Capitalism Question

George Will has a great article at NRO on capitalism.  He puts the choice that Americans face this way:

In the accelerated churning of today’s capitalism, changing tastes and expanding choices destroy some jobs and create others, with net gains in price and quality. But disruption is never restful, and America now faces a decision unique in its history: Is it tired — tired of the turmoil of creative destruction? If so, it had better be ready to do without creativity. And ready to stop being what it has always been: restless.

You should read the whole thing but in case you don’t, we want to reinforce what he did say and note what he doesn’t say.  George has some nice examples of the changes that capitalism has wrought in the grocery business.  Capitalism leads to net gains with constant disruptions.  We would like to discuss two things that George does not mention in the article.

First, what is the alternative to capitalism?  A good analogy is earthquakes.  With capitalism you get small quakes all the time as the market reacts to new conditions.  Over time you get the results that George notices where, in just over a century, the A&P goes from zero to a 75 percent share of the grocery business to bankrupt.  The alternative is to try and forestall the little earthquakes.  The pressure still builds up and we get epic economic events like the former USSR, eastern Europe, and Venezuela to name a few.  Economic change is coming.  The question is how do you want it?

Second, George makes no comment but capitalism and open borders are not connected.  Folks try to connect the two because the Venn Diagram of the two groups of supporters has a substantial overlap but they are unrelated things.  We support the former but not the latter.



Come On, WSJ

As we know, the WSJ editorial page is enthusiastic about open borders.  Here is a great paragraph from Rebecca Davis O’Brien talking about Churchill Downs horse track in Kentucky:

But Kentucky is also horse country, and many in the state’s most glamorous business say the president’s immigration crackdown is causing a pinch. Trainers say they depend on a steady supply of [Illegal it appears] foreign labor, primarily from Latin America and Mexico [odd, Mexico is part of Latin America], to do jobs Americans won’t.

Let’s translate: Businesses say that enforcement of the people’s laws would cause a problem because they are unwilling to pay higher wages.  Illegal aliens are willing to work for less.

We see the argument for more open immigration.  We don’t see the argument for not enforcing the current law.


In the local paper today, it is not on their website, is the following headline:

Who Sends The Most Taxes To DC

With the following subheadline:

The Surprising Answer: It’s Not A State

The first paragraph:

As Tax Day approaches show some love for the good people [what about the folks who are not good?] who live in the nation’s capital.  [Because?]

They send the most money per capita to the US government.  Color us surprised.  Not.  Even if we weren’t informed it should be a logical guess that with all that tax and lobbying money going into DC that its denizens will be doing well.  How can anyone be surprised that the folks in DC are, on average, making big bucks.  As they quote somebody later, the reason they pay lots of taxes is that they are getting lots of dollars for income.  Big income means, on average, big taxes per capita.

Of course, the headline of most taxes and the switch of per person in the second paragraph are, at best, not very well thought out.  DC has a larger population than just two states.

Sidebar: Places with a small population are are likely to have the small and large per capita results because small numbers of observations means big variation.  If you don’t believe it [we say without even checking] then check the major league leaders as of today.  After about a dozen games there are strange results.  End Sidebar.

Fifteen states have ten times the population of DC.  Since only one state, West Virginia, pays less than one-tenth of DC then the headline is highly misleading.  Lots of states pay more in taxes then DC.  Per capita is a whole different thing.  We hope that the media remembers that when considering economics and unauthorized workers.  We doubt our hopes will be recognized.

There are no surprises here.


Don’t Forget Division!

Ramesh Ponnuru writing at Bloomberg starts by summarizing a recent working paper by Edwards and Ortega.  He doesn’t mention it was funded by the Center For American Progres (CAP), a progressive group.

It’s an eye-opening finding: If the U.S. no longer had any illegal immigrants, its GDP would be $5 trillion smaller over 10 years. That’s the conclusion of a recent study. But while the number is big, it’s not clear it tells us much about what to do about illegal immigration.

Normally, the expectation that a policy would shrink our economy by that much would be a very powerful argument against it. But that’s because normally, we would expect this shrinkage to take the form of lost jobs and lower living standards for Americans.

It is unclear why this data is eye-opening.  If we take a large number of folks out of the economy the size of the economy will go down.  What is interesting is division.  What will happen per capita?  Here is the real money quote from Edwards and Ortega considering the source of their funding:

Our results show that the economic contribution of unauthorized workers to the U.S. economy is substantial, at approximately 3% of private- sector GDP annually, which amounts to close to $5 trillion over a 10-year period. These effects on production are smaller than the share of unauthorized workers in employment, which is close to 5%. The reason is that unauthorized workers are less skilled and appear to be less productive, on average, than natives and legal immigrants with the same observable skills.

Just to be clear, according to the study, unauthorized workers are 5% of the workforce and contribute 3% of private sector GDP.  Later Ramesh cites a CBO study that finds the per capita economy would be 0.2% after two decades [emphasis added].  So we have two studies.  One suggests that eliminating unauthorized workers would improve the economy and the other suggesting a tiny positive change.  Conclusion: no overall economic harm will come from exporting unauthorized workers.  As Ramesh says, it is not the only issue to consider but it could be an important one.  It turns out that it is not important.

What else should be considered: There could be specific areas of the economy that might harmed or improved.  There might be specific groups or areas of the country  to consider as well.  The impact on law enforcement needs to be considered.  Just don’t worry about the overall economy.