The odd language of economists

(written by lawrence krubner, however indented passages are often quotes). You can contact lawrence at: lawrence@krubner.com

Obviously I support the professional jargon that each profession needs to be successful. Computer programmers have a tendency to engage in games of “If we take this to its logical extreme…”. Economists engage in “Assume a can opener…” and “Let’s pretend only individuals exist”. As thought experiments, these are fine.

I do have a big problem when people switch modes and try to make their thought experiments political. The economist who starts with “Assume a world with homogenous preferences…” and ends with “…therefore we should abolish all restrictions on trade” is an intellectual fraud, since they are attempting to take a toy model of the world and sell it as if it is the real world.

But the by-products of these thought experiments can certainly be interesting. This bit by Branko Milanovic is fantastic:

So, how best to achieve such a decrease in inequality between people? Economic theory, common sense and simulation exercises clearly show that it can be best done by allowing free movement of people. Such a policy would increase global income (as any free movement of factors of production in principle should), reduce global poverty and global inequality. It is immaterial, from a global perspective, that it might slower between-country convergence (as some recent results for EU indicate) because countries are, as we have just seen, not the relevant entities in global economics: the relevant entities are individuals and their welfare levels. If people’s incomes are more equal, it is wholly immaterial if the gap between the average incomes in A and B increases. To see this point, think in the familiar terms of the nation-state: no one in his or her right mind would argue that people from the Appalachian in the US should not be allowed to move to California because the average income in the Appalachia might go down. In fact, both the average income in California and in Appalachia might go down, and both inequalities in the Appalachia and California might go up, and yet the overall US income would rise and US inequality would be less.

The argument is identical for the world as a whole: a high-skilled Nigerian who moves to the United States might lower the mean income of Nigeria (and might also lower the mean income of the US), and might in addition cause both inequalities to go up, and yet the global GDP would be greater and global inequality would be less. In short, the world would be a better place. The objections to migration, namely that it might reduce the average income in recipient countries, raised by Paul Collier in his book “Exodus” are immaterial because the real subject of our analysis is not the nation-state but the individual.

Thus far the argument seems to me entirely incontestable. But then things get a bit messier. Pushing this logic further, and using the results of the Gallup poll that show the percentage of people who desire to move out of their countries, we find that in the case of unimpeded global migration some countries could lose up to 90 percent of their populations. They may cease to exist: everybody but a few thousand people might move out. Even the few who might at first remain, could soon find their lives there intolerable, not least because providing public goods for a very small population may be exceedingly expensive.

So, what?—it could be asked. If Chad, Liberia and Mauritania cease to exist because everybody wants to move to Italy and France, why should one be concerned: people have freely chosen to be better off in Italy and France, and that’s all there is to that. But then, it could be asked, would not disappearance of countries also mean disappearance of distinct cultures, languages and religions? Yes, but if people do not care about these cultures, languages and religions, why should they be maintained?

Destroying the variety of human traditions is not costless, and I can see that one might believe that maintaining variety of languages and cultures is not less important that maintaining variety of the flora and fauna in the world, but I wonder who needs to bear the cost of that. Should people in Mali be forced to live in Mali because somebody in London thinks that some variety of human existence would be lost if they all came to England? I am not wholly insensitive to this argument, but I think that it would be more honest to say openly that the cost of maintaining this “worldwide heritage” is borne not by those who defend it in theory but by those in Mali who are not allowed to move out.

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