Saturday, August 18, 2007

Opportunity Cost and Immigration

I have little or no pity for the roofers, drywallers, textile workers, etc., who have lost their jobs to immigrants.
Why should they be protected from competition? According to what principle?
Let's say two individuals make widgets. Joe and Larry. Who should you buy a widget from? Let's assume they are of equal quality. Then you buy from whomever sells for less, let's say Joe.

Why? Because it shows that Joe's next best alternative is worse than Larry's next best alternative. He has a lower opportunity cost.

If Larry can make widgets at a cost of $4 or whatsits at a cost of $5, these are his two options.
If Joe can make widgets for $4 or whatsits at a cost of $6, these are his two options.

Who should do what? Let's say we want ten of each. If Larry makes whatsits and Joe makes widgets our economy uses $90.
If they switch roles the economy uses $100.

Everyone is better off if they allocate their energies according to what their next best alternative would be. This would be revealed in the price that each would be willing to sell their widgets for. Joe would be to sell for less because his next best alternative has a higher cost than Larry's next best alternative.

What this shows us is that competition forces people to use their resources in such a way that the entire economy benefits, instead of just concentrated groups.

We might like to protect our buddy's job, because he's our buddy. But we are hurting ourself, and others in the long run, by choosing a less efficient allocation than would have resulted through competition.

No one should ever feel like their job is secure, or that they have an entitlement to anything. Competition forces everyone to always work to improve themselves, to innovate better processes, to invent better machines, to work better, smarter, faster, more efficiently. It is through this competitive process that America has risen to a position of affluence such that it can afford to be concerned about environmental issues and such other luxuries.

Those who fall behind in the competition won't be excluded from participation, they just won't be paid as much. Their services have fallen in relative value.

Immigration is ultimately either about protection of privileged status under the law - classism, or about abuse of public programs - statism.

1 comment:

Pedro said...

This is why I don't understand why economic conservatives haven't championed an open border policy.

The so called conservatives sound more like the cold war communists building walls between east and west Germany.

Interesting post.