Monday, July 4, 2011

Open Borders and Market Provision

I'm a defender of open borders or, at the very least, pretty porous borders. But immigration is very, very unpopular. So, states restrict immigration big time.

Suppose that you agree with me that more immigration would be a very good thing. Well, if you think this, then this generates a surprising case for free markets.

The key part of the argument is suggested by Rafaela Dancygier's excellent book Immigration and Conflict in Europe. Dancygier does some groundbreaking empirical work and shows that people oppose immigration more and immigration generates more conflict when states control the provision of scarce goods, like housing, education, or health care. When states control scarce goods and immigrants gain access to these goods, natives become resentful of immigrants. And so they oppose immigration (sometimes violently).

But, for some reason, when markets allocate scarce goods, natives don't become resentful, at least not as much. Why? The mechanism goes like this. When the state controls a scarce good, natives can mobilize to pressure the state to respond to their interests. When immigrants compete with people for these goods, natives mobilize to restrict immigration.

But, if the market controls scarce goods, people won't mobilize to restrict immigration because market agents don't care much about what resentful natives think, as long as the money keeps coming in. Dancygier says:
When competition centers on goods that are allocated by the market, the scope for effective anti-immigrant activity, though present, is more limited. Not only are market actors, such as employers or private landlords, less sensitive to local voting patterns; during economic downturns they also generally face few incentives to give into demands for resource allocations that favor natives, especially when migrants are willing to accept a lower wage or a higher price.
So, here's the thought: if you love open borders, you should also love free markets.