Are significantly lower, so this is another way the benefits of low skilled immigration. Low Skilled Services are cheaper in markets where there is a lot of immigration. Ok. There is a variety of other things that immigration does. We talked about the productivity spillover from other types of immigration. There are other impacts. I want to drive home the idea that we benefit from bringing in low skilled workers. There is this potential cost and maybe we are raising inequality, and that is a big concern, so we might want to couple this with transfer policies. It is a lot Like International trade. Maybe you can compensate the losers. In the u. S. You do not see much of this supposedly cost side of the equation. Theres good reason to think it is small. Theres the possibility that immigrants and natives work in different kinds of jobs and that firms are very adaptable in how they react to low skilled immigration. Finally, alex asked me to talk about my thoughts on policy, and all the heat and the noise seemed to be about illegal immigration, like what are we going to do about border enforcement, what are we going to do, are we going to have an amnesty . That feels like we are too late when we have that debate. You need to take a step back and say, why are they coming here despite the fact that is not legal to do so . The answer is they have this enormous incentive, they want to come here, they have the big economic gains from coming here, and on top of that, we want them to come here. We benefit from them coming. We demand their labor which is why they want to come. Maybe the problem really is not illegal immigration, it is why dont we have more low skilled visas, why dont we have more legal ways for immigrants to come . You may be concerned about other impacts of admitting a lot of low skilled workers, and my answer to that is look, they have this enormous benefit for coming here, if youre worried about the costs of admitting low skilled immigrants, why dont we capture that with visa fees or other things to capture those benefits for ourselves . Maybe in an era of budget deficits, maybe that is something to give thought to. Thanks for letting me give a talk here. I appreciate it. [applause] this is it . Great. Thank you very much for your time. I hope to give you something for it. I do not mean to alarm you, but i just met you and i know roughly how much money you make. Almost all of you, and not exactly of course, but i have a good idea, and the reason i have a good idea is because of a remarkable calculation that was done at the world bank recently by an economist, which is a great book of his called the haves and the have nots. He is assembled the data of real income of people all over the world, stuck them into a single harmonized database, and asked this question if you take some random person from that database and you want to predict their real income, adjusted for prices across countries, how far can he get toward a perfect prediction of that persons real income knowing nothing else about them except what country they live in, one fact only . And the stunning fact is 60 he can predict 60 of the real Living Standards based on only where you live and work. I want to let that sink in for a second because to me this is one of the most stunning facts about the economy or the world. Were talking about something important, that your real Living Standard and all that means for your ability to realize your dreams and the health and survival of your children, etc. And the calculation does not just suggest that where you live is more important than anything else about you, this number means where you live is more important than Everything Else about you combined, whether you are hardworking, lazy, black, white, female, male, your parents were rich, your parents were poor, hot, ugly, Everything Else about you explains a lot, but not as much as your country of residence. That is a remarkable situation that suggests there is an enormous inequality of opportunity in the world. You can notice it in places like this. Here is the border between the u. S. State of california and the mexican state of baja california. The minimum wage on one side of that border is it 57 cents an hour and a minimum wage on the other is an order of magnitude higher. Another way to look at the fascinating results is to think for a second, you have the same person doing the same task in two different places, and that is an arbitrage opportunity, the same thing is being sold to different markets for hundreds of percent differences, and it is an opportunity to add value. All arbitrage opportunities are an opportunity to create value in the world, to generate wealth. And it is common in the world to have the same person, to have a person who does a task for 250 a month in one place, be able to move, come to washington, d. C. , other richer parts of the world to do exactly the same thing for 10 times as much. Alex mentioned my paper that summarizes lets say nascent economic literature on what is the size of this arbitrage opportunity, how much value could be added to the World Economy by exploiting this opportunity. There are all kinds of calculation that amounts to saying how many people are you going to assume can move and what is the gain to each one of them. When you add them up, in sophisticated ways, you get to be really big numbers in the trillions. The global gdp gain to even modest increases in Labor Mobility rivals and exceeds the Global Economic gain from any other kind of relaxation of the International Economic barriers you can think of. What i talk about in the paper is that if you add up economists best calculations of the global gain from dropping all policy barriers to trade, so total elimination of tariff on earth, licensing restriction, and add to that the economic gain estimated by others of total elimination of every barrier, policy and otherwise, to the movement of capital, so perfectly allocate capital across the entire globe, eliminate all informational asymmetry, add those together and you cannot get to more than 3 trillion every year in global gain. Compare that to a modest increase in Labor Mobility, and i mean take one in 20 of people now residing him what the world bank defines as developing countries, allow them to work in richer countries, just one in 20 of them, and you get above 4 trillion, conservatively, and larger amounts of mobility would result in even larger gains. So really just titanic gains. I want to push back gently on the brilliant presentation by ethan, this is a gain that is primarily realized instantaneously by migrants, but these kind of population shifts occur over generations. If you were to say in 1900, ok, 80 Million Immigrants are coming to the United States and they are going to experience an economic gain over the next hundred years, but that gain would go to the immigrants . Now they are us. They were them then, but we are them now. Now i am us. These movements occur over a time scale where we should i am not sure it is meaningful to talk about us and them. This is a gain to the country because the immigrants become the country. What kind of doubts could you have about these numbers . There are not a lot of papers about this issue, an issue that needs to be studied a lot more. A lot of what i read about in the paper is how we could challenge numbers like these. What are people doing in papers like this . A very simple calculation of theres a bunch of people at a low income level, and what if we move a certain amount of them to a higher income level and multiply the amount of people moving by the income gained. You can think of four ways you can critique this that are pretty obvious. You might wonder maybe migrants are not as productive as natives at the destination. Something about their productivity is less when they arrive. What are people doing in papers you could say maybe there is some kind of bad economic effect on people who did not move at the origin, and that offsetting cost should be taken into it accounts in a global calculus. Maybe there is a offsetting negative economic harm at the destination which other the panelists have talked about, and fourth, you might have a non economic concern about all these economic gains, but how many of these people could feasibly move in any realistic political scenario, so why dont we leave in any realistic political scenario, so why dont we leave this hypothetical stuff on the table and talk about things that really matter. I want to take the rest of the time to surf lightly over the literature on these different subjects. First, lets talk about the gains to migrants. You could ask what is the productivity of a migrant who moves or the reverse of the question, if somebody had not moved, what would be their economic productivity . If you took one of them many ethiopian cabdrivers in washington and transported them to ethiopia, a what would be their productivity, and how would that differ from the average economic differences between americans and ethiopians . In a paper called the police premium, my coauthors try to estimate for the gains to immigrating the United States, and we tried to account for as many observable and unobservable differences between migrants and nonmigrants as we can. We got micro data from the world bank, from the u. S. , and from 42 other countries, stacked them all together and asked the question, how about an observably identical person from each of 42 countries and in that country and in the United States, what is their real income after adjusting for price differences, after adjusting for country of birth, after adjusting for country of education and age and education level and gender. The question were asking is, take a mexican, born in mexico, educated in mexico, left after age 20, and they are 35 years old and they have nine years of education and they are male, and then make all plausible adjustments based on self selection on determinants of them, and ask what do you end up with as the gap in economic productivity between that person in United States and that person in mexico. Here are the results for all 42 countries we did. The vertical axis is the multiple of that persons real income at home that they get in United States. The red, orange, and yellow parts are an analysis based on the degree of selfselection on determinants of income after you have left out country of birth, gender, education level, and age. Even after all those adjustments, youre still left with hundreds of percent gains. Another way to look at this is most of the determinants of poverty in ethiopia do not come with his cabdrivers. To turn shakespeare backwards, dear brutus, the fault is not in ourselves, it is in our stars, mostly in where we are born. How about the second objection about negative externalities at the origin . Theres a lot of literature about this, and i want to provoke thought briefly on this subject by taking a local thought exercise. Here is metropolitan washington, d. C. , and there are people in the world who believe that skilled migration from developing countries is so harmful that it should be referred to with the pejorative rhyming phrase brain drain. I do not use that. I just refer to it by the neutral term skilled migration because for the following reason lets take a low income part of washington, these parts east of the Anacostia River where incomes are relatively low, and ask the question, what is the economic harm that is done by allowing smart young kids to leave those places, allowing them to live elsewhere, allowing them to work elsewhere . Conversely, that is that the same logical question of asking what would be the economic benefit to those places of not allowing them to leave, that is, trapping them there, not giving them a decision about whether or not to leave. Lets set aside many ethical problems that you might have a policy like that and say, would it be effective . Well, you might wonder how much of the deficit in Human Capital production in those neighborhoods would be remedied by forcing the skilled people who have grown up there to go there, and the same thing happens between countries. The ocd has estimated by what fraction africas deficit of physicians would be remedied by the hypothetical relocation of all emigre african physicians back to africa, somehow, by black helicopters, i do not know. And the answer is about 10 of the deficit as estimated by the World Health Organization would be remedied by even that draconian, forcible relocation of every emigre african doctor, and that is the reason why doctors are not in africa is primarily due to very complex forces that are not remedied by forcing people to live one place or another. In this anacostia example you might be concerned about whether not allowing smart young people to leave that Geographic Area would it affect Peoples Education decisions. Isnt some of the reason people like people do stay in school and get an education the fact that they can get high incomes elsewhere . The same thing does happen between countries. In my research and the research of others, we have shown that the education decision, the extent and the specialties of education decisions of a lot of young people in developing countries are shaped by the opportunity to migrate, the option to migrate, even if not exercised. The bottom line on this is and this is going to sound like a strong statement, but i know this literature so i can say definitively, that there is no piece of evidence in the economic literature that any place on earth was ever developed primarily due to restrictions on movement or that any place on earth was ever made healthier by restrictions on movement of Health Professionals or any of the other effects you might imagine from restricting peoples movement. It makes more sense when we contemplate the real effects of a policy like trapping people in a low income neighborhood. Now i want to talk briefly about effects on people on the destination. I can cut this pretty short because madelin and ethan have done a fantastic job. I want to point out the long term discussion is not even worth having. Other economists have pointed out the u. S. Got a lot bigger between 1900 and 2005, and the u. S. Got four times bigger. In 1900 we were a country of 75 million people. Unemployment in those two years happens to be exactly the same. Somehow all of that labor force entry, less than half by immigrants and a lot of other labor force entry, especially by women during that time, and to have generated it proportionate terms roughly as many jobs as it took. Really this is very intuitive when you think in the long term immigrants and other labor force entrants are not just suppliers of their own labor. They are consumers of the produce of other peoples labor. In the long run we are all part of an economy. The only reason were having this discussion or doing research on it is in the short term, and the most influential piece of research in this area is by a person at berkeley who studied this episode in a paper in 1990. The mariel boat life, an agreement between carter and castro that allowed about 125,000 cuban refugees to leave cuba and arrive in miami. Research on it is in the short term, and the most influential 100,000 of them stayed there permanently. That means in three months there was this unexpected giant 7 jump in the size of the labor force of miami. He looks for effects on anybody elses employment or wages in the months after relative to other cities that do not experience this gigantic inflow and cannot find anything, nothing, even for blacks and hispanics, isolated, nothing at all. It is fair to say that even 23 years later it is still a subject of active research. How could that be . Madelin and ethan have talked a lot about some of those reasons. It might have to do with labor supply, the labor supply of natives was low in areas where these people ended up working. I have a new paper on that subject, documenting that the u. S. Workers supplied to manual farm work jobs in North Carolina did not seem to be affected by the Great Recession when unemployment jumped to from 4 11 . In economic terms, for just some jobs that immigrants are doing, the native supply seems to be the Great Recession when unemployment jumped to from 4 11 . In economic terms, for just some locally inelastic. It could have to do with labor demands, that there is something about large inflows immigrants that stimulate demand, and not just driving other workers down the labor demand curve by competing with them, but shifting outward labor demand curve. Ethan talked about all kinds of mechanisms for this. Firms adjust their Technology Choices in response to the availability of labor. Ethans research has been very influential there. Jenny hunt has a fascinating new paper showing that natives adjust their educational choices based on the presence of low skill migrants. Another at Boston University has some innovative work showing that skilled womens Labor Force Participation are influenced by the availability of low skill migrants. All kinds of things that stimulate economic activity, and therefore the demand for other peoples labor, including natives and including low skill natives, lots of things going on here. The mental model of one labor demand curve and is it downward sloping or not, the title of a 2003 paper, is much simpler than the actual economy. I want to talk finally about feasibility, and then i will finish. This is where this economist departs from economics. Even people agree entirely with every word i have just said and just pat me on the back and say would luck with that. That is impossible. I want to point out in america lots of things are impossible until they are possible and then they are possible. One of the most inspiring documents in all of u. S. History is this letter from ben franklin to congress in february 1790, and you might know that franklin died in april of 1790, so this is the last public act of his life. He dashed off a letter representing a quaker association, saying how about you guys abolish slavery right now and 1790, not just end the slave trade, bu