AMA Highlights

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Isn’t amazing that Brian must explain that the solution to a water shortage is to raise the price? Why do high schools award diplomas to people who don’t understand the basic laws of supply and demand?

As a redditor quoted Bryan:

Economists’ consensus estimate is that open borders would roughly double world GDP, enough to virtually eliminate global poverty (Clemens 2011).

But then Bryan says the proper (and yes, I agree, obvious) response to increased population in an area with a water shortage is to raise water prices. Presumably this applies to other resources (like, say, living space) as well.

How would this lead to a doubling of GDP and the elimination of poverty? Has poverty been eliminated in Southern California?

@NZ

Define what you mean by “poverty.” If you’re talking about absolute $1.25 a day (or even $2 a day) poverty that has plagued humanity from the beginning of recorded history, then yes Southern California’s done that quite handily.

@Chris H:

You’ve sniffed out the key question: Whose definition of poverty are we talking about? I suppose it’s relative.

If I make $52,000 per year, I’m making the median household income for Americans. If you cut that in half, it’s still more than double the global median ($10,000 according to Gallup).

Do you think it’s an appropriate thing for your national leaders to reduce your real income so that foreigners can enjoy a higher standard of living than they get in their home countries?

Isn’t it extremely aggressive to call Clemens 2011 a consensus? I thought it was considered to be a fringe upper bound?

Also, a doubling of world GDP, which occurs roughly every 25 years at 3% growth, won’t necessarily have any effect on the world poverty rate which is essentially a distribution and human capital problem. It’s not that there isn’t enough productivity, it’s that there’s not enough productivity over there or from those people.

I’ve written some thoughts about Bryan’s theory of signaling in higher education here: http://trotskyschildren.blogspot.com/2014/02/college-signal-vs-substance.html

@Chris H:

Most libertarians are against forced redistribution. That is, if I’ve earned $52,000 this year and you’ve only earned $25,000, it is wrong and/or disutilitarian to take some of my earnings and give them to you simply because I have more.

I don’t know if you’re a libertarian of course, but maybe you at least comprehend the logic in that position.

So, why abandon this stance at the international level?

@BC

“If that’s the case, then why isn’t there enough potential value-add to pay off whatever public officials are necessary to allow multinationals to freely compete? ”

This is a classic case of the Kidnapper’s Dilemma. Let’s say Nike could build sweatshops in low-wage Zimbabwe. Nike could earn substantial profit with its lower cost basis, enough to pay the ruling regime handsomely and still make good return.

But there’s no way for Nike to guarantee that after they’ve invested the money in building the factory that it won’t just be looted. At 10% return on assets and a 50/50 split with the government, the government can make in one day looting what it would make in 20 years taxing.

Consequently Nike doesn’t build factories, and the ruling regime is worse off than had they done so. In short Zimbabwe’s regime lacks credibility. And to build it would take a long-time and a lot of impulse control. The immediate reward of looting has to be forsaken for the much longer-term reward of building the taxable capital base.

And the problem is even if the regime tempers its thirst to loot, other factions have an impetus to try to capture control of the state. They can promise their supporters large payouts by campaigning to loot the amassing capital pool. It’s much safer to continuously loot and pay off competing threats.

Here is what Vivek Wadhwa said about Caplan, Open Borders, and the inevitable tragic implications.

“My team lost by a landslide. 🙁 On reflection, this is not surprising, given the point we ended up having to defend: that anyone, anywhere, should be allowed to take a job in the U.S. The image that our opponents very skillfully planted in the minds of the audience was of 20 million poor Haitians begging on the streets of New York City.

Brian Caplan, who is a George Mason University professor and who was on my side, strongly believes that we should let anyone go anywhere–that it is a basic human right. I have reservations about importing poverty. I believe in exporting prosperity. I agreed with our opponent Ron Unz, who is publisher of The American Conservative, that we need a much higher minimum wage–to rebuild the middle class, stop shifting the burden to government and welfare, and create market forces that limit immigration to the country’s needs.”

Naturally water pricing is oddly distorted, but it’s restating the trivially obvious to point out that increasing water prices would do nothing about the water shortage. It would merely reallocate the existing water.