I’m not going to argue that we should necessarily have a market citizenship for immigrants, but I think it is a useful starting point for analysis. After all, when we have some scarce resource we want to allocate, absent some public goods nature of the good, markets are the way we normally do it. Does citizenship have some public goods nature? Even if this is the case, markets should be the starting point of analysis and the market failure should be clearly explained so that market-based solutions can be examined.

How would markets allocate citizenship? While citizenship is necessarily produced by the government, it doesn’t need be allocated by mandate or allocating shares democratically, but instead it could be done by auction. Each year the government can choose how many citizens to produce, and then they could auction them off. What would the problems be with doing it this way?

One could argue that low-skilled immigrants hurt low-skilled natives, whereas high-skilled immigrants are likely to invent things and produce externalities in production, which means we should favor the high-skilled over the low skilled. However, a system that allocates citizenship based on auction will naturally favor individuals who will be very productive, because they will have a high-willingness to pay. If the externalities to certain migrants were certain enough, we could also offer a x% discount to individuals with specific degrees or qualifications. That means these migrants would get a matching grant of 20 cents for every dollar they bid in the auction. Starting from a price system and attempting to correct for positive and negative externalities will be much more efficient than the status quo, and compared to setting immigration quotas based on country, education levels, etc. it would require less information from policymakers and be more dynamic.

Another objection is that we want to grant some people immigration for humanitarian reasons, and these people would be priced out of the market. But there are lots of goods we want to give people for humanitarian reasons, but we don’t throw out the price system for these goods. Private charities and individuals could spend money buying citizenship for people. Imagine how many people could have been brought from Haiti to the United States if citizenship could be bought. This allows private groups like NGOs who are actually on the ground in these countries to try and allocate citizenship to those who need it most.

I’m prepared to accept that markets won’t work for immigration or that there are some massive market failures that can’t be overcome. But I would like to see these things identified rather than assumed. I also think this analysis is useful in terms of selecting optimal non-market allocations. After all, if you think we should value high-productivity workers more than a price system, perhaps one combined with subsidies for specific degrees, then you should explain why. Likewise, if you think we should allocate these based on humanitarian reasons more than private charities and a market system would, then you should explain why. What is it about citizenship that suggests we should diverge from the allocations markets would produce?


ADDENDUM: It’s also worth noting how this relates to the DREAM act. People who have lived here for most of their lives, and especially those who are college bound,  will likely have a very high willingness to pay for citizenship. After all, consider this: if you’re an American reading this, what would your willingness to pay for U.S. citizenship be? Given this, I think the DREAM act is a pretty good marginal proxy for a market outcome, since it’s granting citizenship to likely auction winners.

It’s not perfect, of course, as some possible immigrants from across the world would probably outbid some DREAM act beneficiaries, and some charities would probably outbid them for citizenship for Haitians. Nevertheless, it does seem to be as good of a marginal allocation as any centrally planned allocation we could conceivably get.