Tag Archives: economics

A Thought on Immigration and Human Progress

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Over at AEIdeas, James Pethokoukis has an article titled Has human progress stalled? And if so, what can we do about it? In it he talks about the apparent stagnation in human technological progress, and mentions the fact that American “productivity growth averaged nearly 3% during the period 1947-1973,” and we haven’t approached that rate since.

He quoted Aeon:

Yet there once was an age when speculation matched reality. It spluttered to a halt more than 40 years ago. Most of what has happened since has been merely incremental improvements upon what came before. That true age of innovation—I’ll call it the Golden Quarter—ran from approximately 1945 to 1971. Just about everything that defines the modern world either came about, or had its seeds sown, during this time. …  The Golden Quarter was a unique period of less than a single human generation, a time when innovation appeared to be running on a mix of dragster fuel and dilithium crystals.

Then he quoted Aeon again by way of offering an explanation (that I think somewhat begs the question) of why we “spluttered to a halt more than 40 years ago.”

Could it be that the missing part of the jigsaw is our attitude towards risk? Nothing ventured, nothing gained, as the saying goes. …  In the 1960s, new medicines were rushed to market. Not all of them worked and a few (thalidomide) had disastrous consequences. But the overall result was a medical boom that brought huge benefits to millions. Today, this is impossible. ….

The solutions that Pethokoukis and others to whom he linked in his article, though, are governmental: “maybe too much government regulation.” He also points to demographics [links in the original]:

We are a decade older, on average, today than in 1970 and perhaps more risk averse for that reason. Younger societies tend to be more dynamic, creative, and entrepreneurial, as Nobel laureate economist Gary Becker has written. And economist Robert Gordon cites demographics as one big reason when he thinks the era of fast US economic growth is over.

I think he’s likely right on both scores, but I think government regulations, though hugely important, are the lesser of the two factors. Regulations, after all, even with political inertia, can be undone. Aging is irreversible.

Or is it? Contra Gordon, our rapid economic growth need not be a thing of the past. We can recover our nation’s youth and vitality and our ability and willingness to get out of our comfort zone and take risks, take big risks for big gains, to “land a man on a moon of Saturn and return him safely to the earth within this generation.” That’s what immigration does for us. It’s what immigration always has done for us. Keep in mind: immigrants already are risk takers, or they wouldn’t be here.

A Free Market Solution to Immigration?

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Guy Sorman wrote about a Gary Becker idea for this in a recent CapX article. According to Sorman, Becker’s idea runs something like this:

The immigrant takes a risk, and often pays intermediaries to have access to the accumulated capital available in the host country. Becker therefore proposed that the right to enter a country, and apply for a work visa for various periods of time, should be priced and sold. This is already the case in most developed countries, but it only concerns wealthy investors. Fixing a price on all work visas would allow poorer people—who may get into debt to invest for their future—to have access to privileges now reserved to the wealthiest. This right to a paying visa would suppress most of, if not all, illegal immigration and make border controls, as well as the war on evaders (who would become rarer) easier.

Or not. The idea’s presentation leaves unanswered the mechanism for how possession of a visa would make border controls easier: someone still has to be at the border checking the visa, and someone still has to be…somewhere…tracking the visa and its holder’s departure by the visa’s indicated deadline.

Also left unanswered is the mechanism that makes a bought and paid for visa suppressive of illegal immigration. The man who’s leaving his home country and entering his target country exactly because he has no money and wants a better job is unlikely to be able to afford the visa. Coyotes, you say? They only bring a fraction of illegals across.

Also left unanswered is the mechanism that makes a bought and paid for visa useful when another significant fraction of illegal immigrants enter the target country to (re)join their families who already are here. The cost of illegal entry vs bought and paid for visa entry makes that choice obvious.

Good for Amazon

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‘Way last July, amazon asked the FAA for expanded outdoor testing permits (Amazon Petition for Exemption – Docket No. FAA-2014-0474) so the company could engage in serious testing of its planned drone-based delivery system. To date, the FAA has chosen not to respond. Amazon has renewed its request and advised the agency that continued unresponsiveness will force amazon to take its development out of the country [emphasis added].

To date, much of our Prime Air research and development efforts, including flight testing operations, have been conducted inside our laboratory and indoor testing facilities in Washington State. However, we must move beyond indoor testing if we are to realize the consumer benefits of Amazon Prime Air. In the absence of timely approval by the FAA to conduct outdoor testing, we have begun utilizing outdoor testing facilities outside the United States. These non-US facilities enable us to quickly build and modify our Prime Air vehicles as we construct new designs and make improvements. It is our continued desire to also pursue fast-paced innovation in the United States, which would include the creation of high-quality jobs and significant investment in the local community.

Their request also has from the jump anticipated risks: they’ve identified a remote area for testing and would conduct their flights within 400 feet of the ground. Other safety precautions are built in, also. The FAA, though, has continued to be unresponsive. Indeed, its disinterest is amply demonstrated by its suggestion that amazon stop bothering them with drone testing applications and go look for an Experimental Aircraft certificate—which aside from starting a wholly unrelated lengthy permitting process from scratch, is a certificate for manned aircraft and so plainly not applicable here.

The FAA’s…disinterest…also is cynically circular. They’ve already determined (under whatever pseudo-logic, but it’s their story and they’re sticking to it) that small drone operation is per force commercial in nature. Experimental aircraft, by legal definition, cannot be operated commercially—they’re for private pilots flying themselves, and maybe a passenger, for fun and no profit. Of course, the FAA knows this; experimental aircraft certificates are FAA-issued certificates.

Amazon now is emphasizing its determination to proceed:

It is also in the public interest for Amazon to keep its small UAS R&D operations in the United States, and help America establish itself as the leader in development of UAS technology. Our continuing innovation through outdoor testing in the United States and, more generally, the competitiveness of the American small UAS industry, can no longer afford to wait.

And their stick to prod the FAA:

We are poised to significantly expand our distinguished team of engineers, scientists, and aeronautical professionals at Amazon’s next-generation R&D lab in Washington State. Amazon Prime Air currently has dozens of United States job openings for highly-skilled professionals including hardware engineers and research scientists.

And

Amazon urges the FAA to swiftly approve our Section 333 petition, submitted nearly five months ago. Without the ability to test outdoors in the Unites States soon, we will have no choice but to divert even more of our UAS research and development resources abroad.

More businesses—especially large ones, which have the heft to make such claims meaningful—should take the government to task for its desultoriness in responding to requests. This would produce a far better business environment and a far better marketplace for American citizens than does big business’ current practice of crony capitalization.

Another Argument for Disbanding Fannie Mae and Freddie Mac

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Fannie Mae and Freddie Mac on Monday announced details of a controversial plan to allow some first-time homeowners to obtain a mortgage while putting down just 3% of the price of the home.

We’ve not finished recovering from the Panic of 2008, and these entities want to resume an underlying component of the last housing bubble and burst that contributed so heavily to that.

But wait:

Fannie Mae said the loans that allow for 3% down payments will be held to the same eligibility requirements as other Fannie loans, including underwriting, income documentation and risk management standards.

That’s a low bar, indeed, as it was during the last bubble.

The problem here is not so much the high leverage of those loans, per se, as it is the lack of skin in the game—the lack of equity, or actual ownership, or what is there for the borrower to lose—a 97% borrower has in the home he’s buying. What does he lose when can’t—or decides he doesn’t want to anymore—continue paying down his loan?

Here’s Andrew Bon Salle, Fannie Mae Executive Vice President for Single Family Underwriting, Pricing and Capital Markets (you can tell he’s important to Fannie Mae from the length of his title):

This option alone will not solve all the challenges around access to credit. Our new 97% LTV [loan to value] offering is simply one way we are working to remove barriers for credit-worthy borrowers to get a mortgage[.]

Which, of course, is only loosely related to reality: if the borrower were credit-worthy, he would have the scratch to put down 10%.

The argument seems to be, also, that it’s too hard for a homeowner wannabe to raise 10% of the house’s purchase price. This, too, is nonsense. The homeowner just needs to save longer and with more diligence. Or look to buying a less expensive house. Or both.

Judgment like this demonstrates the need for these two agencies to disappear and to let the market determine the viability of mortgage packaging and peddling.

Massachusetts’ Native American Senator Elizabeth Warren Objects

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The Democrat from Massachusetts is saying that

House Republicans were threatening to shut down the government if they didn’t get a chance to repeal part of the 2010 Dodd-Frank law.

What Warren objects to is a provision in the proposed House funding bill—which funds the entire government, mind you—that would “undo the Dodd-Frank provision that prohibited bank units within the federal financial safety net from betting on derivatives.” This is critical because only Progressives like Warren know how to run a bank, or any other private enterprise. We’re seeing today how well government-run (VA) hospital businesses are doing, how well government-directed medical practices are working out, how well government-mandated health coverage plan businesses are doing.

Americans for Financial Reform Executive Director Lisa Donner added this:

The section of Dodd-Frank that Congress is proposing to repeal was put in place to help prevent future bailouts of too-big-to-fail banks[.]

While carefully eliding the fact that other sections of Dodd-Frank guarantee taxpayer bailouts of too-big-to-fail banks by declaring them systemically important and so subject to government seizure and “correction” outside bankruptcy law.

Finally, the only ones talking about shutting down the government are the Democrats.

The Gruber virus is spreading rapidly. This would be amusing if it weren’t so tragic.