– October 21, 2019
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With the move from pumpkin-spice-everything season to peppermint-everything season, we’re going to start hearing radio commercials suggesting that you should not buy a gift for the person on your list but should instead sponsor the gift of a duck, a chicken, a goat, or a sewing machine. Samaritan’s Purse is one organization that works to provide Christmas gifts for children in low-income countries. It’s a neat idea: you fill a shoebox with little gifts, and then the organization distributes them to poor children.

The intentions are laudable. As I tell my students, though, the most valuable thing you could probably put into a Samaritan’s Purse shoebox is a forged US passport. This would help them by making it easier for people to get to the places where their labor is most valuable. As Bryan Caplan has pointed out in his extensive discussions of the economics of immigration, almost all of the Haitians who have escaped extreme poverty have done so by leaving Haiti.

Why? Places like Haiti have lousy institutions compared to the United States, Canada, Mexico, the Bahamas, and many, many other countries. Haitians enjoy relatively little economic freedom and, therefore, relatively few opportunities to produce and exchange. Effective institutional change is difficult, however, and it comes rife with very likely unintended consequences. Simply swooping in and replacing one government with another can do considerable long-run damage, and as much as it might be tempting to think that having the right strongman in power will lead to prosperity, work by William Easterly suggests that this simply isn’t the case: strongmen tend to be bad for growth, and Lee Kuan Yew, for example, is the exception rather than the rule.

Institutions encourage three kinds of entrepreneurship first explained by the economist William Baumol. There is productive entrepreneurship, which is entrepreneurship of exchange. It is positive sum, and it is the kind of improved resource allocation or creative destruction that leads to economic progress. There is unproductive entrepreneurship, which is (at its best) merely redistributive. This is the kind of entrepreneurship that takes place when lobbyists are fighting about tax rates and when politicians are introducing new tax plans based on the idea that they will stand a better chance of election if they promise to tax Bad people and give money to Good people.

The third kind of entrepreneurship is destructive. There is a blurry line between unproductive and destructive entrepreneurship insofar as even zero-sum struggles consume resources, but destructive entrepreneurship happens when people expend resources crafting policies that make people worse off, on net, relative to a world without the policy. Destructive entrepreneurship happens in the regulatory sphere when firms seek to erect barriers to entry or when immigration and international trade are restricted for the benefit of domestic special interests.

Bryan Caplan makes an important point in analogizing immigrants in poor countries to people trapped in Antarctica or the desert. Immediate relief might demand sending a coat to someone in Antarctica or a glass of water to someone in a desert, but over the long run, the obvious solution that gets Antarcticans and desert dwellers out of extreme poverty is to get them out of Antarctica or the desert. Countries like Haiti are institutional wastelands on par with Antarctica and the desert — and it is a real tragedy given the vibrancy and beauty of Haitian art, music, literature, and cuisine.

This leads me to question typical justifications for the state, which Douglass C. North defines as “an organization with a comparative advantage in violence, extending over a geographic area whose boundaries are determined by its power to tax constituents.” The usual story we hear is that we have states because they can use their coercive force to provide public goods for which free-rider problems are largely insurmountable. However, the public goods states provide have to be balanced against the public bads they provide — in this case, things like border walls that prevent the global labor market from integrating fully and that, if Michael Clemens’s estimates are even in the right ballpark, impoverish the world.

Of course, there are a lot of problems that would come with filling Samaritan’s Purse shoeboxes with forged passports and other immigration or residency documents —- not the least of which is the considerable legal risk that comes with acquiring and distributing forged documents (there’s a lot of jail time associated with this, I think). Actually buying a forged passport, it seems, is pretty expensive (a quick Google search said about $3,500, which I actually thought a little on the low side — and of course, just because it’s on the internet doesn’t make it true). It illustrates and expresses a pretty important point, though: it’s really hard to make people better off in the long run, and the best way to do it is to get them to where their labor is most productive — which in the case of Haitians, means “pretty much anywhere but Haiti.”

A lot of people might balk at this and suggest that immigrants will lower our wages or take our jobs (they won’t), destroy our culture (not very likely), or burden our welfare state (again, probably not). Indeed, there seems to me to be something a little hollow about claiming we want to help the poorest people in the world while actively keeping them off the proven path to prosperity.

The most recent Nobel Prize in economics was awarded for work on using rigorously evaluated randomized controlled trials to evaluate development policies and ideas (Vincent Geloso discusses the prize for AIER here). It’s important work, but there are, as David Henderson points out in a Wall Street Journal article assessing this year’s prize, a lot of really big ideas on the table that could dwarf the effect of even the most well-done small-scale intervention. 

If we are serious about helping people escape extreme poverty, then it’s time to look into what the aforementioned Clemens calls The Biggest Idea in Development that No One Really Tried —  specifically, getting people from where their labor has lower value to where their labor has higher value.

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Art Carden

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Art Carden is a Senior Fellow at the American Institute for Economic Research. He is also an Associate Professor of Economics at Samford University in Birmingham, Alabama.

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