Bryan Caplan is wrong about open borders and the size of government

Bryan Caplan once again claims that open borders would reduce the welfare state. He uses two misleading pieces of evidence, based on Alesina et al. (2001):

1. First, internationally, more ethnically fragmented countries have less social spending as a share of GDP.

This compares underdeveloped third world countries like Peru and Guatemala with Western Europe. Ethnically fragmented societies tend to be poorer and less well organized, which makes a large welfare state hard to finance. But we are discussing immigration to the west, not to Guatemala.

Alesina et al. (2001) further use social spending, a narrow component of government spending which is even more biased towards rich European countries.

I use the total size of government (taxes as a share of GDP 1990-2001), from the OECD, and only for rich OECD countries, as well as fractionalization data from Alesina et al. (2001). The period is chosen to correspond with the years when ethnic fractionalization was calculated.

As you see, there is no statistically significant relationship between ethnic fractionation and the size of government among advanced OECD countries.

2. The second graph of U.S states which Caplan cites is equally flawed. This uses the generosity of welfare expenditure per recipient, controlling for state income.

As I pointed out in my earlier post, generosity per welfare recipient is an improper measure to evaluate diversity and the size of government. More poor minorities mechanically increases the number of those on welfare. Likely, the state will respond by making welfare less generous per recipient. The total cost may however still go up, since there are now simply more people on welfare. New Hampshire can afford to be more generous than Maryland.

This is why I use aggregate numbers, which suggest that American states with more minorities spend more in total. After all, we are discussing the effect of open borders on the overall size of government, which is a aggregate number. Even if open border forces us to be less generous per welfare recipient, increasing the number of poor people tends to expand government.

Caplan doesn’t counter any of my other arguments. In particular, let me stress once again that even if open borders makes the majority population more anti-government, after a while their preferences will not matter, since they will inevitably become a minority of voters.

One more point. Looking at third world countries is also misleading for another more subtle reason. Poor countries tend not to have yet developed liberalism, an important mediating factor between ethnic diversity and the size of government.

Non-liberal voters probably become less generous if their taxes are going to poor people from other ethnic groups. This is especially true in poor countries such as Africa or Latin America. However, liberal western voters likely become more supporting of government intervention if poverty is concentrated among disadvantaged racial minorities.

This is because they view a society where the white majority is rich but where blacks and Hispanics are poor as racist and discriminatory, in addition to merely having an uneven distribution of income (I think this view makes some sense). Poverty which is spread out evenly between races is by contrast perceived as more likely to be the result of a reasonably fair market process, and therefore less morally offensive.

I know I can’t persuade Bryan Caplan of this, because in my experience he is too ideologically dogmatic regarding open borders to listen to anything other than perhaps hard data. For instance, I was banned from Econlog after I debated the fiscal cost of unskilled immigration.

But the rest of us should simply read the arguments of the American left to test my claim. What are the overwhelmingly white Hufftington Post, New York Times and Daily Kos more bothered by, poverty among rural whites (their co-ethnics) or poverty among African Americans and Hispanics?

Or look at how movies and the media portrays poor Appalachian whites (“rednecks”, “white trash”) compared to how poor minorities are depicted.

For the same reason, I think using a definition of ethnic fractionation of different white groups (such as different language groups in Switzerland) which Alesina et al. use is misleading. We should calculate the share of racial minorities, since liberals view black or immigrant poverty more problematic than white poverty.

Racism carries a bigger moral punch in our society than the unequal distribution of earnings among whites.

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