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The Problem with Aggregate “Calculations” of the Value of Immigration

Economists on both sides of the immigration debate use statistics showing that immigrants have X net effect on tax contribution/consumption and Y net monetary effect on the private economy. A fatal problem when using these statistics to argue for or against immigration is that, beyond the monetary effects of immigration, the nonmonetary effects1 of immigration must also be taken into consideration to know whether natives will benefit or be harmed by immigration2 (in the ex-ante sense). However, state interventions into the economy restricting the sphere of private property render economic calculation in the realm of immigration impossible.

The monetary statistics associated with the economics of immigration include immigrants’ effects on employment, wages, prices, local and federal government budgets, etc. The nonmonetary effects of immigration on natives include all happiness or unhappiness natives feel as a result of immigration, and can be based upon factors such as real or perceived understanding of immigrants’ particular political views, languages, diets, artistic tastes, preferred sports, heights, weights, ages, etc. Who one lives and interacts with plays a role in one’s happiness, and this role cannot be reduced to dollars. Instead, the monetary effects of immigrants must be melted down and amalgamated together with all other considerations in the minds of individual natives to determine whether they subjectively evaluate the arrival of any individual immigrant as “good.” Knowing the monetary effects of immigrants without knowing the nonmonetary effects is basically useless for the purposes of the immigration debate. It’s like deciding to accept a roommate into one’s home knowing how much the roommate will pay for rent, but not knowing who the roommate is. And unfortunately, as long as decisions on immigration aren’t made at the level of individual property owners choosing to host immigrants on their property or sell them property, the nonmonetary effects are forever out of grasp, lost to the calculational chaos of centrally-planned immigration.

If immigrants pay X dollars more than they consume in taxes, and produce Y benefit for the private economy in dollar terms, these statistics nonetheless can never tell us whether immigration is a net ex-ante benefit or harm from the perspectives of the subjective preferences of native individuals. If Smith is willing to pay Jones $1000 to move in with him, Jones may refuse, because he prefers having the house to himself to living with Smith. If the state forces Jones to take Smith as a roommate and accept the $1000 a month offer, Jones is now $1,000 a month wealthier in terms of money, and yet he is ex-ante harmed because the nonmonetary harms of having to live with Smith outweigh the benefit of the $1,000 a month.

Likewise, if there are public roads, public parks, public squares, public libraries, public schools, compulsory education laws, welfare programs, and other state prohibitions on freedom of association, even if immigrants confer net monetary benefits to both government budgets and the private economy, we cannot know if the arrival of immigrants is beneficial from the standpoints of natives. Like in the case of the unwelcome but paying roommate Jones, if the domestic residents had been left to their own devices under a free market where the roads, schools, and every inch of land were privately owned, and freedom of association were unhampered, they may have chosen not to have allowed these immigrants onto their property, fully aware of the monetary benefits.

The reverse is also true in some cases. Particular immigrants could be net tax consumers and reduce real income, but in a pure private-property order, they could nonetheless be welcomed by natives. If Jones loves his grandmother, he may choose to live with her, even if she contributes nothing to rent and increases the utility bills, because living with her yields a net benefit to him, even accounting for the monetary loss. So long as natives voluntarily wish to invite immigrants into their homes, businesses, and schools from outside of the country, but the state places obstacles in the way of this process, immigration restrictions will cause losses for both the natives and immigrants in question despite anticipated monetary harms by immigrants.

Using statistics about the monetary effects of immigrants as a rhetorical tool to advocate for or against immigration is rowing without a paddle, because the economy and wealth consist not only of money, but also of all of the intangible factors that contribute to the economy. The lack of uninhibited property rights, as per Mises’ economic calculation problem of socialism, creates calculational disarray in the realm of immigration. So long as the state nationalizes immigration policy with a simultaneous combination of immigration restrictions, subsidized immigration, and forced integration, advocating changes in federal immigration policy is analogous to advocating for changes in policy in Soviet concrete production: more bumbling in the dark. The way to ensure that immigration benefits both immigrants and the natives whose persons and property come into contact with these immigrants is through the privatization of all resources.

  • 1. Nonmonetary satisfaction is also called “psychic income,” but this term is misleading, because how individuals value monetary income is based upon individuals’ subjective value scales, and in this sense is also “psychic.”
  • 2. Regarding the immigrants themselves, so long as they voluntarily choose to immigrate, we know a priori that their decision to immigrate is always ex-ante beneficial from their perspective.

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The Mises Institute exists to promote teaching and research in the Austrian school of economics, and individual freedom, honest history, and international peace, in the tradition of Ludwig von Mises and Murray N. Rothbard. These great thinkers developed praxeology, a deductive science of human action based on premises known with certainty to be true, and this is what we teach and advocate. Our scholarly work is founded in Misesian praxeology, and in self-conscious opposition to the mathematical modeling and hypothesis-testing that has created so much confusion in neoclassical economics. Visit https://mises.org

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