Saturday, December 5, 2015

Immigration and economic vigor

At the "Five Short Blasts" Forum: November Employment Report Looks Strong – in the “New Normal” Economy:
... To hear economists tell it, the economy is doing great. Even the Federal Reserve has begun to sip the Kool-Aid, licking its chops at the prospect of jacking up interest rates next month.

... Our “new normal” high is 2%, or about six million workers, lower than it was before the recession...

Nevertheless, the Federal Reserve sees this as a good time to shoot a hole in the boat. I think it’ll be sorry.

Pretty interesting stuff. Well written. Shows graphs. Looks at the numbers (like "Per Capita Employment") his own way. Pretty interesting stuff.

The guy's name is Pete Murphy.


Murphy's post links to an older one: 315,000 More Workers Vanish in November (from back in 2011):
If President Obama has been smart enough to restrain the growth in the population through cuts in immigration, he’d now be talking about a real, significant drop in unemployment – one that actually feels like an improved economy – instead of one that’s been trumped up by proclaiming that millions have simply given up looking for work.

I don't think I ever looked at immigration. Pete got me interested.

The Migration Policy Institute has a graph showing the "annual number of U.S. legal permanent residents" for the 1820-2013 period. Plus, you can download the numbers. So, I did. Then I went to FRED looking for population numbers, for comparison.

Graph #1: Annual Number of Legal U.S. Residents as a Percent of
Total Population: All Ages including Armed Forces Overseas
(Damn! I forgot to clear the subtitle line.)

General uptrend since 1952, and an unusual spike around 1991. Dunno the explanation for the spike. Same trend (and same spike) appear at Migration Policy Institute.

Graph #1 starts out showing around 0.1% of population as immigrants. One person in a thousand. In the late years it shows 0.3 or 0.4% -- three or four in a thousand people. Three or four times the starting number, but still not a lot.

Dunno if immigrants still count as immigrants after they get citizenship, or if they come out of the count. That would affect the interpretation of the graph.

Dunno what Murphy has in mind when he says Obama should have put restraints on immigration. Looks to me like the immigrant population was falling all through the Obama years.


Pete Murphy's sidebar offers his proposed 28th Amendment to the Constitution of the United States. The text of it says
The United States shall not be a member to any international organization that does not recognize the United States’ fundamental right to manage international trade in its best interest.

Sounds good to me. The same proposed amendment says
The United States shall not maintain a trade deficit with the rest of the world. The Congress shall enact trade policy utilizing import quotas and tariffs as necessary ...
I have to reserve judgement on that.

I like the site because Murphy has developed his own theory -- a "theory of population density-induced decline in per capita consumption", as he puts it. I find it interesting (in the sense that I have to think about it before I know what I think about it).

On his “Free” Trade? page, Murphy lays out an overview of his theory:
... as population density rises beyond some optimum level, per capita consumption begins to decline. This occurs because, as people are forced to crowd together and conserve space, it becomes ever more impractical to own many products. Falling per capita consumption, in the face of rising productivity (per capita output, which always rises), inevitably yields rising unemployment and poverty.

He's trying to explain the decline in consumption, or the sluggishness of aggregate demand. He's got his eye on the target, and his explanation is far more interesting than Scott Sumner's. (The interesting thing about Sumner is not his solution -- print more money -- but that he manages to get away with saying it while calling himself conservative.)

My kneejerk is that the lethargy in consumption and/or aggregate demand is due to the cost of accumulated private debt, combined with the widespread desire to reduce rather than expand that debt. That seems a much stronger argument to me than Murphy's notion that overcrowding makes owning things impractical.

I've not yet read enough of Pete Murphy to pass judgement on his work. But he does leave me a bit confused.

No comments: