IMMIGRATION COST-BENEFIT, THEN AND NOW

                           Julian L. Simon and Rita James Simon


             Immigration is worrying the public again.  Sanctions against illegal

        immigrants passed through Congress in 1986.  Now legislation to "reform"

        legal immigration has passed in the Senate and is coming up for debate in

        the House.  The key element is a "cap" to restrict total immigration,

        though special-interest issues distract attention from the cap.

             The Founding Fathers were sure of the value of immigration. One of the

        Declaration of Independence's complaints against King George III was that

        he hindered the peopling of the colonies from abroad.


             He has endeavored to prevent the population of these States; for that
             purpose obstructing the Laws for Naturalization of foreigners;
             refusing to pass others to encourage their migration better, and
             raising the conditions of new appropriation of Lands.

        And James Madison wrote: "[T]hat part of America which has encouraged the

        foreigner most has advanced the most rapidly in population, agriculture and

        the arts."  Yet public opinion has always opposed immigration.

             The passions, arguments, and public opinion are the same now as

        always, eerily identical throughout our history.  In the first half of the

        19th century, the Irish immigrants in New York and Boston were seen as the

        unassimilable possessors of all bad qualities.  One newspaper wrote:

        "America has become the sewer into which the pollutions of European jails

        are emptied."  And another:  "Have we not a right to protect ourselves

        against the ravenous dregs of anarchy and crime, the tainted swarms of

        pauperism and vice Europe shakes on our shores from her diseased robes?"

             The 1884 platform of the Democratic party stated its opposition to the

        "importation of foreign labor or the admission of servile races unfitted by

        habit, training, religion or kindred for absorption into the great body of

        our people or for the citizenship which our laws confer."

             [Out?]  [Francis Walker, Commissioner General of the Immigration

        Service, and first president of the American Economic Association, wrote in

        June 1896:

             The question today is ... protecting the American rate of wages, the
             American standard of living, and the quality of American citizenship
             from degradation through the tumultuous access of vast throngs of
             ignorant and brutalized peasantry from the countries of Eastern and
             Southern Europe.

        He cautioned:

             The entrance into our political, social and industrial life of such
             vast masses of peasantry, degraded below our utmost conceptions, is a
             matter which no intelligent patriot can look upon without the gravest
             apprehension and alarm.]

             Right through the 1930's, these views were expressed about immigrants

        in national media such as The Saturday Evening Post.  And polls since the

        1930's consistently show that a majority of Americans are against

        immigration.  The attitude in each generation may be characterized as:  The

        immigrants who came in the past were good folk.  But the ones coming now

        are scum.

             The economics of immigration are better understood now than before,

        however.  Emma Lazarus's poem at the base of the Statue of Liberty did harm

        by fostering a false impression about the economic nature of immigrants.

        She wrote about "huddled masses" and "wretched refuse."  But immigrants

        generally are not tired, poor, "huddled masses;" they are not "wretched

        refuse."  Rather, they are usually young and vigorous adults, well-educated

        and highly skilled, with excellent earnings potential.

             Even when Ms. Lazarus wrote her heartwarming poem, immigrants compared favorably with the native population

        in occupational skill.  P.J. Hil interest rate would change at all, let alone magically have the change of the

        required size.  So again the monetized K/Y ratio remains the same while the physical relationship changes.

             For labor's share the argument is similar to that for the

        interest rate.  Assume for now that labor's share is increasing,

        by say 5% or l5%.  But the largest possible increase is from,

        say, 66% to lOO% of all income.  Even if this change were induced

        by some change in physical capital efficiency (physical output

        per dollar of capital cost, in a case where labor remains the

        same), it could not offset some of the really big changes in

        capital efficiency that we see (e.g., in computers).  And there

        is no reason to see labor's share change as induced, anyway.  So

        the constancy of labor's share is not crucial to the argument,

        but rather is necessary only to argue it with neat and simple

        algebra.


                 IV.  THE REAL COURSE OF THE PHYSICAL K/Y RATIO


             Now that we have seen that there is no empirical reason in

        the observed monetary K/Y ratios to believe that the physical K/Y

        ratio is constant, we are free to theorize about the course of

        the physical K/Y ratio as economic development proceeds.  This

        section is entirely dispensable; one might judge that it were

        better omitted from the paper.  But there may be some others who

        will think that this discussion of physical K/Y ratios is

        illuminating rather than obfuscating, and therefore it is

        included.  I repeat that one may choose not to engage in this

        speculation at all, a position that is perfectly consistent with

        one implication of this paper, that is, that a growth model may

        imply a decreasing K/Y ratio; one can simply ignore the K/Y ratio

        completely.  But it seems to me that such speculation is at least

        interesting even if it has no implication, because it illuminates

        the process of economic development.

             A falling physical capital-output ratio would seem an

        obvious technological fact.  But to show this rigorously we must

        proceed in step-by-step fashion, making only those comparisons

        that can legitimately be made.  This means that we cannot compare

        entire capital stocks, largely because new consumer products are

        introduced with the passage of time.

             Any useful comparisons must be between units of capital that

        are similar in at least some fashion.  I propose that two machines

        be considered similar capital for the purposes of the discussion

        here if they produce identical output.  (There can be no

        reasonable way of objectively comparing various kinds of capital

        making different products.  That is at the root of my argument and

        supports it:  If there is no hope of creating an objective measure

        of such capital, it is not meaningful to make statements about the

        physical relationship of capital to an equally-impossible-to-

        measure-objectively physical measure of aggregate output.)

             Let us begin with identical tools used to make identical

        products at different moments of history.  Consider the important

        example of farmland.  A given acre of Pennsylvania land produces

        --even after other physical inputs are allowed for--a much larger

        amount of corn now than in earlier years.  And if a Pennsylvania-

        Dutch Amish farmer chooses to work with horses, the horses

        together with the Pennsylvania land produce more output per acre

        and per horse (with equal or less man hours) than in previous

        years.  And there is no reason not to attribute this increased

        output-capital ratio to labor-augmenting technological progress--

        better calendars, better knowledge of hybrid seeds, information

        about optimal planting depths, improvements in motive power, and

        so on.

             Or take the homely example of the claw hammer, which has

        changed little in form for many years; the amount of fastening

        that a carpenter does in a day with a claw hammer has risen

        considerably over the years because of improvements in nails,

        materials to be fastened, materials transportation, and so on.

             Still other examples:  With the same endowment of human legs

        we get faster miles run, higher heights jumped, and longer

        distances leaped, due to better knowledge of track techniques and

        training methods (but hopefully not because of new drugs).  With

        the same ox or baby we now get more lifetime days of work due to

        better knowledge of nutrition and disease prevention.  We build

        the same house with less stone, due to advanced civil engineering

        knowledge of stresses.

            The same must be true of almost every tool that we now use,

        unchanged from earlier years, to produce the same output.  And for

        most of these tools additional uses have been discovered over the

        years, which can only be interpreted as a reduction in the

        capital-output ratio.

             If one were to consider tools for the same purpose that have

        im- proved over the years--diesel locomotives compared to steam

        locomotives or horses--the comparison is more strained, yet it

        suggests even more strongly an increased technological output-

        capital ratio.  If a farmer replaces a team of horses with a

        tractor that uses the same number of man-hours, then implicit in

        the replacement decision is that the new capital dominates the

        old, in the Pareto sense of having a higher output/capital ratio,

        and for this farmer the price of output may be taken as constant

        with respect to this decision.  Unless the tractor purpose also

        causes a decrease in man-hours (which raises the issue of

        relative prices) the shift to the tractor may be seen immediately

        as a reduction in the capital-output ratio.

             For much of the capital stock the choice does involve relative cost

        valuations of labor and capital, however, and much other capital produces

        goods and services that were not produced in the past.  Hence pairwise

        technological compal analyzed immigrants' wages and occupations in censuses

        and other data sources from 1840 to 1920, with special attention to the

        1890's, and concluded that "immigrants, instead of being an underpaid,

        exploited group, generally held an economic position that compared very

        favorably to that of the native born members of the society." And Bernard

        Bailyn's research on the colonial-period Registry of Emigrants from Great

        Britain reveals that immigrants had excellent economic characteristics,

        being mainly young "useful artisans" and farmers.

             Today, too, the economic "quality" of immigrants is high compared to

        that of natives.  Immigrants are mainly in their twenties and thirties, the

        ages of greatest physical and mental vigor, when people are flexible about

        job location and therefore help the economy adjust to changing conditions.

        As of the late 1970's, while 32.5 per cent of the U.S. population belongs

        to the 20-39 age bracket, 46.3 per cent of the immigrant cohort belongs to

        that prime bracket.  And among immigrants who are admitted on the basis of

        their occupations rather than their family connections, fully 61.6 per cent

        are age 20-39.

             In addition to being young and vigorous, the immigrants possess higher

        education and professional capabilities in greater proportions than does

        the native labor force.  In 1980, some 16 percent of employed natives were

        professional and technical workers.  The corresponding figure for recent

        immigrants was 26 percent.  Immigrants surely are not poor with respect to

        their earning potential.




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