Free-market approaches to immigration: Legrain vs Becker
What should be done? One answer, particularly favoured by Guardian readers, is essentially to scrap immigration restrictions. There is indeed a strong economic argument for a policy of open borders. This was perhaps best put recently by Philippe Legrain in a paper for the IEA. Legrain points out that free movement of labour between countries boosts world output in the same way as free movement of capital and free exchange of goods and services.
However this case is a difficult one to argue in the current political climate. At the very least we all expect some sort of restrictions on the entry of criminal migrants, including potential terrorists. More significantly, as we approach Brexit, politicians are aware of the widespread perception that uncontrolled migration can impose externalities on the existing population – pressures on housing, the health service, schools and possibly competition for jobs driving down pay in some fields. Arguably these costs are exaggerated, but in a democratic polity they cannot simply be dismissed.
If Legrain’s arguments represent one free-market position, another approach is that offered by the late Gary Becker in his 2010 Hayek Lecture. In this lecture, Becker suggested that governments should set a price each year for settling in the country, a price which would match the number of applicants with the numbers which were felt appropriate to admit. Any externalities could be offset by what amounts to a sort of Pigouvian tax. And those coming in would primarily be those who would be able to support themselves and had significant future earning power.
This is perhaps a second-best solution, but it would allow market forces a role, unlike the current situation where arbitrary migration statuses are imposed by government. And it would help provide a sort of answer for hard cases like Shane Ridge and Brian White. Even if they could not afford the Becker-style fee themselves, I have no doubt that the generous British public would respond to an appeal as they often do in funding many other deserving causes. A charity could be set up to formalise this. I’d be willing to contribute.
Is it feasible politics? Well, we already have accepted the principle involved by the way in which we treat investors and entrepreneurs who want to come into the country: if they put up enough money, they can come in. That is why we have so many Russian oligarchs resident here. Moreover the levy which is now imposed on firms who bring in employees from outside the European Union involves the same principle, albeit the charge is currently much lower than that which would clear the market.
Thus, we’ve got Beckerian elements in our immigration system already. Why not travel a bit further down that road?