Two points – one unrelated to immigration.

1. Is it not odd that employers who actually hired these workers, albeit at lower wages than they feel they deserved, are the targets of lawsuits? After all, are not the the low wages of these workers caused by other employers choosing to NOT offer jobs to these same people?
   
2. American employers who end up hiring illegal immigrants and are subsequently caught face severe penalties for doing so.

In either case, employers in industries where wages and skills are low face very costly risks when they hire either American workers at low wages or illegal foreign workers at low wages. Whether they choose to hire at all is an interesting question. Even if they do hire, it is not clear which worker employers would prefer to hire. If we assume the same productivity levels of each worker – and if we assume that you pay each worker the same, whether you hire an illegal or not is a function of what the expected costs of getting caught with an illegal as compared to the expected costs of being investigated for discriminating. Add to the costs of hiring American workers payroll taxes and the uncertainty of government policy which may impose additional costs and penalties upon you for not offering health benefits or certain working conditions, and it seems that the balance is tilted in favor of immigrant hiring even if the money wages paid to each group were identical.

I had one more thought. Think about the humanity of all this. In one case, employers are vilified because they seem to not be doing enough to help a low-skill (native) worker. In another case, in what could very well be the same exact job paying the same exact wage, employers are vilified because they are doing too-much to help a low-skill (non-native) workers. I don’t want to hear about the “legality” of immigration – I just want to point out the absurd position employers often find themselves in. There’s a good reason why I wimped out and am working “for the man.”

Low prices are excoriated because some view this activity as unfair to other businesses that cannot lower their costs as much. The worry is that Walmart will lower prices so low as to drive other companies out of business, and then when all of the other competitors are gone, then Walmart will jack up the prices of everything and take us for a serious ride. Nevermind that this has never been proven to have happened, and nevermind that consumers are big winners here, let’s just look at why Progressives are upset about these policies. It seems to me that they think it is unfair to inefficient, high cost, unprofitable competing businesses. And gosh, we just can’t have them go out of business.

Here is the pretzel twist: how come when these evil, large, greedy, price cutting firms compete in the labor market by offering high wages to workers the same arguments are not levied against them? Seriously. If the University of Rochester really wants me to teach here (for whatever reason) they bid up my wage. And they might bid it up so high that nearby competing institutions have no chance to secure my services. So, Rochester gets the good students, and gets high quality economics courses offered, while Nearby U. gets worse students and lower quality economics courses taught. This has the same competitive impact as U of R charging “cut rate” prices for students to enroll.

So I ask my dear enlightened progressives why is not OK for firms to outcompete other firms by making the lives of consumers better off, and at the same time it IS OK for firms to outcompete other firms by making the lives of other workers better off? You can’t have it both ways, can you?

• “we shouldn’t allow American companies to outsource some of their production overseas, because it costs American jobs”
• “we shouldn’t allow French wineries to sell their wines over here, because that hurts the New York State wine industry”
• “if we have too many firms selling the same product around the world, that is wasteful and excessive”
• “if we allow people to trade with whomever they want, pollution and environmental damage will migrate to poorer and less well regulated parts of the world”

And so on. Ignore for the time being the accuracy of any of those statements. I suspect that if you queried people holding these particular views about what they thought about “monopoly” that a large majority of them would also shudder in horror at how big, evil businesses can exploit customers if they have “too much control.”

But hold on a minute. You simply cannot hold both positions, not even as a matter of faith. Take the case of French wines causing problems for New York wineries. If you think competition from high quality international wines takes money out of the pockets of New York vintners, then you must also conclude that competition from Virginia vintners takes money away from New York vintners, or that competition from Long Island vintners takes money away from Finger Lakes vintners, or that competition from Cayuga Lake wines takes money away from Keuka and Seneca Lake vintners! Why is competition from French vintners so awful, but competion from the guy down the road less so? Furthermore, if you want to take this to its logical conclusion, mustn’t you also have the belief that vintners and consumers would be better off if there were just one single winery, say, right here in the western Finger Lakes? But I thought monopoly was bad? Maybe there is a “right” number of firms. Not too many so as to be wasteful and destructive, and not too few so as to be able to exploit us poor customers and workers. That notion is malarkey.

Of course, competition is a glorious thing – it lights a fire under producers encouraging them to innovate, to discover the needs and wants and desires of current and potential customers, to figure out ways to deliver higher quality and lower costs, and it helps us consumers sort out the wheat from the chaff.

I get questions like this all the time. Readers can imagine my answer. But the reason for the post is an obvious contradiction here. Government lovers the world around like to use economic theory to justify their market interventions. With the financial crisis raging, and the health care sector causing such “problems” a new favorite theoretical justification for technocratic planning of our lives is “an information problem.”

The crux of such arguments are that private markets suffer from terrible information asymmetries, and government intervention is required to overcome them. For example, many insurance markets are thought to break down because those being insured know more about their propensity to need to file a claim than do the insurance companies themselves. Such a distinction leads to the unraveling of insurance markets, with only the high risk folks getting insured and at a very high cost. One “solution” is to FORCE everyone to stay insured.

What does this have to do with short-selling? Well, if it does anything, the presence of short-sellers in a market provides much needed information about markets and expectations. And now, government lovers the world around are saying that TOO MUCH INFORMATION is also problematic – they wish to prohibit or severely restrict short-selling. You can’t have it both ways folks.

What’s next? Should we restrict long-buying too? After all, if lots of people get into the long-buying business, expectations of future price increasesmight stimulate irrational “fear” that the market will continue to go up, and allowing people to purchase stocks fuels speculative bubbles. Let’s ban that activity? Heck, shouldn’t we ban the short-selling and long-buying of everything else too?

Seriously, think of what else resembles “short-selling” … individuals sell an asset now that they do not own, and agree to buy it in the future for delivery. Do businesses not manage inventories this way? Do farmers not hedge risks in this way? Sounds a little like surrogate mothering too!

Another way to think of his point is to ask just how much of the earth’s land area would be taken up by people, if all of the people on earth lived like the folks in Manhattan do. Manhattan isn’t even nearly the most densely populated area in the world, but I use that example because many of us would not find it intolerable to live in such a place (as I write this from the comforts of a suburban mid-sized city …).

• Earth has 150 million square kilometers of land (this ignores the other 70% that is water).
• The Earth has about 7 billion people
• The population density in Manhattan is 27,257 people/km²
• So, to fit all 7 billion people in a city with the same density as Manhattan would require 7 billion /  27,257 people/km² = 256,815 km²

Taken together, if everyone on earth lived in modern American city, we would only require 0.17% of the total land area on earth! In other words, all of Asia would be empty, all of Africa would be empty, all of Australia would be empty, all of South America would be empty, all of Mexico would be empty, all of Canada would be empty, every island, isthmus, ocean, lake, etc. would be emtpy. All of these people would fit in a square area that is roughly 507 kilometers on each side (about 315 miles).

As a point of comparison, this is about the size of the entire state of Oregon. So if all of the world’s people lived in a Manhattan-like city, not only would every part of the globe be empty, but so would 49 of the 50 American states. Such a population not only would fit in Oregon, but of course could easily fit into Alaska, Texas, California, Montana, New Mexico, Arizona, Nevada or Colorado, and still leave plenty of room for parks and other amenities.

Let’s leave the talk of resources and producing for larger populations for another day, it is not the purpose of this post. But the one thing I would like to point out in addition to the above point that 7 billion people is really not any significant physical challenge in terms of living areas, something about the population discussion always confused me. When you ask people about the Black Plague, or the Spanish Flu, or the prospects of a Bird-Flue pandemic, or Mad Cow pandemic, they always paint horrible pictures of devastation and destruction … because that is true. Losing that many people is horrible in a huge variety of dimensions. If that is the case, then how can it also be true that increases in population are something we should worry about? The two stories just don’t fit together. Like the temperature, and like prices, there is not a “right” population … and just nashing teeth about a population that is too large does not make it a problem. It isn’t.