Conservatarian Dilemmas 1: Immigration

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This is the first of a series of three posts, inspired by several things, but primarily by a dialogue between Nick Gillespie and Charles C.W. Cooke. I will be referring to the three-axis model, as described in my e-book The Three Languages of Politics.

The libertarian argument against immigration restrictions is that they restrict personal choice in a very fundamental way. Along the freedom-vs-coercion axis, immigration restrictions are prima facie coercive.

The conservative counter is that immigrants bring a culture of dependency and support for populist demagogues. Thus, unrestricted immigration, or even loose immigration, will end up undermining America’s commitment to liberty.

One libertarian rejoinder is to argue that, empirically, immigrants value liberty. [UPDATE: For an example, see this Cato paper.] A conservative rejoinder might be to point out that progressives are salivating at the prospect of seeing more immigrant voters, and this is not because progressives expect these voters to value liberty.

Another libertarian counter would be that restricting immigration in order to preserve liberty creates too much dissonance between ends and means. If you are for liberty, then you should be for liberty, period. Fight the battle against dependency and demagoguery by arguing against those phenomena, not by restricting the liberty of people to choose where they live.

I am inclined to go with this latter view. Also, I am not worried so much about how immigrants vote. If a libertarian society is to emerge, it is likely to result from exit rather than voice.

Yuval Levin on Conservative and Libertarian

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He writes,

Successful lives in the postwar era involved effectively navigating our large institutions and making the most of the benefits they offered. Success in the coming era will increasingly involve effectively navigating a profusion of smaller networks, and a government that wants to help people flourish will need to retool—focusing more on enabling bottom-up, incremental improvements and less on managing top-down, centralized systems. Both empowering individuals and offering them security will look rather different in this era.

Read the whole thing. Even by Yuval’s standards it is a very pointed, articulate post.

He is responding to Charles C.W. Cooke’s provocative case for conservatarianism. I have a few posts scheduled on that same topic. While recognizing differences, Yuval is focused on the affinity between conservatives and libertarians. So is Veronique de Rugy. (The high quality of commentary on Cooke’s work speaks well for the book itself, which I have not read.) My focus instead will be on the tension between the two.

Don Boudreaux on Exit and Voice

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He writes that it is a “weird notion” to believe

that if each individual can, on his or her own, choose which offerings of private businesses to accept and which to reject, and all without having to coordinate these choices with other individuals, people are slaves to corporations – but that individuals regain their freedom and dignity only by voting to use government power to regulate businesses, with every individual forced to abide by the ‘will’ of the majority.

By the way, there is a web site called Voice and Exit, which may represent an interesting libertarian-ish movement, but the web site seems to have been designed by stoners. I just can’t penetrate it.

What I’m Reading

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MIT and the Transformation of American Economics, edited by E. Roy Weintraub. David Warsh cited it and I blogged on Warsh about ten days ago, talking about how other universities’ resistance to hiring Jews enabled MIT to surge ahead. I think it is a fascinating volume, and I don’t think it’s just because I did my graduate work at MIT. A few things I’ve picked up so far.

1. Economic methods changed relatively rapidly between 1935 and 1955. In 1935, economics still looked a lot like a branch of social and political philosophy. By 1955, it was much more technical and policy-oriented, with a shiny scientific veneer. Keynes and the Depression got economists interested in activist government, and the operations research of World War II stimulated much subsequent work on theory, data collection, and policy.

2. Beatrice Cherrier’s essay, and others in the book, describe the emergence of what Samuelson dubbed the “neoclassical synthesis.” You can think of this as an attempt to reconcile Solow’s growth theory, in which saving is good, with Keynesian macro, in which saving is bad. The resolution is to say that the economy is only Keynesian in the short run.

3. In Andrej Svorencik’s essay, we get quantitative support for the view that a few dissertation advisers at MIT have played a dominant role in the profession as a whole. He points out that in my era Dornbusch out-sired Fischer in terms of numbers of students. Still, I continue to hold Fischer responsible for turning macro into a wasteland.

4. In Yann Giraud’s essay, we find that Samuelson’s textbook was bitterly opposed by conservatives, who put pressure on the MIT Administration, which in turn persuaded Samuelson to make changes. If this caving into outside pressure seems surprising, remember that this was the McCarthy era, and most individuals and institutions preferred discretion to waving a red cloak in front of that bull, so to speak.

I am still only part way through the volume.

Housing Finance and Recessions

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Oscar Jorda and others write,

The rapid increase in credit-to-GDP ratios since the mid-1980s was just the final phase of a long historical process. The run-up started at the end of World War II and was shaped by a long boom in mortgage lending. One of the startling revelations has been the outsize role that mortgage lending has played in shaping the pace of recoveries, whether in financial crises or not, a factor that has been underappreciated until now.

Pointer from Mark Thoma.

When I read this, I wanted to shout “Underappreciated by who?” Maybe by the macroeconomists who were trained by Stan Fischer, Thomas Sargent, and their progeny. But until Genghis Khan pillaged macro, every macroeconomist knew that housing and mortgage credit rationing were major economic forces in the United States. Until the late 1980s, the process generating recessions consisted of interest rates rising, mortgage lenders losing deposits (because of interest rate ceilings), home buyers losing access to credit, and housing collapsing. And every macro economist knew this.

And even if you are too young to know any old-fashioned macro, you could read Ed Leamer. I would suggest that the authors of this essay try searching for Leamer Housing is the business cycle.

What this essay teaches shows to be underappreciated is Google.

Note that there is more to the essay, which Timothy Taylor found worthwhile.

Genghis Khan Lays Waste to John Taylor

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Stanley Fischer said,

a simple rule of that sort will, by necessity, leave out many factors that appropriately influence monetary policy, such as financial developments, temporary divergences in relationships between different measures of economic activity or inflation, and the like. A simple rule can provide the starting point for the decisions made by the FOMC, but in reaching their interest rate decision, members of the Committee will always have to use their judgment to identify the special circumstances confronting the economy, and how to react to them.

Pointer from Mark Thoma.

Housing Policy: A Civilized Approach

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Joe Gyourko writes,

They should begin by completely phasing out the FHA over some clearly defined period (for example, three to five years) and replacing it with a new subsidy program that would help the two types of households the agency is meant to serve. The new program would help prospective homebuyers amass a 10% down payment that would then allow them to obtain financing at market rates from private lenders. This could be done through a simple system in which qualified households pay into a special savings vehicle and receive some type of match from the government. These funds would accumulate on a tax-free basis until they were large enough to provide a 10% down payment on a home.

On the civilization vs. barbarism axis, this would encourage saving and responsible behavior. If you read the whole article, you will see reinforcement for this. Of course, along the oppressor-oppressed axis, the only thing holding back people from owning homes is oppression, so there is no need for requiring a down payment.

Of course, what matters here is a different axis entirely. The real estate lobby vs. everybody else. And from that perspective, Gyourko’s sensible proposal does not stand a chance. Another indication of the political impossibility of this approach is that it is one that I have long advocated.

Lifted from the Comments

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On this post.

The question is why are people moving back into the cities, when real estate in the cities is so much more expensive, (i.e. despite the fact that the “rent is too damn high”), the appeal of city life is not noticeably greater than it was a decade or two ago, and the cost-differential is so high that it practically erases the compensation and lifestyle gains?

Read the whole comment.

I see gentrification occurring primarily because of the New Commanding Heights. Education and health care concentrate in cities, in part because of tax advantages. That in turn draws affluent professionals. With enough affluent professionals, you get young people wanting to live in cities to be around other affluent professionals, in order to perpetuate bifurcated family patterns.

Questions for Mark Thoma

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He writes,

Surprisingly, the loss of more than 800 independent banks wasn’t due to an unusually large number of bank exits during the financial crisis. Instead, it was due to a fall in bank entries, from around 100 new banks per year prior to the Great Recession to just three per year on average since 2010 (only four new banks appeared from 2011 to 2013).

1. Does too-big-to-fail play a role in this, by making it hard for smaller banks to compete? Are some conservative (e.g., Peter Wallison) complaints about Dodd-Frank reinforcing TBTF possibly valid?

2. Does the causality run the other way? That is, have business formation rates been low, and this reduces the demand for services of small banks?

These are genuine questions, not rhetorical ones–my inclination is to believe Thoma’s story. I do not know if it is possible to find data that would answer these questions, but I think that searching for answers could be interesting.