The economics of open borders

A colleague recently sent me a paper on the economics of open borders, by John Kennan, which I hadn’t known of before, though it came out in 2013.
Kennan’s conclusion is striking

Liberal immigration policies are politically unpopular. To a large extent, this is because the beneficiaries of these policies are not allowed to vote. It is also true, however, that the enormous benefits associated with open borders have not received much attention in the economics literature.20 Economists are generally enthusiastic about free trade. But if free movement of goods is important, then surely free movement of people is even more important.
One conclusion of this paper is that open borders could yield huge welfare gains: more than $10,000 a year for a randomly selected worker from a less-developed country (including non-migrants). Another is that these gains are associated with a relatively small reduction in the real wage in developed countries, and even this effect disappears as the capital–labor ratio adjusts over time; indeed if immigration restrictions are relaxed gradually, allowing time for investment in physical capital to keep pace, there is no implied reduction in real wages.

So, is Kennan right about the benefits of open borders? And if so, is there a way of transferring some of those benefits to already-resident wage earners who would otherwise lose, or at least not gain, from expanded migration?

On the first question, I’ll offer a bold Maybe. Kennan’s core assumption is that immigrant workers with a given level of education and (I think) experience will have the same productivity as already resident workers. So a move from a low productivity country to a high productivity country produces a big increase in their effective labor capacity. That benefits those workers, but also produces a shift in global income from labor to capital since the supply of labor has increased.

There’s room to debate this assumption, and there are special cases where it clearly doesn’t apply, such as that of professionals whose qualifications aren’t recognised in their new country. But Kennan makes a good case that it isn’t far from the truth.

Moreover, in a world where more than a billion people travel internationally each year, it’s inevitable that vast numbers of people are going to have close relationships of all kinds with citizens of other countries. Restrictions on movements across borders impose costs on all those people ranging from minor to calamitous.

Supposing that Kennan is right about the economics, what can be done to spread the benefits of open (or less tightly closed) borders more broadly and thereby, potentially, get increased political support. Since owners of capital benefit from open borders, an obvious possibility would be to increase the rate of tax on capital income and redistribute the income to labor. That seems neat enough in the abstract, but there’s no obvious (to me) way of putting it together as a political package.

The other way to spread the gains would be to tax, or otherwise capture, some of the benefits gained by immigrant workers. For example, new immigrants could be obligated to make a contribution, say through a tax surcharge, to a fund representing their share of the existing infrastructure of the destination country. Again, it seems neat enough in the abstract, but there are obvious difficulties. In particular, migrants who could have entered anyway would be significantly worse off.

Still, it seems unlikely that support for the migration policy status quo, let alone an expansion of existing flows, will be an adequate response to the rise of rightwing identity politics (what I’ve previously called tribalism), in which opposition to migration is a central feature. The more people who see freer movement as benefitting them and their families, the better will be the chances of mobilising support for a diverse and tolerant society.

76 thoughts on “The economics of open borders

  1. Coogee beach had “open borders” in a sense.

    http://www.abc.net.au/news/2016-12-27/coogee-beach-booze-ban-after-disgraceful-christmas-day/8149670

    Open borders means some people see a good place, come in, exploit it, trash it and leave it. Without a real stake in a place, a proportion of people act like this. I mean a proportion of all peoples so this is not a racist statement. This proportion (of all peoples) does not have to be all that large percentage-wise to be very damaging. Open borders would be an exercise in extreme naivety. Of course, the capitalists, neoliberals and glibertarians want open borders. This would allow them to destroy all lands and all peoples comprehensively, solely for the private profit motive.

  2. @GrueBleen

    “my gut-feel estimate was that at least 60% of the shoppers’ were Asian. Ok, I know that Chadstone Mall is a home-from-home for many Asians, but stiil it surely illustrates something – whether ‘open borders’ or not, I can’t quite say.”

    Work on understanding that gut feeling and you might understand something about how your gut works to influence your brain.

    When I go to the post office or the pub in my right wing nut job electorate I know from looking at the way they vote that 90% of the people I see there are not like me even if most of them are not Asians. We do have one Asian family in town though.

  3. @Luke Elford

    I have a preceding comment awaiting moderation which gives average commute times for Sydney and Brisbane

    Hmm, well either I have finally gone BDS* or it hasn’t arrived yet. So in the meantime I did the requisite Google and read a few “studies” that indeed appear to support your number. I say (and emphasize) “appear” because they struck me as very poor studies.

    For starters, all we got was the “average” commute time – which as we all know is an ambiguous name, sometimes meaning ‘arithmetic mean’, sometimes ‘geometric mean’ and sometimes even ‘median’. So t’riffic analysis guys. Didn’t give us those usually vital numbers: median and standard deviation (I think the modal value is probably less useful here).

    Secondly, there was no indication of the kinds of travel being undertaken: once upon a time, for instance, almost all ‘office work’ jobs – and a sizable chunk of retail – were CBD based, though less so now. So once upon a time most of the travel would have been from suburbs to centre – plus some travel to manufacturing/trades centres. Now less so.

    Thirdly, there was no indication of ‘time of day’ factors – eg when ‘flexitime working’ became more accepted (back nearly 40 years ago) the commute time was shortened by spreading out the ‘peak time’ – a longer, but less intensive, peak, hence shorter travel times. Nowadays, that’s much less of a moderating factor because ‘peak’ just lasts a lot longer.

    Fourthly, it seems most of the studies – with one apparent exception – gathered their data from commuter testimony from memory: a notoriously inaccurate measure. The exception used a single day ‘diary’ which basically has two problems: one is the accuracy of filling out the diary (and as we know from ‘viewer diary’ measures of tv show popularity, that can be very misleading). The other is ‘single day’: I used to occasionally commute approximately 17km to the Melbourne CBD by car and it could take me anywhere from 35 to 55 minutes (and occasionally much longer) depending on the day – and it wasn’t simply predictable either, eg Friday could be either good or bad without apparent reason.

    But I more often commuted by rail and that was 53 to 63 minutes: 15 minutes drive to station, find parking and wait for train, 30 – 40 minutes (normal variance) train travel (approx 15km), 8 minutes walk from station to front door of the office building (which adds another issue – was the commute time door to door or carpark (ie home driveway) to destination carpark).

    I continue to await your figures and I’ll be interested to see how many of the above issues are clarified by them.

    *BDS = Blind, Deaf and Stupid.

  4. @Julie Thomas

    you might understand something about how your gut works to influence your brain

    But I already know how my gut influences my brain, Julie: it tells me when I am hungry.

    What does your gut tell you ?

  5. To be clear, my analysis is meant to apply to cities generally (and, at a larger scale of analysis, to regions, since similar relationships exist between wages and the population density of regions). It’s not all about Melbourne, Melbourne people!

    The 0.06 elasticity is not a “pure guess”; it is a midpoint value from the literature.

    If the effects of increasing transport costs dominated the effects of wage increases, people would be prepared to pay less to live in cities (and cities would barely exist).

    To that end, we can use the capitalisation of net agglomeration economies and diseconomies (available given typical infrastructure investments) into housing prices as an alternative way of estimating the net external benefits of immigration. In the US, the elasticity of the median price of owner-occupied housing with respect to city size is 0.13. If households spend 20-25% of their income on housing, this implies a benefit of 2.6-3.25% of income. This is similar to my earlier estimate of 0.0522*55% = 2.87%.

    GrueBleen, whatever the shortcomings of travel surveys, I very much doubt that they bias the results in a way that materially affects my analysis. If you’re hoping my preceding comment would include a treatise on the points in your comment, you’re going to be disappointed.

  6. @Ikonoclast

    Open borders means some people see a good place, come in, exploit it, trash it and leave it. Without a real stake in a place, a proportion of people act like this. I mean a proportion of all peoples so this is not a racist statement. This proportion (of all peoples) does not have to be all that large percentage-wise to be very damaging. Open borders would be an exercise in extreme naivety.

    There is no immediately apparent reason why this argument should be evaluated differently in relation to the borders between Australia and the rest of the world, the borders between New South Wales and the rest of Australia, the borders between Sydney and the rest of New South Wales, the borders between Randwick City and the rest of Sydney, the borders between Coogee and the rest of Randwick City, or the borders between Coogee Beach and the rest of Coogee. If you’ve got a good argument there that open borders between Australia and the rest of the world are a bad idea, it would seem to be an equally good argument that open borders at all those other levels are also a bad idea.

    Perhaps they are. Perhaps if there were border controls between Coogee Beach and the rest of Coogee they would have prevented the destruction on Christmas Day, although that’s not the plan the council’s going with.

  7. @Luke Elford

    If you’re hoping my preceding comment would include a treatise on the points in your comment, you’re going to be disappointed.

    I rather thought I would be, Luke. But thank you for not trying, it saves me wasting any more time.

  8. Today I had a chance to read John Kennan’s paper. A few comments:
    1) Methodology:

    a. Use of duality theory. See Diewert’s review paper [1] regarding technical conditions and issues even when applied in micro-economics on the level of a ‘firm’ or ‘individual’.
    b. Macro-economic ‘general equilibrium’ model, applied to ‘international trade’, using quantity data of imports and exports. Setting aside issues arising from duality theory on the micro-economic level and assumptions such as no transport costs, the aggregation problems on the macro-level are, IMHO severe; intractable.
    c. To illustrate the remoteness of this model from the so-called real world (defined as the world we live in), I’ll pick on one assumption, namely ‘preferences of consumers are assumed to be identical in all ‘countries’. This means people in Alaska have the same relative desire for a sombrero as people in Mexico. (I just won’t buy this level of simplification.)
    d. As far as I could detect, there is no dynamic specified in this paper; it is comparative statics. What happens to prices of non-traded commodities when there is ‘free labour’ movement? Think of real estate prices. Even if nominal wage rates do not decline, the purchasing power of workers in the immigrant ‘countries’ would decline due to rising rent costs. (The model is not a full general equilibrium model.)
    e. The approach is akin to that advocated by Milton Friedman – simple model and see how it fits the data.
    2) It seems to me Kennan should test his model on US data. There is ‘free labour movement’ across States. How have prices of various types of human services (‘labour’), real estate, machines, … (physical ‘capital’), garden plots, agricultural land, backyards, ….. (‘land’) converged within the USA? How did the relatively poor in various States benefitted from free labour mobility? Data from the post-unification era of Germany might also provide a test of Friedman’s methodology.
    3) IMHO, one cannot base policy on this paper. It is not the politics, which is the problem but the economic modelling.
    4) There is clearly an asymmetry in the treatment of borders for financial (and some physical) capital and labour in the international institutional arrangements. One may as well argue that ‘free capital movements’ and the belief in Samuelson’s factor-price equalisation theorem have served some ‘countries’ well but have not helped to reduce income and wealth inequalities across countries while allowing income and wealth concentration to grow in those ‘countries’ which, in the aggregate, benefited, using simple time series and cross-section data instead of rows of equations which in the end result in comparing import and export quantities across countries.

    http://econ.sites.olt.ubc.ca/files/2014/02/pdf_course_erwin-diewert-ECON581Ch4.pdf

  9. That was a brave effort, Ernestine.

    Not that I really understood the outcome of that paper, what I saw was an attempt to examine real world situations through restrictive formulae each of which only operate with specific data within specific ranges, with the duality principle being used to “stitch” together the fragments in order to achieve some kind of unified result. Your conclusion that the outcome was flawed is no surprise to me.

    Decades ago a friend (an economist) consulting to a lease finance house was able to defeat all of the major institutions in lease finance deals that eventually ran into the billions of dollars by using an iterative approach to complex calculations with as many as 26 variables and large numbers of exceptional events. Some years later I used his approach to demonstrate that “All of Life” insurance policies could achieve at best a yield 2% above inflation (based on the yield tables offered). ie it does not require enormous mathematical prowess to make useful evaluations of real world situations, more useful is a degree of progamming skill and a commonsense approach.

    I remember reading a quote in Life magazine (back in the late fifites) that the future will require not great simplifiers (the formulaic approach) but great complexifiers (the iterative approach). Who ever it was who made the quote was spot on, epitomised in the complexity of the middle east conflicts which I see as the natural outcome of applied Libertarianism.

  10. Ernestine basically refuted the paper in economic terms. I need not paraphrase E. I would only muddy the waters if I attempted a paraphrase.

    Open borders are open to a sociopolitical refutation too. Essentially, national polities, especially democratic ones, need control of national borders (a level of control making the border semi-permeable to people attempting movement in both directions). Without this control, a national polity loses national control and in a very real sense ceases to be a nation.

    The basic question is do we (Australia) want to be a nation? While we are democratic and some polities are not, the answer is yes we do want to remain a nation. While corporations and capitalism challenge democracy, the answer is yes we do want to remain a democratic nation state with a representative democratic government (flawed and distorted as it is) as a bulwark against capitalism and corporatism.

    Until and if socialism and workplace democracy triumph everywhere, globally, we do not want open borders (if we are wise). Open borders are another trojan horse for corporate capitalism to destroy democracy, such as it remains, at the present time. First socialism, then open borders, that is the only way to go. Under capitalism, open borders are a disaster for many polities except perhaps for the most powerful ones which are largely ruled by corporations and oligarchs. Even for these nations only the elites and their functionaries will benefit. The majority of the population will be harmed economically and socially.

  11. So true, Ikonoclast. Australia’s open everything experiment was with Murdoch and his media ambitions. Government after government caved in to his arguments (and possibly threats) to the extent that he was able to amalgamate media across the nation, and then across borders to eventually be one global voice, his (IMHO). Definitely not an outcome that served the interests of most Australian’s. Putin is now deploying an open border cyber policy with similar effect to that of Murdoch. I really don’t think that we need to go into the economics of this to measure the negative outcomes.

  12. Ikon: “Essentially, national polities, especially democratic ones, need control of national borders. Without this control, a national polity loses national control and in a very real sense ceases to be a nation.”

    Great Britain wasn’t a nation before the Aliens Act of 1905? Not trying to be pithy Ikon. I’m very much agnostic on open borders. I can think of just as many good reasons for them as against – and in any case, I’m under no illusion a majority would ever support the idea until at least the end of the oil age. But worth adding some historical context:

    http://people.mpim-bonn.mpg.de/geordie/Zweig.html

    Indeed, nothing makes us more sensible of the immense relapse into which the world fell after the first World War than the restrictions on man’s freedom of movement and the diminution of his civil rights. Before 1914 the earth had belonged to all. People went where they wished and stayed as long as they pleased. There were no permits, no visas, and it always gives me pleasure to astonish the young by telling them that before 1914 I travelled from Europe to India and to America without passport and without ever having seen one. One embarked and alighted without questioning or being questioned, one did not have to fill out a single one of the many papers which are required today. The frontiers which, with their customs officers, police and militia, have become wire barriers thanks to the pathological suspicion of everybody against everybody else, were nothing by symbolic lines which one crossed with as little thought as one crosses the Meridian of Greenwich. Nationalism emerged to agitate the world only after the war, and the first visible phenomenon which this intellectual epidemic of our century bought about was xenophobia; morbid dislike of the foreigner, or at least fear of the foreigner. The world was on the defensive against strangers, everywhere they got short shrift. The humiliations which once had been devised with criminals alone in mind now were imposed upon the traveller, before and during every journey. There had to be photographs from right and left, in profile and full face, one’s hair had to be cropped sufficiently to make the ears visible; fingerprints were taken, at first only the thumb but later all ten fingers; furthermore, certificates of health, of vaccination, police certificates of good standing, had to be shown; letters of recommendation were required, invitations to visit a country had to be produced; they asked for the addresses of relatives, for moral and financial guarantees, questionnaires, and forms in triplicate and quadruplicate needed to be filled out, and if only one of this sheaf of papers was missing one was lost.

  13. Nick’s quote is from text by Stefan Zweig.

    Stefan Zweig’s problem was that he didn’t realise the freedom he enjoyed was not available to the great majority of people even in Europe, not because of borders and passport requirements but because of the extreme income and wealth inequality at the time.

    Laissez faire worked well for a few.

  14. Indeed, Ernestine. Keynes states as much in the first couple of chapters here:

    http://www.gutenberg.org/files/15776/15776-h/15776-h.htm

    My point, however, was that ‘open borders’ is not just some utopian libertarian goal that we’ve never seen before. It was the default condition for most of human history. And while I really like Ikon, his reasoning is perfectly valid, and I’m certainly not accusing him of anything – I’d be very careful how we start defining ‘national essence’, and the ‘importance of the nation’ in the next few years…

    It’s ironic isn’t it, that cheap modern travel was supposed to be one of the great emancipators, but of course nobody likes when ‘too many poor people’ start turning up on their doorstep. Especially, as you said, if they look and sound different. The speed at which just about every European country has been erecting border fences the last two years makes Trump’s Mexican wall seem positively tame. It’s not going to be pretty this next few decades, I can assure you that. People are being very short-sighted when they assert things like ‘Luxembourg was way off in her predictions’…

    To my ‘end of the oil age’ remark, I’d add ‘end of worldwide gun proliferation’, and ‘beginning of world population decline’. Thanks to increased urbanisation and access to contraception and abortion, we’re well on our way to latter. The world is currently experiencing dramatic population degrowth. Personally, I don’t see the people becoming less selfish and possessive in their thinking until we turn that corner – and slowly but surely there’s more of the world to share around again. I think that moment, when it arrives, will change human thought and perception about the world very much for the better.

    Re. gun proliferation, I don’t see much changing until America is ready to take the lead – and I dread the scale of massacres we’re going to have to witness before that actually happens.

  15. @Nick

    You sort of integrated me into some story in which I have no part when you write: “Especially, as you said, if they look and sound different.” I didn’t say this!

  16. Sorry Ernestine! I was loosely referring to your comments to J_D back @ 12, regarding spoken language. The ‘look different’ bit probably refers to some other comments on this thread I skipped over.

  17. @Nick

    I did not say or imply that we had a ‘national essence’. I did however attribute an importance to the nation (rather than of the nation) if it was a ‘democratic’ nation. I noted our democracy was limited but still operative to some extent.

    Why do I attribute such importance to the ‘nation’ at this juncture in history?

    (1) Realism – Nations really exist and their government decisions have real effects.

    (2) Only site of effective democracy currently (in some nations to some extent). – Only national governments of at least middle to greater nations have the power to make decisions in the interests of the masses and to resist the special interests of the rich and the corporations.

    Moves which weaken democratic government and democratic nations, by minimizing government and weakening their integrity with policies like open borders while at the same time granting capital and corporations ever greater power, will weaken the power of ordinary people.

    This does not mean I think nations are or should historically eternal. Though, I notice just about every advocate of capitalism thinks capitalism will be and should be eternal. Not until workplaces are made democratic and workers own the production system, and this applies predominantly as the global norm, as global socialism, would it be remotely safe to move to open borders in the social and economic senses. Not until the power of oligarchic capitalists and corporations is broken would it be remotely safe to move to open borders.

  18. Open borders and congestion (traffic) and ‘congestion pricing’.

    Nick # 51 referenced a 2015 paper by the Department of Infrastructure and Regional Development, Australia (DIRD).

    I found this paper useful and thorough. In particular, I liked the author(s) putting into perspective their methodology of using highly aggregated data by pointing out that detailed network analysis needs to be done for specific cities or regions and town planning principles and measures matter, too . (Thanks, Nick, for the reference. You may have noticed by now I am interested in technical matters.)

    Open borders for people. There is useful information in the DIRD paper, which is directly relevant to the topic of this thread. The paper suggests, supported by plausible arguments and empirical data, a ‘satiation level of km travel/per capita’ is possible (likely, depending on how one reads the data) in the medium term. That is, at ‘satiation’, the km travel/per capita remains constant thereafter. One possible scenario considered is a decline in this statistic due to changed preferences. (The notion of satiation is well defined and understood in economics.) Further increase in km travel/per capita (all of Australia) would be due to immigration. [hc’s point, I think]

    Congestion pricing is currently a popular topic [eg hc but not limited to hc]. IMHO, it is not necessarily a solution to ‘congestion’ (even though it has been introduced in London). It depends. If the income distribution is rather flat (not necessarily equal income but such that the minimum wealth condition is fulfilled), then congestion pricing could be introduced without making other problems predictably worse. In the absence of alternative travel modes, alternative workplace-residential options,…, childcare-residential options (ie ceteris paribus) such a congestion tax would be simply a relative price change for more of less everybody with some tax revenue increase for the relevant governments.

    What happens if we take the hypothetical alternative to the theory, namely a bit of reality? Globally, there are many hypotheticals, London being one of them. In general one would have to get location (city) specific data, including data on the geographical income distribution, cross classified by work related demand for km travel, childcare, ….., housing, alternative modes of transport, to name a few obviously relevant variables. As for Sydney I am confident in saying, based on published information, a congestion tax would be non-trivially regressive. How regressive by sub-location in the metropolitan area is a matter that needs a more thorough analysis.

    Open borders for goods and services. Prior to tariff reductions, cars were very expensive in Australia, relative to income or relative to a staple food item, such as meat or even housing in Sydney. (Data: direct observations). In line with the partial equilibrium-cum duality theory approach so prevalent in applied economics, imported cars became cheaper and, eventually, car production in Australia stopped (or is about to stop). Under the very plausible assumptions of consumer demand theory, cheaper cars leads to more road traffic, which leads to more road congestion (not a factor in textbook consumer demand theory). Now the people who lost their income due to the demise of the car industry are supposed to pay a congestion tax (to allow those ‘consumers’, who benefit from cheaper cars to save travel time)? Not a Pareto improvement in my books. Automobile industry workers are also ‘consumers’.

  19. Ernestine, I like the technical matters too.

    Can you compare Table 1 from the 2015 report with Table 2.1 from the 2007 report, and tell me what you see? Also, the daily VKT profiles in the 2015 report (Figure 11) appear to be taken directly from the 2007 report. That strikes me as odd, so let’s dig a bit deeper.

    Hmm, the report authors weren’t kidding – these really are dubious assumptions. Is my 3-year-old daughter’s time really considered to be worth the same as an “average Australian full-time employee in 2010” every time she rides in the car with me? It’s lucky we don’t have 3 kids. That would make our family’s “social costs of congestion” hideously expensive 😉

    Do you see from this how they’ve structured the entire equation backwards – by always calculating ‘ride sharing’ as a multiplier, instead of a divisor? For example, if I had to travel for an hour by myself just to go to the beach for 2-3 hours, I would seriously reconsider it – to my mind, the time and petrol spent would clearly outweigh the benefits. If it were a family outing, on the other hand…

    It’s no different with ‘work ride sharing’, or any ‘ride sharing’. People are willing to travel further, and tolerate more delays, with another person in the car – not the other way around.* It’s the entire point of ‘ride sharing’. To share the time and costs and inconvenience, not multiply them. To travel somewhere together in a single car. Instead, the report quite literally treats ‘ride sharing’ as the timevalue-equivalent of having 2-4 more cars on the road! Even if it’s just children in the backseat.

    Come to think of it – try to find a single reference to ‘children’ anywhere in either report? It’s like they just. don’t. exist. Even though we can safely assume many of them get driven to and from school every single weekday, in and around peak hour, in cars and school buses. That’s 3,750,973 schoolchildren (ABS 2015), minus the amount who walk, ride, catch trains, or live rurally/regionally. They might not travel as far as commuters do – but many would take ‘local roads’ and at least one ‘arterial’, which are easily 85-90% of the VKTs (Figure 2.25b). It all adds up, and it all contributes to peak congestion. And all of them were “aggregated” at the same rate as an “average Australian full-time employee in 2010”. eg. A bus of 20 schoolchildren is considered to be a bus of 20 full-time wage earners.

    Ditto for any uni student who happens to drive. They all earn $80k a year too according to the report.

    So let’s dig deeper again. Where are the missing “vehicle occupancy surveys”? Ok, it turns out we’ll need this:

    https://ngtsmguidelines.files.wordpress.com/2014/08/agpe04-12.pdf

    Yikes. $52.80 to read a PDF from a quasi-public company? Lucky someone left a copy online. Hmm, still not seeing them. Ok, here they are, I think, referenced in the footnotes. Can you tell me who “Arup Transportation Planning” is? Because I still can’t for the life of me find those “vehicle occupancy surveys”. And without public access to them, the 2015 report is completely indecipherable. Interesting, don’t you think?

    In addition, their dollar per barrel oil projections were way out, their GDP projections were way out (understandable enough), to the extent that basing every passenger’s time on full-time wage earners income is at all appropriate, they use average wage, not median, they base it on gross income, not after tax etc.

    And in the end, they discover and conclude exactly what they set out to discover and conclude. That the answer to all these multi-billion dollar “social costs” = regressive road-pricing/congestion charges (see the 2007 conclusions). Except of course, they’re not regressive because as Joe Hockey infamously reminded us – poor people don’t drive cars…

    * Again, this is to my mind. I can’t assume everyone thinks the same way as I do. But of course, that’s what the report implicitly assumes in the opposite direction…

  20. Nick, while I am also interested in ‘technical’ measurement and valuation issues of the type you raise, I do believe these questions are well outside the topic area of this thread. If JQ puts on another ‘sandpit’ and you re-post the relevant material on it, I may reply. I say may because I am not always on the key-board.

  21. Ha. I didn’t get into any ‘technical’ matters, did I. Sorry for using you as a sounding board, Ernestine. I’m sure their econometrics are superb, and exceedingly thorough. But it’s their assumptions I’m interested in. I’d be very happy to be shown I’m incorrect on these.

    It’s possible I was wrong on the vehicle occupancy surveys, and that they weren’t sourced from Austroads/Arup …other candidates would be sources like the Victorian Integrated Survey of Travel and Activity (VISTA). What makes it difficult is they don’t even refer to them in the 2015 report – though they’re clearly a critical input. If I find them, I can try to post them in a sandpit down the track.

  22. Assumptions are part of ‘technical valuation’ matters, which in the case in question, are outside the topic of this thread. Sandpit down the track.

  23. @GrueBleen

    Conversely, GB #1, do you have any evidence that “unrestricted” borders causes actual damage (other than that generated by fear in the response)?

  24. “Open borders” is another one of those mythic constructs like “free markets”. Neither phrase makes any logical or technical sense when you analyze it. These phrases are political catchcries not firm or technical definitions in any way. These phrases make no sense in philosophy, nor in logic, nor in science, nor in economics. And I place these items in order of importance. Economics is the least important discipline of the four. If we don’t analyze matters first and properly at the philosophical, logical and scientific levels (with these disciplines informing each other) then our economics will be sheer nonsense; that is to say it will be sheer ideology.

    No market is perfectly free and no border is perfectly open. Indeed, the term “open border” is an oxymoron. If a border or boundary is perfectly open in every sense then it is not a border or boundary in any sense. It is non-existent.

    No market is perfectly free. We can easily see this. Every market exists in an institutional setting of society, culture, government, law, common law and custom. Every market is also regulated to a greater or less degree. For example, there are restrictions and even bans on trading many dangerous and illegal goods. Those categories overlap but are not identical.

    With borders, the correct way to look at such matters is to view them through the lens of complex system thinking. A nation is a system. A border is a boundary and a boundary is one of the defining characteristics of a system.

    “A system is a set of interacting or interdependent component parts forming a complex or intricate whole. Every system is delineated by its spatial and temporal boundaries, surrounded and influenced by its environment, described by its structure and purpose and expressed in its functioning.” – Wikipedia.

    To highlight the boundary issue: “Systems are a complex of interacting parts and processes which are interrelated in such a way that interactions between them sustain a boundary-maintaining entity. (Adapted from Laszlo.)

    If you fully abolished its boundaries, if that were possible, then a nation would cease to be a nation. Whether a national border is the only boundary a nation has is an interesting question. The answer is almost certainly no, but boundaries thus will be found to be implicit in many other ways. Immigration border control could be abolished while maintaining the “border of law”. You would be free to come into Australia but once you passed the border, Australian law would apply to you and indeed would apply to certain crimes committed abroad (and recognised by Australian and international law). The “open border” is thus not truly open in every sense.

    While capitalism exists, less controlled borders will favor capitalists over all other people on average and by a considerable margin. Free movement of capital clearly favors owners of capital the most. A free system, an unregulated system, always favors those with the most capacity. Just as an open buffet favours large-stomached gluttons, an unregulated capital system favors those with the most capital.

    Some poor workers can get a benefit from less controlled borders for humans, but most workers globally will be forced into a further race to the bottom under a de-regulated capitalist system. Where capital holds the whip-hand (almost everywhere now under neoliberalism), poor people moving to well-developed areas will force wages down and lift unemployment there (unless there is an absolute labor shortage there, a situation which pertains almost nowhere in the world now). There will be no concomitant increase in wages in the areas they left. The labor glut is global under conditions of advanced industrialization. Global labor arbitrage will ensure industry and jobs still move to the places with the poorest wages, the weakest regulations and the weakest environmental protections. The global average labor share of income will fall. This is the real world experience under neoliberalism or late stage capitalisism; call it what you will.

    See “The Global Decline of the Labor Share” –
    Loukas Karabarbounis
    University of Chicago and NBER
    Brent Neiman
    University of Chicago and NBER
    June 2013

    Abstract

    The stability of the labor share of income is a key foundation in macroeconomic models. We document, however, that the global labor share has significantly declined since the early 1980s, with the decline occurring within the large majority of countries and industries. We show that the decrease in the relative price of investment goods, often attributed to advances in information technology and the computer age, induced firms to shift away from labor and toward capital. The lower price of investment goods explains roughly half of the observed decline in the labor share, even when we allow for other mechanisms influencing factor shares such as increasing profits, capital-augmenting technology growth, and the changing skill composition of the labor force. We highlight the implications of this explanation for welfare and macroeconomic dynamics.”

    http://piketty.pse.ens.fr/files/KarabarbounisNeiman13.pdf

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