Caplan’s Liberaltarian Challenge

Maybe my views are not as coherent as I supposed, but I do have practical and philosophical objections to free immigration.

Practically, middle and lower class Americans would suffer drastic reductions in standard of living if the hundreds of millions of people who would like to immigrate to the US did so. While we have a moral obligation to assist those who are less fortunate, we don’t have an obligation to impoverish ourselves in the process, particularly when there is no hope of housing and employing everyone who needs help.

Philosophically, generations of Americans have sacrificed heavily to invest in education, infrastructure, defense, a stable, viable, non-corrupt government, human rights, social welfare, etc. That investment was made primarily for our children and grandchildren. I have a problem with just handing the benefits of that investment over to new immigrants who have not made such sacrifices.

Adam:

Immigration at recent low levels may not have had an immediate general impact – but you can’t extrapolate from that to the effect of completely open borders, nor to the long term impact on smaller sectors of the economy.

Immigration has certainly had a strong negative impact on salaries in my field (science and engineering, S&E). Check out http://en.wikipedia.org/wiki/H-1B_visa#Wage_depression and http://www.nsf.gov/statistics/nsf11306/theme1.cfm#2. Some factoids: 10% immigration-induced increase in the supply of doctorates lowers the wage of competing workers 3-4%. In 1989 27% of all S&E doctorates were awarded to temporary visa holders. In 2009, it was 37%. Most of these folks remain in the US on H-1B visas (30,000 – 60,000 every year, decade after decade).

But I’m even more concerned about what this means to our children and our future technological and scientific capabilities than I am about salaries. My generation of Americans, and current undergraduates in other countries, got to learn science, math and engineering from people who speak their language and understand their culture – real live three-dimensional persons with whom students can interact, emulate, and learn difficult material from. But three decades of massive immigration in S&E has drastically changed that situation for current American undergraduates. My kids (typically) have to struggle to learn the most difficult subjects from foreigners who can barely speak the language and come across as one-dimensional automatons no one would want to talk to or emulate. No wonder the number of native-born students in S&E continues to plummet. This is unfair to American students and a bad long-term strategy for building a tech-based economy.

My ideals are probably close to yours. But charity begins at home, and until we figure out how to realize the American ideal for every kid who is already here, immigration should be delayed.

Adam

Thanks for the response – you are making me think hard about this.

Our country’s future technological and scientific capabilities can be improved by making better use of the skilled and talented people already here rather than casting them aside to hire people who will work for little less money. Our science and engineering education system is broken – we do not attract and retain enough native students to meet our needs, in part because salaries are kept low by massive immigration, in part because undergraduate S&E courses are run largely by foreign graduate students who don’t communicate effectively and turn off students.

We can certainly let it stay broken and just import foreign tech talent. But I think there’s high long-term value in a domestic supply of engineers and scientists and the infrastructure for training them. Fixing the problem is not difficult – schools and universities need to do a little better job at science & math education, and tech industries need to do a better job motivating (Microsoft engineering scholarships, anyone?) young people to take up S&E careers. If the tech industry put as much effort and money into encouraging S&E careers as they do on immigration lawyers and lobbying for more H-1B visas, we would solve this problem very quickly.

One thing to recognize is that the competition at the Ph.D level is not fair. The typical foreign Ph.D. gets a free undergraduate degree in his home country, then comes to the US as a grad student. He pays nothing for his S&E doctorate from a US school – in fact all his living expenses come from teaching or research fellowships funded by the US taxpayer (who also supplies the very expensive labs and equipment needed for his training). He is then hired by a US company after briefly returning to his home country. He can accept a lower salary and still have the same standard of living as his native counterparts because he (and his parents) are not tens or hundreds of thousands of dollars in debt for his undergrad education like the typical American. Nor have they contributed a cent toward the trillions that generations of Americans invested in building the world’s best science education system.

It’s like a US company competing with a foreign firm whose government builds the factory and subsidizes the raw materials. I don’t have a problem leveling the playing field for an American company in that situation, and I don’t have a problem leveling the playing field for American scientists and engineers.

I think you’re missing an important element of the story. This is not a situation in which foreigners (or Californians) with Ph. D.s from their own country are competing with Americans (Coloradans) holding Ph.D.s from US institutions. That’s a reasonably fair competition since both parties (or their families and countrymen) have invested in building their respective educational facilities. In the case of foreign and domestic students receiving graduate S&E degrees from US institutions, the American student (or his family and countrymen) has paid for the facilities, while the foreign student has not. The foreign student in essence receives a $250K (guesstimate) subsidy from the US taxpayer, allowing him to compete unfairly. Would you be comfortable with the US govt handing out thousands of $250K scholarships each year to foreign students to study economics in the US and then offering them work visas so they could compete with you?

I don’t want to ban subsidized French films, Japanese music or German beer. I don’t want to protect one class of workers from fair competition with foreign workers. I do want to see duties carefully adjusted to remove the subsidy advantage and allow American companies to compete fairly. I do want to require foreign students to compete fairly by paying the full cost of their US education before they are allowed to take a job in the US.

Re filmmakers: I intended my statement about duties on subsidized foreign companies to apply to filmmakers, musicians and artists as well as other business people.

You don’t have a problem with foreign students who have their education subsidized by US citizens competing with US citizens for US jobs. Fair enough. I am glad that outstanding foreign students are getting scholarships, and I have no problem with Microsoft hiring 40 outstanding immigrants a year. But I think it is wrong that they hire 4000 immigrants a year while American IT workers are unemployed by the tens of thousands. Out of curiosity, are your fellow econ students competing with you for grades, or for jobs in the US? I wasn’t aware that there were H-1B visas for economists.

I did not say we could improve the tech sector by banning foreign workers. I said “[tech capabilities] can be improved by making better use of the skilled and talented people already here rather than casting them aside to hire people who will work for [a] little less money.”

Could Colorado ban foreign workers and still improve its tech sector?

Yes. Korea (LG), Finland (Nokia) and Taiwan have built very strong tech sectors with little or no reliance on immigration, and they seem to be staying at the cutting edge. Colorado should be able to follow suit.

Your story follows logically from the assertion that immigrants as a group are more intelligent/talented/innovative/motivated than Coloradans/Americans, and the corollary that without immigration it would be impossible to acquire and maintain a supply of high quality students/workers/teachers. But I don’t know of any evidence for that assertion (outside of West Virginia . It seems at odds with several decades of personal experience with domestic and foreign tech folk and the success of Korea, which seems to have limited tech immigration (if only because of the language barrier), and yet is a world leader in several tech areas.

Your assert that “colleges would have to let in lower skilled students”, which leads to a cascade of negative consequences. Why would colleges have to admit lower skilled students if Coloradans are sufficiently talented? Is there some other assumption you’re making?

I read the Krugman article, (excellent, but a lot to digest at once) but didn’t see a direct application to immigration. I need to have another look.

On average, tuition covers less than 20% of the cost of university operating expenses. (See pg vii of Stanford’s budget at http://www.stanford.edu/dept/pres-provost/budget/images/01.exec.pdf). For technical subjects, which require expensive labs and equipment, I would guesstimate that tuition only covers 5 -10% of actual costs, while for lecture-only disciplines it is maybe 30-40%. The remainder is subsidized by gifts, income from endowments, and federal research grants. So American donors and taxpayers (The parents and grandparents of US students) are heavily subsidizing everyone’s education, to the tune of 10-20 x annual tuition x 5 years for tech PhDs.

Q. If universities aren’t getting more benefit from immigrant research assistants than they cost then why do private colleges do it? A1. The school, public or private, needs to put a warm body in the lab/classroom – doesn’t matter to them whether it’s a foreign or domestic grad student. A2. For the same reason private colleges give scholarships at all despite the loss they take.
Q. And if they are more than covering their costs, then why should they owe natives anything? A. If they were repaying what Americans actually spent on their education all would be fine. We would just be selling a product that we make very well to foreigners at a fair price (comparative advantage!). But even students who pay full tuition and bring a stipend from home are paying a small fraction of the true cost of their education. If tuition is $20k a year, and my guesstimates are somewhat close, then each tech student is getting 10x20Kx5 = $1MM from the American public.
Q. Why do duties on imports suffice but only a ban on immigrants will? Shouldn’t you just be pushing for a fee for immigration? A. A fee would be fine, banning or limiting immigration by fiat is just easier for me to think about. A fair fee for foreigners getting a tech PhD in the US would be on the order of $1MM, so it would pretty much have the same effect as a ban.

I don’t think this quality reduction is as obvious as you do. Let’s use SAT scores as quality measure, and assume that scores of both Coloradans and Californians are normally distributed with the same mean and standard deviation. CO has a population of 100,000 hs seniors and CA has 1,000,000 from which we want to draw 1000 students for our tech program. Drawing at random would give the same average score from either population. Drawing from the top of the distribution would give us 1000 Coloradans with mean score at the ~99.20th percentile, and 1000 Californians at ~99.92th percentile. So you are correct -theoretically we could get a higher quality cadre of students by drawing from the combined pool or just from Californians. In practice I don’t think this difference is significant – we will still draw from CO the few people at the 99.99th percentile needed for jobs requiring truly exceptional ability.

It’s a different story if we need 10,000 students. Then we would have to go down to the 90th percentile in CO, but only the 99th percentile in CA, and the quality difference would be significant. But this is not the situation in our hypothetical or in the US. In practice I think that as long as the talent pool size is above some threshold, the distribution of career choices among the high-quality candidates will be more important than size of talent pool.

I should know better than to get into an argument with a statistician! You make good points, but I think I can refute them.

My earlier example was not intended to be a realistic view of college admissions, just a simple, quantitative model to get a handle on the effect of population size on quality. (BTW, I haven’t been in school since 1984)

I’ve played around with a model more like the one you suggest. Assume we have 1000 applicants for 500 spots in our freshman class. Math SAT scores are normally distributed with a mean of 600 and s.d. of 75 (pretty realistic for an ok state school). We accept the top 500 applicants, who have a mean score of 658 (and a very non-normal score distribution). What happens if we eliminate 5% of the accepted students who are out-of-staters (with 658 scores) and replace them with the next 25 applicants in the pool? The mean score is now 656. For 10% replacement it drops to 652, for 20% it drops to 645, or 0.17s.d. below the original mean. This is a real, but very small drop, which could be addressed by modest financial incentives or more aggressive recruiting.

Your line of argument suggests that any limitation on the pool of applicants would lead to significant drop in student and institution quality. Virtually all public colleges discriminate heavily against out-of-state students, effectively limiting the pool of applicants, while private schools do not discriminate. But public colleges are not in a death spiral of ever diminishing quality. It’s true that in economics, no public institution is in the top 10, but 3 out 10 top law schools are public and 5 of the top 10 engineering schools are public. The differences between the high quality public and private universities are primarily due to higher spending/student, not larger applicant population.

Yeah, 37% replacement drops the mean from 660 to 630. But you’re screwing me by using U of C as an example – it’s got much higher than average (~18%) out-of-state attendance.

How is it that public schools with large barriers to out-of-state enrollment maintain quality relative to private schools?

Not following how subsidization allows public schools with large barriers to out-of-state enrollment maintain quality relative to private schools?

I understand that state subsidies to public universities allow the creation of barriers to out of state students, which don’t exist for private schools. My question is how public schools are able to avoid the continual decline of quality that you suggest results from such barriers. Or are public schools in a decline relative to private schools?

Sure, if only CO was subsidizing its schools (or its Walmarts) then I could buy an education (or a TV) for the same price at home as in CO. But all states subsidize their schools, so there is an effective tax on the out-of-state students (customers) that decreases their demand for Coloradan products.

This should produce significant quality degradation relative to private schools that don’t impose such a tax, if I understand your argument correctly. Can this degradation be observed?

We both presented theories on the effect of banning out-of-state students from public universities on university quality. I claimed that this would not create a significant decrease in quality for sufficiently large in-state population, while you claimed that excluding out-of-state students would cause a continuous and substantial decrease in quality. Is there empirical evidence to support one of these theories? We don’t have the ideal test case of identical states, one of which excludes out-of-state students and one of which poses no barrier to out-of-state enrollment. We do have large populations of students at public universities which limit (but don’t ban) out-of-state enrollment to an average level of about 20%, and at public universities which draw from the entire student population. Current or historical changes in quality could provide support for one of these theories.

Do you agree this is a reasonable test case for the two theories?

If so, is there data to support your theory that limiting out-of-state enrollment diminishes quality?

You’re sayng that your theory can not be tested with available data, right? That leaves us with speculations, and I like mine better

The lesson of the Krugman paper (Ricardo’s Difficult Idea) is that it’s hard to get non-economists to agree with the theory that free trade makes everyone better off – the virtue of free trade is a given. But even Krugman seems to be backing off the notion that free trade is always and everywhere beneficial, especially as unemployment becomes high and international trade becomes a significant fraction of GDP.

I agree that a simple model predicts a decline in average SAT scores by ~30 points if 37% of the accepted students were suddenly excluded. I don’t agree with you that this would result in a disasterous, self-perpetuating decline in educational quality. Steps could be taken to improve the quality of in-state students, attract students who now go to out-of-state schools or pursue two year degrees, etc. Or class size could simply be reduced by 37%, maintaining quality and saving Colorado taxpayers a bundle.

But whether I agree with you or not, our “plausible stories” are pure speculation until the experiment is actually performed, or we can find some real world example that shows what actually did happen when a comparable situation occurred.

Were getting far afield from the original discussion on limiting free graduate education and work visas for foreign students. I appreciate your stimulating ideas and discussion, but I think we’ll have to agree to disagree on this.