CHAPTER 16 EVALUATION OF IMMIGRATION POLICIES TOTAL NUMBER OF IMMIGRANTS TO BE ADMITTED GUESTWORKERS OR NO GUESTWORKERS? POLICY TOWARD ILLEGALS REFUGEES FAMILY RECONSTITUTION PERMANENT RESIDENCE FOR FOREIGN STUDENTS IN THE U.S. ADMITTING UNDERGRADUATE AND GRADUATE STUDENTS FOR STUDY WELFARE PROGRAMS FOR IMMIGRANTS BRINGING POOR PERSONS FROM POOR COUNTRIES DISCRIMINATION BY COUNTRY OF ORIGIN SELECTIVE ADMISSION BY EDUCATION SELECTIVE ADMISSION BY AMOUNT OF INVESTMENT CAPITAL SELLING FOREIGNERS THE RIGHT TO IMMIGRATE AFTERNOTE: IMMIGRATION, TECHNOLOGY, AND POLITICAL COMPETITION This chapter discusses a variety of possible U. S. immigration policies, and evaluates them. The visa allocation system at present is roughly as follows: In the class of "mumerically exempt immigrants" who are admitted immediately are spouses, children, and parents of U.S. citizens at least 21 years of age. The total of "numerically-limited immigrants" is 270,000 per year. The "preferences" and sizes are: Percentage &Preference Groups Include Number of Visas First Unmarried sons and daughters of 20% or 54,000 U.S. citizens and their children Second Spouses and unmarried sons and 26% or 70,000* daughters of permanent resident aliens Third Members of the professions of 10% or 27,000 exceptional ability and their spouses and children Fourth Married sons and daughters of 10% or 27,000* U.S. citizens, their spouses and children Fifth Brothers and sisters of U.S. 24% or 64,800* citizens (at least 21 years of age) and their spouses and children Sixth Workers in skilled or unskilled 10% or 27,000 occupations in which laborers are in short supply in the United States, their spouses and children Non- Other qualified applicants Any numbers not preference used above* *Numbers not used in higher preferences may be used in these categories. Each country is limited to 20,000 persons born there. Refugees and some other special categories of persons are not covered by this system. TOTAL NUMBER OF IMMIGRANTS TO BE ADMITTED The total number of immigrants to be admitted legally is the key economic element of immigration policy. If no applicants will be admitted legally, the only remaining immigration decisions concern illegal immigrants. If all applicants will be admitted, there are no further decisions to be made. The alternatives that I think realistic are: a) substantially more immigrants than now, b) substantially less immigrants than now, and c) about the same number as now. By "substantially" I mean a change up to a doubling (and perhaps subsequent doublings) or halving of the immigration rate. Furthermore, it would seem likely that, given the nature of politics and social decision-making in the United States, changes in the amount of immigration would be made in several steps - a sequential process of "muddling through" as we learn by trial and error. Recommending only "substantially more" or "substantially less" would seem to be consistent with this prevailing political process. A recommendation of either zero immigrants or an open door would have no chance of being adopted by American society now or in the forseeable future, and therefore it would hardly be useful to make either recommendation even if it were warranted on strictly economic grounds. Please remember, however, that immigration presently is not high relative to historic levels. In proportion to population size, immigration was five or six times greater at the turn of the century than in the 1970's and 1980's. The practical question is whether the U.S. is better off with say, one million or even two million rather than 500,000 immigrants yearly. Another reason for not considering an open-door policy is that it might -- though there is no evidence that it would -- result in a flow of immigrants larger than the U.S. or other nations have experienced in the past, relative to population size, and hence with results that are not predictable. As Kuznets noted in a discussion of related issues, "long-term projections into ranges well beyond those covered by the observed past are subject to wide errors; and the variables and parameters . . . are too diverse and too crude to permit adequate analysis." (1977, p.14). The most important economic considerations with respect to the total number of immigrants would seem to be the effects upon a) total national product, and b) natives' per person income. The model analysed in Chapter 10, which embodies influences through the supply of capital, productivity change, and transfers of taxes and welfare services, concludes that natives benefit by additional immigrants almost immediately, even without balancing the greater advantages in the longer run versus the less positive effects in the shorter run. This result suggests admitting more immigrants than at present. More specific considerations also seem favorable to admitting more immigrants. The balance of transfers and taxes is positive with respect to natives' welfare, as Chapter 5 shows. Because immigrants are self-selected with respect to their drive and energy, and/or because they do not begin their lives in the U.S. with the material and social advantages enjoyed by natives and therefore are "hungry", they apparently make a greater effort in economic endeavors than do natives. As discussed in Chapter 4, this effort level results in innovation, increased productivity, and especially a high level of entrepeneurial activity which produces new jobs, along with other benefits to natives. The most potent objection to immigration heard in political discussions of immigration volume -- the purported increase in native unemployment due to "displacement" by immigrants -- seems to be a small or even non-existent problem, as Chapters 11 and 12 discuss. Given that at the present level of admissions, immigrants are economically beneficial rather than a drain on the taxpayer, a policy of more immigrants than allowed by present or proposed laws would benefit American citizens. I will not recommend a total number of admissions into the U.S., however. One reason for not doing so is that our knowledge at present is far too thin, especially -- and inevitably -- with respect to immigration levels that have never been experienced in the United States or elsewhere, or that have not been experienced in recent years. Some persons may also be interested in the effect of the total number of immigrants because of the contribution to total population, and thence its effect upon international political position. This factor, along with the political effect of admitting more students and graduates in scientific and engineering discussed briefly in Chapter 8 and below, will not be mentioned further here because political considerations are outside the purview of this book. Recommendation: Increase the volume of total immigration in substantial steps unless there appear negative effects that are unknown at present. GUESTWORKERS OR NO GUESTWORKERS? A difficulty in assessing a guestworker policy is that it is not clear against which alternative a guestworker policy should be compared. Comparing guestworkers against the same state of affairs except with no guestworkers is quite different than comparing a policy of guestworkers against an increased number of illegals doing the same work that the guestworkers would do. Another difficulty in discussing a guestworker policy is that there is a tendency to consider guestworkers as second-class citizens, and to argue against a guestworker policy because it creates an ethically unacceptable division of classes. Compared to a beautiful world of no borders and perfect freedom to live with full rights wherever one likes, having both citizens and non-citizens within a country may seem undesirable. But compared to a world in which every country controls who may enter (some even control who may leave, who may become a citizen, and which rights non-citizens have), the comparison may seem quite different. And making a distinction between citizens and aliens need not be invidious; American engineers, Peace Corps members, and servicemen/women who work in countries where they do not have the same rights as citizens apparently do not feel demeaned or otherwise injured by such a status. It seems to me, therefore, that a guestworker policy should not be rejected out of hand for non-economic reasons of human dignity. (And indeed, giving people the choice of whether they do or do not wish to serve as guestworkers seems to be more dignified than deciding for them that serving as guestworkers would not be good for them.) The analysis may best be conducted in several steps. Let us first consider the aggregate effects of having foreigners do the work that either guestworkers or illegals would do, as against no such workers. The Borts-Stein-Berry-Soligo production-capital analysis discussed in Chapter 7 implies that from an aggregate point of view, having guestworkers is clearly (though only slightly) beneficial through that channel. Transfer-and-tax considerations strengthen this conclusion considerably. Demographic capital effect that goes in the other direction is not very relevant for guestworkers. Additionally, none of the complications that enter into the analysis of permanent immigrants apply to temporary immigrants. Hence we may say with confidence that temporary immigrants increase average per person income among natives as long as there is demand for their services. The distributional effect of guestworkers (or illegals) is another matter, however. Unlike "normal" permanent immigrants, guestworkers are likely to be concentrated in low-skill and low- paying jobs, and in a few industries such as agriculture, restaurants and hotels, and textiles. Hence, those natives who work in the industries that would employ the guestworkers would suffer some damage. As discussed at greater length in Chapter 13, in this respect (though not in others) the situation is exactly analogous to that in which a country permits the import of a foreign-made good: The workers in the domestic industry producing the same product are injured, and it is cold comfort to them that economic welfare on balance is increased. There is, however, a difference between the import of goods and the import of workers which makes the latter relatively less painful: The import of workers is likely to cause a reduction of wages but not a loss of jobs (Chapter 12), whereas the import of goods is likely to reduce jobs in the short run. And loss of jobs seems to many to be more painful than reduction in wages. Furthermore, the empirical studies suggest that the wage effect is small even among the worst-affected groups. A drawback attributed to guestworker plans is that the guestworkers will not leave when their contractual period is over, but rather bring their families and settle permanently; European countries have complained of this recently. But such an outcome can be avoided or minimized by various financial incentive arrangements; examples include deposits of Social Security payments in the person's home country that are forfeited if the worker does not live up to the agreement, or deposits in escrow upon entry (see Neal, 1981, for further discussion of such schemes). Various pairs of countries such as Italy and Australia already have reciprocal social security agreements. Recommendation: A guestworker policy should be adopted, along with a device that ensures the guestworkers' return to their home countries after their contract period is complete. POLICY TOWARD ILLEGALS Reducing illegal activity is worthwhile in itself, because illegality is hardly beneficial to a society. From a more specific economic point of view, commerce is hampered unless people habitually play by the legal rules of the game. Furthermore, allowing some people to enter illegally while others who seek legal entrance wait their turn is not fair to the latter, and induces the latter group to take the law into their own hands. This said, it does not follow that an all-out effort should be made to curb illegal immigration. One drawback of such an effort is that such a campaign may have a high material and non- material costs, and the efficiency may be low. Another drawback is that valuable immigrants may thereby be lost to the economy. Again, the key difficulty in making sound decisions about illegal immigration is in choosing a reasonable comparison state of affairs. For example, if one compares the existing state of affairs against a state of affairs that is identical in all ways except that the immigrants do not have illegal status, then obviously the latter is preferable on non-economic grounds. But the latter state of affairs is not a realistic alternative. Also, it should be noted in passing -- because it helps keep this issue in perspective -- that natives are better off if a given immigrant worker is currently working in the U.S. illegally rather than legally, because the illegal pays about the same taxes but receives less social services and transfer payments because of his illegal status, as discussed in Chapter 15. But I doubt that many would justify maintaining the persons in illegal status for that reason. A guestworker program would seem preferable on all grounds to having the same persons work as illegals (unless one considers it a benefit that illegals cannot use social services they would be entitled to if legal). (It is noteworthy that the much-cited estimate by the Congressional Budget Office of the "cost" of the Simpson-Mazzoli bill finally enacted by Congress in 1986 referred only to the difference in welfare services used by an immigrant when legal rather than illegal. See Chapter 15 for the details.) The more difficult question is whether having illegals is preferable to having no illegals or guestworkers, that is, whether it makes sense to try to reduce the flow and stock of illegals. Again, the only drawback is distributional, and the meaning of a distributional change cannot easily be valued economically. Another relevant comparison is a guestworker program, or a de facto program of illegal immigration, versus different policies of the Mexican government toward U.S. investment in Mexico. Mexico has a "maquiladora" program which allows U.S. firms to operate wholly-U.S.-owned plants in such border cities as Ciudad Juarez, subject to certain requirements about shipping the output back to the U.S. rather than selling in Mexico. The basic $1.30 per hour wage (as of 1986) is attractive to U.S. firms, and is considerably higher than most other comparable opportunities in Mexico. The program surely affects the flow of illegals and guestworkers. Ciudad Juarez "suffers from a labor shortage," indicating that the supply of labor is not inexhaustible. This suggests that a policy which widens opportunities for U.S. and other investors within Mexico could have a substantial effect on the flow of migrants northward, as well as having other desirable effects.1 An editorial in the Wall Street Journal in the late 1970's summarized the recent history of U. S. policy toward illegal immigration as alternating episodes of tightening and loosening control of the borders, somewhat in response to public concern and to changes in general regional conditions. The editorial then arrived at the surprising conclusion that this messy implicit resolution to the problem of illegal immigration from Mexico is probably preferable to any possible solution that would be neater, and suggested that the U.S. simply decide to continue with the present system which is at least livable even if not esthetic. This proposal, unpalatable though it is, has much to recommend it. Recommendation: In the absence of a guestworker policy, muddle through as has been done in the recent past with respect to illegals. REFUGEES One might think that refugees are less desirable immigrants than are immigrants who choose to come for economic reasons alone, because refugees are less self-selected according to economic motivation and belief in their own capacity to get ahead economically in a strange and perhaps hostile environment as are economic immigrants. Indeed, Chiswick (1981) interprets his results for various ethnic groups, including Cubans and Soviet Jews immigrants whom he believes are largely political refugees, as showing that refugees do not get ahead as fast as non- refugees, holding constant such characteristics as education and age. One might further argue that the age and family composition of refugees is not quite so favorable as is the composition of non-refugee economic-immigrant families; the refugee heads of families are likely to be older and already having children. (See Chapter 3, Figure 3-10.) On the other hand, several communities of refugees have arrived with exceptionally favorable educational and occupational characteristics, for example, the Jews driven from Europe by World War II, the Cubans fleeing Castro, and perhaps the Vietnamese War refugees. Some of the refugee communities who came to the U. S. as a result of the Vietnam War, however, have little education. For example the Hmong are often said to be unusual among refugees in that respect. (But see Baker and North, 1984.) Often it is difficult to distinguish between "economic" immigrants and refugees. Fleeing oppression is a more reasonable decision when you are anxious to improve your economic status, and when you believe that you will succeed in the country of refuge. Refugees are likely to have the characteristic of not expecting to return to the country of origin. This would seem to be favorable to making an especially diligent effort to adapt to the new economy and society. Indeed, the (to me) most persuasive explanation for Mexican immigrants not advancing as rapidly as other immigrant communities with the same educational characteristics -- including other Hispanic communities -- is that many Mexicans do not cut their ties so sharply with their home communities because geography allows them to go back and forth so readily (see the data in Chapter 4 on naturalization rates). On the other hand, this characteristic means that those who do not succeed in the U.S. cannot leave, and hence may turn out to be a burden upon the community. On balance, I do not find any major difference between refugees and economic immigrants with regard to their economic prospects, and therefore I believe that no distinction need be made in the analysis for this characteristic. Even if one assumes that the United States has a responsibility to assist victims of political repression, however, there may be ways other than admitting them as immigrants (which also benefit the United States). One possibility is to influence other countries to assist them, as the U. S. has done to some extent with Vietnamese refugees. If there should be a choice between refugees and "economic" immigrants within a fixed quota, it would make sense for the U. S. to provide funds to other nations to take in some or all of the refugees, and thereby to increase the welfare of a larger number of persons, to a greater degree, than it could by displacing economic immigrants with refugees. Of course it would be unseemly to carry out such a program explicitly even though it is done implicitly, but to cluck about it is simply hypocrisy. Recommendation: Consider refugees as indistinguishable from ordinary economic immigrants in all economic policy making. If refugees are to be handled differently, the grounds should be non-economic rather than economic. If refugees would not be as desirable economically as other potential immigrants, pay other countries to take in some of the refugees. FAMILY RECONSTITUTION Jasso and Rosenzweig (forthcoming) have estimated the extent to which an immigrant leads to additional immigrants in the future by way of the preference system. This method is too complex to describe here, but seems reasonable. They conclude that the system does not "explode" in the sense that family re- unification would not drive out all "independent" immigration. But they do not calculate the "equilibrium" proportion of family- unification persons that would result from a constant admission process. (They note that any "temporary" increase of immigrants boosts the backlog of requests.) The enclosed data from Philippine immigration (Figure 16-1) is relevant and interesting, however. ----------- Figure 16-1 ----------- Arnold et.al. tackled the same problem by interviewing samples of Filipino and Korean families about to immigrate to the U. S. While the number of potential relatives who conceivably might also immigrate is very large -- about 25 and 17 per immigrant respectively in the Philiptines and Korea-- the number newly added to eligibility by a given immigrant's change in status is much smaller -- between 1.0 and 1.8, and between 0.5 and 0.7 for the two countries respectively, depending upon the assumptions one makes. And many of these persons cannot come immediately because of quota limitations, so that these numbers apply, not immediately, but during the course of the new immigrant's lifetime. These findings reinforce the findings of Jasso and Rosenzweig. Allowing persons to enter as immigrants on the basis of family ties rather than on other--and especially economic-- characteristics is by definition a non-economic decision. But once a decision has been made to give preference in admission to various classes of relatives, those relatives who come must be taken into account in any assessment of an admission policy. Independent persons selected on economic grounds would be preferable to relatives, were there to be no humanitarian considerations. This runs contrary to fact, however, so no further consideration will be given to the matter. PERMANENT RESIDENCE FOR FOREIGN STUDENTS IN THE U. S. Students who come to study and then choose to stay are not given preference under present policies, and may even be discriminated against. The contributions of foreign graduate students even before they graduate were mentioned in Chapter 8. And valuable as they are while students, they are even more valuable to the U.S. after they receive their degrees, and have particularly favorable characteristics as potential immigrants. By the time that they have finished most courses of study, the graduates have mastered English. They are at the perfect age, being just ready to enter the labor force and having their entire earning lives ahead of them. Usually they have already well assimilated themselves within the U.S. society. They have seen enough of the U.S. to have formed a well-founded judgment about whether it is a country in which they would like to remain. They usually have investigated the markets for their skills, and therefore are likely to find employment relatively rapidly. And of course they are, on average, an extremely well-educated group. On balance, then, it would seem that foreign students have extraordinary promise as valuable contributors to the U. S. economy. And foreign graduate students studying engineering and science have even greater benefits for the U. S. than foreign students at large, as discussed in Chapter 8. An objection is that admitting foreign students as immigrants will result in damage to the countries of origin because of the "brain drain." Whether on balance countries of origin really suffer much from such emigration is discussed in Chapter 14. For now let us assume that whether or not there is real damage, many in the countries of origin think that there is. Let us therefore ask how the U. S. might admit the students as immigrants and at the same time prevent the feeling of damage by the origin countries. One possibility is that the students make reparations payments to the countries of origin during the course of their productive earning lives; this is the essence of Bhagwati's scheme (1976; or in Chiswick, 1981). The U.S. could then require as a condition of admission that the student commit him/herself to such a contractual arrangement. There would seem to be no ethical obligation for the U. S. to place qualifications upon admission with respect to the potential immigrant's relationship to the country of origin. To suggest that there is such an obligation is to suggest that countries own their subjects and have a right to prevent their emigration, which seems counter to existing international law as embodied in the Helsinki accord. And in fact one might argue that for the U. S. to place such an obligation of reparations upon immigrants is itself unethical. Yet the U. S. obviously would like to prevent other countries from feeling damaged by U. S. policies that seem to be undertaken for the U. S. economic interest. So there is a complex political/ethical issue to be dealt with here. If the U.S. were to adopt a policy of sale of admission, as discussed below, and were also to decide to remit some part of the fees to the countries of origin, this would immediately resolve this problem. Some may wonder whether it is "fair" for the U.S. to take advantage of the rest of the world's supply of brains. This issue is addressed below in the afternote to this chapter. Recommendation: Give special preference to foreign students who have completed their courses of study in the U. S. ADMITTING UNDERGRADUATE AND GRADUATE STUDENTS FOR STUDY Study in U. S. institutions of higher learning is a best- selling "invisible" export.99 And as long as foreign students pay the true cost of their education, having them come is of extraordinary value to the United States, for several reasons. First, education is an excellent product for the U. S. to sell. Second, it enables the U. S. to maintain its universities at a larger level that would be possible otherwise, which is a boon to research programs. Third, the students tend to have attitudes favorable to the United States when they leave. Fourth, it serves as a feeder for immigration, as discussed in the above section. This recommendation seems the least arguable of all the recommendations: Recommendation: Promote the coming of students from abroad who will pay the costs of their education. WELFARE PROGRAMS FOR IMMIGRANTS Probably from the first days of the human species, our charitable feelings have been at odds with our desire to improve character. (Seen another way, the conflict is between altruism in the short and long runs). For example, on one side there is the desire to assist immigrants who need help in a new land, while on the other side there is the aim of not making the new land attractive to persons who do not intend to, or cannot, take care of themselves. This conflict seems quite easy to resolve. An unworthy immigrant takes the place of a more-worthy potential immigrant who would otherwise be able to enter and take advantage of what the U.S. has to offer, while at the same time being able to give to the society more than s/he takes from it in transfers. Therefore, there seems to be a compelling argument for stringent requirements that immigrants (perhaps with the help of a sponsor) take care of themselves economically, with effective sanctions for those who do not do so. Two present provisions of the Immigration and Nationalization Act try to prevent immigrants from becoming a welfare burden. One states that aliens are ineligible to receive visas if they are "likely to become public charges" (8 U. S. C. 1182, quoted in Report to the Congress by the Comptroller General, "Number of Newly Arrived Aliens Who Receive Supplemental Security Income Needs to be Breduced", February 22, 1972, p. 5). And another provision orders deportation if the immigrant "has within five years after entry become a public charge from causes not affirmatively shown to have arisen after entry" (ibid, p. 1251). Still, more might be done. Requiring immigrants to be self-supporting has at least three advantages. First and most immediate is that it benefits natives through the public coffers. Second, in the longer run it improves selection of immigrants for the economy and society. And a third benefit: By reducing the number of egregious cases of welfare abuse by immigrants, it defuses an objection to immigration which is really founded upon unrepresentative anecdotes of gross abuse drawn from newspapers and gossip. Recommendation: Tighten up procedures preventing immigrants from taking illegal advantage of welfare services, to prevent hostility to immigration as well as to reduce costs. BRINGING POOR PERSONS FROM POOR COUNTRIES Earlier (1969; 1982) I described an improbable-seeming plan for speeding the economic development of poor persons in poor countries: An international organization would pay countries that bid successfully for the opportunity of admitting groups of such persons, for the purpose of transmitting to them the economic culture of advanced countries. This scheme would require an international taxing body, which would somewhat reduce the sovereignty of nations. The scheme seemed infeasible at the time I proposed it, though I thought that it might be feasible several decades in the future, just as the liquidation of empires seemed most improbable before World War II but happened speedily. As it has turned out, there has been some increase in related international activities since then. On the other hand, the United Nations seems to have come into poorer odor since then. On balance, the prospect of such a scheme being practical seems even less than when proposed, rather than more likely. Nevertheless, a word or two about the scheme may be relevant here, for completeness only. Were such a plan to be inaugurated, it would behoove the United States to bid low enough to win (though according to the scheme, the fee per person to the United States would be greater than for less wealthy countries, because its potential to raise the productive capacity of immigrants is greater). Submitting a winning bid is recommended because the cost to the United States would not be much greater than in other countries, though it might seem so at first; most goods are cheaper in the U. S. than in poorer countries, and many services could be contracted for by foreign professionals. And the social difficulties are less in the U. S. than in many other more homogeneous countries. In the long run, too, these persons and their offspring would make an economic contribution rather than be an economic drag, as this book argues. Recommendation: None called for now. DISCRIMINATION BY COUNTRY OF ORIGIN It might be that there are differences in productive "quality" among immigrants from various countries of origin even after the obvious control variables such as amount of education have been allowed for. Some persons would see in this a potential device to increase natives' welfare by discriminating according to country of origin. I shall not, however, discuss this possibility for two reasons: First, such a policy seems contrary to the spirit of U.S. democracy, which asks us not to consider an individual's racial or religious background in any decisions other than personal relationships. Second, there does not seem to be massive conclusive evidence of major differences. And third, there is a strong possibility that studies finding differences among persons of different ethnic origin are confounded by the fact that prejudice in the U.S. affects the earnings of persons of some ethnicities, though I do not suggest that prejudice accounts for all the observed differences. Recommendation: None SELECTIVE ADMISSION BY EDUCATION A country generally benefits from having a greater supply of material capital. By analogy it would seem desirable for a country to have additional human capital. But adding human capital is more complex than adding material capital. One reason is that material capital arrives complete in its package, and has no important effects other than its productive capacities, whereas human capital arrives accompanied by a person who has a variety of effects upon others in addition to the increase in production effected by the capital. Also, the "owner" of the additional human capital is not a native, as discussed in chapter 2, and therefore the returns to that capital are not appropriated by natives, unlike the case with physical capital acquired by natives. Additionally, along with the human capital come claims upon the society for various services, as well as various social effects such as intermarriage. And though additional physical capital analogously lowers the return to existing physical capital, the negative effect of additional human capital upon existing native human capital is likely to produce much more concern than the negative effect of additional physical capital. So additional human capital in the form of immigrants is not an unmixed blessing. This section discusses policies to increase the amount of human capital for a given quota of immigrants, by choosing for admission people with a relatively large amount of human capital. This policy is in contrast to simply admitting immigrants willy- nilly without regard to their education. Of course there already are in force various policies that discriminate among potential admittees on the basis of special skills with respect to special needs of the country. But these policies are mainly arbitrary, in that decisions about which categories are to be admitted are made bureaucratically on the basis of "expert" assessment of the nation's needs. The policy discussed in this section would be more automatic--setting up rules that favor people with high education without reference to specific contemporary national needs. There are several obvious large benefits of admitting people with more rather than less education. Most measurable is the effect upon the flow of welfare services and taxes. Chapter 6 shows that persons with low education receive much more welfare assistance of various kinds than do people with high education. And people with high education pay more taxes because they earn more income, on average. Additionally, people with high education would seem more likely to improve the skills of the natives they work with, thereby increasing those natives' human capital and earning power. There are other likely benefits from having immigrants with relatively large amounts of human capital. They are more likely to be mobile, moving to locations where their skills are needed, when they are needed; such domestic mobility is very important in economic development. People with high education are more capable of retraining themselves when such retraining is needed. They are more able to make voluntary contributions of skill to the community through various organizational activities. They raise native children who acquire a relatively large stock of human capital. They are more likely to contribute valuable innovations. Many more such advantages of education could be added. The long list of advantages from having people with more human capital makes it seem as if a decision to discriminate in favor of people with more education necessarily makes sense. But there are two sets of reservations, one economic and the other ethical. They will be discussed in turn. Discriminatory admission by education is intended to be rule-governed rather than arbitrary. But constructing rules for guaging a person's education would not be easy. The difficulties that universities in the U. S. face in appraising the amount and quality of high school and college education of applicants, even from within the U.S. let alone from abroad, are small compared to the difficulties that the U. S. would face in deciding whether or not to count, say, years of education studying barbering or theology in foreign and perhaps little-known languages. The sort of policy envisioned here would not discriminate among disciplines studied. But is semi-formal education in a religious institution to be counted? What about sports education? Certification of institutions could be very different in different countries. And certification fraud would certainly follow on the onset of such a policy; the frauds with respect to religious education during periods of military draft are notorious, and stories of foreign medical school frauds were in the newspapers in 1985. One might argue that the worst that could happen as a result of such subversion of the policy is that it reduces its effectiveness and leaves matters closer to where they would be with no such policy, but no worse off than with no such policy at all. Perhaps so. But promoting fraud is seldom wise in the long run. It is relevant that Canada, which has a point system with much in common with discrimination by education, has not found the system easy to implement (Staff Report, U.S. Commission on Immigration and Refugee Policy, 1981, Ch. 8), and its effectiveness is subject to question (Ornstein and Sharma, 1983). A problem with a point system is deciding on the system. Even among the professional staff of the Select Commission on Immigration and Refugee Policy there was large disagreement on the matter, including much disagreement about how to weight particular continents of origin. See Jasso (1986 -- Demography?) Another possible drawback of such a policy is that it would lead to too much competition among educated persons, with consequent "academic unemployment." But educated persons are less likely to immigrate when their job prospects are poor; witness the very low rates of immigration of foreign lawyers, whose skills are not easily transferable, compared to the high rates for physicians, whose skills move readily. (The displacement issue is dealt with more thoroughly in Chapters 11 and 12.) Another potential drawback of such a policy is that key skills which do not require much formal education would be shut out, e. g. machinists and electricians. Special provision might be made for such skills, but that leads back toward the bureaucratic process of selection that the policy under discussion is intended to avoid, or toward a complex point system. The appropriate data for analysis of the effect of admitting various educational groups are simply the earnings of various educational categories in various periods after entry. This analysis may be seen in Figure 16-2, which compare each immigrant cohort to natives. The large possible gains to natives from such discrimination are obvious even without a full taxes-and- transfers cost-benefit analysis. ----------- Figure 16-2 ----------- One might also consider selection by age at entry as well as schooling. Table 16-1 shows that young persons with much schooling immediately begin to earn at high rates relative to comparable natives, whereas older immigrants do not do so well. This reinforces the powerful Social Security funding argument for bringing in younger rather than older immigrants. ---------- Table 16-1 ---------- Canadian data enable us to assess the effect of selecting by age alone. Table 16- shows that foreign-born immigrants aged 25-54 earn considerably more than does the average Canadian with income, aged 15 and over, both among males and females. (Note that it is the total Canadian figure which is relevant, and not age-group earnings.) Keeping in mind that admitting immigrants does not impose costs on the native population, because the immigrants' own children will pay for their parents' public retirement program later, and also because of discounting those payments an average of 25 years into the future when persons 24- 34 are admitted (both matters are discussed in Chapter 5) -- a public policy that would admit immigrants aged 25-34 would have large economic benefits for natives. Such a policy would be heavily reinforced by selecting with education as well. ----------- Table 16- ----------- Though selection by ethnicity is another obvious possibility, it will not be considered here, because of its analytic complexities as well as because such a policy is not likely to be considered consistent with other national goals. A command of English would seem particularly beneficial as a criterion for admission. Skill with English is helpful no matter what one's occupation. And having gone to the trouble of acquiring a sound knowledge of English probably indicates a strong desire to succeed in the new country, which certainly is a desirable characteristic. Furthermore, it is relatively easy to devise a test that would be reliable and fair to all. One might argue that it is unfair to discriminate in favor of better-educated persons and therefore against the poor. I think that this ethical issue can best be dealt with in two steps. First, if we feel that uneducated persons should be admitted for humanitarian reasons, even if their economic effect will be negative (though this is not likely), then the first step is to make that decision explicitly. The next step is to decide about admitting better-educated persons purely on their merit. (There is a parallel here to various domestic issues where it may be preferable to give money to the poor directly, rather than to frame other policies that will indirectly benefit the poor). Recommendation: Give weight to the amount of formal education in the admissions procedure, subject to an ethical veto. And discriminate among potential immigrants on the basis of their tested skill in English. This recommendation would improve the present policy, but may well be inferior to other potential policies to be discussed below.0-0 SELECTIVE ADMISSION BY AMOUNT OF INVESTMENT CAPITAL Adding financial capital to a country may be presumed beneficial. Though financial capital may at first be simply portfolio investment rather than direct investment in U. S. plant and equipment, in all likelihood such portfolio investment eventually flows into U. S. plant and equipment rather than into investment abroad or into such non-productive investment as collectibles (which probably cannot simply be a sink for investment, either). The most important role for capital brought with an immigrant, however, is as start-up money for a new business, or as purchase money for an existing small business. The act of an immigrant going into busiess for him/herself produces two important benefits to natives: It increases the total stock of entrepeneurial capacity in the country; more and more it is recognized that the stock of such entrepeneurial capacity is a crucial element for an economy, there never being too much of it. And entrepeneurial activity increases the number of jobs for natives and immigrants. By "making" jobs entrepreneurs offset immigrants "taking" existing jobs; this is one of the mechanisms which work to reduce unemployment for natives. Surprisingly large amounts of capital are brought to Canada and Australia by "business" immigrants (and also by other immigrants); data are given in Chapters 7 and 12. Does discriminating by investment capital have indirect economic ill effects by displacing some otherwise desirable immigrants? It is hard to imagine any other group of persons who embody a more valuable amount of human capital on average than those who go into business for themselves, however, and therefore I think that this question may be answered straightforwardly in the negative. There is also an ethical question about whether it is acceptable to discriminate on the basis of wealth. The question is at base identical to the question about the ethics of discrimination on the basis of human capital, except that financial wealth seems a less-attractive and less "meritorious" characteristic. The issue reduces to whether a nation may use its immigration policy to do well by itself or whether it is unethical to use such a policy for national ends even if the policy thereby maximizes the welfare of the world as a whole. (And it does not take very many or very strong assumptions to make an argument that a wealth-discrimination policy really does maximize world economic welfare). If the answer is "yes," then it makes sense to separate the decision about this discriminatory policy from the decision about whether a certain number of poor or uneducated people should also be admitted as charity (though keeping in mind that such people also are likely to have a positive effect upon natives on balance, though less so than people with more capital or education). When one questions whether an asset-discrimination policy is ethically acceptable, other general questions arise: Is it unethical for a merchant to sell a piece of merchandise to a rich person when a poor person would buy the merchandise at the same price or for slightly less? Would a decision to sell to the poorer person constitute an ethical act vis-a-vis the richer person? In what respects is a state like or unlike an individual or a business firm in its "business" actions? (Here we must keep in mind that "economic" immigrants and not refugees are the subject of discussion here.) I am well aware that if quoted out of context the discussion in this section, as well as in neighboring sections, would produce the impression that the author is hardhearted and/or nationalistic. But I believe that dispassionate analysis shows these policies to produce more welfare for disadvantaged as well as advantaged persons, in the long run. Recommendation: Give preference to applicants with financial assets, subject to ethical veto. If direct investment can be made a criteria, that would be an improvement. SELLING FOREIGNERS THE RIGHT TO IMMIGRATE2-1 To suggest selling the right of immigration into the United States to the high bidders inevitably is to label oneself an inhumane brute, or an "ivory tower" theorist, or both. Selling admission smacks of trafficking in human flesh. And of course such a scheme will not be politically feasible in the foreseeable future. But perhaps even those who will immediately reject the idea out of hand may agree that there is pedagogical value in studying a radical plan for the light it may throw upon more conventional schemes. Please notice that it is reasonable to compare this scheme against other quota systems; comparison to an open-border system is outside the present frame of discussion, in part because an open border is vastly less likely than even an auction scheme. An auction plan clearly promises economic benefits to Americans. Additionally, one can see (if one gets past the instinctive revulsion) that this plan also is less arbitrary, and thus fairer, than the existing policy as well as most alternative policies, and it can also improve the lot of the residents of the countries of origin more than other policies. The right to immigrate has been sold before, but (so far as I know) only in the form of bribes to officials rather than as a publicly-stated explicit policy. (A white market rather than a black market is under consideration here, of course.) And some countries already have policies tantamount to selling admission when they offer low taxes to induce persons to reside there, as do Monaco and Caribbean countries, though perhaps the lesser demand for immigration into those countries compared to the U.S. makes the situation different there. Belize is now discussing a plan to sell citizenship for a $12,500 payment and a $12,500 government bond purchase (New York Times, March 25, 1986, p. 2). And Canada is now waging an ardent campaign to lure Chinese businessmen fleeing Hong Kong -- especially those willing to invest a quarter of a million Canadian dollars or more in a job- creating business" (The Washington Post, March 8, 1986, p. A11). I hope to show that this plan is better than other quota plans with three key tests: l) U.S. natives' incomes, 2) fairness, and 3) welfare of people in sending countries. It should be noted that though the use of a market to allocate immigrant admissions seems most peculiar to non- economists, this approach is almost second-nature to economists, and they are quick to promote it. Indeed, the general scheme I suggest was invented independently by at least three writers (Becker, 1987); Chiswick, 1982), and would be re-invented again and again if more economists were to address the problem. 1) Benefit to Natives. An auction policy would have a better effect upon the incomes of U. S. natives than does any other policy because it will efficiently identify those potential immigrants who have an especially large capacity to produce goods of high economic value while working in the United States. A point system also discriminates among potential immigrants by their economic worth. But a system of rationing by auction has all the best features of a point system and more, because it self-selects persons who have the best chance to make an economic success. Those persons can and will take into account not only their occupations and the demand for them, but also their talents in their occupations, their willingness to work hard for success, and other characteristics that cannot be easily established objectively. Charging a fee for admission would also accentuate the tendency for immigrants to move when they are young and strong, because admission has higher (discounted) future lifetime value for young persons than for older persons, ceteris paribus. The analysis of age and sex distribution in various admission categories in Australia in Chapter 3 (Figure 3-10) reinforces the recommendation that, from the point of view of the economic welfare of natives, self-selected immigrants - in comparison to family-reconstitution immigrants - are particularly desirable, because they arrive just at the beginning of their work lives, with the maximum number of years before them during which they will be paying taxes and not receiving old-age assistance from the public coffers. For the above reasons, an auction puts additional purchasing power into the hands of natives. The amounts of money would not be insignificant relative to other aspects of the governmental budget. Becker calculates that at $20,000 per immigrant -- the discounted present value of a $2,000 "profit" by an immigrant each year, compounded at 10% -- half a million immigrants would bring in ten billion dollars each year. Persons who are willing to pay a lot to enter the country must believe that the opportunity to do so will be valuable to them. For a few, this may just be an opportunity to live a pleasant and free life. But for the many it would represent an opportunity to make a lot of money in the large and rich market that is the U. S. And an immigrant who makes a lot of money for herself or himself will accordingly be a large benefactor of the community by providing jobs and contributing taxes (putting aside the unusual cases such as Mafiosi). To such a person, a large payment to purchase a ticket of immigration would simply represent an investment, which would often be accompanied by further investment in business assets. This further investment would generally be an additional benefit to natives.3-2 Furthermore, by benefitting natives, an auction plan should make additional immigration more popular among natives. It even might increase the number of unwealthy immigrants, too, by improving public attitudes toward immigration and thereby leading to larger total quotas. Evidence that emphasis on economic factors is the high road to successful immigrant adjustment comes from a recent study in Australia of what are known as General Eligibility Migrants, those who are admitted on the basis of personal characteristics rather than being refugees or relatives of families residing in Australia. Their "high incidence of employment success leading to economic viability, and acceptance in the workplace, justifies the emphasis placed on economic factors in the migrant selection process." (Northage and Associates, 1983, p. 57). And Canadian data show that Asian immigrants who arrived between 1960 and 1969 have done much better economically relative to immigrants from the United Kingdom and Canadian-born persons than have Asian immigrants who arrived between 1970 and 1979; a larger proportion of Asian immigrants in the latter period were admitted on the basis of family reconstitution than in the former period, whereas for immigrants from the U. K. (and of course for the Canadian born) this was not the case, showing that family reconstitution is significantly less good a policy as selection on economic characteristics. (See Table 4-15.) Another virtue of an auction plan: selling admission avoids "chain" migration whereby an entrant later obtains admission for relatives through the preference system. If it were known in advance that relatives would only be allowed if the admission fee were paid for them, too, then a potential immigrant could take that possibility into account when deciding whether to immigrate, and there would no longer be "humanitarian" grounds for a preference system except for spouse and children, neither of which have the degree of uncertainty and multipliability that other relatives have. 2) Fairness. The present scheme is in no way "fair." It does not give to all potential immigrants the same opportunity to be admitted to the United States. Only a world-wide lottery would be fair in that sense (though perhaps a lottery might only need to include those people who indicate a desire to immigrate, which might not be many times greater than the present number of immigrants). Nor is the present scheme fair in the sense of giving all persons with the same qualifications the same opportunity. Persons in some countries (say, Canada or Great Britain) have a much better chance of admission than do similar persons in other countries (say, Malaysia or India). And an even more serious departure from fairness is that the relatives of persons in the United States have a vastly greater chance of being admitted than do similar persons without relatives; this is a case of "connections" on the broadest scale imaginable, a departure from fairness which is not mitigated by the fact that we may have good social reasons for such a policy. An auction does not discriminate in such fashion, but instead discriminates according to the standard of a market- oriented society--ability and willingness to pay. Hence the auction scheme may be seen as a gain in fairness. If we think there is something good about the present discriminatory scheme, we could use it within an auction system to identify a sub-class of people who would be allowed to enter for less than the full amount paid by others--an amount which we would know is more than the special-preference people would pay, given that they would not be among the high bidders. Hence the system would benefit them by giving them a good which is worth more on the market than they are willing to pay for it. It should also be remembered that if the U.S. admits some poor and unskilled persons by means of a complex system of family ties plus allocation by length of time in the queue, other especially-worthy poor and unskilled persons are implicitly denied admission. There is nothing "fair" or "charitable" in such a system. It would probably be easier to identify and assist the most needy persons if charity were to be given directly, in money, out of admission-fee proceeds, with a consequent increase in total "fairness" and benevolence, no matter how one would wish to define those terms. So in brief, an auction scheme is not less fair than the present scheme. Reluctance to ration admission to the United States by ability and willingness to pay for it would seem to stem from the same psychological root as does our reluctance to use the market to ration such other "merit goods" as food and gasoline in times of shortage, in contrast to our everyday policy of allocating according to readiness to pay. But in these latter cases the aim of an equal-ration policy is to ensure that everyone in a well- defined population gets the same amount so that none suffers injury to health. The auction plan is closer to rationing health care on the battlefield, where the aim is to try to provide care to those who need it most. But to apply any sort of merit-good principle to immigration is to intermix two objectives at the expense of both (though perhaps with the very purpose of confusing the issue so as to make it easier to attain a hidden objective--fewer immigrants of any kind). 3) Welfare of the Sending Countries. What about the loss to sending countries of some of their most productive people? Clearly those countries' residents who will win the auction and emigrate have their welfare improved, because (ex ante) they plan to earn more abroad than at home. And if there are no externalities and no one is injured at home by the migrants leaving, then allowing them to emigrate increases the overall welfare of the sending country prior to the emigration. If there are externalities--for example, the alleged positive externalities derived from physicians (see Chapter 14) - - and if the United States is concerned with not inflicting such externalities upon the sending countries, it can easily compensate the sending countries for the amounts of those externalities with only a small portion of the fees collected in the auction, because it is most unlikely that the externalities are anywhere near the size of the fees that would be paid. Objections to an Auction Plan Some will object: Even though the United States could best help sending countries with this scheme together with "compensation" for talented emigres, the U. S. (they say) simply will not in practice send the fees abroad, and therefore the scheme will turn out to be exploitative. Perhaps. But this objection leaves the domain of the economic analyst, and enters into the domain of the practitioner of the feasible; let it be argued out there. One might wonder whether an admission-fee plan would result only in high-skill people immigrating legally, thereby making the U.S. even more inviting than at present for low-skill persons to enter illegally, with the attendant problems of "lawlessness". So it would be. But a guestworker program in tandem with an admission-by-fee plan would be a businesslike overall policy, and would avoid the lawlessness problem almost completely. Such a policy would, however, require greater sanctions against any illegals that did come anyway - perhaps most of them high-skill persons - because allowing them to remain illegally would be quite unfair to those who pay high admission fees, and also would spoil the market. If immigration policy were to be put on such a businesslike basis, it would then be less painful than at present to enforce such laws on the books such as those that require deportation if the immigrant becomes a welfare burden. One may also wonder whether such a policy would result in only the very rich being admitted. This need not be so, for three reasons. First, very rich persons may prefer to remain in their home countries because of lack of felt need for economic advance.4-3 The absence of revelations of bribes to obtain visas may indicate that this is indeed so. Second, the auction plan could enable persons without liquid assets to gradually repay their admission fee, adjusted for carrying costs, out of future yearly income; it would be collectible along with their income tax, in which case the immigrants need not be rich at the time of the auction. Third, the fee could be set quite low and still yield a profit on each entrant (in fact, a negative fee would break even, given the estimates made earlier in the book). This scheme would seem to be more advantageous than Bhagwati's scheme mentioned earlier, because there are no complications in collection. Furthermore, by allowing immigrants to bid for places, it would identify those who would most benefit from entrance into the United States, and who would most benefit the United States. Bhagwati's scheme does not have these properties. Managerial Issues Interesting management questions arise in connection with an auction policy. For example, should the U.S. attempt to operate as a profit-maximising monopolist? If so, the profit would be set far above "cost". Such a policy would require some agreement about the best estimate of "cost"--which this book tries to do. Another question is whether the same price should be set for all ages and both sexes. As long as policies to deport those who become welfare charges would be enforced, the fee probably could be the same for each married couple irrespective of age. There would probably need to be a different fee for single persons, but I have not yet worked out the logic of such differential fees. Yet another question is how to estimate demand for entrance. Perhaps this would best be done adjusting the "quota" from quarter year to quarter year. If the plan were to aim at maximizing revenue subject to a numerical constraint on the number of immigrants, a price- discriminating lottery would probably be most effective. One method would ask persons to bid for inclusion in the quota, with the persons's actual bid to be paid by each bidder above the quota cut-off. (Because the likelihood of adoption of such a scheme is so low, I shall not pursue theoretical analysis of varieties of such bidding schemes.) Or, it might be decided that it would be unfair to charge different fees to different people, in which case the amount bid by the lowest successful bidder would be paid (noting that higher bidders would be economically more desirable for reasons discussed earlier). Because of the greater productivity in the U.S. of those who are willing to pay more for the opportunity to immigrate than for those who will not bid as high, the U.S. could surely improve the lot of a larger number of poor persons in the countries of origin than at present by treating the fees as a charity fund for those poor persons, even if only part were sent back. To put it a bit more precisely: Specify any number of poor and unskilled immigrants who might be allowed entrance, and estimate their gains by immigration (assuming there are gains, which there might not be). It would be possible for the U.S. instead to admit the same number of high-bidders, remit to those poor persons who would otherwise have come the full value of their potential gains in the U.S., have something left over for U.S. citizens, and also improve the lot of the high-bidding immigrants. Such a procedure would come close to the economist's dream: a "Pareto improvement" in which everyone benefits. Will the Plan Ever Be Politically Feasible? One naturally wonders whether such a policy is so unfeasible politically as to not even be worth discussion. I think not. Furthermore, politically infeasible schemes often serve as a useful frame of reference for schemes that are more politically realistic at the moment. Furthermore, schemes that seem outlandish when first proposed can later become feasible, as time passes and political and economic water flows under the bridge; the education voucher system is such an example. Summary of Plan If a country is to ration admission by the amount of human or financial capital that the potential immigrants will bring to invest, why not go even further and simply auction off the right to immigrate, with the proceeds of the auction going to the public coffers? The policy of rationing admission by sale to the highest bidder embodies many of the best features of such policies considered earlier, such as admission by education and admission by capital investment, without suffering from many of their defects. At the same time it would permit the U.S. to devote at least as much economic resources to charitable welfare as under less market-oriented allocation policies. The key to the efficiency of an auction system is that individuals are likely to assess their own economic capacities better than can an arbitrary point system; the latter process does not take into account many of the most important characteristics because they are not identifiable with demographic criteria. Those persons who will stake their own money upon correct identification of such capacities are ipso facto the best possible bets to be high economic producers in the U. S. AFTERNOTE TO CHAPTER 16 IMMIGRATION, TECHNOLOGY, AND POLITICAL COMPETITION As economics usually does, this book addresses the effects of immigration upon individuals -- mainly U. S. residents, and also the immigrants themselves. Also following the usual practice of economics, the book mainly analyses immigration incrementally -- that is, determining the effect of the "next" single immigrant -- rather than asking about the effect of an entire large cohort of immigrants. At a very few points the question has been raised whether a large number of immigrants might have a different effect than a much smaller number of immigrants, or different than effects that are experienced with the current or historical volumes of immigration; for example, the effect on natives of working together with a relatively large number of immigrants was considered in Chapter --. But even in these exceptional cases only the possible special difficulties and not the possible benefits of a large cohort of immigrants were discussed. In connection with consideration of a large cohort of immigrants, some readers might also wish to consider the political implications of the economic effect of immigration -- and necessarily, a fairly large flow of special immigrants, rather than just the "next" ordinary immigrant. That is, the issue is the political standing of the U. S. relative to other countries. It may reasonably be assumed that a nation's political standing is heavily influenced by its economic situation, both the standard of living of individuals and the total output of the residents taken together. And when we ask this question, we find that immigration represents perhaps the most amazing opportunity for the U. S. that any country has ever had to get ahead of its political rival or rivals -- the safest, cheapest, surest alternative ever available to a country. (This statement is not made as a recommendation but rather simply as observation.) Nowadays the future of any country, and most especially the future of a major country that is in the vanguard with respect to production and living standards, hangs completely on its advance in knowledge and skill and productivity. This is more true at present than in the past because technology changes so rapidly nowadays. Even a single invention can radically alter a country's economic or military future -- consider, for example, the atom bomb or the computer -- with a speed that no invention could in the past, even the invention of the gun. All that the U. S. need do to sharply increase the rate of advance in its technology and its industrial productivity is relax its barriers against the immigration of skilled creators of knowledge. It could simply give permanent-resident visas to those foreign students who come to the U. S. to study. Many foreign students already find ways to remain under the present rules -- about half among the students of engineering and science (H. Simon and Servan-Schreiber, 1987), a group that those writers argue persuasively is crucial to present progress. But even more foreign graduates would remain if allowed to, and they could push up the rate of progress even further. Going even further, if young people abroad knew that they would be able to remain in the United States after completing their education here, more would choose to come here to study. This would provide multiple benefits to the United States. Given assurance that they could remain, these students could afford more realistic tuition rates than are now charged, which would benefit U. S. universities. And these incrased rates would enable the universities to expand their programs to serve both freign and native students better. Most important of all, of course, would be the incrased number of highly competent engineers and scientists of all kinds who would be part of the American work force. Going even further, a larger number of students requires a larger number of professors. And a larger number of openings for professors, especially in such fields as engineering and science, would attract from abroad more of the world's best scientists. This would enhance the process which has brought to the United States so many foreigners who have won Nobel prizes in the U. S. to the advantage as well as honor of the U. S. Some may wonder whether it is "fair" for the U. S. to take advantage of the rest of the world's supply of brains. From the point of fairness alone, can it be less than fair to give to any individual the opportunity to better himself or herself? Persons who believe in the sanctity of the state may answer in the affirmative, but U. S. public philosophy clearly answers in the negative. Furthermore, nations from which these persons come are likely to benefit from the movement of such persons, as discussed in Chapter 14. And I there seems no reason not to believe that the supply of excellent brains to be educated is quite elastic. As more openings and opportunities arise in LDC's due to movements to the U. S., more students are drawn into the educational process who otherwise would not have the chance to develop their excellent brains and contribute their fruit to their communities and to the world. Others may wonder whether the world might not have its cake and eat it too -- have the benefit of these scientists and engineers without them leaving their home countries. In principle this makes perfect sense. In practise, there is some set of conditions in advanced countries, and even more so in the United States, which makes them much more productive places for advanced knowledge workers to study and work. Perhaps the best evidence for this comes from the people who are in the best position to judge with respect to their particular contributions -- the indiv8iduals involved. One might say that it is only a herd instinct that leads so many students to want to study in the United States rather than in Europe or Japan or the Soviet Union. But these same persons, many of whom have had to opportunity to know the professional and personal life of knowledge workers in Europe as well in the United States, choose the United State in large numbers. Who is prepared to contradict them about where they can best live their lives, for their own profit and the profit of the rest of the world? Just why scientific knowledge workers produce so much more when they are located in the U. S. than in poor countries is exceedingly hard to specify. It must be some combination of the reward structure, the resources avaiable to work with, the colleages (which is a self-reinforcing matter), closeness to the center of scientific activities, and so on. But the fact that the difference is great is indubitable. Where would the physical capital come from for the additional scientists to work with, and to use for housing and schooling their families? Would this not mean a "dilution" of the capital supply in such fashion that there is less for natives to work with, and hence a diminution in the productivity of native workers? This bugaboo is discussed in Chapter 7. The conclusion, contrary to everyday common sense, is that aside from the shortest-run considerations, physical capital does not pose a constraint. One matter not emphasized there that deserves special mention in the present context is that new invetment opportunities will be created by the immigrant scientists and engineers, and capital will flow into the country from abroad to invest in these opportunities, which works to keep the supply of capital per worker from being diluted. No other country has this opportunity. The Soviet Union must resort to compulsion to prevent even its native scientists from leaving, and there obviously is little demand from foreigners to work there. Europe draws some, but is perhaps hampered by the fact that English is the international language of science, which makes it advantageous to live in an English- speaking country such as the U. S., Canada, Australia, or Great Britain. But this great opportunity is being neglected by the U. S. There is an eerie similarity to the historical episode of black baseball players not being allowed to play by any professional white team. The U. S. currently has an opportunity like the one that the Brooklyn Dodgers had when they integrated. And the opposition to such a change in policy probably is mostly of the same kind as was the case in baseball -- racism. And as with baseball, the adoption of such a new policy requires vision and courage and the desire to get ahead of the competition, intermixed with a bit of religious-style zeal -- that is, the political equivalent of Branch Rickey, 86-88 Polic19b.AAA 12-16/87 FOOTNOTES 0-0Fund and Norquist (1986) suggest that increasing the admissions of skilled persons can be used as leverage against other nations to induce them to do the will of the U.S., while at the same time benefiting the U.S. In principle the argument is sound, as well as amusing. But I would fear giving arbitrary power to manipulate admissions to the executive branch, lest the machinery be operated in reverse as a result of the pressure of anti-immigration groups. 1-0For more information on the maquiladora program, see: "Mexican Factories Along the U.S. Border Succeed Despite Criticism on Both Sides," The Wall Street Journal, November 19, 1985. "Mexican Border Towns Boom," The Washington Post, April 20, 1986. 2-1[T]here is much more agreement among economists than laymen think there is: I sent the first draft of this essay to Melvin Reder, whose credentials include the first modern theoretical paper on immigration way back in 1963. Reder replied that he had been thinking of a similar scheme but had not gotten around to writing it up; he offered his support, and some useful new twists. Then I mentioned it to Mark Rosenzweig, who had been the economics co-director of research for the Select Commission on Immigration and Refugee Policy. Rosenzweig said he had proposed a similar scheme to the Select Commission. Later I sent it to Milton Friedman, because this scheme is so consonant with many of those he has put forth. Friedman replied: Re your auction proposal, it does of course appeal to me, but the reason I write back promptly is that I believe this is one of those cases where when competent economists turn their attention to a particular problem, in this case immigration, they are likely to come up with the same solution. Unless my memory fails me, both Gary Becker and Barry Chiswick have suggested the idea of auctioning quotas. And indeed, Chiswick had suggested a very similar scheme as part of a long paper published in 1982, and Becker has been circulating a preliminary draft on the topic. 3-2The qualification "generally" refers to the paradoxical possibility that though by almost any test a larger supply of capital is beneficial in the short run, in the longer run it might have a deleterious effect by reducing the impetus to individuals putting forth vigorous economic activity. This is the argument against foreign aid, of course--a striking apparent contradiction between standard microeconomics and the policy prescriptions of some of the most distinguished microeconomists-- and conceivably it might apply also to the human capital that is the subject of this chapter. On the other hand, additional human capital also may have various indirect positive consequences in the long run, as shall be discussed here. 4-3Business people leaving the home country--for example, Sweden--to avoid high taxes is not relevant here, because those persons can head for tax shelters, where the lack of earning opportunity is not relevant. 86-88 Polic19b.AAA 12-16-87