Luck, Wealth, and Immigration
By David Henderson
In his column in yesterday’s New York Times, Cornell University economist Robert Frank writes:
Another important message of recent research is that a person’s salary depends far more on where she is born than on her talent and effort.
For example, as a Peace Corps volunteer in Nepal long ago, I hired a cook who had no formal education but was spectacularly intelligent and resourceful. Beyond preparing excellent meals, he could butcher a goat, thatch a roof, plaster walls, resole shoes and fix broken alarm clocks. He was also an able tinsmith and a skilled carpenter. Yet his total lifetime earnings were less than even a very lazy, untalented American might earn in a single year. Well-paid Americans owe an enormous, if rarely acknowledged, debt to the social investments that supported their success.
Call me naive, but until the last sentence, I thought Professor Frank would go in a different direction. He’s right that we Americans are lucky to have been born in arguably the richest country in the world. Or, in my case, I was lucky to have been born in Canada. Throughout his article and in much of his other writing, Frank shows concern for people in poor countries. Indeed, his own decision to join the Peace Corps may well be evidence of that concern.
That’s why his last sentence was jarring. It was jarring in two ways. First, I think he’s wrong to say that we owe a debt to “social investments,” if he means by that term what I think he means. I think he uses “social” to mean “government” and “investments” to mean “spending.” But it’s hard to see how, for example, expensive but mediocre government schools are an important cause of our wealth. There’s a more-obvious cause of the wealth that we have been born into: a great deal of economic freedom compared to that in other parts of the world. Check Economic Freedom of the World, 2008, to see the rankings. In 2008, Nepal came in a dismal 128th out of 141 countries ranked.
Let’s say Frank disagrees with me about the causes of wealth, although I’m not sure he does. But let’s say he does. There’s something even more jarring. He and I both agree that his cook in Nepal had the bad luck to be born in Nepal. He also believes–and this is the whole point of his article–that government should do what it can to offset bad luck. One thing it could do is quit preventing people from Nepal from moving here. But Frank doesn’t say a word about relaxing immigration restrictions.