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Why Open Borders? – Article by Jeffrey A. Tucker

Why Open Borders? – Article by Jeffrey A. Tucker

The New Renaissance HatJeffrey A. Tucker
September 15, 2015
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Two dear friends of mine just experienced incredible struggles with immigration control in the United States, one from Australia and one from Canada. Both are enormously talented, in love with the freedom that America represents to the world — or once did anyway.

One barely got in after months of waiting, even though a willing, begging employer was waiting. The other was deported with a single day’s notice.

Each has been a captive of bureaucrats with awesome power. Their stories are tragic. Natives know nothing about this ghastly system and how it treats human beings. We never experience it.

The labyrinth of bureaucracy is jaw-dropping. The arbitrary power exercised by “our” bureaucrats is frightening. The loss to our nation’s productivity is mindboggling. Hearing these stories, you can’t help but apologize for the way our own government treats people who want to love this country and contribute to its greatness.

And to think that for the first 100 years of this country’s existence we had zero national immigration restrictions. The whole world was invited in — and this invitation led to the most prosperous society the world has ever known. In these times, there were no passports. For the most part, everyone was free to move around the earth — and this was thought to be the very essence of liberty.

Today, we have an effective ban on immigration. You can’t come to the U.S. to live and work legally unless you are family, highly educated, or get in as a refugee. Other than that, the barriers to legal immigration are impossibly high. The wait lines for employment visas are impossibly long, and people from the world’s largest population centers aren’t even eligible.

Meanwhile, the government spends $18 billion on stopping immigration — more than all other federal criminal enforcement agencies combined. This is money spent to stop people from freely exchanging labor for money. That the whole thing is a massive flop is revealed by the 11 million illegal immigrants in this country, and the half million apprehended crossing the border each year — surely only a fraction of those who were not.

But apparently, that’s not enough. Donald Trump is soaring in popularity by calling for mass deportations and building a wall around the country, in effort to double down on a failed government policy. Other candidates are alarmed at his rhetoric, but echo his core claim that there is some kind of crisis going on.

Meanwhile, this is a huge debate among people who otherwise swear fealty to “limited government.” Many people who claim to want freedom seem to have no problem with the implications of a closed-border policy: national IDs, national work permits, non-stop surveillance, harassment of all businesses, a “papers please” culture, mass deportation, tens of billions in waste, bureaucrats wrecking the American dream, broken families, the rights of Americans and foreigners transgressed at every turn.

In this environment of political hysteria, in which the rankest form of racial fear has reared its head, few dare to stand up and call for the only liberty-minded answer: open borders.

Just the phrase causes people to sputter in shock. The objections start flying: wages will fall, welfare will explode, people will vote for the wrong people, there will be cultural confusion, the national language will evaporate, crime will soar — on and on the parade of horribles marches.

The more you look into the research, the more these objections fall away. Immigrants cause less crime than natives. Immigration does not cause unemployment. Immigrants don’t consume more public benefits than natives; in fact, they use fewer. Indeed, they have kept Social Security afloat, even though they will never get a dime from the system. They don’t love liberty less: they poll in as more libertarian. Indeed, every one of these and other claims in Trump’s immigration policy paper are patently wrong.

Apparently, the facts don’t matter. And as for humane values and human rights, forget it. Immigration restriction is a fundamental attack the rights of at least two parties: the person who wants to employ someone currently outside the border and the person who wants to come work. It’s a thuggish interference with an economic exchange, like any other arbitrary restriction on trade.

So often, in many recent discussions I’ve had online, what’s going on here is just a shoot-from-hip bias. It’s exactly the same kind of fears that make people object to getting rid of the minimum wage, cutting taxes, eliminating tariffs, privatizing the TSA, eliminating zoning laws, cutting government spending, legalizing pot, and so on.

It’s freedom itself that people fear.

Once freedom goes away, it is difficult to imagine how things would work if it came back. The notion of freedom then scares people, and it becomes easy to think up a thousand different scenarios in which freedom can’t possibly work. Surely disaster will ensue!

This was a problem during alcohol Prohibition. The system wasn’t working, but the prospect of making its consumption and production legal again elicited a kind of panic. Would our streets be filled with staggering drunks? Would scarce income be squandered on liquor? Would families break apart?

The lack of imagination concerning how freedom can work is the single biggest barrier in the U.S. to ending the war on immigration.

Imagine if the U.S. had massive border controls between states, with checkpoints and passports and drug-sniffing dogs, and if you had to have permission to change from a job in Ohio to a job in Vegas, or if a Virginian could be deported from New Jersey for overstaying, or if you had to wait years to obtain the right documentation to move from one state to another, or if the labor market was so tightly regulated that an employer in another state could only hire you if they could prove they had no other options.

If all that were true, anyone who suggested open borders and a free labor market between states in the U.S. would be considered a dangerous loon.

But here is the clarifying fact: the conditions that allow free migration between states within the U.S. are identical with regard to free migration between the U.S., Mexico, and Canada. The only difference happens to be the government that issues citizenship documents.

I live in Georgia. What if I started a movement to prohibit immigrants from Chicago to Georgia? Why would I suggest such a crazy thing? Because I believe that crime is higher in Chicago, welfare is more widely used, their imported labor would drive down wages, they vote in ways that are regrettable, and people there just don’t get the ways of the American South.

Should we have immigration controls between states? It sounds preposterous (though Trump could probably sell the idea). But the claims that we can’t have free immigration into the U.S. follow the exact same logic.

Every argument for immigration restrictions into the United States as a whole applies with equal validity for immigration controls between states, counties, cities, and even towns. And yet we do not have such controls. Why does it work so well? Because freedom works.

How can we begin to imagine what open borders would be like? We need an experiment in that exact thing. It just so happens that we have just such an experiment. There are 28 countries that have historically been at war for thousands of years. They all have different languages, different religions, and different folkways. At various periods, people from these countries have hated each other to the point of causing genocide.

Then one day, starting with an agreement that began to be implemented twenty years ago (the Schengen Agreement), they opened all the borders. Anyone from these countries can live and work anywhere. They can travel freely, on the same passports. No bureaucracy stops their freedom of movement and their freedom to produce.

The results have been spectacular. It’s the greatest experiment in completely open borders the world has seen in more than a century. It’s called the European Union. And it works. It points toward the ideal: a world in which everyone is free to move about the earth without fear of gun, wall, or barbed wire.

Let’s not fear freedom and free trade (which means, free trade in capital and labor). In the end, Ludwig von Mises was right: “Without the reestablishment of freedom of migration throughout the world, there can be no lasting peace.”

Jeffrey Tucker is Chief Liberty Officer of Liberty.me (http://liberty.me/join), a subscription-based, action-focused social and publishing platform for the liberty-minded. He is also distinguished fellow of the Foundation for Economic Education (http://fee.org), executive editor of Laissez-Faire Books, research fellow of the Acton Institute, founder of the CryptoCurrency Conference, and author of six books. He is available for speaking and interviews via tucker@liberty.me.

Dead Models vs. Living Economics – Article by Sanford Ikeda

Dead Models vs. Living Economics – Article by Sanford Ikeda

The New Renaissance Hat
Sanford Ikeda
November 23, 2013
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Since 2008, straw-man versions of free-market economics have popped up whenever someone needs an easy villain. Keynes roared back to prominence, and it looks like this reaction might be gaining steam.

According to an article in The Guardian, students at a few British universities, prompted by “a leading academic,” are demanding that economics professors stop teaching what they refer to as “neoclassical free-market theories.”

Michael Joffe, an economics professor at Imperial College, said, “The aim should be to provide students with analysis based on the way the world works, not the way theories argue it ought to work.”

Joffe is right on that point. But his target is wrong: It’s not free-market economics that’s the problem, it’s the model of perfect competition that often gets conflated with free-market economics. A commenter on my recent columns addressing falsehoods about the free market (here and here) suggested I discuss this conflation.

I was thinking of putting it into a third “falsehoods” column. But the Guardian story makes me think the issue deserves more attention. Here’s the key passage:

The profession has been criticised for its adherence to models of a free market that claim to show demand and supply continually rebalancing over relatively short periods of time—in contrast to the decade-long mismatches that came ahead of the banking crash in key markets such as housing and exotic derivatives, where asset bubbles ballooned [emphasis added].

Why Do You Support the Free Market?

“Free-market economists,” on the other hand, typically have confidence in free markets owing to our understanding of economics, although we often (notoriously) disagree on exactly what the correct economics is. A number of free-market economists base their confidence on what is known as the model of “perfect competition.” Briefly, that model shows how in the long run the price of a good in a competitive market will equal the additional cost of producing a unit of that good (i.e., its marginal cost), and it shows that no one has the power to set prices on her own. How do you get those results? By making something like the following assumptions:

  1. Free entry: While buyers and sellers may incur costs to consume and to produce, there are no additional costs to enter or leave a market.
  2. Product homogeneity: From the point of view of any buyer in the market, the output of one seller is a perfect substitute for the output of any other seller.
  3. Many buyers and sellers: No single buyer or seller is large enough to independently raise or lower the market price.
  4. Perfect knowledge: All buyers and sellers have so much information that they will never regret any action they take.

From these assumptions you can derive not only marginal-cost pricing but also nice efficiency properties as well: There is no waste and costs are minimized. Which is why people like the model.

Moreover, for some important questions the analysis of supply and demand under perfect competition is quite useful. Push the legal minimum wage too high and you’ll generate unemployment; push the maximum rent-control rate too low and you’ll get housing shortages. Also, financial markets sometimes—though as we have seen, not always—conform to the predictions of perfect competition. It’s a robust theory in many ways, but if you base your support for the free market on the model of perfect competition, you’re on shaky ground. The evidence against it is pretty devastating.

Free Entry, Not Perfect Knowledge

In fact, it doesn’t even take the Panic of 2008 to shake up the model; any comparison of the model with everyday reality would do the job. Assumptions two and three about product homogeneity and many buyers and sellers are pretty unrealistic, but it’s the last assumption about perfect knowledge that’s the killer. (I’m aware of Milton Friedman’s “twist” (PDF), which argues that this is irrelevant and only predictions matter, but it’s a methodology I don’t agree with.) Markets are rarely if ever at or near equilibrium, and people with imperfect knowledge make disequilibrating mistakes, even without the kind of government intervention that caused the Panic of 2008.

When the institutions are right, however, people learn from the mistakes that they or others make, and there’s a theory of markets—certainly neither Keynesian nor Marxist—that fits the bill better than perfect competition.

It’s Austrian theory. Its practitioners argue competition is an entrepreneurial-competitive process (PDF). This theory not only says that competition exists in the presence of ignorance, error, and disequilibrium, it explains how profit-seeking entrepreneurs in a free market positively thrive in this environment. The principal assumption that the theory rests on, besides the existence of private property, is No. 1: free entry.

As long as there are no legal barriers to entry, if Jack wants to sell an apple for $1 and Jill is asking $2 for that same quality apple—that is, there is a disequilibrium here in which either Jack or Jill (or both) is making an error—you can profit by buying low from Jack and selling high to Jill’s customer, Lucy. If another entrepreneur, Linus, spots what you’re doing, he can bid up the price you’re giving Jack and bid down the price at which you’re selling to Lucy. Bottom line: A process of entrepreneurial competition tends to remove errors. There is no need to assume perfect knowledge to get a competitive outcome; instead, competition itself improves the level of knowledge.

So Joffe and the critics are wrong about the theory. You don’t knock out the theoretical legs from under the free market by “debunking” the model of perfect competition. He is also wrong about the history. As I’ve referenced many times, economists Steve Horwitz and Pete Boettke have documented how a government-led, interventionist dynamic, and not the free market, led to the Panic of 2008.

Joffe, the Imperial College professor, “called for economics courses to embrace the teachings of Marx and Keynes to undermine the dominance of neoclassical free-market theories.” He also complains that “there is a lot that is taught on [sic] economics courses that bears little relation to the way things work in the real world.” I agree. But that complaint would apply at least as much to the Keynesian and Marxian economics he hypes as to the static, equilibrium-based models of competition he slams.

Sanford Ikeda is an associate professor of economics at Purchase College, SUNY, and the author of The Dynamics of the Mixed Economy: Toward a Theory of Interventionism.
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This article was originally published by The Foundation for Economic Education.
Rejecting the Purveyors of Pull: The Lessons of “Atlas Shrugged: Part II” – Article by G. Stolyarov II

Rejecting the Purveyors of Pull: The Lessons of “Atlas Shrugged: Part II” – Article by G. Stolyarov II

The New Renaissance Hat
G. Stolyarov II
October 13, 2012
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Atlas Shrugged: Part II is a worthy successor to last year’s Part I, and I am hopeful for its commercial success so that John Aglialoro and Harmon Kaslow will be able to release a full trilogy and achieve the decades-long dream of bringing the entire story of Ayn Rand’s Atlas Shrugged to the movie screen. The film is enjoyable and well-paced, and it highlights important lessons for the discerning viewer. The film’s release in the month preceding the US Presidential elections, however, may give some the wrong impression: that either of the two major parties can offer anything close to a Randian alternative to the status quo. Those viewers who are also thinkers, however, will see that the film’s logical implication is that both of these false “alternatives” – Barack Obama and Mitt Romney – should be rejected decisively.

While the cast has been replaced entirely, I find the acting to have been an improvement over Part I, with the actors portraying their respective characters with more believability and emotional engagement. Samantha Mathis, in the role of Dagny Taggart, showed clearly the distress of a competent woman who is ultimately unable to keep the world from falling apart. Esai Morales aptly portrayed Francisco d’Anconia’s passion for ideas and his charisma. Jason Beghe also performed well as Hank Rearden – the embattled man of integrity struggling to hold on to his business and creations to the last.

The film emphasizes strongly the distinction between earned success – success through merit and creation – and “success” gained by means of pull. The scene in which two trains collide in the Taggart Tunnel is particularly illustrative in this respect. Kip Chalmers, the politician on his way to a pro-nationalization stump speech, attempts to get the train moving through angry phone calls to “the right people,” thinking that all will be well if he just pulls the proper strings. But the laws of reality – of physics, chemistry, and economics – are unyielding to the mere say-so of the powerful, and the mystique of pull collapses on top of the passengers.

As the world falls apart, the film depicts protesters demanding their “fair share,” holding up signs reminiscent of the “Occupy” movement of 2011 – “We are the 99.98%” is a clear allusion. Yet once the draconian Directive 10-289 is implemented, the protests turn in the other direction, away from the freedom-stifling, creativity-crushing regimentation. Perhaps the protesters are not the same people as those who called for their “fair share”  – but the film suggests that the people should be careful about the policies they ask for at the ballot box, lest they be sorely disappointed upon getting them. This caution should apply especially to those who think that Barack Obama’s administration parallels the falling-apart of the world in Atlas Shrugged – and that Mitt Romney’s election would somehow “save” America. Nothing could be further from the truth.

If there is any character in Atlas Shrugged who most resembles Mitt Romney, it is not John Galt. Rather, it is James Taggart – the businessman of pull – the sleek charlatan who will take any position, support any policy, speak any lines in order to advance his influence and power. Patrick Fabian conveyed the essence of James Taggart well – a man who succeeds based on image and not on substance, a man who has a certain polished charisma and an ability to pull the strings of politics – for a while. James Taggart is the essence of the corporatist businessman, a creature who thrives on special political privileges and barriers to entry placed in front of more capable competitors. He can buy elections and political offices – and he can, for a while, delude people by creating a magic pseudo-reality with his words. But words cannot suspend the laws of logic or economics. Ultimately the forces of intellectual and moral decay unleashed by corporatist maneuvering inexorably push the world into a condition that even the purveyors of pull would have preferred to avoid. As Ludwig von Mises pointed out, the consequences of economic interventionism are often undesirable even from the standpoint of those who advocated the interventions in the first place. James Taggart is ultimately pushed into accepting Directive 10-289, though his initial plans were much more modest – mostly, a desire to hang onto leadership in the railroad business despite his obvious lack of qualifications for the position. Mitt Romney, by advocating James Taggart’s exact sort of crony corporatism, may well usher in a similar overarching totalitarianism – not because he supports it now (in the sense that Mitt Romney can be said to support anything), but because totalitarianism will be the logical outcome of his policies.

Because, in some respects, Ayn Rand wrote during a gentler time with respect to civil liberties, and the film endeavors to consistently reflect Rand’s emphasis on economic regimentation, there is little focus on the kinds of draconian civil-liberties violations that Americans face today. The real-world version of Directive 10-289 is not a single innovation-stopping decree, but an agglomeration of routine humiliations and outright exercises of violence. The groping and virtual strip-searching by the Transportation Security Administration, the War on Drugs and its accompanying no-knock raids, the paranoid surveillance apparatus of large-scale wiretaps and data interception, and the looming threat of controls over the Internet and indefinite detention without charge – these perils are as damaging as an overarching economic central plan, and they are with us today. While not even the most socialistic or fascistic politicians today would issue a ban on all new technology or a comprehensive freeze of prices and wages, they certainly can and will try to humiliate and physically threaten millions of completely peaceful, innocent Americans who try to innovate and earn an honest living. Obama’s administration has engaged in this sort of mass demoralization ever since the foiled “underwear” bomb plot during Christmas 2009 – but Romney would do more of the same, and perhaps worse. Unlike Obama, who must contend with the pro-civil-liberties wing of his constituency, Romney’s attempts to violate personal freedoms will only be cheered on by the militaristic, jingoistic, security-obsessed faction that is increasingly coming to control the discourse of the Republican Party. There can be no hope for freedom, or for the dignity of an ordinary traveler, employee, or thinker, if Romney is elected.

I encourage the viewers of the film to seriously consider the question, “Who is John Galt?” He is not a Republican. If any man comes close, it is Gary Johnson, a principled libertarian who has shown in practice (not just in rhetoric) his ability and willingness to cut wasteful interventions, balance budgets, and protect civil liberties during two terms as Governor of New Mexico. He staunchly champions personal freedoms, tax reduction, foreign-policy non-interventionism, and a sound currency free of the Federal Reserve system. Gary Johnson was, in fact, a businessman of the Randian ethos – who started as a door-to-door handyman and grew from scratch an enterprise with revenues of $38 million.  And, on top of it all, he is a triathlete and ultramarathon runner who climbed Mount Everest in 2003 – clearly demonstrating a degree of ambition, drive, and pride in achievement worthy of a hero of Atlas Shrugged.

Ayn Rand never meant the strike in Atlas Shrugged to be an actual recommendation for how to address the world’s problems. Rather, the strike was an illustration of what would happen if the world was deprived of its best and brightest – the creators and innovators who, despite all obstacles, pursue the path of merit and achievement rather than pull and artificial privilege. Today, it is necessary for each of us to work to keep the motor of the world going by not allowing the purveyors of pull to gain any additional ground. Voting for Mitt Romney will do just the opposite – as Atlas Shrugged: Part II artfully suggests to the discerning viewer.