Archives for May, 2008
Immigration Is Good for the Economy 2: Inventions
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The falsely praised THE FISCAL COST OF IMMIGRATION by Edwin Rubenstein doesn’t even mention “patents” or “entrepreneurship” anywhere in his study. This oversight (I don’t want to accuse Edwin Rubenstein of intentionally misleading his readers) casts real doubt on the sincerity of this report.
Focusing on skilled immigration, Professor Jennifer Hunt in this study states:
“Twenty-six percent of U.S.-based Nobel Prize recipients from 1990-2000 were immigrants (Peri 2007), as were twenty-five percent of founders of public venture-backed U.S. companies in 1990-2005 (Anderson and Platzer n.d.), compared to a foreign-born population of 12% in 2000” (Hunt, 1),
and that:
“Immigrants account for 24% of patents, twice their share in the population” (Hunt, 3),
and:
“A one percentage point rise in the share of immigrant college graduates in the population increases patents per capita by 8-22% . . . the state-level results mean that the 1990-2000 increase in the population share of this group from 2.2 to 3.5% increased patents by 10-29% . . . I find that immigrants have more than double the impact on innovation that natives do” (Hunt, 4).
Immigrants are more inventive than natives. Period.
Another World Bank working paper on foreign graduate student by Chellaraj, Maskus, and Mattoo computes:
“That the sensitivity of patents activity with respect to foreign graduate students is more than four times larger than that with respect to skilled immigration” (18). “A marginal impact of another foreign graduate student [is] around .63 patent applications” (20).
While some patents turn out to be totally worthless, some have radically improved human welfare. The point is that the next Carnegie or Einstein could be wasting away in an undeveloped nation instead of filing patents in America. How much tax revenue has been collected due to the enormous number of patents filed by foreign student or immigrants? How many thousands of firms make more money because of these inventions? Also, how many billions of dollars in value have been created by ventures where one of the founders was an immigrant? Google, Yahoo!, and eBay were all co-founded by Americans who immigrated as children.
All of these revelations and more show THE FISCAL COST OF IMMIGRATION by Edwin Rubenstein is a work of political ideology with a thin veneer of sincerity.
Immigration Is Good for the Economy 1
These comments made yesterday have prompted me to write a series of blog posts. I only hope that zeezil or other commentators decide to respond to my specific points instead of pasting cookie cutter commentary.
THE FISCAL COST OF IMMIGRATION by Edwin Rubenstein is a fatally flawed study which uses poor methodology. Rubenstein claims that tax revenue was lower than expected because of immigrant competition driving down wages. That claim assumes two things: 1. Wages have decreased and 2. Immigrants decreased them. Neither of those assertions is true. As Professors Russ Roberts and Don Boudreaux at George Mason University are fond of pointing out on cafehayek, statistics which purport to show a decrease in wages since the 1970s do not include factors such as overestimation of inflation, increased paid vacation time, healthcare benefits, dental care, and employer matching savings plans. Considering those factors, wages have risen substantially since the 1970s.
Far from decreasing wages, immigrants have INCREASED the wages of 92% of Americans between 1970 and 2000. The 8% of Americans negatively impacted by immigration are those who failed to earn a high-school degree. RETHINKING THE GAINS FROM IMMIGRATION: THEORY AND EVIDENCE FROM THE U.S. by Ottaviano and Peri clearly and concisely reports these facts. Far from hurting our economy and decreasing tax revenue, immigrants fill the government’s coffers.
House considers Farm Bill on the floor
On the floor this morning, U.S. House of Representatives is considering the House-Senate conference report on the new Farm Bill, which the White House has threatened to veto because of its bloated $300 billion cost and lack of reform. However, the bill’s proponents say they will have the two-thirds majority needed to override a Presidential veto.
Currently, on C-Span, Rep. Jeff Flake is objecting to the rules which don’t allow time for opponents of the report to debate the bill.
Immigration Assimilation
The Manhattan Institute released a fantastic study called Measuring Immigrant Assimilation in the United States. As the title suggests, it sets forth a clear statistical methodology for measuring the economic and civic assimilation of different immigrant groups. One interesting passage is:
“The slow rates of economic and civic assimilation of Mexicans apart from other immigrants, and may reflect the fact that the large numbers of Mexican immigrants residing in the United States illegally have few opportunities to advance themselves along these dimensions.”
Could it be that the Federal government’s policy toward immigration has the unintended negative consequence of slowing assimilation? If entire groups of people are legally restrained from using the courts and are constantly afraid of being deported, it makes sense that they will stick to their ethnic and cultural communities. Legalization is the only way to turn recalcitrant illegal immigrants into Americans.
On the positive side, assimilation rates for Mexican immigrants since 1995 seems to be increasing, just as other ethnic immigrant groups have done. Despite the government’s best intentions and a few laggards, immigration to the United States is a stunning success.
Some Advice For Pro-Immigration Protestors
Many of the problems affecting America’s modern pro-immigration movement were evident during the recent May Day rallies. Unless addressed, they will condemn immigration efforts to failure. Since I sympathize with the activists’ overall goals, I would like to offer some advice.
One, be pro-American. Whatever you do, do not wave Mexican, Guatemalan, or any other flag at your protests. Remember, you want to stay in the United States, not go back to your native countries.
Two, reject the political Left’s multiculturalist propaganda. The United States is a melting pot that has melded a uniquely American culture from myriad national influences. American culture is dynamic because newcomers do their best to assimilate. Americans are keenly aware of multiculturalism’s balkanizing influence in some European nations. They do not want it here.
Three, do not deride America as bad and unjust. No doubt, immigration raids and deportations are traumatic and devastating. But if your goal is to stay in the U.S. to work and provide for your family, blame the government’s policies, not the nation.
Four, appeal to Americans’ self interest. Explain why immigration is good for America. Highlight the stories of immigrant entrepreneurs like Metin Ozen, founder of Ozen Engineering. Or the fact that 40 percent of U.S. science and engineering Ph.D.s are foreign-born. Or that 24 percent of all international patents filed form the U.S. listed a foreign worker as an inventor or co-inventor. Or that immigrants pay more in taxes than they receive in government benefits.
Five, make it clear that you want to follow the law. Without a doubt, America’s immigration laws are broken. For most illegal immigrants, sneaking into the country is the only way to get here. But Americans, rightly, have great respect for our laws and institutions. Point out that immigrants commit fewer crimes, on average, than native born Americans. This should be easy to do—the U.S. is enjoying its lowest crime rates since the 1950s.
Six, don’t blame the free market, and focus on reforming bad immigration laws. Capitalism is the reason America is a rich desirable place to live. Were entrepreneurs allowed to operate freely and without restraint, they would be able to hire anybody they want from anywhere in the world.
Ignore these simple truths, and you will fail to reform America’s broken immigration regime. The late economist Julian Simon rightly called people “the ultimate resource”—and that is true regardless of national origin. A steady flow of immigrants, and their labor, ideas, and innovations, will help reinvigorate America’s economy, as those immigrants help themselves.
When burning gas is good for the planet
OK, so say we accept the premise that CO2 causes global warming, is there any case where energy use will be beneficial for the planet? Yes, according to New Scientist:
They say the use of biogas plants, which store the decomposing manure and capture the natural gas it releases, could improve rural farmers’ livelihoods, while protecting the environment.
Biogas digesters are used across the Indian subcontinent, Africa, and Latin America, but few rigorous studies have been done of their overall costs and benefits. So Govindasamy Agoramoorthy of Tajen University and Minna Hsu of National Sun Yat-sen University, both in Taiwan, surveyed 125 rural households in India that use biogas plants.
Using regulation to undo what regulation caused?
Humane Society of the US just released another expose video on animal cruelty in the meat industry. They argue for more regulation so that the responsibility for downer cattle is firmly placed on someone’s shoulder.
Their ultimate goal is to eliminate factory farming, where cattle are raised one place, transported to a feedlot where they pack on a lot of weight, and then transported to a meat packing plant where they are finally slaughtered. It is meat production by bussing, and it is part of the reason why we have downer cattle, which HSUS are so concerned about.
HSUS, which is not related to your local Humane Society in any way, shape, or form, is arguing for more regulation. They want regulation that says who is responsible for downer cattle at the meat packing plant, at the auction houses, and anywhere else. No one seem to take care of them when the truck driver cannot hand off a walking animal to the next link in the chain that takes the cattle from the farmers pastures to your dinner table.
I propose that the regulation caused the factory farming in the first place. There are two reasons for why I make that argument:
1. Regulation cost money; small slaughterhouses cannot afford the excessive cost of following USDA’s detailed guidelines and reporting routines.
2. USDA has been pushing for larger slaughterhouses, because it cost them more to supervise small operations.
The number of meatpacking plants in the U.S. has reduced drastically from almost 2,500 in 1974, to about 900 today. This has in part been a result of the cost and efficiency of using new technology, but there is another component to the story, which is not told very often. Reason started telling the story with a brief list of how regulation prevents Virginia farmer Joel Salatin to do what he wants with the products from his farm. Salatin has published several books on how to make organic, local food systems profitable. His most recent book Everything I Want To Do Is Illegal: War Stories From the Local Food Front is a tale of how his battle with USDA.
Salatin also has impeccable credentials from the organic food movement, and food snob Michael Pollan’s recent book the Omnivore’s Dilemma featured several chapter of Salatin’s farming methods and thoughts on supplying food for people. Salatin has been trying to establish a slaughterhouse because he does not want to ship is cattle offsite for slaughter. The USDA will have nothing of it. USDA do not mind that he slaughters onsite, they do not mind that he gives away the beef he slaughtered on the farm, but they will not let him sell it.
Salatin tried to establish a slaughterhouse with an acquaintance. After much ado, the USDA finally issued the permits. Once the plant was in operation, the USDA pulled the inspector because he was not processing animals fast enough. I was not aware that the USDA’s mission was to increase productivity in individual slaughterhouses, they only have to verify that it is done right, and even that is something that other organizations seems to do better.
The other story I have about misguided regulation of the meat supply is a story from the New York Times. Animal rights activists are pushing to ban the slaughter of horses all together, and have already succeeded in doing so in Illinois and in Texas. The result is that horses are now transported all the way to Canada for slaughter. Regulation is causing more industrialized farming, instead of achieving the activists goals of a
Selling Out Online Advertising
Wayne Crews and I have a new C:Spin discussing a proposed New York law aimed at protecting consumers from behavioral advertising:
Online ads can be annoying. From pop-ups to flash screens, it’s hard to surf the Web for long without encountering a sales pitch for an unwanted product. A world without these ads might be pleasant, of course, but then who would pay for all the original content websites make available? Advertising explains why we can browse the Internet without pulling out our credit cards at every turn. But New York lawmakers are now considering a bill that would make this scenario a reality, spelling doom for the advertising models that could fuel the Internet’s future.
Irked by pervasive advertising, some consumers see the Wild Wild Web as a realm warranting legislative assurances that all information stays private, hidden beyond the reach of marketers without explicit consent. They prefer that we opt-in, rather than opt-out.
But an alternative interpretation of the nature of the cyberspace is that any advertiser may legitimately assemble information that has been transmitted on what is clearly a very public network.
Even Wikipedia, long funded entirely by private donations, may soon have to place ads on its popular encyclopedic entries. All the server farms and fiber optic cables that power today’s Internet are not cheap, and somebody has to pay. Ad revenues indirectly fund many of the network upgrades needed to prepare for the ever-increasing stream of global Web traffic. And since advertisers are expected to tighten their belts as the global economy slows down, effective advertising models are more important than ever. If the Internet is to realize its full potential, firms must be free to develop experimental new methods of delivering ads.
Increasingly, today’s “dumb” online advertisements are yielding to “smart,” behavioral ads. By cataloguing individualized information about a user’s browsing tendencies, behavioral advertisers like Phorm and NebuAd can guess what sort of ads might interest that person, and select which product to promote accordingly. In this model, advertisers don’t even have to record specific web addresses; rather, browsing habits are stored only under broad subject categories, like automobiles or golf. Sensitive websites like WebMD aren’t logged whatsoever. All this data is tied not to our names but to anonymous identifiers like cookies or IP address, which typically cannot be traced back to a particular individual except by court order.
Read the rest here
Comcast’s solution to network congestion
Broadband Reports ran an opinion piece by Karl last week discussing the rumors that Comcast will soon adopt a 250GB a month maximum with overage fees for excessive consumption.
As the piece points out, implementing overage fees runs the risk of giving FiOS (and, to a lesser extent, U-Verse) an even bigger edge on cable broadband. Because of AT&T and Verizon’s last-mile network
architecture, heavy users aren’t as likely to impact other customers’ experiences as they are on Comcast’s shared cable network, so the telcos can typically get by without terminating heavy users or charging them extra.
Yet right after Karl finishes explaining about how overage fees will change the competitive landscape, he starts ranting about the prospect of “investor pressure constantly forcing caps downward and overage fees upward.”
Competitive pressures make this scenario a remote possibility, especially as content portals serving massive files like Apple TV and Xbox Marketplace gain mainstream appeal. If Comcast wants to deflect criticism from other ISPs over bandwidth limits, any cap must be high enough to ensure very few customers even approach it. Arguably, 250GB a month is enough to satiate even power users, at least for a couple more years.
ISPs are competing fiercely to attract subscribers, so providers regularly make hay out of seemingly trivial product differences such as the “ugly cabinets” that AT&T sometimes installs when upgrading a neighborhood’s DSL speeds. Imagine the ads Verizon will run if Comcast starts charging customers for heavy use—“With Comcast, you never know when you’ll be hit with an enormous monthly bill if your kids go on a YouTube frenzy or your computer is overtaken by hackers. Here in FiOS land, rest assured there are no extra fees, no matter how much you download.” It’s not hard to see this message resonating with customers, especially those living in households with multiple Web-savvy residents.
Making things harder for Comcast is the fact that most U.S. customers aren’t used to explicit bandwidth limits (unlike Canadians). Currently, the only major U.S. ISP with an outright cap on consumption is Cox Cable, but even then enforcement is highly selective. Time Warner is testing the waters with bandwidth caps in a handful of markets, but otherwise most ISPs have either no caps at all or hidden ones affecting a tiny fraction of users.
The “Save the Internet” brigade’s insistence on neutrality and transparency has left Comcast with little choice but to resort to a metered solution to network congestion. Of course, I’m pleased that Sandvine and the “invisi-caps” will soon be history, and I look forward to consuming 249.99 GB each month on my Comcast connection.
But what about non-neutral solutions to last-mile congestion? To be sure, Sandvine was far from perfect, but who knows what innovative network management technologies will go undeveloped because of the stigma, and threat of regulation, against traffic discrimination?
It wouldn’t be surprising if we soon see calls for government to impose price controls because Comcast’s $1.50 per GB is “excessive” and “unfair.” For many proponents of government regulation of private networks, I suspect having neutral ISPs isn’t enough. They yearn for a utopian marketplace that offers limitless bandwidth, neutral networks, and affordable prices. And who doesn’t? But the best way to make this vision a reality is to foster private investment and let emerging technologies fill today’s competitive void.
Preliminary thoughts on the RFA’s PR campaign
As most ethanol watchers know, the Renewable Fuels Association ran a full-page ad in The Hill magazine last week (May 6, 2008) titled: “Without ethanol, we’d be paying over $4.00 a gallon for gasoline today.” To substantiate this claim, the ad quotes from a March 24, 2008 column by Wall Street Journal reporter Patrick Barta:
“Without biofuels, which can be refined to produce fuels like the ones made from petroleum, oil prices would be even higher. Merrill Lynch commodity strategist Francisco Blanch says that oil and gasoline prices would be about 15% higher if biofuel producers weren’t increasing their output.”
What to make of this? Some preliminary thoughts.
(1) If Blanch’s analysis is correct, then proponents of the ethanol mandate, the 51-cent per gallon blenders tax credit, the 54-cent per gallon tariff, and other forms of policy privilege can no longer claim that ethanol “displaces” petroleum in the nation’s fuel supply. Rather, ethanol adds to the total stock of motor fuel. It is by increasing total liquid fuel supply relative to global demand that ethanol, in Blanch’s analysis, reduces crude oil and gasoline prices.
If correct, this is also an argument for opening the Alaska National Wildlife Refuge (ANWR) and the Outer Continental Shelves to oil production. Increased oil production should also increase supply relative to demand, lowering oil and gasoline prices.
(2) Blanch’s estimate, as far as I can determine, is not part of a formal or published study. It may merely be one analyst’s back-of-the-envelope. I find it troubling that RFA and others are making political hay out of an estimate based on assumptions, methods, and data that the RFA has not shared with the public, may not have evaluated, and may not even be privy to.
(3) The WSJ article says that global oil demand rose by 900,000 barrels per day (bpd) last year, and biofuel production rose by 300,000 bpd. We may surmise, therefore, that Blanch, assuming a particular elasticity of demand, estimated what would happen if biofuel production had not increased.
That is a reasonable thought experiment, but it tacitly assumes an “other things being equal” universe. Yes, if demand grows by 900,000 bpd and biofuels don’t grow by 300,000 bpd, then – other things being equal – the price impact might be exactly as Blanch estimates. But usually other things are not equal.
For example, the same WSJ article says that OPEC’s output “declined by about 400,000 barrels per day, according to the IEA [International Energy Agency].” How do we know that if biofuel production had been lower, OPEC output would not have been higher? If OPEC is truly the cunning cartel some commentators claim it is, then OPEC adjusts its production decisions in light of what other actors, including biofuel makers, plan to do. If OPEC’s 400,000 bpd cutback was a strategic decision, designed to prop up oil prices despite planned increases in other liquid fuels, then it wiped out any price reduction from the lesser, 300,000 bpd increase in biofuels.
For years, environmentalists have opposed opening ANWR to oil production on the grounds that its output would be just “a drop in the bucket,” the price-reducing effects of which OPEC could easily negate just by cutting back production. The same critique applies with equal merit (or the lack thereof) to ethanol.
(4) Blanch’s 15% estimate is questionable in light of recent changes in oil prices. He estimated in late March that without the increase in biofuels, oil would be $115 a barrel instead of $102. However, some six weeks later, oil hit $120 a barrel. Between those dates there was no drop in biofuel production. So it is not obvious that, in March, biofuels were responsible for the price of oil being $102 instead of $115.
(5) As you’d expect, RFA ignores the many ways in which ethanol increases the price of gasoline. These include the increased costs to store and ship ethanol, the increased cost to refine gasoline mixed with ethanol to counteract ethanol’s volatility and the associated hydrocarbon emissions, and the fuel economy penalty resulting from the fact that ethanol has one-third less energy content by volume than gasoline. To what extent Blanch’s estimate takes these factors into account is unknown at this point.
In closing, let me make clear that I mean no criticism of Blanch. Making estimates is what economists do. But I am troubled by the facile conclusions that the RFA and others are drawing from his estimate. They may have no idea what assumptions it is based on. They very likely have never considered whether the estimate takes into account potential strategic behavior by OPEC, or whether it is reasonable to give ethanol credit for lowering oil by $13 a barrel in March when oil prices were $18 a barrel higher in May.
GI nuisance from WW2 might be useful for cellulose based ethanol
New Scientist recently mentioned a really cool method for cellulose based ethanol in their daily 60-second science podcast. During the second world war, our GI’s had a problem with a cloth eating fungus that ate through tents and shirts.
It sounds like something out of a bad science fiction novel. During World War II, a fungus called Tricoderma reesei ate its way through US military uniforms and tents in the South Pacific. It chewed up the cloth and used special enzymes to convert the indigestible cellulose into simple sugars. Now that infamous fungus is getting some good publicity. It looks like it might hold a key to improving the production of biofuels.
Scientists from the Los Alamos National Laboratory published a paper on the fungus’s genetic sequence in this week’s Nature Biotechnology. The organism uses a surprisingly small number of genes to produce its cellulose-munching enzymes. Scientists say this means its production is extremely efficient. They hope to capitalize on the genetic information to find more efficient and cheaper ways to break down cellulose for ethanol in biofuel production. That cellulose could come from a native plant like switchgrass, or even from municipal waste. And fuel from waste, say scientists, is a more carbon-neutral way to power our cars. Which might make veterans forgive the fungus that ate their shirts.
—Cynthia Graber
Want Medical Care in Britain? Call the Papers!
Great Britain’s vaunted National Health Service denied a 61-year-old woman a heart operation because she was too old. Can’t waste the money!
But then the media got involved. Reports the Daily Mail:
However late yesterday, following media interest in Mrs Simpson’s plight, the PCT backed down and agreed to fund her treatment.
Medical director Dr David Geddes apologised to Mrs Simpson for the “distress” caused by the delay.
He said: “We have reviewed the case in the light of the additional clinical information and national guidance and, as Mrs Simpson fits the clinical criteria, we have agreed funding for her treatment.”
“All decisions are taken on individual clinical needs; we do not discriminate on the grounds of age.
“Our procedures exist to ensure fair decision-making, based on clinical evidence, for all our patients.”
Of course. Just an innocent mistake.
Remind me again why we should nationalize health care in America …
“Right-to-Know or Right-to-Confuse?
Andrew Grossman of the Heritage Foundation recently released an important paper on a Senate bill to create what some might call a product blacklist of allegedly unsafe products. Currently, Consumer Product Safety Commission (CPSC) reports on product recalls based on some level of validated data. This new legislation would mandate that the CPSC develop and maintain what promises to become a sloppy, inaccurate, and confusing list of complaints about products. Essentially, anyone could add to the list— including product competitors—products they don’t like for whatever reason in order to dub them unsafe. Environmental activists, who love to hype phantom risks, would have a heyday with such a program. Because the database would be government-sponsored, people would assume it contained weightier, scientifically validated information.
This case highlights the problem with so-called right-to-know laws that claim to educate people about risks. These laws don’t really perform that function too well. They more often are misleading and confusing. This proposed CPSC database, as Grossman so aptly demonstrates, would be among the most unreliable sources of information.
I disagree with Grossman on only one point. He suggests that a House bill to “study” the possibility of a database offers an acceptable compromise on the issue. However, once a government agency is given money to study the possibility of increasing its own budget, we can be pretty sure what it will conclude. In any case, this unscientific and sloppy database is clearly a waste of money, so why spend taxpayer dollars to study it?
Farm Bill veto would be richly deserved
Right after House-Senate conferees announced that they had reached agreement on a new farm bill yesterday, the U.S. Secretary of Agriculture said that President Bush would veto it because it didn’t reform wasteful farm programs, continued to provide subsidies to rich farmers, and still used some budget machinations to hide the costs.
Indeed, the boondoggle bill deserves a White House rejection for its almost $300 billion of farm programs that will be paid for by taxpayers and consumers. Farm bills, however, no matter how wasteful, have a way of surviving, and this legislation may be no exception, since it’s a case study of bipartisanship gone bad.
Besides the sugar provisions we’ve written about here and here, the biofuels programs’ grants and loan guarantees, plus moneys for R&D and “energy efficiency” projects, together with the extension of the tariff on imported ethanol, will continue to exacerbate the food vs. fuel program.
CEI Encounter With Sopranos “Tony” in DC
In today’s fluff news, CEI Warren Brookes journalism fellow Lene Johansen got a nice mention in the Washington Post (Amy Argetsinger’s Reliable Source) and DC Examiner (Patrick Gavin’s Yeas and Nays). The dynamic writer from Norway met the chief Sopranos mobster at Washington’s famous Hay-Adams Hotel on Wednesday night, when a small group of free market warriors gathered to imbibe a few posh cocktails. Anyhow, check out the write up + picture of Lene that appears in both papers.
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