Lively Thought

Tim Harford has a wonderful talent for communicating economic ideas. In his latest piece at The Undercover Economist, he uses a great story to illustrate the difference between centrally controlled economies and free market economies:

Shortly after the Soviet Union collapsed, a Russian bureaucrat travelled to the west to seek advice on how the market system functioned. He asked the economist Paul Seabright to explain who was in charge of the supply of bread to London. He was astonished by the answer: “Nobody.”

Harford tells this story is in aid of explaining just how confused we are when try to control immigration by establishing quotas for various job categories. As an alternative, and this is always Harford’s alternative, he thinks the UK should set up an immigration marketplace, a sort of eBay for work permits.

Here’s a crazy alternative: the government could restrict immigration simply by auctioning the right to work in the UK. Permits would have various durations (a month, a year, in perpetuity). Citizens would get a free lifetime permit; non-EU residents would have to pay, or persuade their employers to pay. The price of the permits would depend on their scarcity, a decision that might just be within the competence of the state.

As well as allowing employers and migrants to decide for themselves whether they would get enough out of the match to justify the price of admission, the auction system would raise money to help pay for the public services migrants are so often blamed for clogging up.

Before explaining my problem with this plan, let me just say that from a number of perspectives, it makes a lot of sense to establish an immigration marketplace. The demand for spots to work and live in Western Europe and North America vastly outstrips the supply of spots the governments of those nations offer. People wait years and even decades in order to come and contribute to these economies, or they pay thousands (and sometimes tens of thousands) of dollars to smugglers to bring them in illegally. A work-visa auction would definitely help solve a great number of the problems associated with the current immigration systems as they are established throughout the western world.

No, my problem with Harford’s plan isn’t that it doesn’t make sense. My problem with it is that it doesn’t go far enough. In a world where we are constantly moving towards the free movement of goods and capital across the globe, it’s time that we finally start taking the notion of free migration seriously. If we admit that free trade and globalization make sense, then we also have to concede that people should be allowed to move as freely as jobs and money.

What Harford is describing with his auction idea is dismantling the bureaucratic barriers to immigration and replacing them with what is essentially a massive tariff. What we really need, however, is a world where people can freely pursue jobs anywhere they like. When people complain about their jobs being shipped overseas, they should keep in mind the fact that it is far easier in the world today to ship a job away than it is to bring in a worker to do that job. Companies don’t ship jobs away because they want to have workers all over the globe, they do it because they have little other choice.

The barriers to immigration are costly. Running our immigration system and enforcing the penalties against illegal immigration do nothing to advance to our economy. We lose out on skilled workers who would love to come to the west and contribute, if only it weren’t for the massive barriers that stand in their way. Companies that cannot find skilled workers locally are forced to set up shop overseas. Conversely, workers in the west also lose out on opportunities to work their way across Europe or Austalia, or seek opportunities in the fastest growing economies in the world.

The arguments against more liberal immigration are nearly always based on xenophobia, protectionism, and misguided ideas about the burden that immigrants place on the social welfare systems we’ve established. Yet, nearly every serious economic study of migration finds that more liberal immigration policies benefit both labour exporting and labour importing nations. It’s time to get past our fear and realize that freer migration is in the best interests of us all.