05/09/2006
Republished on VDARE.com on May 09, 2006
Forbes, April 20, 1998
THIS MAGAZINE’s editor-in-chief wrote one of the many respectful obituaries for Julian Simon, the University of Maryland business school professor and libertarian theorist who died recently at the tragically early age of 65. These tributes were striking evidence of the extraordinary intellectual revolution of our time — and its imperfections.
At the end of the 1970s Simon made a now-famous bet with environmentalist Paul Ehrlich, author of The Population Bomb, that the real price of various key commodities would be lower in ten years' time. Ehrlich had to pay up.
Simon won this bet because he had grasped a single great truth: The price mechanism works. Rising prices choke off demand, encourage more economical use and, ultimately, call forth new supply. Ehrlich lost the bet because, like many scientists and lawyers, he simply had no concept of these tradeoffs. And, to be fair, neither did many people in that decade of economic controls and gas rationing by shortage. When, as a young financial journalist, I challenged the assumption that consumers would go on greedily guzzling gas at absolutely any price, I was hooted down by an entire editorial meeting as a hopeless ideologue. This would not happen now. (Well, not for that reason.)
It was as a fellow libertarian ideologue that I first met Simon — at a 1990 Manhattan Institute seminar for his new book, The Economic Consequences of Immigration. He greeted me warmly, quizzed me about my rumored deviationism on the immigration issue and inscribed my copy flatteringly. We proceeded to have, alas, a distinctly acrimonious public relationship, especially after the 1995 appearance of my own book Alien Nation: Common Sense About America’s Immigration Disaster — which came to conclusions quite contrary to his.
On immigration, Simon had again grasped a single great truth: You can’t reason simplistically from increasing immigration to native dispossession. As he put it: "Immigrants not only take jobs, they make jobs."
In his book, however, Simon made important but little-noted qualifications. He acknowledged that, while immigration may increase aggregate output, specific groups of workers may very well be displaced, e.g., low-skilled blacks. And any increased output may not even go to them but to others, e.g., upper-income whites. Simon also noted — proudly, he invented the concept — the "negative human capital externalities" of immigration. Mass unskilled immigration could eventually overwhelm the higher skills of natives, he admitted — the macroeconomic equivalent of getting a cab driver in Manhattan who can’t speak English. This was why Simon, contrary to a widespread impression, did not advocate opening the borders.
The critical qualification to Simon’s truth, however: To show nice things can happen is not to prove nasty things can’t happen — and aren’t happening.
Thus the 1965 immigration act, which restarted mass immigration after a 40-year lull, accidentally instituted a perverse selection process. It effectively favored lower-skilled immigrants. Researchers began reporting the consequences about ten years ago. Their findings were confirmed recently by the National Academy of Sciences' survey The New Americans: Post-1965 immigration has brought essentially no proven aggregate economic benefit to native-born Americans; it is imposing an annual average net fiscal cost (through transfer payments) of about $200 per native-born household — $1,200 in California.
Simon, who did little primary immigration research himself, simply ignored this.
In retrospect, Simon’s truth about environmentalism is similarly incomplete. Population might grow safely forever. But it might not. Disasters do occur. More fundamentally: Even if the U.S. could be turned into a continent-size Calcutta — do Americans want that?
We are all free marketeers now. But the free market is not all things. It must function in a framework of institutions and values. That framework needs attention, too.
Julian Simon was a light cavalryman of the intellect. He was brilliant at swooping on key positions far in an enemy’s rear. He was not designed to hold those positions against sustained counterattack. But then, that was not his role.
I last saw him at a Hoover Institution immigration debate. Before it started, partly to lull him, I mentioned my Charticle (Forbes, May 20, 1996) showing that recent slow GDP growth rates were actually the long-run historic norm. Disturbing news for libertarian ideologues who like to blame the slowdown on encroaching government. As one ideologue to another, was there an answer?
"There is," he said. "I'll tell you later." But he had to catch a plane.
Right or wrong, it would have been interesting. I wish he were still here to tell me.
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