What is the economic return on an unskilled migrant?


Migrants, even the best of them, take a long time to pay off the resources they absorb when coming to a new country.

And then there’s this: Sorry, Donald Trump: America needs birthright citizenship.

Fine. But tell me this, is there an upper limit on how many migrants we should take in or what sort of personal characteristics they should have?

Five years too late

It is so depressing to read such stuff. From The AFR today:

Dr Banks suggests with monetary and fiscal policy no longer able to spur additional economic growth, it is time for other changes that can spur activity.

This was the former head of the Productivity Commission lamenting that we have run out of the ability to use monetary and fiscal policy to generate higher levels of economic activity. The depressing part is, of course, that anyone ever thought we could. What we are seeing today is the end game in having wasted our resources in various loss-making stimulus projects. But he is the same as the rest of the economics fraternity. They are genuinely mystified by the deepening downturn that should have gone away with all their public spending.

Possibly even more irritating is to find the former Secretary of the Treasury, Martin Parkinson, on the front page of The OZ discussing Slow growth the reason to reform not delay. He was not just the Secretary when Labor was in government creating the problems, he continued as Secretary well into the present government’s period in office. Tell me again, Joe, how reformist you are. Well, now, way too late, we hear this:

“You will never be able to ­increase the potential growth rate without increasing productivity, and at the moment our performance on that is terrible. That is the starting point for the argument on reform.”

Is that so? So tell me, Martin, about all the public spending you signed up on as part of our stimulus and all the cuts that were never made.

Then there’s this: Labor takes aim at Malcolm Turnbull as NBN cost blows out by $15bn. The subhead:

The Labor leader, Bill Shorten, says communication minister ‘hasn’t been doing his day job properly’ as negative polls hint at Coalition leadership change

At least someone is pointing out just how bad a Minister he’s been. And with no little thanks to Malcolm, Bill Shorten is now preferred PM.

No safe spaces for Christians

What does anyone know about the persecution of Christians? From Jim Goad:

They know nothing of Christianity’s first few hundred years under the Romans. They know nothing of Tamerlane leaving hundreds of thousands of decapitated Christian skulls in his bloody wake. They know nothing of the religious underpinnings of the Armenian genocide. They know nothing of the mass slaughter of Christians under totalitarian communist regimes. They certainly know nothing about the fact that since the early eighth century, Muslim imperialists have raped, murdered, tortured, and beheaded Christians everywhere they could get away with it. They don’t know that the mass persecution of Christians during the French Revolution is considered by many to be the first modern genocide. They don’t know that in Saudi Arabia, Christians are routinely whipped in public and executed. They don’t know that in North Korea, Christians are being exterminated in gas chambers. Despite all the chest-thumping they do about “Islamophobia” and “anti-Semitism,” they don’t seem to know that an estimated 80% of all modern religious persecution worldwide happens to Christians.

And they definitely don’t act like they know that for decades, the Middle East has been one ongoing slow-motion anti-Christian Kristallnacht that only seems to be escalating.

Let my right hand forget her cunning

It is Psalm 137 in reggae. This is where it was sung and why.

The Jewish rapper/reggae artist known as Matisyahu demonstrated an unusual degree of courage yesterday when he performed at a Spanish music festival in front of a sea of Palestinian flags and hecklers from the boycott, divestment, and sanctions (BDS) movement.

Previously, Matisyahu had been disinvited to the festival because he refused to take part in a pro-Palestinian video and did not respond to questions about whether he believed in a Palestinian state. But the Spanish foreign minister along with the American and Israeli embassies lobbied the festival organizers and the artist was reinvited.

What happened when he mounted the stage should be made into a Hollywood movie:

Far from boycotting the reggae artist’s gig, the “hate Israel” crowd showed up en masse. And they came bearing flags, immense Palestinian flags, which they waved with gusto from every corner of the 20,000-strong crowd.

As Matisyahu took the mike and looked out to the audience, he was presented with an unmistakably hostile message. It was clear that those who sought to have him banished stood before him in protest. Then the catcalls started, with some chanting, “out, out.” It might easily have been unnerving, disorienting.

But then he began to sing about Jerusalem.

“Jerusalem, if I forget you, fire not gonna come from me tongue. Jerusalem, if I forget you, let my right hand forget what it’s supposed to do.”

And then, as he bounced and twirled around the stage, the most defiant lyrics of all: “3, 000 years with no place to be, and they want me to give up my milk and honey.”

“Tonight was difficult but special,” he later posted on Facebook, along with a clip of the performance.

What courage. Not to be intimidated when the concert organizers demanded he pacify the BDSers, and then to return to the festival’s schedule in defiance of the opposition, and chant Jerusalem on stage with such gusto.

What courage.

Is it still the GFC from 2009, you numbskull kidders?

It it is hard, indeed it seems impossible, to get across the message that using up resources to produce loss-making forms of output causes an economy to slow, lowers the standard of living and reduces employment. Keynesian economics is driven by C+I+G; whatever you spend on makes no difference. So here’s an interesting story, about which Malcolm Turnbull has had an important role to play:

The company building the National Broadband Network could blow its budget by as much as $15 billion after revealing that revenue flow will slow and the costs of construction are far greater than it first expected.

The government-funded company revealed that its peak funding will now come in between $46 billion and $56 billion, up from the $41 billion assumption it previously held.

The company is aiming to complete the build — which will pass eight million homes by 2020 — for $49 billion, which is 20 per cent more than its original forecast. A worst-case scenario would see costs blow out by 36 per cent or $15bn.

The increased funding has smashed the rate of return that the project will generate for the government, which will now come in the range of 2.7-3.5 per cent. The previous rate of return was around 5 per cent. Despite the low return the project will remain off the budget.

The funding increase has been brought on by increases in the capital and operational costs of the build as well as increases in the costs to roll out of fibre to the node technology.

This is the final para of the story, which for some reason did not mention Malcolm.

The NBN received another $4.7bn of government funds in the past year to take its total equity to $13.2 billion in equity at end of financial year 2015. Total government equity contributions are capped at $29.5 billion.

This is just one example of the worldwide waste of resources in one government stimulus project after another. No modern textbook, other than mine, can explain to you why our economies are heading over the cliff. As the latest news has it, Aussie stockmarket tumbles amid growing fears over health of global economy. You’ll have to remind me again what it is that has caused all these problems? Is it still the GFC from 2009, you numbskull kidders? Meanwhile, a bit of whistling by the graveyard:

Treasurer Joe Hockey said that while markets would fluctuate, the fundamentals were still good for the global economy, particularly the US.

He said several factors would cause volatility in the markets in the next few months, particularly any decision by the US Federal Reserve to move on interest rates in September.

“If they do increase their interest rates, then you will see movement of money from equity markets, probably into bond markets,” he said.

He said such volatility would hit confidence in Australia and that’s why the government had to keep reminding people that their economy is one of the fastest-growing in the world right.

The fundamentals are disastrous in the US and not so good here either. These Treasury advisors do not have a clue.

Brendan O’Neill – “Here’s my beef with gay marriage”

This is a guest post at Catallaxy by Brendan O’Neill on gay marriage:

Sinclair Davidson seems to think my main beef with gay marriage is that the people who campaign for it use unpleasant tactics. But this is merely an observation. And it’s the one I made on Q&A last Monday because I had just witnessed the doublespeak of Sam Dastyari, who said, in response to traditional marriage campaigner Katy Faust, that “people are entitled to have different views” (how generous of him) “but this American evangelical claptrap is the last thing we need in the debate”. For me, this summed up the illiberal liberalism of the gay-marriage campaign. “You’re entitled to your view; just don’t express it.”

Beyond this observation, however, my gay-marriage scepticism (an awful phrase, I know) is driven by a belief that gay marriage expands rather than diminishes the power of the state over our lives.

The first way it does this is through allowing the state to redefine the moral meaning of marriage. For much of the modern period, the state has brokered marriage, yes. But the moral idea and value of marriage is something that developed organically over centuries through the interplay of communities and traditions. That the gay-marriage campaign grants the state a new, unprecedented authority over how we define our personal relationships and family lives is clear from the relish with which the ruling elites of Canada, the UK and elsewhere have rewritten public documents to excise mentions of “mothers”, “fathers”, “husbands” and “wives” in favour of a more neutral language to suit their homogenisation of all relationships as “marriage”. Those who say “They’re only words, who cares?” clearly don’t know their Orwell: the policing of language is very often a policing of attitudes, a reengineering of societal values so that they better accord with the elite’s view.

The second way the gay-marriage campaign boosts the power of the state is in the realm of moral conscience and freedom of thought. New equality laws have been utilised to punish those who refuse to acknowledge gay marriage. Bakers who won’t make gay cakes have been taken to court. In the midst of the global celebrations that greeted Ireland’s “Yes” vote to gay marriage, few seem to have noticed that the Irish deputy PM said there would be no “conscience clause”, because it would be intolerable to “exclude some people or institutions from the operation of marriage equality”. Through gay marriage, the state — in the shape of the courts, the policing of “hate speech” and the restructuring of moral education in schools — is exercising greater control over what can be thought and said about human relationships.

So that’s my beef with gay marriage: it allows the state to increase its already considerable clout over both our personal/family lives and our consciences. The ugly tactics of the loudest gay-marriage proponents are no accident: they speak to this illiberal heart of gay marriage. There’s one question I’ve asked every liberal I’ve encountered in Australia, all of whom harangue me for my views on gay marriage: why are Western governments that are so allergic to freedom and autonomy passionately embracing gay marriage? They’ve all struggled to answer. I think it’s because gay marriage chimes brilliantly with these governments’ insatiable desire to diminish the sovereignty of the family and intervene more in our personal lives, and to police what we think.

People say Oz is different, because the law was rewritten in 2004 to say marriage is between a man and a woman. They say this means they’re campaigning for less government definition of what is an acceptable relationship. Look, I’m sure Australia is different in some ways. But from the chattering-class intolerance of dissent to your media’s suffocating conformism on this matter, your sameness to the rest of the West is what’s most striking. Sorry, Aussies, but on this you’re not as special as you think.

A final point: Sinclair, like others, says slavery and other bad things also existed for a long time and then disappeared, so what’s the big deal about marriage changing quickly too? To speak about the enslavement of vast swathes of humanity in the same breath as the inability of free, equal, often middle-class gays to get married is grotesquely to diminish that historic crime. What’s more, slavery took centuries to defeat, and its defeat came at the hands of huge numbers of ordinary people, black and white, fighting for freedom; gay marriage, by contrast, is an idea that has spread like mad in less than a decade and which is spearheaded exclusively by elites: lawyers, politicians, media people, think tanks. You can appeal to historical struggles for freedom all you like, but there’s no disguising the illiberalism, elitism and plain weirdness of the gay-marriage contagion.

Mathias Corpsman

A third of the time when I listen to some Government minister on about something, I have the overwhelming impression that they are of the left but trying to fake it on how a conservative would think and react to various events. And to tell the truth, I am less plugged into the who’s who of politics in the Liberal Party than I once was. But to listen to Mathias Cormann on Bolt this morning refusing an offer to defend Dyson Heydon and his integrity against Shorten and the union movement, even when twice invited to by Andrew, made me wonder who he and people like him think of as the real enemy.

That was a no-brainer. If there is any hesitation within cabinet about the absolute necessity, never mind the fact that it is the right side of the issue, to be using the Heydon business to beat the Labor Party over the head for its ties to a corrupt union movement, then these people have reached a level of political incompetence that is hard to fathom. If they really are on a mission to return Turnbull to the leadership, then they are as out of political judgement as the man in the moon.

Donald Trump – the inside story

I picked up from our local second-hand bookshop a copy of a hatchet job done on Donald Trump written in 1991 which goes by the name Trumped: the inside story of Donald Trump – his cunning rise and spectacular fall, a book written much too soon given his subsequent success. I cannot say I read every word, but as hatchet jobs go, what I came away with was a sense of someone who knew what he was on about, knew how to go about getting what he wanted, knew how to cut his losses when things did not work out, but was someone always in command of any situation, even as here, where he went in over his head in a series of deals on building casinos in New Jersey. But if you want a sense of who he is, the chapter headings are all quotes from Trump, and they reveal someone of substance even though they were not at all intended to be taken that way:

“Some people have a sense of the market and some people don’t. I like to think I have that instinct.

“People think I’m a gambler. I’ve never gambled in my life.”

“We were selling fantasy.”

“Despite what some people may think, I’m not looking to be a bad guy when it isn’t absolutely necessary.”

“Well, it’s all a game.”

“I want great promotion because it’s great promotion.”

“What I never anticipated was that we could win – and end up losing anyway.”

“Life is very fragile. Anything can change, without warning, and that’s why I try not to take any of what’s happening too seriously.”

“Sometimes your best investments are the ones you don’t make.”

“What separates the winners from the losers is how a person reacts to each new twist of fate.”

“Good publicity is preferable to bad, but from a bottom line perspective, bad publicity is sometimes better than no publicity at all.”

“In my life, there are two things I’ve found I’m very good at: overcoming obstacles and motivating good people to do their best work.”

“I’m loyal to people who’ve done good work for me.”

“Sometimes by losing a battle you find a new way to win the war.”

For all his outward appearance, he is nobody’s fool and gets things done. Meanwhile:

Southern spectacle part of strategy…
Senator Jeff Sessions Joins Donald Trump on Stage in Alabama – IN TRUMP HAT!

And in other news that might also be relevant, from Drudge:

Dow Plunges 531 Points in Global Selloff: Signs of slowdown in Chinese economy pressure stocks, commodities
World’s Richest People Lose $182 Billion as Market Rout Deepens…
Signs of panic-like selling…
China blamed for free-fall…
Oil biggest losing streak in 30 years…
CLAIM: Dow 5,000? Yes, it could happen…

We do live in interesting times.

Using the failure of anti-market policies as evidence markets don’t work

Now here’s an article I find really gets the point. By Per Bylund on Mises Daily with the quite nice title, Economics Is Dead, and It Is Being Killed Again. It’s hard to pick a best bit since you really do need to read it all. But to find someone as on the money as this is a rare event and needs to be brought to the attention of others. Here he is pointing out that the stimulus – as anti-market a policy as there has ever been – made us worse off which the left now uses as evidence that markets don’t work.

You have to applaud the anti-economics left for this rhetorical masterpiece. They have struggled for decades to sink the ship of economics, the generally acclaimed science that has firmly stood in the way of their anti-market and egalitarian policies, hindered the growth of big government, and raised obstacles to enact everything else that is beautiful to the anti-economics left. The financial crisis is exactly the excuse the Left has been waiting for. It is a slam dunk: government grows, Keynesianism is revived, and economics is made the culprit for all our troubles.

We see this now in education, as students demand to be taught (and professors demand permission to teach) a more “relevant” economics. Relevance, apparently, is achieved by diluting economics with a lot of the worst kinds of sociology, post modernism, and carefully structured discourse aimed to liberate us from our neoliberal bias. And, it turns out, we must also teach Keynesian ideas about how government must save the market economy.

We see this same agenda at academic research conferences, where it is now rather common to hear voices (or, as is my own experience, keynote talks) claiming that “it is time” for another paradigm: post-economics. The reason is always that economics “has failed.”

If this weren’t so serious, it would be amusing that the failure of Keynesian macro-economics (whether it is formally Keynes’s theory or post-Keynesian, new Keynesian, neo-Keynesian, monetarist, etc.) is taken as an excuse to do away with sound micro-economic theory to be replaced with Keynesian and other anti-market ideas. But it is not amusing. If most of the discussions heard are to be believed, the failures of central planning is a reason for central planning, just like socialism is a reason for socialism. The success of the market, on the other hand, is not a reason for the market.

It is incredible that economists in general don’t get it, but there is at least one who does.

A brief history of Say’s Law – which was not invented by Say

I have just done an interview for a podcast with Tom Woods on my first book, Say’s Law and the Keynesian Revolution which has as its subtitle, How Economic Theory Lost its Way. Some reflections on the interview about what is not well understood about Say’s Law. I will, of course, put the podcast up online when it is broadcast next week. Here are some reflections on that interview.

First, although it was called “Say’s” Law, the name was only given in the 1920s. Say had his law of markets (loi des débouchés), but this was that goods buy goods. Everyone knew that, going back to at least Adam Smith and probably well before. The relevant sequence of events to understand this issue is this:

1803 – Say publishes his Treatise in which he points out that goods buy goods which he did in trying to explain why recessions are not caused by a lack of money.

1808 – James Mill replies to William Spence who had argued that demand is the core necessity in creating employment and economic activity. Mill in his comprehensive reply, emphasises the impossibility of demand deficiency as a cause of recession and unemployment, but picks up Say’s point about goods buying goods.

1813 – Say publishes the second edition of his Treatise in which he re-writes his entire chapter on the law of markets to pick up James Mill’s point that demand deficiency does not cause recession – but gets it wrong by arguing that if Good A doesn’t sell then more of Good B needs to be produced to create an increased demand for Good A. No one thinks of it this way.

1820 – Malthus publishes his Principles in which he argues that recessions and unemployment are caused by general gluts (demand deficiency)

1820s – General Glut debate – virtually the entire mainstream comes to the conclusion that general gluts are never a realistic possibility – but the policy conclusion is that if Good A doesn’t sell, it should stop being produced. Say never gets it and continues to the end with his version that more of other goods (Good B) is the solution

1848 – John Stuart Mill’s Principles is published in which the full explanation of Say’s Law properly understood is found. It becomes the universal position of mainstream economics through until 1936. The conclusion universally held was that demand deficiency never causes recessions and increased demand will not lower unemployment. Only those on the left, especially amongst the followers of Marx, argued on the other side.

1921 – Fred Taylor publishes his Principles text in which he discusses demand deficiency and also notes that although a crucial point, the argument contra demand deficiency has never before been given a name and is therefore often overlooked. He gives it one: Say’s Law.

1920s – By giving this principle a name, it becomes the focus of much criticism but only on the American side of the Atlantic.

1936 – Keynes publishes his General Theory in which he attacks Say’s Law. He defines Say’s Law as “supply creates its own demand”, as close to a meaningless phrase as it is possible to find. But there is no doubt he is really in every way attacking the underlying principle, which he very accurately understands. He explains exactly what he is getting at on page 32 in the para which begins, “The idea we can safely neglect the aggregate demand function . . .”.

The idea that we can safely neglect the aggregate demand function is fundamental to the Ricardian economics, which underlie what we have been taught for more than a century. Malthus, indeed, had vehemently opposed Ricardo’s doctrine that it was impossible for effective demand to be deficient; but vainly. For, since Malthus was unable to explain clearly (apart from an appeal to the facts of common observation) how and why effective demand could be deficient or excessive, he failed to furnish an alternative construction; and Ricardo conquered England as completely as the Holy Inquisition conquered Spain. Not only was his theory accepted by the city, by statesmen and by the academic world. But controversy ceased; the other point of view completely disappeared; it ceased to be discussed. The great puzzle of Effective Demand with which Malthus had wrestled vanished from economic literature. You will not find it mentioned even once in the whole works of Marshall, Edgeworth and Professor Pigou, from whose hands the classical theory has received its most mature embodiment. It could only live on furtively, below the surface, in the underworlds of Karl Marx, Silvio Gesell or Major Douglas.

[As an additional note, the question I like to ask all my Keynesian friends is where did Keynes get the phrase “Say’s Law” from since he never mentions anyone else from whom he took so much as a single idea. I wrote an entire paper on Keynes’s plagiarism which was rife.]

Second, the most complete statement of the demand deficiency side of Say’s Law was produced by John Stuart Mill in 1848. The Liberty Fund just last month ran a series of papers on The Economics of John Stuart Mill for which my paper was the lead article. As I note in one of these articles [#16], Mill’s specific statements on these principles, which did not have a name in his own time, is scattered around his Principles of Political Economy. But in classical times these were the hardest of hard principles, an absolute bedrock and foundation for economic thinking. These were the conclusions:

1. recessions do occur and when they do the effect on the labor market is prolonged and devastating;

2. recessions are not caused by oversaving and demand deficiency;

3. recessions cannot be brought to an end by trying to increase aggregate demand.

After the marginal revolution of the 1870s, while these conclusions remained in place, economics shifted to the demand side (marginal utility) and the theory of the cycle almost went into hibernation. By the time Keynes writes the General Theory, virtually all of the anti-bodies against demand deficiency as a cause of recession had disappeared from amongst economists, especially those under forty. The conclusions of the General Glut debate had been washed completely away.

Alas, it does get me down that there is so much of this story that no one knows. If we are going to finally reverse the Keynesian Revolution and its poisonous policy prescriptions, we are going to have to reverse the notion of demand deficiency which Keynes introduced into economic theory. There is no issue more important than Say’s Law if we are going to get macro principles and policy right, but as I have found, it is almost impossible to get these things right because of the way the issue has developed over the years. In my view, you have to understand both the principle and its history to see the point given all the mystification that has entered into it over the past 200 years.