
on whom we associate with. The only
people who should be filtered out are those who have demonstrated that they have
no respect for our rights of life liberty and property — namely criminals.
And these people should be filtered out whether they are natives or
immigrants. Any filter beyond that
is an unjust restriction on our very American freedoms we used to hold so dear.

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