Wednesday, July 12, 2006

One argument I've read for restricting immigration is that it would increase our productivity in the long term because the higher cost of labor would encourage innovation, especially automation. Thus, instead of bringing in nurses from the Phillipines, we should follow the Japanese example and invest more in robots to care for our elderly. I've often read a similar argument in favor of making petroleum more expensive, either through taxes or regulations. It goes like this. Businesses are too focused on short-term profitability to adequately invest in alternative fuels. Therefore, we'll keep overusing oil until reserves become so low that there isn't time to switch to something else without suffering an economic catastrophre.

Both arguments boil down to the same thing. We're short-sighted when it comes to innovation. Necessity being the mother of invention, we must create necessity now. In the long run, this will make us better off.

I don't buy it. To the extent that we are short-sighted, let us have direct tax incentives for savings and R&D. This addresses the problem more efficiently and fairly than does creating specific artificial scarcities of things like gasoline.

By the way, there are certainly other arguments for restricting immigration (e.g., its effect on our institutions and culture) and taxing gasoline (e.g., offsetting costs of pollution and public road maintainence). For this post I just want to shoot down a bad argument.

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