But, in the first study of its kind, the MAC – set up by the last Labour government, and independent of Whitehall – said large-scale immigration was having a significant impact on the job prospects of the ‘native’ population.

The report, which follows years of controversy over whether immigration leads to fewer jobs for British workers, showed that every increase of 100 foreign-born working-age migrants in the UK was linked to a reduction of 23 Britons in employment between 1995 and 2010.

Between 2005 and 2010 alone, the number of working-age migrants in employment rose by 700,000 and displaced 160,000 British-born workers, it said.

What is the biggest single drag on the beleaguered global economy? Opponents of globalisation might point to the current crisis, which shrank the world economy by about 5%. Proponents of globalisation might point to the remaining barriers to international flows of goods and capital, which also serve to shrink the world economy by approximately 5%. That sounds like a lot.

But the truly big fish are swimming elsewhere. The world impoverishes itself much more through blocking international migration than any other single class of international policy. A modest relaxation of barriers to human mobility between countries would bring more global economic prosperity than the total elimination of all remaining policy barriers to goods trade – every tariff, every quota – plus the elimination of every last restriction on the free movement of capital. [Emphasis added.]

I’ve addressed the stupidity of the “free trade” advocates before, so I won’t do it again here.  However, I will address the problems with the concept of free labor.

First, the economic models used to demonstrate the wisdom of free labor often ignore the simple fact that the conditions facilitating trade in the first place are predicated on culture, and that allowing people from one culture to interact with the trade-oriented culture will diminish the support for the very conditions that allow for trade in the first place.  In other words, all cultures are different.  Some are pro-trade, others are not, and some are only pro-trade when the benefits are staggeringly obvious.  Expecting radically different cultures to interact with one another without also expecting a change in the cultural institutions that harbored that interaction in the first place is astonishingly stupid, and, indeed, ignorant of basic human nature.

This mindset, that the free market will be enough to ensure that all people from all cultures will behave rationally and interact peacefully with one another, is predicated on the wholly fallacious assumptions that people are inherently rational, that all cultures are equivalent, and that cultural biases and prejudices are easily overcome.  Of course, the real world differs significantly from this model.  People are not rational creatures; they are rationalizing creatures.  And, shockingly, people still hate people from other countries simply because they’re from other countries!

Economic growth is rarely (perfectly) linear and never guaranteed.  Furthermore, the conditions for growth are vast and complex, and so it is the height of arrogance to think that models that inaccurately measure a few irrelevant variables are going to make for a compelling argument.  Yet, this is precisely what economists are doing when they argue for free labor.

Second, free labor (and, come to think of it, free trade) advocates tend to ignore the very simple fact that wealth is not based on being able to buy things at lower prices.  Lower prices are the effect, not the cause.  Quite simply, economists ignore fundamental microeconomic principles, leading to this wacky macroeconomic theory.

Wealth, fundamentally, comes from producing something of value, whether for yourself or someone else.  As long as you value that which you’ve created in the quantity in which you’ve supplied it, you have created wealth.  If you create something that someone else values in the quantity in which they value it, you have created wealth.

The standard macroeconomic theory posits that people are effectively wealthier when they can consume more products at identical or lower prices.  Of course, this thinking extends to labor, with the argument being that cheaper labor enables one to produce more with less (in essence, the decreased cost of inputs means that cheaper labor translates to greater economic activity).

This argument is technically true, but irrelevant.  Lower prices as a result of cheap labor does not make consumers wealthier because consumption is, by definition, destructive since one is using up a resource.  What makes consumers wealthier is their own personal production, not lower prices.  Lower prices, in a sense, give the illusion of wealth because they make it easier for poor people to have the things that rich people once exclusively enjoyed.  Note that this is not to condemn lower prices in and of themselves, but rather to clarify that lower prices are no substitute for production.

And so, the argument made by free trade and free labor apologists is largely irrelevant.  Lower prices do not make people inherently wealthier.  Instead, they reveal how other people have become wealthier by improving their means and methods of production.  Confusing cause and effect is a fundamental error, and one that is often overlooked in this debate.

In sum, the argument for free movement of labor completely ignores human nature, as well as basic economic principles.  As such, it does not merit any further discussion, nor should it be taken seriously.

Decades of outsourcing manufacturing have left U.S. industry without the means to invent the next generation of high-tech products that are key to rebuilding its economy, as noted by Gary Pisano and Willy Shih in a classic article, “Restoring American Competitiveness” (Harvard Business Review, July-August 2009)

The U.S. has lost or is on the verge of losing its ability to develop and manufacture a slew of high-tech products. Amazon’s Kindle 2 couldn’t be made in the U.S., even if Amazon wanted to.

First, how can Gary Pisano and Willy Shih be sure of the keys to the future?  The eight-track used to be the way to the future of music; the laserdisc used to be the future of home movies (as did HD-DVDs).  How can anyone say with any degree of certainty that high tech products are the key to the future, especially in light of diminishing marginal returns?  The simple fact of the matter is that there is no way to predict what people in the future want, and there is no need, then, for this sort of histrionics.

Second, who says manufacturing is the key to future wealth?  What makes Apple products so popular isn’t their manufacturing specs; it’s how they’re marketed.  It may be that marketing is key to the future, especially if consumers become considerably more concerned with status.  As such, focusing on America’s ability (itself a logical fallacy) to manufacture certain products is shortsighted and unnecessary.

Finally, why is the ability to manufacture high-tech products considered a hallmark of American competiveness instead of domestic economic policy?  If one truly wants to understand why American manufacturing has declined, one need look no further than the federal government’s domestic economic policy.  It has become increasingly anti-business and anti-manufacturing over the past decades, and more supportive of foreign trade.  As I have demonstrated many times now, this combination is eventually going to prove fatal to American businesses.

Thus, the problem isn’t that “America can’t manufacture a Kindle,” it’s that American businesses are being increasingly hamstrung by the American government.  The solution, then, is to repeal the economically destructive laws put in place by the government; it is not lamenting over the decline of high-tech manufacturing.

What caused the 1992 L.A. riot? While this question has no definitive answer, the evidence presented in this paper does suggest that South Central L.A. had some characteristics that made it more likely than other cities to explode into a large scale riot. Our empirical results suggest that the ethnic diversity of South Central L.A., the high unemployment rates of young black men in that area, and the sheer size of Los Angeles all help explain the 1992 riot. [Emphasis added. HT: Chuck.]

One of the effects of free trade has been to increase unemployment in manufacturing industries.  Jobs in these industries are generally low-skill, and the proper domain of younger males, at least given the labor market value of young males (hint:  it’s really low since young males tend to lack intellectual capital, i.e. skills).  So, since there are fewer jobs available to young men as a result of free trade, and since young men without jobs are more prone to rioting, it would appear that free trade has a probable role in setting the stage for future riots.

Of course, it is entirely possible to avoid this possibility.  The government can either impose wage parity tariffs on all imports, which would have the effect of ensuring that any imported product would have the cost of minimum wage labor factored in, or the government can stop making illegal for young males to compete with foreign labor and production on price, which means eliminating minimum wage laws.  It is absolutely ludicrous for the government to have policies that hamstring domestic labor and favor foreign labor.  Something has to give eventually, and let’s hope it doesn’t take a large number of unemployed males rioting in the streets to convince the government to set a pro-domestic labor policy.*

* While I’m on the subject, I’d just like to note just how completely horrible it is that the government’s current economic policy is in the worst possible interest of the citizens it claims to represent.  Free trade only benefits domestic consumers because it enables them to buy goods at lower prices than they normally would.  Of course, the general price of goods wouldn’t otherwise be high in the first place if the stupid government hadn’t set policies that drove up the price of goods in the first place.  Between inflation, minimum wage, asinine “corporate” taxation, and incredibly cumbersome regulation, the government has managed to concoct a perfect storm of skyrocketing prices.

The only thing that obfuscates this fact is the presence of foreign trade, which the government welcomes because it helps keep consumers from knowing the true cost of government interference.  Of course, this charade can’t be kept up forever because foreign labor will eventually become more productive, leading to increased demand, leading further to increased prices (wages).  As this happens, the buying power of foreign labor will increase, relatively speaking, and drive up the price of goods on a broad, international level, meaning that Americans will eventually pay more for goods anyway.  By the time this happens, though, the American economy will have been so hamstrung as to become permanently crippled.

And that’s why I hate the American government and the politicians and bureaucrats that run it.  They are fools, every last one of them.  They, and I mean this literally, deserve to rot in the bowels of hell for all eternity for the fraud, deceit, and destruction that they have practiced against the American people.

The quick fix that got both Democrats and Republicans off the hook with a temporary bipartisan tax compromise, several months ago, leaves investors uncertain as to what the tax rate will be when any money they invest today starts bringing in a return in another two or three or ten years. It is known that there will be taxes but nobody knows what the tax rate will be then.

Some investors can send their investment money to foreign countries, where the tax rate is already known, is often lower than the tax rate in the United States and — perhaps even more important — is not some temporary, quick-fix compromise that is going to expire before their investments start earning a return.

Although more foreign investments were coming into the United States, a few years ago, than there were American investments going to foreign countries, today it is just the reverse. American investors are sending more of their money out of the country than foreign investors are sending here.

Since 2009, according to the Wall Street Journal, “the U.S. has lost more than $200 billion in investment capital.” They add: “That is the equivalent of about two million jobs that don’t exist on these shores and are now located in places like China, Germany and India.”

President Obama’s rhetoric deplores such “outsourcing,” but his administration’s policies make outsourcing an ever more attractive alternative to investing in the United States and creating American jobs.

This passage has puzzled me since I was a young man. It seems to me that individual liberty is obviously violated when governments intervene in trade. If a government imposes a tax on a good for the purposes of assisting the producers of a close substitute, this must be just as much an infringement of the liberty of consumers as when it imposes a sin tax on a good to discourage consumers from purchasing that good.

However, it is now clearer to me what Mill was trying to say. The first key to the puzzle is that Mill refers to ‘the principle of individual liberty’ rather than just ‘individual liberty’. What Mill means by the principle of individual liberty is explained a couple of paragraphs earlier as the maxim ‘that the individual is not accountable to society for his actions, in so far as these concern the interests of no person but himself’. According to that view, the individual should be accountable to society for ‘actions that are prejudicial to the interests of others’.

Now, in the paragraph immediately prior to his discussion of international trade, Mill acknowledges that damage to the interests of others does not necessarily justify the interference of society. In this context he discussed the views of society toward various forms of contest in which people who succeed benefit ‘from the loss of others’. He notes: ‘society admits no right, either legal or moral, in the disappointed competitors to immunity from this kind of suffering’.

The second key to the puzzle is that in the passage quoted above Mill suggests that all restraints are evil. If Mill is referring to coercion, as seems likely, then it seems to me that at this point he is close to recognizing the merits of the definition of liberty that Hayek later adopted. Hayek defined liberty as ‘a state in which coercion of some by others is reduced as much as possible in society’ (‘Constitution of Liberty’, p 11). This definition meets Mill’s desire to acknowledge that restraints are necessary to protect citizens from force and fraud, and may be appropriate under some other circumstances where individual conduct adversely affects the interests of others.

Mill seems to have been attempting to establish that the attitude of society toward individual conduct should depend on where it lies on a spectrum. At one end of the spectrum, where conduct affects only the individual actor, other people have no right to intervene. At the other end, force and fraud should obviously be illegal. At other points on the spectrum the effects of individual conduct on the welfare of society are ‘open to discussion’. (Mill uses these words are used in the introductory paragraphs of Ch. IV.)

In asserting that the ‘doctrine’ of free trade rests on equally solid ground to ‘the principle of liberty’ Mill is clearly implying that in our discussion of trade there should be a strong presumption that free trade enhances the general welfare of society. It follows that he must believe that government intervention in trade is generally an unwarranted form of coercion. That seems to me to be just another way of saying that such intervention is generally an unwarranted interference with individual liberty.

Later this year, the Obama administration and Congress will seek bipartisan votes to pass free trade agreements with South Korea, Colombia and Panama. With 87% of global economic growth over the next 5 years taking place outside of the United States, trade supporters believe these agreements will create jobs and prosperity by helping American companies tap into fast-growing export markets.

Opponents disagree. They argue that “NAFTA-style” trade agreements hurt rather than help the U.S. economy — and polls show that much of the public agrees.

But is this conventional wisdom correct? Or do trade deals work? As Washington gears up for hard-edged debates about trade, it’s worth exploring some common misconceptions about free trade agreements.