The case for opening borders

The overwhelming majority of would-be immigrants want little more than to make a better life for themselves and their families by moving to economic opportunity and participating in peaceful, voluntary trade. But lawmakers and heads of state quash these dreams with state-sanctioned violence—forced repatriation, involuntary detention, or worse—often while paying lip service to “huddled masses yearning to breathe free.”
 

Wage differences are a revealing metric of border discrimination. When a worker from a poorer country moves to a richer one, her wages might double, triple, or rise even tenfold. These extreme wage differences reflect restrictions as stifling as the laws that separated white and black South Africans at the height of Apartheid. Geographical differences in wages also signal opportunity—for financially empowering the migrants, of course, but also for increasing total world output. On the other side of discrimination lies untapped potential. Economists have estimated that a world of open borders would double world GDP.
 

Even relatively small increases in immigration flows can have enormous benefits. If the developed world were to take in enough immigrants to enlarge its labor force by a mere one percent, it is estimated that the additional economic value created would be worth more to the migrants than all of the world’s official foreign aid combined. Immigration is the greatest anti-poverty program ever devised.
 

Alex Tabarrok makes the case for opening borders, and it's a strong one. The ultimate NIMBY-ism isn't at the city level, it's at a national level. “Give me your tired, your poor, your huddled masses yearning to breathe free,” but just a few of them, the rest, the masses, they're on their own.

I would not be where I am today had my parents not come to the United States from Taiwan when my dad entered graduate school. Go back further, and my parents were lucky to be able to migrate to Taiwan during the turmoil in the 50's in China. I'm entirely the product of a long line of good fortune.

As noted in Good Luck Being Born Tomorrow, which I've linked to before:

97% of people born tomorrow will be in a country that is authoritarian, communist, doesn’t support same sex marriage, does not allow abortion, supports capital punishment or has seen over ten thousand deaths in recent armed conflicts. Good luck!
 

If you were reborn tomorrow, assigned randomly to be one of the babies born somewhere in the world, your odds of being as fortunate as you are now (I assume you are one of the lucky ones given you're reading this post) are worse than the odds of flipping a coin and drawing heads. A lot worse.

To believe that those not as fortunate deserve no chance to improve their lot, that takes a deep sense of privilege. As Tabarrok notes:

What moral theory justifies using wire, wall, and weapon to prevent people from moving to opportunity? What moral theory justifies using tools of exclusion to prevent people from exercising their right to vote with their feet?
 

No standard moral framework, be it utilitarian, libertarian, egalitarian, Rawlsian, Christian, or any other well-developed perspective, regards people from foreign lands as less entitled to exercise their rights—or as inherently possessing less moral worth—than people lucky to have been born in the right place at the right time. Nationalism, of course, discounts the rights, interests, and moral value of “the Other, but this disposition is inconsistent with our fundamental moral teachings and beliefs.
 

Freedom of movement is a basic human right. Thus the Universal Declaration of Human Rights belies its name when it proclaims this right only “within the borders of each state.” Human rights do not stop at the border.Today, we treat as pariahs those governments that refuse to let their people exit. I look forward to the day when we treat as pariahs those governments that refuse to let people enter.

The Good Dinosaur

But there was absolutely no way to do the number of sequences featuring big landscape shots that Sohn wanted, using Pixar’s traditional process, said Munier. They couldn’t design and render that much landscape in the time they had. And meanwhile, Sohn had fallen in love with the Jackson Valley on his research trips to Wyoming, and basically wanted to set the film there.
 

Enter the U.S. Geological Survey, which posts incredible amounts of topographical data to its website—including the height above sea level of all of the land features, and lots of satellite images. So Munier and his team tried downloading a lot of the USGS data and putting it into their computer, and then using that to “render” the real-life landscape. And it worked: They were able to take a classic Ansel Adams photograph of the Grand Tetons and duplicate it pretty closely using their computer-generated landscape. And with this data, they could point a digital “camera” anywhere, in a 360-degree rotation, and get an image.
 

“We ended up downloading over 65,000 square miles of USGS data,” said Munier. This “gave us the sense of scope for [Arlo’s] journey in the film.”
 

Informative Charlie Jane Anders' piece on the making of the Pixar movie The Good Dinosaur out this Thanksgiving. Because Pixar pushes on the bleeding edge of what's possible with technology,  each of their movies reflects a bit of what's just possible during the several years prior to release, though never at the expense of story.

Judging by the trailers, they've achieved a new level of photorealism in landscapes. Just watching it on my retina MBP, some of those trees and leaves and grass look just a penny short of real. If you removed the characters, who are rendered more cartoonish in style, and imagine an environment like this rendered in virtual reality at that resolution (not possible today, but not far future anymore), you can almost see how someone might choose the blue pill.

Star Wars Battlefront

I haven't played a video game in years. I don't miss it, though some of the virtual reality games I've demoed recently are so immersive that the novelty could lure me back in. Console games, though? That time of my life may have passed for good.

But then I watched this promo video for Star Wars Battlefront with my brother, and, well, my heart started to race. And then at 4:34 of the video, something happens that made me gasp, and a few seconds later my brother and I were screaming like idiots and searching online for the best deal on a Playstation 4.

I'm setting aside a bond now as a reservation for down payment when the virtual reality version of a Star Wars game comes to pass and I don my goggles and hand controllers to march into a lightsaber battle. It may be the most enticing reason for me to maintain some level of flexibility and physical agility as the years go by.

In Star Wars™ Battlefront™ you can battle in epic 40 multiplayer battles reminiscent of The Battle of Hoth. As the Empire, you must accompany AT-AT walkers as they march towards the Rebel base to destroy it. And as a Rebel, you must do everything you can to stop them.

Warriors, come out to play

Coming off legacy stuff is complicated for customers. For something like an Oracle database, that software has all the financial information and is all but impossible to leave behind. When Oracle introduced its cloud and fast data analysis products, they were aimed primarily at those virtually locked-in legacy customers.
 

All that now looks shaky. At its annual customer conference, Amazon on Wednesday introduced new features and services aimed at offering legacy customers on all sorts of computing systems not just easy ways to get off the old technology, but also better and faster ways their old data can work on A.W.S.
 

Among the most notable, there was a 47-pound data storage device that A.W.S. would ship to a customer, and for $200 would suck down 50 terabytes of data, incidentally converting it from an older system to a more modern one. There was a service called Database Migration, which takes data in proprietary systems and converts their schema to open-source products.
 

Fun to see my old colleagues and friends at Amazon Web Services continue to move aggressively. Clever ideas here to minimize switching costs for customers on legacy systems.

First AWS was for individual developers, then for startups, then for some large scale technology companies. Now it's going after any company that needs computing. Up (down?) the ladder they go.

How to allocate subsidies most effectively

Sometimes you hear something that sounds so much like common sense that you end up missing how it overturns everything you were actually thinking, and points in a far more interesting and disturbing direction. That’s how I’m feeling about the coverage of a recent paper on student loans and college tuition coming out of the New York Federal Reserve, “Credit Supply and the Rise in College Tuition: Evidence from the Expansion in Federal Student Aid Programs,” by David Lucca, Taylor Nadauld, and Karen Shen.
 

They find that “institutions more exposed to changes in the subsidized federal loan program increased their tuition,” or for every dollar in increased student loan availability colleges increased the sticker price of their tuition 65 cents. Crucially, they find that the effect is stronger for subsidized student loans than for Pell Grants. When they go further and control for additional variables, Pell Grants lose their significance in the study, while student loans become more important.
 

There’s been a lot of debate over this research, with Libby Nelson at Vox providing a strong summary. I want to talk about the theory of the paper. People have been covering this as a normal debate about whether subsidizing college leads to higher tuition, but this is a far different story. It actually overturns a lot of what we believe about higher education funding, and means that the conservative solution to higher education costs, going back to Milton Friedman, will send tuition skyrocketing. And it ends up providing more evidence of the importance of free higher education.
 

Thus begins this piece by Mike Konczal, fascinating throughout. This is a true mystery, because why does tuition rise more student loans are available, and why doesn't it rise just as much if funding comes in the form of Pell Grants? Konczal explains why this is strange:

David Boaz at the Cato Institute has a snarky post in response to the study, saying that “[u]nderstanding basic economics” would have predicted it. This is false, because economics 101 would have predicted the opposite. Economists fight a lot about this [1], but the simple economics story is clear. According to actual economics 101, letting students borrow against future earnings should have no effect on prices.
 

This derives from something called the Modigliani-Miller Theorem (MM), the frustrating staple of corporate finance 101 courses. A quick way of understanding MM is that how much you value an asset or investment, be it a factory or higher education, should be independent of how you finance it. Whether you pay cash, a loan, your future equity, a complicated financial product, or some other means that doesn’t even exist yet, you ultimately value the asset by how profitable and productive it is. In this story, which requires abstract and complete markets, expanding credit supply won’t drive tuition higher.
 

Now what would change your valuation, according to this theorem, is getting subsidies, say in the form of Pell Grants. This would make you willing to buy more and pay a higher price. This is one of the reasons why so much of the economics research focuses on Pell Grants instead of student loans: the story about what is happening is clearer. But, again, extensions of the credit supply, not subsidies, are doing the work here.
 

Conservatives position an increase in the student credit supply as enabling them to borrow against future earnings. I even read somewhere last year about a company that wanted to allow actors or other celebrities to sell ownership of their future owners. You could become a shareholder of, say, Jennifer Lawrence by fronting her some cash now in exchange for her take from future Hunger Games and X-Men movies and whatever else she does.

In the case of education, this entire proposal doesn't work if the increase in credit supply is met with an equal increase in tuition. Why does tuition increase in lock step with credit supply? Konczal isn't sure, and it's the central mystery.

Note that it isn’t clear why students borrowing more against their future is driving increases in tuition they’ll pay. It could be “rational” under arcane definitions of that word. It could be that in a winner-take-all economy, in which those at the top do fantastically and those who don’t make it do not make it at all, leveraging up and swinging for the fences is a smart play. It could be that liquidity and credit are important determinants of the economy as a whole rather than a neutral veil over real resources. It could be as simple as the fact that 18-year-olds aren’t highly calculating supercomputers solving thousands of Euler equations of their future earnings into an infinite future, but instead a bunch of kids jacked up on hormones doing the best they can with the world adults provide them.
 

This article on public options dives in deeper on the topic.

So far, so familiar. The interesting question is what happens when we generalize this logic to other areas, like higher education. Imagine a state that's considering a choice between spending, let's say, $1 million either subsidizing its public university system, enabling it to keep tuition down, or as grants to college students to help them pay tuition. On the face of it, you might think there's no first-order difference in the effect on access to higher ed -- students will spend $1 million less on tuition either way. The choice then comes down to the grants giving students more choice, fostering competition among schools, and being more easily targeted to lower-income households; versus whatever nebulous value one places on the idea of public institutions as such. Not surprisingly, the grant approach tends to win out, with an increasing share of public support for higher education going to students rather than institutions.

But what happens when you bring price effects in? Suppose that higher education is supplied inelastically, or in other words that there are rents that go to incumbent institutions. Then some fraction of the grant goes to raise tuition for existing college spots, rather than to increase the total number of spots. (Note that this must be true to at least some extent, since it's precisely the increased tuition that induces colleges to increase capacity.) In the extreme case -- which may be nearly reached at the elite end -- where enrollment is fixed, the entire net subsidy ends up as increased tuition; whatever benefit those getting the grants get, is at the expense of other students who didn't get them.

Conversely, when public funds are used to reduce tuition at a public university, they don't just lower costs for students at that particular university. They also lower costs at unsubsidized universities by forcing them to hold down tuition to compete. So while each dollar spent on grants to students reduces final tuition costs less than one for one, each dollar spent on subsidies to public institutions reduces tuition costs by more.
 

The same logic applies to public subsidies for any good or service where producers enjoy significant monopoly power: Direct provision of public goods has market forces on its side, while subsidies for private purchases work against the market. Call it progressive supply-side policy. Call it the general case for public options. The fundamental point is that, in the presence of inelastic supply curves, demand-side subsidies face a headwind of adverse price effects, while direct public provision gets a tail wind of favorable price effects. And these effects can be quite large.