From commenter Handle.
it was already in really bad shape before the storm. But Puerto Rico has had just about as many institutions of American government as it possible for any slightly-foreign, Spanish-speaking place to have for a long, long time. It obeys federal law, gets generous federal subsidies, has elections, courts, local offices of all the federal agencies, military bases, etc. Puerto Ricans are American citizens, have open borders with the rest of the U.S., and so forth.
And yet all those institutions don’t seem to have done the island much good in terms of convergence: it always seems to trail the rest of the US by the same proportion economically, consistently lags much more educationally, local governance is poor quality, and they are effectively bankrupt – though this could also be said for some of the worst mainland states (Connecticut) and cities (Chicago). They have been going through the motions, but not getting the results.
South Korea and North Korea are a case of similar people, different institutions. Are Puerto Rico and the U.S. a case of similar institutions, different people?
“Generous federal subsidies”?
https://www.finance.senate.gov/imo/media/doc/Arthur%20MacEwan%20and%20J.%20Tomas%20Hexner%20(Submission%204).pdf
Page not found?
That’s weird. When I googled it again(Puerto Rico tax federal spending was the search) the link works. Meanwhile, Puerto Rico ranks 19th in net federal expenditures(after taxes paid) per capita.
Pretty amazing considering the median income is around 19 gs a year.
Could it be the downside of right to exit? More Puerto Ricans live on the mainland than in Puerto Rico.
Brain drain maybe?
A quick google search found this interesting analysis:
http://libertystreeteconomics.newyorkfed.org/2016/08/migration-in-puerto-rico-is-there-a-brain-drain.html
I am a little dubious of similar institutions, different people as there are more of Puerto Rico people living in the mainland. There is of debt issues but it is impossible if the population is shrinking.
if the Democrats were smart they send giants to PR and move to Florida PRONTO!!!! There is no WALL!!!!
Another issue is PR did not focus their economy and institutions until after 1980ish so they are still behind like a lot of Latin American nations.
North Korea vs South Korea is a really crappy example of drag out all the time. Everyone knows that “full retard” totalitarian systems can destroy any people. However, once that system runs it course, good people recover. The Japanese and Germans recovered from getting bombed back to the stone age. The Chinese are recovering from Mao.
The relevant question is amongst “basically average mixed economy nations” that make up most of the world now why do some do well and some do poorly. Why is socialist Sweden a better place to live then some theoretically more libertarian middle income trap country.
The answer is genetics.
To be fair, from what I read, Swedish genetics will be a thing of the past soon.
I have been playing with data on Puerto Rico’s economic institutions, for example its scores on the Doing Business report, and its institutions seem far more similar to mainland U.S. than people give it credit for.
Is Puerto Rico vibrant or stagnant? How does it compare to West Virginia or Mississippi? I think you have a problem with brain drain and dregs, as well as long time cultural values that observe and yearn for the rewards of capitalism without understanding or undertaking the process.
Let’s say Mississippi and West Virginia are “Mainland Puerto Ricos”, and have the same issues with brain drains and ‘dregs’, as you say. Then you are just making the “Same Institutions, Different People” point even stronger.
Indeed, the United States has “run the experiment” multiple times, and so provides us with plenty of examples that allow us to compare cities or states with “Same Institutions, Different Outcomes.” Some of that is policy, but a lot is also people.
The big picture here – in terms of the broader mainstream economics intellectual conversation regarding the determinants of wealth and growth rates – is that there is a strong demand for tall tale “explanations” that both avoid radioactive topics and justify certain political agendas. And the “Inverse Say’s Law” holds, as economists try to make their careers providing this market with its supply of such rationalizations in the guise of “studies”.
One of those rationalizations is over-exaggerating the importance of a purposefully vague concept of “institutions”, and it’s really a dismal sign of the sorry state of contemporary mainstream economics to observe how easy it is for ordinary commentators to just demolish these narratives with devastating arguments using simple common sense. Another good example of precisely this kind of sad state of affairs and straightforward, common-sense countering, is the adulation lavished on Chetty for his risible work on geographic influences on intergenerational social mobility.
Just as it’s obvious to any observant, intelligent person that nature and nurture both matter a lot for individual human outcomes, it’s also clear that social institutions and “average potential human capital” both matter a lot for aggregate outcomes. See, e.g., Garett Jones’ Hive Mind, especially for differential rates of development for formerly poor countries around the world.
Indeed, the US examples have given us real-life empirical observations, so we don’t have to wonder: under an open borders regime, it’s clear that most other poorer countries are going to face the same fates as Puerto Rico and West Virginia.
That’s an inconvenient fact about the consequences of human-capital-loss for many prestigious libertarians to deal with in the various arguments on the subject of geographic mobility. But the trend seems to be for many of them to simply bite the bullet on the matter, “Oh well, then that’s how it goes; tough luck for the people left in those places.”
Perhaps the worst argument for immigration restriction is that less productive people have the right to keep more productive people in their own country (where the latter will be both less productive and worse off) so the latter have to keep selling them underpriced goods and services.
I’m less concerned about ‘brain drain’ than I am about capable, productive, decent people having to keep their families in hell holes because misery loves company.
That is exactly the “bite the bullet” / “tough luck, losers” attitude I’m talking about. It’s worth thinking about how the likelihood of brain drain warps the incentives of the drained country’s government in terms of investing in local human capital.
I’d say that’s a mischaracterization of the attitude. Indeed it’s not an attitude at all but an arguement: that the benefit of imported labor tothe importer can be expected to be greater in magnitude than the loss to the country ‘exporting’ the labor.
There’s also the ethical argument that two people being born on the same island doesn’t give either the right to determine whether one is allowed to leave the island.
Octavian,
Let’s take this argument and run with it. Why should I, a productive professional, have to subsidize a largely unproductive black population, simply because we were born in the same geographic area? Why should I grant them political rights (like voting) that often result in the violation of my rights?
If this logic applies to not keeping people out of the polity, why shouldn’t it apply to kicking people out of the polity? Or if you want to phrase it differently, why can’t our kind secede and from the polity that includes blacks and make a new one.
At a small scale this already happens. Whites seceded from Detroit and Baltimore by moving to the suburbs where they could set up working white institutions again. Probably the scariest thing about immigration is that it might take this option away. If state governments ever start to look like the governments of Detroit or Baltimore, good luck.
I guess you could say “we owe them.” But that doesn’t mean much to my Irish ancestors from the North. We don’t appear to owe blacks much of anything.
This can go beyond blacks. For decades the Scotts Irish of Appalachia were part of the Democratic coalition and voted overwhelmingly for Bill Clinton. The whole LBJ War on Poverty was focused on them and there were all those folk songs about coal miners. In 2016 they are deplorables being “othered” by Democrats.
I guess the question basically comes down to, “And who is my neighbor?” Some people interpret that passage as being “everyone”. Some interpret it as “people who treat you well, regardless of who they are.” Still others, “show mercy to strangers, but the two who passed you by (who did not treat you like a neighbor) are not your neighbor.”
“Why should I, a productive professional, have to subsidize a largely unproductive black population, simply because we were born in the same geographic area? Why should I grant them political rights (like voting) that often result in the violation of my rights?”
Why should you, a productive professional, have to be ashamed of wearing a white sheet?
@Octavian
No one here has suggested that Puerto Ricans shouldn’t be allowed to leave the island. The right of exit might be a possible explanation for the relative lack of development. It might not. Tropical societies are generally are less productive.
@asdf – Puerto Rico’s population is 75-80% white. The rules that require you to do things like “subsidize a largely unproductive black population”, just like the rules that force you to “subsidize a largely unproductive white population” were primarily written by white people. White people decided to take Puerto Rico from the Spanish, and to set up the rules as they are. Sorry for the inconvenience.
@Octavian: Since this thread is getting crowded, I say we wait until the next post regarding human geographic mobility and the “brain drain” issue, then lay out and assess the various positions there.
The link I posted in my comment above suggests Puerto Rican emigrants aren’t inaverage more skilled than the people that stay behind.
Complicated.
First, not all American institutions are unalloyed good for sustainable economic growth, and PR adopted/was forced to adopt more than its share of them: protectionism (Jones Act), use of tax policy as a tool for industrial development (section 936 Tax Code), federalization of minimum wages over and above local realities, federalization (at least as aspiration) of a sense of entitlement to a safety net that the local economy can not support, the use of the USD in an obviously not optimal monetary union. The united states did not grow wealthy by indulging in all of these Progressive dreams. Run the current Chicago, Connecticut, etc. economic model starting at Puerto Rico’s state of development in the 1930’s (when an alliance of local and stateside Progressives began “bootstrapping” the island’s economic development) and see what you get. Of course, the preponderance of American institutional imports where a net plus, so Puerto Rico did end up outperforming most comparable Caribbean, Latin American countries.
Demographic and cultural differences can account for some of the under performance, but they should not be exaggerated, especially when comparing Puerto Rico with any state. In some cases, the Spanish-Puerto Rican “cultural contribution” to the mix has undermined development — great at making laws, less at uniformly respecting them. (Check trust factor.) In others, better — ethnic tensions worked themselves out much better. Also, Puerto Rico saw its fair share of aspiring immigrants, which left the island well represented among many of the cultural groups that sociologists (at least those who dare) use as examples of cultures that positively drive economic change. Brain drain undermined this, and it is indeed an unintended negative consequence of an Open Border policy. So, if you are comparing Puerto Rico to Minnesota, the Milton Friedman adage could summarize it. But I can think of many regions of the US where the cultural comparison would not explain much.
I doubt it is a people problem. I suspect that Puerto Ricans do quite well in the US compared to those on the island, but perhaps this is selection bias.
I bet the problems found in Puerto Rico are the same problems that affect mostly small towns all across America. Wealthy cities can handle the burdens of the administrative state much better than less wealthy areas of the country.
Puerto Ricans in America have the same low incomes and high poverty rates as most Hispanic immigrants, especially from the various islands. This persists over multiple generations. The data is very easy to find on Pew Research.
They actually have worse statistics then average Hispanics when it comes to crime or family breakdown.
Some of the wealthiest places in America are suburbs. In fact once you stop talking about SF, BOS, NYC, its pretty clear that the affluent suburbs are better off then the cities in a lot of the Great Migration urban areas. But they get rolled into the Metropolitan Statistical Area and we pretend people who moved away from the city and commute in are somehow urbanites. Perhaps most famously, who better handles the burdens of the administrative state. The government of Detroit or the governments of Detroits suburbs?