Showing posts with label Economics. Show all posts
Showing posts with label Economics. Show all posts

November 2, 2007

Greenspan's bubble and hidden inequality

There is always a lot of arguing back and forth over income inequality, but expenditure inequality is little discussed, even though it's just the flip side of the standard of living inequality coin. The recent housing bubble created much inequality of lifestyle, much of it almost random in occurrence. Consider two couples who live side by side in one of the parts of the country with much housing inflation in this decade. The two 38 year olds at 106 Elm St. bought their house in 2000. Right now they are touring Tuscany. The two 32 year olds at 112 Elm St. bought the house next door in 2006. They are presently touring their local Aldi's supermarket looking for deals on canned beans so they they can keep paying their mortgage.

When the first family thinks of their good fortune, they are apt to chalk it up to their brilliant nose for the market. But they didn't exactly buy Wal-Mart stock in 1972. They just happened to reach the point in their lives when middle class American couples buy a house when it happened to be when all the smart money was going into Cisco Systems, not something boring like houses. So, houses were reasonably affordable. Their neighbors, those morons, reached that point six years later, when everybody knew that houses always rose in price so even if you overpaid you could always refinance.

It's interesting that their is almost no political outcry over this form of inequality. You might think that its randomness would make it seem more unfair, but randomness saps political salience. I noticed this years ago with diseases when I had non-Hodgkins lymphoma. An illness that hits a coherent group of people, such as AIDS, will get far more political attention and federal research money than one that hits people almost completely at random, such as lymphoma.

Similarly, while we hear constantly about past race discrimination, we almost never hear about past discrimination against lefthanders (e.g., Ronald Reagan, like many natural lefthanders of his generation, was forced to write right-handed. Nor do we ever hear about the heroic activists who changed social attitudes toward lefthanders. Why not? Lefties just are not a coherent group of people.

My published articles are archived at iSteve.com -- Steve Sailer

October 31, 2007

Samuelson on "Farewell to Alms"

Robert J. Samuelson writes about Gregory Clark's "A Farewell to Alms" in the Washington Post. (My 2 part review of the book is here and here.)

Personally, I'm fairly optimistic about Third World poverty, in the absolute sense if not the relative sense. For example, telephones are hugely useful for getting things done, and the good news is that cell phone systems are much less dependent on having a functional culture than the old land line systems. The old systems required big bureaucracies that were reasonably honest and efficient, which many countries, including some Western European ones, couldn't reliably manage. But you can have working cell phone networks in places as anarchic as 1990s Somalia.

My guess would be that technology will continue to evolve toward plug and play solutions that will work even in dysfunctional cultures like Nigeria. The U.S. burned up a lot of brainpower in the 1980s and 1990s figuring out how to use, first, PCs and then the Internet. (For example, I worked mostly on introducing PCs to my marketing research company from the fall of 1984 to the summer of 1988, and on introducing the Internet to the company from late 1994 to the end of 1996.) The whole world has benefited and will continue to benefit from these investments. Granted, the Nigerians have latched on to the Internet most famously for the purposes of fraud, so maybe that's not the best example ...

And then there's the Secret Solution to African Poverty, the one that nobody talks about: get the men to work as hard as the women. By one estimate I've seen, from an African feminist organization, women do 80% of the work in sub-Saharan Africa. That's probably biased, so let's say it's only 70%. So, if the men started working as hard as the women, and were on average as productive, that would boost output by 40%.

My published articles are archived at iSteve.com -- Steve Sailer

October 28, 2007

Blackwater

Leaving aside all the usual moral issues for the moment, as a taxpayer, I want to complain about this 21st Century innovation of using ex-U.S. military servicemen as highly paid mercenaries alongside much lower paid servicemen.

The government has forfeited its monopsonistic (i.e. sole employer) buying power over government-funded jobs killing people and breaking things, so the taxpayers are having to shell out much higher pay, either to Blackwater mercenaries or in six figure re-enlistment bonuses to U.S. military servicemen to keep them from going over to Blackwater. From the taxpayers' point of view, it's a ridiculous situation.

This is not a unique case restricted to the military. Much of the demand for privatization of traditionally governmental jobs comes from government employees themselves who want a competitive job market for their skills. For example, the folks who run state lotteries have been working for years to get the state lottery business privatized so they can transfer from a civil service job to a "private"-sector job ... running a state-licensed monopoly. It's the best of both worlds!

As a taxpayer, I'm tired of paying to train somebody in a government job, then, when they are finally productive, having them jump to an privatized for-profit job that costs me two or three times as much.

I want our monopsony back!

(I've also been wondering, how did the Blackwater company decide to name themselves after a particularly lethal complication of malaria? Were "Black Plague" and "Black Death" already trademarked by somebody else?)

By the way, mercenaries are not some brilliant 21st Century innovation that nobody ever thought of before. Renaissance Italy, for example, used lots of mercenaries and how'd that work out for them? There are good reasons why advanced societies got rid of their reliance upon mercenaries. Same with Max Boot's brainstorm of using lots of illegal aliens in our armies. These are old, old ideas. Machiavelli discussed the downsides of mercenaries and foreign fighters in Chapters 12 and 13 of The Prince.

The mercenary captains are either capable men or they are not; if they are, you cannot trust them, because they always aspire to their own greatness, either by oppressing you, who are their master, or others contrary to your intentions; but if the captain is not skilful, you are ruined in the usual way.

And if it be urged that whoever is armed will act in the same way, whether mercenary or not, I reply that when arms have to be resorted to, either by a prince or a republic, then the prince ought to go in person and perform the duty of captain; the republic has to send its citizens, and when one is sent who does not turn out satisfactorily, it ought to recall him, and when one is worthy, to hold him by the laws so that he does not leave the command. And experience has shown princes and republics, single-handed, making the greatest progress, and mercenaries doing nothing except damage; and it is more difficult to bring a republic, armed with its own arms, under the sway of one of its citizens than it is to bring one armed with foreign arms. Rome and Sparta stood for many ages armed and free. The Switzers are completely armed and quite free.

I conclude, therefore, that no principality is secure without having its own forces; on the contrary, it is entirely dependent on good fortune, not having the valour which in adversity would defend it. And it has always been the opinion and judgment of wise men that nothing can be so uncertain or unstable as fame or power not founded on its own strength.

My published articles are archived at iSteve.com -- Steve Sailer

October 18, 2007

Surprise, surprise

Back in August, I pointed out that subprime crisis was in part the result of years of government efforts to prevent "discrimination" against minorities in the mortgage market. Now, the NYT reports -- unwittingly, of course -- that the current supbrime mortgage crisis is in part an outgrowth of the long government war on redlining:

Study Finds Disparities in Mortgages by Race

By MANNY FERNANDEZ

Home buyers in predominantly black and Hispanic neighborhoods in New York City were more likely to get their mortgages last year from a subprime lender than home buyers in white neighborhoods with similar income levels, according to a new analysis of home loan data by researchers at New York University.

The analysis, by N.Y.U.’s Furman Center for Real Estate and Urban Policy, illustrates stark racial differences between the New York City neighborhoods where subprime mortgages — which can come with higher interest rates, fees and penalties — were common and those where they were rare. The 10 neighborhoods with the highest rates of mortgages from subprime lenders had black and Hispanic majorities, and the 10 areas with the lowest rates were mainly non-Hispanic white.

The analysis showed that even when median income levels were comparable, home buyers in minority neighborhoods were more likely to get a loan from a subprime lender.

In Jamaica, Queens, for example, where the majority is black and the median household income was $45,000 in 2005, 46 percent of the mortgages were issued by lenders who specialize in subprime loans, the second highest rate in the city. In Bay Ridge, Brooklyn, which had a median income of $50,000 and is mostly white, the rate was among the lowest in the city, with 3.6 percent of home loans coming from subprime lenders.

The analysis provides only a limited picture of subprime borrowing in New York City. The data does not include details on borrowers’ assets, down payments or debt loads, all key factors in mortgage lending. And comparing neighborhoods is inexact; the typical borrower in one may differ from a typical borrower in another.

Jay Brinkmann, an economist with the Mortgage Bankers Association, said there was not enough information in the Furman Center analysis and other studies on the issue to draw conclusions about whether subprime lenders were discriminating against minority home buyers. One of the crucial missing pieces is the credit histories of individual borrowers, he said.

But the Furman Center study, a summary of which is being released today, still raises questions about the role of race in lending practices. A separate analysis of mortgage data by The New York Times shows that even at higher income levels, black borrowers in New York City were far more likely than white borrowers with similar incomes and mortgage amounts to receive a subprime loan.

“It’s almost as if subprime lenders put a circle around neighborhoods of color and say, ‘This is where we're going to do our thing,’” said Robert Stroup, a lawyer and the director of the economic justice program at the NAACP Legal Defense and Educational Fund Inc.

The New York State Division of Human Rights is investigating whether subprime lenders have been engaging in discriminatory practices by singling out minority communities. ...

Even so, housing and civil rights advocates said the findings highlight lending patterns that have long troubled them.

They say minority communities whose financing needs were starved decades ago because of redlining — banks’ refusal to offer loans or other services in minority areas — are now singled out for high-cost, high-risk mortgages in a kind of reverse redlining.

In other words, in the past, poor credit risks in minority neighborhoods had a hard time getting mortgages at the standard rate. So, now, after decades of government lawsuits and programs to direct more lending to minorities, the complaint is that the poor credit risks in minority neighborhoods are getting mortgages, they just have to pay more for them. Obviously, the only solution is for the rest of us to subsidize the mortgages of minorities. After all, how much could it cost? A trillion or two?

My published articles are archived at iSteve.com -- Steve Sailer

October 14, 2007

Let's Play: "Spot the Fallacy"

From the Washington Post:

When Immigration Goes Up, Prices Go Down

So, that's why it's so cheap to live in California!

My published articles are archived at iSteve.com -- Steve Sailer

Conclusion of my review of "Farewell to Alms" by Gregory Clark

Last week, VDARE.com ran the first portion of my review of Gregory Clark's "Brief Economic History of the World," in which I considered Clark's initial topic: why did the Industrial Revolution start in England. Today, I consider the second, and more important subject of his book: why has the Industrial Revolution spread to some countries but not to others?

A Farewell To Alms Part II: Why Have Some Countries Profited From The Industrial Revolution?

By Steve Sailer

[See also last week's A Farewell To Alms: Why Did The Industrial Revolution Happen Where It Did?]

In A Farewell to Alms, economic historian Gregory Clark asks: Why has the Industrial Revolution of the last two centuries caused a Great Divergence, making some nations so rich, while others have stayed so poor.

This is a social scientist's question, not a historian's, because there are enough separate countries in the world that general patterns can be perceived that can be reasonably well explained by a limited number of factors.

There are a lot of data to work with, folks.

A quick survey of the globe shows, for example, that countries tend to be poorer when they are ruled by crazed ideologies (e.g., North Korea vs. South Korea) or are far inland (e.g., Paraguay vs. Uruguay).

But another factor is so obvious that we aren't supposed to mention it.

If you rank the 156 countries with populations of one million or more in order of per capita GDP, the top 23 are made up of one Arab oil country (the United Arab Emirates), four Northeast Asian countries—and 18 countries with populations primarily of European origin.

Number 24 is Israel, where Europeans make up a little less than half the population, but dominate the economy. Not until 33rd place do we find a non-oil country without a predominant European or Northeast Asian population: Trinidad and Tobago, which is 40 percent South Asian and 38 percent black.

The poorest European country is Serbia, which is still ahead of 66 others.

As of 2006, the 43 countries with majority European populations average $22,000 each, the eight Northeast Asian countries $21,000, and the 105 other countries $5,225.

Economists, however, have intellectually disarmed themselves from tackling this second question. Clark complains:

"Although the disparities in performance across countries remained unchanged, the ‘labor quality’ explanation disappeared from the economics literature after WWII. … Unskilled labor is assumed to be of the same quality everywhere."

[MORE]

My published articles are archived at iSteve.com -- Steve Sailer

October 9, 2007

"A Farewell to Alms:" My VDARE.com review, Part 1

Here's my new VDARE.com book review. The second part will run next Sunday night.

A Farewell to Alms: Why Did the Industrial Revolution Happen Where it Did?

By Steve Sailer

An ambitious and provocative new book by University of California at Davis economic historian Gregory Clark, A Farewell to Alms: A Brief Economic History of the World, attempts to explain two huge questions:

Why did one part of the human race finally break out of the "Malthusian trap"—in which growth in per capita income is washed away by subsequent population growth—namely England, at the end of the 18th Century, through rapid and sustained technological advance?

And why did the prosperity made possible by the Industrial Revolution successfully spread to some countries but not to others?

In the process, Clark offers a stunning rebuke to economists:

"God clearly created the laws of the economic world in order to have a little fun at economists' expense. In other areas of inquiry, such as the physical sciences, there has been a steady accumulation of knowledge over the past four hundred years. … In economics, however, we see instead that our ability to describe and predict the economic world reached a peak around 1800. In the years since the Industrial Revolution there has been a progressive and continuing disengagement of economic models from any ability to predict differences of income and wealth across time and across countries and regions."

In other words, economists were closer to understanding the wealth of nations in 1776 when Adam Smith wrote The Wealth of Nations than they are today.

The pioneering economic works of Smith and Thomas Malthus (1798) accurately described the world before the Industrial Revolution that was just getting underway then with the employment of the steam engine in cotton mills. By 1817, when David Ricardo was pessimistically propounding what later came to be known as "the Iron Law of Wages," England was moving in a new, liberating direction unexpected by economists.

In the modern world, a shortage of cheap labor turned out to be a blessing rather than a curse. The future belonged to countries with high wage, high quality work forces.

But the prestige of the economists and their Scroogeonomic emphasis on cheap labor was so great that Britain didn't even effectively outlaw the use of five-year-old boys as chimney sweeps until 1875.

Clark's book idiosyncratically combines the strengths and weaknesses of both economists and historians.

Although economists were long the butt of angry jokes, the improvement of the economy after the early 1980s has raised their prestige and self-confidence. As shown by the three million copies sold of Steven Levitt's Freakonomics, economists are the hot academics of the moment, the glamour professors, just as cultural anthropologists were back in Margaret Mead's heyday in the 1950s.

The strong point of economists is that they believe in "theory" in the same sense that hard scientists do—as a tool for simplifying our understanding of reality and for making more accurate predictions. (In contrast, professors of English literature use the word "theory" to mean the hateful mumbo-jumbo that they wield as a barrier to entry to their otherwise appealing profession—a barricade of bad writing that repels many of the huge number of people who love good writing and would otherwise want to be English professors.)

[More]

My published articles are archived at iSteve.com -- Steve Sailer

October 8, 2007

Q. How do you know it's Autumn?

A. When the media starts its annual round of credulous stories about how crops are going to rot in the fields because of not enough cheap illegal alien labor so we need a bigger Guest Peasant program to alleviate the looming shortage/crisis.

NorCal Farmers: 'We Don't Have Enough Workers'

Produce May Rot In Fields

Farmers in and around the Bay Area are starting to feel the pinch from tighter border security and visa requirements, NBC11's Daniel Garza reported Monday. Some farmers told Garza they expect some of their fields to remain unpicked. Some said they believe their fields will end up filled with rotting produce. The Bush administration has learned of the possible loss of millions of dollars for thousands of farmers throughout the country, and is attempting to loosen visa requirements for workers.

I took a comprehensive look at this genre of annual news story exactly one year ago today in VDARE.com during the Great Pear Crisis of 2006: "Pearanoia." As you have no doubt noticed, nobody in America has eaten a pear in over a year. Larry Ellison bought the last pear in the world at a Sotheby's auction in June and keeps it on display in a crystal vault at Oracle headquarters.

My published articles are archived at iSteve.com -- Steve Sailer

August 28, 2007

A job Americans just won't do!

It dawns on Matthew Yglesias that if border enforcement succeeded in driving up wages for the unskilled, some jobs wouldn't be economical to do anymore. But, he doesn't go far enough:

An early scene in "The Man Who Would Be King" takes place in the office of an English colonial administrator in India. To stay cool, he had a big fan over his head flapped by a servant via a string attached to the sitting servant's toe. That's pretty awesome! If wages weren't so damn high here in America, I could have my own Untouchable toe-fanning servant too, instead of having to use my boring, totally unawesome electric fan. I could impress all my friends. (Well, maybe not the friends I already have, but if I had enough servants, I could assign some of them to get me new friends who would be impressed.)

Think of all the other hundreds of millions of jobs that could be created in America if wages fell to 19th Century Indian levels!

Of course, I couldn't actually afford to pay my toe-fanning flunky the full cost of what it would take for him and his family to live in America, but I believe the externalities of my servant's cost of living should be borne by the public at large, not by me. Thus, my worker's kids should get free schooling, the whole family should get free health care at the emergency room, his tenement should get fire and police protection, he should drive without car insurance, etc. Why shouldn't I cost shift my conveniences on to everybody else?


My published articles are archived at iSteve.com -- Steve Sailer

August 12, 2007

A trillion here, a trillion there, pretty soon we're talking about real money

Now that the long predicted dubious mortgage crash has finally arrived, I keep remembering that going back to the early 1990s, the government has been twisting the arms of private lenders to get them to lend more mortgage money to minorities than the private firms believed was justified by colorblind principles of creditworthiness.

This history seems to have disappeared down the memory hole because it's all in the sacred cause of fighting discrimination (real or imagined), but I recall it distinctly from when I was a daily reader of the Wall Street Journal in the 1990s.


For example, there was a celebrated 1993 study by the Boston Fed showing that minorities' mortgage applications were rejected at a higher rate. (Peter Brimelow pointed out in Forbes that minorities did not have lower default rates, suggesting that lenders were behaving in a rationally colorblind manner, but that was not a popular view at the time.)

Have the chickens finally come home to roost?


I'm sure the private financial markets were quite capable of blowing up a big bubble by themselves in the eternal see-saw struggle between greed and fear, but this political pressure for lending to minorities with doubtful credit must have exacerbated the problem.
About half of all mortgages for blacks and Hispanics are subprime, versus about one-sixth for whites.

A reader has sent me some links to articles from 5 to 9 years ago to show me I'm not hallucinating about what I remember. The first are from early in this decade about Fannie Mae's big plans for boosting mortgages for minorities. Now, I don't pretend to understand what Fannie Mae is (but does anybody?). It's some kind of quasi-governmental publicly-traded for-profit thinga-ma-bob, but Fannie Mae's past pronouncements do make interesting reading at present.

Straightforward tax-and-spend programs were out of favor in the 1990s, but lean-on-lenders for the benefit of your political constituents is always in season.

From 2000:


Fannie Mae Bending Financial System to Create Homeowners, Says Raines

Yet home ownership is unevenly distributed in society, [Fannie Mae head Franklin] Raines said. He quoted the famous pronouncement by W.E.B. Du Bois, in The Souls of Black Folk in 1903, that the problem of the 20th century is the problem of the color line. Du Bois also observed that the size and arrangement of people's homes is an index of their condition.

"We have made great progress since then," Raines said, but "minorities have yet to achieve parity in home ownership in America."

Raines said 70 percent of white people own a home, but the figure is less than 50 percent for minorities, female headed households, and others, despite the current period of "unprecedented prosperity." Minorities, he said, are still often unserved and overcharged.

In the past 30 to 40 years, he said, various approaches have been tried to increase affordable housing for minority and lower income families.

In the early days of the movement, he said, there was a significant commitment of government funds. The state of Connecticut, for example, built and managed 8,000 units of affordable housing, including Stowe Village and Charter Oak Terrace in Hartford. But later, all over the country, government pulled back and eventually thousands of units of housing had to be torn down because they had become uninhabitable.

In the 1980s, public-private partnerships were seen as more effective.

Now, said Raines, more money is being invested in community development through private mechanisms, including Fannie Mae, which works through mainstream lenders to reach out to underserved communities.

During the 1990s, Fannie Mae pledged $1 trillion in capital over seven years to boost home ownership among underserved populations. Last spring, said Raines, the commitment was completed ahead of schedule, and Fannie Mae pledged a further $2 trillion to assist 18 million families during the next decade.


And from Jet in 2002:


Fannie Mae to invest $700 billion in minority housing -
Business Jet, Oct 28, 2002

Fannie Mae, the nation's largest source for financing home mortgages, plans to invest at least $700 billion through 2009 to provide financing to 4.6 million minority households.

News of the breakthrough came during the New Orleans conference of the National Bankers Association (NBA).

Franklin D. Raines, Fannie Mae's chairman and chief executive officer, told the audience that the NBA was uniquely focused on lending to underserved, minority and immigrant families.

"Through this agreement," said Raines, "we hope to extend the benefits of the housing finance system to more Americans in underserved communities and boost minority home ownership rates closer to the national rate of 60 percent."


From Insight on the News back in 1999:


Easy Credit Turning into Hard Times? -
Brief Article Insight on the News, Nov 8, 1999 by Patrice Hill

Analysts worry that banks are too quick to give credit where credit isn't due ... and will pay the price during the next recession.

The easy flow of credit during the 1990s has helped to fuel a nationwide housing boom and spending spree that has kept the economy humming. But analysts say banks have lowered their lending standards, particularly to tap into the fast-growing minority markets, and have been under strong political pressure to do so despite studies showing minorities are more likely to default than whites. The result of this largess may be soaring levels of bankruptcy and default during the next recession.

"We have created a tremendous amount of risk," says Cynthia Latta, economist with DRI/McGraw-Hill in Boston. "At some point, the economy is going to turn down. There will be large numbers of defaults that will trigger a lot of political heat."

Politicians have pushed for the lower standards out of a legitimate desire to spread today's prosperity to groups that previously were on the margin, says Latta. "Banks are under a great deal of pressure to lend in these communities," she says. "It is very political. But I still have reservations about whether you're really doing anyone a favor by letting them borrow 100 percent of the cost of a home. It makes it so easy for them to get in over their heads." If the economy turns sour and unemployment rises, minorities will be the first laid off -- paving the way for a wave of defaults.

Federal laws on fair lending and community reinvestment require bankers to reach out to minorities, notes David Lereah, chief economist with the Mortgage Bankers Association. The record rates of homeownership among minorities as well as the rest of the population shows that these reach-out programs are working.

Nevertheless, Lereah agrees that banks and the economy will pay a price in the next recession. "If the economy goes into a tailspin and experiences recession, then I do worry about some of the low down-payment loans," he says. "The borrowers don't have that much at stake, don't have that much equity in the homes. If they lose their jobs, they could walk away from the homes."

A recent study by Freddie Mac, the federally chartered Federal Home Loan Mortgage Corp. that buys mortgages from banks to resell to investors, documents the shaky financial standing of minorities. The study found that nearly half of black borrowers and a third of Hispanics have "bad" credit records -- that is, they have a record of delinquent loans or bankruptcy -- compared with a quarter of whites. Moreover, income does not explain the disparity, according to the study. Among people with incomes of $65,000 to $75,000, 34 percent of blacks have bad credit, compared with 20 percent of whites.


Apparently, the Fed pumped so much money into the system after 9/11 that, with stocks in disfavor after the Internet bubble burst, that the liquidity flooded into the home market, postponing the day of reckoning in housing until now.

Adversity.net
has collected some articles from 1999:


Mortgage Lenders to Step Up Pursuit of Minorities (10/13/99)
BOSTON, Oct. 13, 1999 (Reuters) - "The mortgage industry intends to pursue minorities with greater intensity as federal regulators turn up the heat to increase home ownership in underserved groups.

"'We need to push into these underserved markets as much as we can,' said David Glenn, president and chief operating officer of Freddie Mac. Glenn made his remarks at the annual convention of the U.S. Mortgage Banker Association of America (MBA) this week.

"Freddie Mac, like its sister agency Fannie Mae, is a government-chartered corporation that buys mortgages from banks and packages them into securities for investors.

"In September, Freddie Mac launched a new lending program, based on research done in collaboration with five black colleges, to bring more African-Americans into the market.

"The call for greater efforts to broaden minority home ownership comes at a time when interest rates are pinching mortgages. A record $1.5 trillion mortgages were granted in 1998 in a refinancing boom fueled by the lowest interest rates in nearly three decades.

"The federal government in the meantime has increased pressure on lenders to seek out minorities, as well as low-income groups and borrowers with poor credit histories.

"Fannie Mae recently reached an agreement with the U.S. Department of Housing and Urban Development to commit half its business to low-and moderate-income borrowers. That means half the mortgages bought by Fannie Mae would be from those income brackets."

Utah (Salt Lake City): Companies Help Minorities With Home Mortgages (05/01/99)
"Premier and M&T Mortgage in Midvale this week agreed to work with the U.S. Department of Housing and Urban Development (HUD) to make an even deeper commitment to helping minorities buy homes. Both companies already seek out low-income and minority customers, especially Latinos, through Spanish-speaking loan officers.



"But they also now have signed formal agreements with HUD to conduct second reviews when loans are declined and to help those who don't qualify address the factors that led to loan denials. "It basically requires lenders to go the extra mile," said Richard Bell, community representative at HUD in Salt Lake City. "It's sometimes hard to persuade them to agree to something like this."


"The agreements do not require lenders to change their underwriting practices. Each applicant still must have a satisfactory credit history, manageable debt load, be employed, and in most cases, have some type of down payment. About 20 Utah lenders have signed HUD agreements in the past two years, but Bell said Premier and M&T have perhaps taken the concept of marketing to minorities and helping them qualify for loans the furthest. (The Salt Lake Tribune, Sat., 05/01/99, by Lesley Mitchell)
[link http://www.sltrib.com/1999/may/05011999/business/101982.htm ]

Wisconsin (Milwaukee): Racial Lending Gap Here Still Too Wide, But There's Hope (04/11/99)
"Ironically, whites may have directly benefited from efforts to expand the number of minority people who receive home loans. After all, making the application process fairer could expand the pool of eligible whites as well as eligible minorities. Hence, such efforts may help explain why the rejection rate has not soared among whites here as it has across the nation." (Milwaukee Sentinel Journal 04/11/99)
[link http://www.jsonline.com/news/editorials/0411loans.asp ]



And nobody in the government seems to have learned a damn thing over the years. Here's an AP article from just a few weeks ago when the bad credit crisis was already severe:


Wednesday, July 25, 2007
Justice Dept. says it is investigating discrimination against minorities in home loans
By ALAN ZIBEL, AP Business Writer

WASHINGTON (AP) — The Justice Department is investigating several possible instances of discriminatory mortgage lending, and plans to open more probes soon, an agency attorney told lawmakers on Wednesday.

House members said at a subcommittee hearing that evidence of racial discrimination in the mortgage market is especially troubling given the surge in home-loan defaults that has showed signs of expanding beyond the market for borrowers with weak, or subprime, credit.

"There is no excuse, and no one should be at all willing to settle for a situation in which race of a borrower today makes so much difference for some people," Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, said.

Grace Chung Becker, a deputy assistant attorney general, said several Justice Department investigations into discriminatory mortgage lending are ongoing based on the agency's own leads and referrals from banking regulators.

"We expect to initiate additional investigations in the coming months," Becker said.

Since last fall, the Federal Reserve has made three referrals of cases to prosecutors, with the Federal Deposit Insurance Corp. making two, Becker said. Two cases have been closed without charges, she said.

A Fed study last year found that 55 percent of blacks and 45 percent of Hispanics received home loans with rates that exceeded Treasury securities by at least 3 percentage points, compared with 17 percent for whites.

Consumer groups say this data provides evidence of discrimination in the mortgage market, while the banking industry says it can be misleading because buyers' credit scores, the quality of the home, the size of the down payment, and other variables are not taken into account.

At the hearing, consumer groups said banking regulators have not been aggressive enough in going after lenders that discriminate against minority borrowers. Ginny Hamilton, executive director of the Fair Housing Center of Greater Boston said they have displayed "minimal and halfhearted efforts" to prevent discrimination.

Banking regulators defended their track record, and several said they have investigations of discriminatory practices under way.

Earlier this month, a report by the Washington-based National Community Reinvestment Coalition found that higher income does not protect blacks and Hispanics from receiving mortgage loans with above-market rates.

The report, which analyzed federal data on home loans. concluded that in 2005 blacks in 171 metropolitan areas were at least twice as likely as whites to receive expensive loans, and said the trend was more severe at higher income levels, rather than lower ones. Similar trends were apparent for Hispanics as well.

It's common for low-wage workers in the Washington, D.C. area to be are steered into taking out loans for homes that cost $300,000 or more, on which they quickly default, said Saul Solorzano, executive director of the Central American Resource Center of Washington.


My published articles are archived at iSteve.com -- Steve Sailer

July 31, 2007

The Delusions of Economists, Part Umpty-Ump Million

Arnold Kling notes an article from the Milken Review, where Giovanni Peri writes:


U.S.-born workers are climbing the educational ladder, acquiring interactive/analytic skills and progressively leaving the manual jobs that would put them in competition with immigrants. If the trend continues as expected, the day is not far off when virtually all manual labor will be performed by foreign-born labor. This implies large wage gains for native workers, since they will be able to specialize in language-intensive and interactive tasks that are typically far better paid.

While some people shudder at the prospect of a more stratified society with immigrants at the bottom, keep in mind that the biggest gainers by far in this situation are the immigrants themselves.


Right, our current immigration system is the perfect policy for Lake Wobegon, where all the children are above average. For the real America, where half the kids are below the median in book smarts, not so much ...


My published articles are archived at iSteve.com -- Steve Sailer

July 18, 2007

How economists think:

Tyler Cowen blogs:


IQ and the Wealth of Nations

How many more times will someone suggest this book in the comments section of this blog? I like this book and I think it offers a real contribution. Nonetheless I feel no need to suggest it in the comments sections of other peoples' blogs.

I do not treat this book as foundational because of personal experience. I've spent much time in one rural Mexican village, San Agustin Oapan, and spent much time chatting with the people there. They are extremely smart, have an excellent sense of humor, and are never boring. And that's in their second language, Spanish.

I'm also sure they if you gave them an IQ test, they would do miserably. In fact I can't think of any written test -- no matter how simple -- they could pass. They simply don't have experience with that kind of exercise.

When it comes to understanding the properties of different corn varieties, catching fish in the river, mending torn amate paper, sketching a landscape from memory, or gossiping about the neighbors, they are awesome.

Some of us like to think that intelligence is mostly one-dimensional, but at best this is true only within well-defined peer groups of broadly similar people. If you gave Juan Camilo a test on predicting rainfall he would crush me like a bug.

OK, maybe I hang out with a select group within the village. But still, there you have it. Terrible IQ scores (if they could even take the test), real smarts.

So why should I think this book is the key to understanding economic underdevelopment?


My published articles are archived at iSteve.com -- Steve Sailer

July 4, 2007

More from my review of Lott's "Freedomnomics"

Here's another excerpt from my review in the Washington Times of economist John R. Lott's Freedomnomics: Why the Free Market Works and Other Half-Baked Theories Don't.


Dr. Lott is an even more fecund generator of plausible explanations than is Dr. [Stephen D.] Levitt [author of the bestseller Freakonomics: A Rogue Economist Explores the Hidden Side of Everything]. For instance, he suggests in Freedomnomics:

- The big mark-up on restaurant drinks stems from customers tending to linger longer over beverages than food, tying up valuable tables.

- The introduction of secret ballots lowered voter turnout. Why? They reduced vote-buying and thus voting. Crooked political operators could no longer be sure they got the votes they paid for.

Dr. Lott offers so many fascinating theories that Freedomnomics' ideas-per-page ratio is more daunting than that of the frothy Freakonomics, which Dr. Levitt's writing partner, journalist Stephen J. Dubner, optimized to not tax tired travelers' oxygen-deprived brains at 35,000 feet.

Is each of the hundreds of ideas in Freedomnomics true? Dr. Lott offers 63 pages of notes, but a more convenient solution would be for authors to post their footnotes on the Web with links to supporting papers.

Like Dr. Levitt, Dr. Lott is more an ardently creative thinker than a dispassionately judicious one. They are both apt to fall in love with their novel ideas and overlook alternatives. Yet, ultimately, so what? Ichiro Suzuki, the great singles hitter of the Seattle Mariners, doesn't drive many runs home, but he gets rallies started. Similarly, while Dr. Lott and Dr. Levitt are better at provoking controversies than at magisterially resolving them, they play valuable roles.

Dr. Lott argues that Dr. Levitt and Mr. Dubner "portray America's free market as a cut-throat environment in which consumers are constantly swindled by so-called experts. Habitually attributing economic anomalies to some kind of scam, the pair don't seem to realize that market forces exist that punish dishonest behavior." This is somewhat overstated -- Freakonomics is too attention-deficit disordered to have much of a theme beyond promoting Dr. Levitt as a "rogue" genius. Nonetheless, Dr. Lott's chapter on how the market encourages good behavior by penalizing bad reputations is insightful.

Still, Freedomnomics raises a fascinating conundrum it doesn't answer. If the free market is so wonderful, how in the world did Freakonomics become the nonfiction publishing sensation of the decade?

Maybe the book market rewards truth-telling less than helping customers feel good about themselves? To paraphrase the famous quote by Adam Smith about butchers, bakers, and brewers with which Dr. Lott launches Freedomnomics, "It is not from the benevolence of the economist, the journalist, or the publisher that we expect our cheesy bestsellers, but from their regard to their own interest." [More]


My published articles are archived at iSteve.com -- Steve Sailer

July 3, 2007

My review of Freedomnomics by John R. Lott Jr.

I don't see a link yet, but Tuesday is supposed to be the day my book review comes out in the Washington Times. The last time I reviewed an economics book for a daily newspaper, my review of Tim Harford's The Undercover Economist appeared in the New York Post on December 25, 2005, so the Third of July is a big improvement in terms of being a high traffic day.

Here's the opening:

Harry Truman longed for a one-armed economist who couldn't tell him, "But, on the other hand …" As the economic mismanagement of the 1970s is forgotten and the profession's confidence soars, however, the opposite has emerged: the two-fisted economist. These scholarly brawlers self-assuredly venture far beyond their traditional topics.

Steven D. Levitt's 2005 pop economics bestseller Freakonomics: A Rogue Economist Explores the Hidden Side of Everything featured his views on the Ku Klux Klan (he's against it), real estate agents (they're kind of like the KKK), sumo wrestling (it's dishonest), and, most famously, the legalization of abortion in the 1970s (it reduced crime in the 1990s by, in effect, pre-emptively executing unwanted babies more likely to become criminals).

Freakonomics, which sold three million copies, included a half page of scandalmongering about rival economist John R. Lott Jr., author of More Guns, Less Crime, who had attacked Dr. Levitt's abortion-cut-crime theory. Dr. Lott responded by suing Dr. Levitt for defamation. Now, Dr. Lott has struck back more constructively with his endlessly thought-provoking Freedomnomics: Why the Free Market Works and Other Half-Baked Theories Don't (Regnery, pp. 275, $27.95).


My published articles are archived at iSteve.com -- Steve Sailer

June 24, 2007

Ted Kennedy's New Iron Law of Wages

An excerpt from my new VDARE.com column "The Axis of Amnesty’s Ideology of Cheap Labor:"

Senator Kennedy is echoing, oddly enough, the fatalistic conventional wisdom of Dickensian England—the doctrinaire assumption that cheap labor is essential, and that the inexorable grinding of the dismal laws of economic science determine wages as immutably as the orbit of Mercury is fixed by Newton's Law of Gravity.

The main difference: while Sen. Kennedy assumes the need for unskilled immigrant workers, the early Victorians were convinced of the necessity of uneducated child laborers.

We don't think of the British as being terribly ideological. But during the second quarter of the 19th Century, their justifiable national pride in developing economics for once overwhelmed the vaunted British common sense. A dogma based on a crude interpretation of the works of Malthus and Ricardo presumed that low wages were crucial to profits, much like the sophomoric economics of today's open borders crowd.

Back then, the ruling class didn't fulminate over plucking chickens but over sweeping chimneys.

Consider the fates of the little boys, from age four on up, who were widely employed by master chimney sweeps to clamber up inside long flues and knock down the soot, at horrific cost to their health. Paul Johnson writes in A History of the English People (p.285), "often they were forced up by the use of long pricks, and by applying wisps of flaming straw to their feet. They suffered from a variety of occupational diseases and many died from suffocation."

The ruling ideology of the age assumed that, as regrettable as this might be, the laws of economics required it.

After all, how else would chimneys ever get swept?

The first bill banning the employment of children under eight from chimney sweeping passed Parliament in 1788. But, like many immigration laws in America today, it was ignored. So was the 1834 act.

Then, the greatest reformer of the Victorian Era, Anthony Ashley Cooper, the seventh Earl of Shaftesbury, began his almost endless crusade to abolish child labor inside chimneys. Like William Wilberforce, the victor over the slave trade, Shaftesbury was a Tory, an evangelical Anglican, and a relentless parliamentarian.

In 1840, Shaftesbury carried a bill to regulate child chimney sweeps over “ resistance that can only be called fanatical", in Johnson's words.

It also was not enforced.

Three more of Shaftesbury's bills failed in Parliament in the 1850s. He succeeded in 1864, but the legislation proved ineffective "due to a general conspiracy of local authorities, magistrates, police, judges, juries, and the public to frustrate the law. Boys continued to die…" including a seven-year-old who suffocated in a flue in 1873.

Shaftesbury finally succeeded in passing effective legislation in 1875.

And, of course, that winter everyone in Britain froze to death due to clogged chimneys.

Oh, wait … sorry, that was in Bizarro Britain, where the reigning interpretations of economics actually applied. Rather like in Senator Kennedy's Abnormal America, where nobody will be able to afford to eat chicken without the Liberal Lion’s amnesty and guest worker programs.

In the real Britain, however, the master chimney sweeps quickly found other ways to clean chimneys. [More]


My published articles are archived at iSteve.com -- Steve Sailer

May 27, 2007

Do neoclassical free market economists comprise a mafia within academia?

Christopher Hayes writes in the Nation:

Mafia is probably a tad hyperbolic, but there is undoubtedly something of a code of omertà within the discipline. Just ask ... David Card. ... Card, a highly esteemed economist at the University of California, Berkeley, caught flak for his heresy not on trade but on the minimum wage. In 1994 he conducted a study to see whether an increase in the minimum wage in New Jersey had the negative effect on employment that basic neoclassical theory would predict. He found it didn't. In fact, his regression analysis showed that, controlling for other factors, New Jersey gained fast-food jobs after increasing its minimum wage, compared with Pennsylvania, which hadn't raised wages. The paper attracted a tremendous amount of attention and criticism, and Card himself largely abandoned working on the minimum wage. In a 2006 interview, he explained his decision to leave the topic behind this way: "I've subsequently stayed away from the minimum wage literature for a number of reasons. First, it cost me a lot of friends. People that I had known for many years, for instance, some of the ones I met at my first job at the University of Chicago, became very angry or disappointed. They thought that in publishing our work we were being traitors to the cause of economics as a whole."

Of course, Card's other famous study, the one of Miami in 1980-85 claiming that immigration doesn't lower wages, is wildly popular with many of the same free market economists and open borders pundits who hate the conclusion of his minimum wage study.

The problem with economics these days is not so much the various models as that economists believe that having models lets them get away without knowing much about the real world.

For example, Card's comparison of wage trends in Miami in 1980-85 relative to four other cities is pretty useless because that was the peak of the Scarface - Miami Vice cocaine boom in that city, so ceteris wasn't at all paribus. Now, anybody who watched TV in the 1980s should know that, but economists never seemed to notice it when discussing Card's study.

Worse, economists seldom seem to care that they are often ignorant about the realities that they so confidently pronounce upon.


My published articles are archived at iSteve.com -- Steve Sailer

May 23, 2007

IDS: Immigration Derangement Syndrome

sure affects a lot of economists. For example, Bryan Caplan greets Harvard economist George Borjas's new blog with this classic:

Borjas: What's His Problem?

Well, Bryan, I guess his problem from your point of view that is that, when it comes to immigration, Dr. Borjas has worked very hard to know what the hell's he's talking about. But who needs painstaking empiricism when Ayn Rand has shown us the true way?

What's striking is the constant reminder of what a large proportion of economists are fervent ideologues who, armed with a selective handful of bumper sticker slogans (e.g., Comparative Advantage! but not
externalities), want to preach morality to the unenlightened far more than they want to try to understand reality.

Economists tend to be complete suckers for the most implausible studies supporting their preconceptions about immigration. Simple reality checks are never performed on agreeable-sounding assertions. For example, one of the most celebrated is Giovanni Peri's recent effort, which Caplan's friend Tyler Cowen approvingly summed up: "... if lots of Mexican carpenters move to California, we don't see the non-Mexican carpenters leaving in droves, due to lower wages."

Great point! Except of course that we have seen droves of native-born blue-collar workers leave California. And we sure don't see many American blue collar workers from the other 49 states moving to California. That's an opportunity cost to Americans -- one of those Econ 101 phrases that gets forgotten when economists start burbling about immigration. As I wrote in VDARE.com last year, using Las Vegas as a more up-to-date example of a booming example, but you could use California in the period studied by Peri:

What [many economists don't] grasp is that illegal immigration is denying Americans the traditional wage premium for undergoing the pain of moving to a boomtown.

Imagine you are an American blue-collar worker in Cleveland, making $10 per hour. You know the local economy is stagnant, so you're thinking about relocating to fast-growing Las Vegas. But your mom would miss you; and you're not a teenager anymore so you don't make new friends as fast as you once did; and you really like the wooded Ohio countryside you grew up around and the fall colors and the deer hunting; and there's this girl that maybe you could get serious about, but her whole family is in Cleveland and she'd never leave.

So, you decide, you'll leave home behind if you can make 50 percent more in Las Vegas, adjusted for cost of living. That seems fair.

But, then you look through the Las Vegas want ads and discover you'd be lucky to make 10 or 20 percent more because the town is full of illegal aliens. They're moving from another country, so it's not much skin off their nose to move to Las Vegas rather than some place slower-growing.

Well, forget that, you say. I'll stay in Cleveland.

Unfortunately, too many economists forget that too. They can’t—or won’t—put themselves in other people's shoes and see how the world really works.

That doesn't seem to hurt them professionally. But it can hurt America.

In the comments on Borjas's blog, businessman Peter Schaeffer writes:

I have looked at the immigration work of Peri for some time now. Recently, Peri has published a new paper, Immigrants’ Complementarieties and Native Wages:Evidence from California (http://www.econ.ucdavis.edu/faculty/gperi/Papers/california_wp_dec06.pdf). This paper attempts to show that immigration has raised the real wages of workers in California, even high school dropouts. A few notes:

1. The empirical data (Figure 3, Change in Real Wage of U.S. natives, by Education group 1990-2004) actually shows large declines for high school dropouts. -17.6% in California versus -15.1% nationwide. Peri does not attempt to explain the large decline in wages of low skill workers (as best I can tell) or why wages fell faster in California.

2. As best I can tell, Peri uses a aggregate production function that would make it very difficult for immigration to ever adversely impact the incomes of natives in general, although that might not be true for specific groups. For reasons stated below, this does not appear to be realistic for California and perhaps not the nation.

3. Peri assumes that immigrants are almost entirely complementary to natives, even at the low end (but less so). He is quite aware that this is a contentious point and attempts to defend his methodology and conclusions. I can neither support nor refute his assertions.

4. Peri appears to be aware that his work is deeply contra factual, although this is never explicitly stated. Natives have been net leaving California in vast numbers (millions) for quite some time now. If immigrants were complementary, this should either not be happening or immigrants should be net leaving as well. Obviously this is not true. Peri attempts to refute this critique via a regression of some type. He offers no other explanation as to why natives would be fleeing California.

5. Peri rather explicitly does not even consider the possibility that immigration has impacted prices (mainly but not exclusively housing) in California. Peri deflates California wages using a national CPI, not a state one. This is highly contrafactual in my opinion. California’s population would be much lower (30% of California’s population is foreign born) without immigration and housing correspondingly more affordable. I cannot quantify the impact of immigration on housing costs in California, however it is certainly large. Note that the Census (but not the BLS) shows California housing to be roughly twice as expensive as the national average.

6. If one takes into account housing costs, Calfornia is considerably more expensive than the US as a whole and real wages corresponding lower. Indeed, California emerges as one of the poorer states (43rd) in the nation, if the local cost of living is taken into account. Given the linkage between immigration and prices, it would appear that immigration has markedly reduced real wages in California. Of course, this would account for the native outflux contra Peri.

Thank you
,
Peter Schaeffer


My published articles are archived at iSteve.com -- Steve Sailer

May 20, 2007

The Myth of the Rational Economist

George Mason U. economist Bryan Caplan, author of The Myth of the Rational Voter: Why Democracies Choose Bad Policies, asks on EconLog:

I've often heard opponents of Latin American immigration complain that they're lowering our average IQ. ... Question: [If] this is the real concern, why not just advocate additional "compensatory" immigration from high-IQ countries like China and Korea?

This logic could be used equally well in many other situations:

Used Car Salesman: "You should buy this red car."

Prof. Caplan: "But this red car is a piece of junk."

Used Car Salesman: "Well ... that blue car over there is in great shape. Hey, you could buy both the bad red car and the good blue car and that would be kind of like having one average car!"

Prof. Caplan: "Wow, that's terrific thinking ... I'll take both! Where do I sign?"

Or:

Prof. Cowen: "Which applicant should we hire for the Assistant Professor job in our Econ department: the really dumb guy or the really smart guy?"

Prof. Caplan: "Tough question, tough question ... I know! Let's hire both!"

Why is it that smart economists' IQs drop 50 points when they try to think about immigration?


My published articles are archived at iSteve.com -- Steve Sailer

May 11, 2007

Ethnic Nepotism

Free Content: The Washington Post publishes economist Paul H. Rubin's op-ed "Evolution, Immigration, and Trade" explaining why all us patriotic Neanderthals aren't as intellectually evolved as him and his fellow transnationalist economists:

Our primitive ancestors lived in a world that was essentially static; there was little societal or technological change from one generation to the next. This meant that our ancestors lived in a world that was zero sum -- if a particular gain happened to one group of humans, it came at the expense of another.

This is the world our minds evolved to understand. To this day, we often see the gain of some people and assume it has come at the expense of others ...

[O]ur evolutionary intuition is that, because foreign workers gain from trade and immigrant workers gain from joining the U.S. economy, native-born workers must lose. This zero-sum thinking leads us to see trade and immigration as conflict ("trade wars," "immigrant invaders") when trade and immigration actually produce cooperation and mutual benefit, the exact opposite of conflict.

In the Comments on EconLog, Mark Seecof unloads:

Mark Seecof writes: Rubin shows how desperately some economists wish to reinforce their ideological position by borrowing ideas from other disciplines. Sadly, Rubin shows that stealing a few buzzwords from another discipline isn't the same as drawing real understanding from it.

Rubin wants to hitch his no-borders wagon to evolutionary psychology, but hasn't read much of it--or he would have learnt that humans are capable (have evolved to be capable) of a variety of more or less selfish or cooperative behaviours. He would also have learnt that groups of humans scattered around the world are very different in capabilities, attitudes, and behaviours and that many of those differences are genetically mediated (that is, they cannot be altered much by economic education).

Rubin's supposition that a world with little sociological or technical change must be one of zero-sum economics is false. All of recorded history abounds with examples to the contrary and anthropologists will testify to the eagerness with which many peoples have traded with outsiders--even in eras of "little change."

Equally false is Rubin's supposition that everyone is really the same, so people viewing others as members of (in- or out-groups) is arbitrary. Evolution depends on differences--it cannot act without them--so any economist who wishes to draw on evolutionary theory must acknowledge and account for real differences among people.

At the same time, evolutionary pressures (almost certainly) cause people to vary their amount of cooperation with their degree of kinship. Cooperative phenotypes act on socially-mediated pseudo-kinship as well as actual genetic kinship. It's not hard to get people to cooperate, if you persuade them to treat each other as kin. In fact, that's the point of the Golden Rule.

Look, Rubin's own discipline can explain why many people want to restrict trade. Those who wish to restrict trade are those who expect, personally, to gain by such restrictions! Economists often call them "rent seekers" and they include producers and merchants more often than "common folk." Does the term "Corn Laws" mean anything to you? Rubin's op-ed falsely suggests that the prejudices of ordinary voters result in trade restrictions, but anyone who looks into the matter will discover that industrial interests drive lawmaking in this area. Virtually every restriction on trade in the USA is a triumph by rent-seeking incumbents in some industry.

We can theorize both "classical economic" and "evo-psych" reasons why people would like to restrict immigration.

For the first, people who will personally suffer from immigration (that is, to a first approximation, workers rather than employers) would like to restrict it. This is not irrational, because (Rubin's purely ideological assertion to the contrary notwithstanding), economic gains from immigration are not evenly distributed. (Note that demands by particular industries to import cheap labor, regardless of externalities, may properly be regarded as a form of rent-seeking.)

As for the second, evo-psych predicts people would be wary of immigration, because most immigrants are not kin (note that this theory perfectly explains the special case of people favoring immigration from their own ancestral regions). Evo-psych predicts, on a very strong basis, that people would rather preserve the economic bounty where they are for their own kin.

Even an economist must agree that (a) immigrants themselves only move because they expect to be better off in their new homes than their old, and (b) once they arrive they will compete with natives for existing economic resources. To genes competing in evolution's rat-race, there is no reason to help immigrants better themselves, and every reason to discourage local competition from immigrants.

It's true that immigrants may help expand economic resources--in a society where greater availability of labor fuels economic expansion. However, the notion, oft-repeated by economists, that labor availability necessarily fuels industrial expansion is obviously false (if it were true, Bangladesh would be rich).

History shows that industrial economic growth depends on high-IQ labor, and is retarded where chiefly low-IQ labor is available no matter how cheaply. Since IQ is at least 60% heritable, only an ideologically-blinded economist would suppose that unlimited immigration by low-IQ people would certainly fuel economic expansion. In fact, there are strong economic reasons to think otherwise, because in the presence of many low-IQ people, society diverts the labor of many high-IQ people from industry to simply managing (or exploiting) the low-IQ crowds.

An economist who really wants to reconcile his discipline with evolutionary psychology should ask "why should people follow abstract theories rather than behave in the ways that promoted the survival of countless generations of their ancestors?" He should then return to Rubin's notion of education, but educate people to discern rent-seeking proposals and oppose them.

As for immigration, once the economist clears his mind of the notion that all immigration is an unalloyed blessing, he can promote a rational policy of encouraging immigration only by people who would promote the industrial economy. Those people could/would be accepted as "kin" and so engage our evolved capacity for cooperation.

The one area of economics which has been pretty-much zero-sum from ancient times right up through today is competition for land.

Even if you slept through everything else I wrote you should agree that to the extent immigrants compete for land, they really are zero-sum competitors and a rational economic actor would seek to exclude them, the more vigorously as he cared more about land. In former times when many people depended directly on their own land for their own and their family's subsistence, both "economic" and "evo-psych" reasons would teach them to oppose immigration.

Only those parts of our modern industrialized economy for which land is not a major factor of production can look upon immigration with complacency. You shouldn't expect (reasonable, as opposed, say, to Marxist) "economic education" to persuade other people to irrationally favor immigrants entering a zero-sum competition for land. This is probably why people readily see non-kin immigrants as "invaders." For all time, a bunch of non-kin moving into the area meant greater (zero-sum) competition for food, because food was directly proportional to land. So immigrants are invaders.

Today a bunch of immigrants means zero-sum competition for pleasant suburban homes. This is why rich people who want low-wage immigrants to serve them favor immigration and everyone else in America rationally opposes it.


My published articles are archived at iSteve.com -- Steve Sailer