Saturday, May 1, 2010

Dynamic Markets and Immigration

I have stated before in a few places that I believe the balance between institutions (such as the state), the economy, and society shift in exactly how they fit together and what aspects of life they cover. Immigration gives a good example of this. Immigration is currently seen as being clearly within the role of the state. The state sets quotas and regulations regarding anyone that comes in and anyone that defies this is breaking the law. Simple. This works quite well with asylum seekers or people who simply want to move into the country for non-economic reasons, such as people moving because of politics or a Canadian snow bird sick of freezing their butt off. The state also retains power to control the access that immigrants have to other state resources, including citizenship.

However, the economic migration that is at the center of the immigration debate is something different. It is driven primarily by demand on the labor market. Few would dispute that if there is demand for something independent producers will produce more to fill demand. This is what's happening with immigration. It has been moved into the market and thus out of the non-market activities that are clearly under the control of the state.

Of course, the state does retain powers to regulate the market but the state does not possess powers to control it. There are innumerable examples of this, whether black markets in North Korea, those in the Soviet Union, my example of the illegal fashionable, or the smuggling in early US history. If the state tries to impose non-market controls on a market, you simply get black market activities as the state is circumvented. There are a distinctly different set of tools available to the state to regulate markets than the state uses to regulate non-market activities. Failure to make this distinction and to apply the wrong tools results in policy failure whenever it is tried.

What we're seeing right now with immigration is this sort of policy failure. Since the state cannot control the market directly it resorts to indirect measures in the vain hope of imposing the same control on a market that it can impose on non-market activities. What is going on now at the border is no different from increased naval controls that earlier societies used to prevent contraband from reaching their shores. These measures may limit it slightly, but not anywhere near the extent desired by the authorities and at the cost of creating very powerful criminal groups as well as contempt of the law and the loss of all the potential revenue if legal channels had been allowed to function. No amount of state power can completely destroy a market once created, the choice is between a legal, regulated market and an unregulated black market outside of state control. Turning immigration into a non-market activity that is within the state's power to control absolutely is outside of the state's power. Any successful immigration policy will have to accept this or be subject to inevitable failure as all earlier policies have been.


  1. "Of course, the state does retain powers to regulate the market but the state does not possess powers to control it."

    That's a key sentence.

    I'm not sure, though, whether the state is currently trying to control the market or whether the state is just trying to look like it's trying to control the market. In some ways, the situation may be worse than the one you describe: A government that knows it cannot control the market and feels unconfident admitting as much.

  2. Doug, I think that may be the best way to describe what the state is currently trying to do. I guess the question aries, what needs to happen for the government to talk sraight on this subject? Since this still hasn't happened with illegal drugs, where the only thing the state has so far been successful at is building up a substantial black market and spurring innovation in the criminal enterprise sector, I think we may have a while to wait before people start thinking clearly on the subject.

    I would like to continue to push the economic frame for the debate though, I think it is the best way to think about the problem and it's the continued rarity of this frame that is allowing the poor policies to continue. I just wish I had a bigger soapbox to stand on so I could push the idea harder.