I like this article, it's very interesting and takes a unique perspective. You've convinced me of the premises of your argument but I want to disagree with your conclusion. I would not congratulate Biden for saving the economy in this manner. I believe it's an incredibly short sighted approach which works to the detriment of country long term. Why? Because this essentially a temporary fix, a temporary fix ontop of a thousand temporary fixes. Putting aside cultural arguments which I do find relevant to this issue, assuming they were all allowed to stay and the economy adjusts, the average American is much poorer in real terms. And this effect already began to take shape prior to the election which I think is the number one reason Trump won. The economy should have been allowed to crash, we are still producing a bunch of stuff no one demands, I believe Trump just might cause that crash despite it being the opposite of what he wants. Regardless this article really made me think so thank you.
Thanks for the thoughtful comment. I'm really glad it made you think. That's what all my posts are really about, just trying to change people's probabilities.
As far as your argument goes, I have to say I disagree that the average American is poorer in real terms. It's true inflation increased, but it did so across the world. That was a necessary step in order to get us out of a recession that was the worst since the Great Depression. The question was, like I said above, whether the U.S. and other countries could achieve a soft landing.
How long inflation would go on, how high unemployment would get because of interest rate hikes, and so forth. The U.S. did a remarkable job. But of course "real wages" might seem lower because of past inflation. But I have the graph about grocery prices going down, and when you look at other data, you can see that wages, during the pandemic actually increased more than inflation did. And the poorest workers experienced the highest wage growth. I'm getting this from this article:
So anyway I'm pretty skeptical about real wages going down recently. Perhaps because of tarrifs, but I don't think real wages were down by the end of Biden's term. Of course, maybe they rose in spite of extra immigration. But I think the fact that they rose during such record numbers of immigration lowers the probability that immigrants decreased them. And aside from empirics, we have all this great economic theory that points to immigrants increasing them! Immigrants positively contribute to GDP growth because of economies of scale and extra innovation (1/4 of entrepreneurs are immigrants) and increased output and productivity and so forth.
So I'm also skeptical about it being a temporary fix, when increased GDP growth, which I link above is empirically connected to higher immigration, is of course a long term good. And I don't think the economy should have been allowed to crash. C'mon man that would create hysteria. And think of all the lost potential GDP growth if it took 3 or 4 years to claw back up. That has serious long term effects.
Also, if goods nobody wanted were being made, we would expect the inventory to sales ratio to get much worse as stocks pile up. But in the U.S. it's historically pretty low:
Fundamentally, I believe in free trade, free economic mobility, freedom to sell whatever you want, freedom to buy whatever you want, etc. Of course there are edge cases like "Oh well should people be able to buy crack or child pornography?" and that can be debated morally, but in terms of principle, I generally think that we've become so rich the last couple centuries not because of new technology or science but because we finally let the average person have the freedom to make their own choices. And when you give people economic freedom under the rule of law and a good patent system and a couple other tweaks, you get pretty great stuff! You know, imagine if suddenly the rest of the U.S. cut themselves off from trade with California or something. No immigration, and no trade of goods. It would obviously be worse! Because in thriving places like Texas, they wouldn't get as many productive workers filling in the needed jobs, in Arizona, farms would cultivate avocados and sell them to east coasters for higher prices because they're growing them on less efficient land. Etc etc. There's a million reasons the rest of the union would be worse off the more you restrict people. That's generally the philosopby I then bring to looking at our current restrictions on British people, Kenyans, the Japanese, and so forth.
I agree with all the statistics you have presented and I find them very worthwhile. I think there's two things you are missing in this response to me.
1) illegal immigrants being of the same type as legal with regards to benefits for innovation, you are correct that immigrants are great for economies of scale, however those immigrants which are capable of contributing to productivity increasing technology do not need to immigrate illegally (for the most part.)
2) I'm not giving you a critique from a restricted trade pov, I'm giving you an Austrian critique, this is why I said the economy should crash. The true meaning of "goods are being produced that people don't actually want" is that if we were in the natural state of the economy without government controlled interest rates and inflation, we would likely see a massive decrease in spending and also a massive shift in investments. This is because artificially created conditions have made people switch their value orders and invest in what is likely to be desired given the created conditions, rather than what people naturally demand. In other words people's time preferences are being forceably increased. This is not good and until the economy is actually allowed to crash and re-adjust we will forever be chasing our tails trying to stave off the desired adjustments.
Why? Because this essentially a temporary fix, a temporary fix ontop of a thousand temporary fixes. Putting aside cultural arguments which I do find relevant to this issue, assuming they were all allowed to stay and the economy adjusts, the average American is much poorer in real terms. And this effect already began to take shape prior to the election which I think is the number one reason Trump won. The economy should have been allowed to crash, we are still producing a bunch of stuff no one demands, I believe Trump just might cause that crash despite it being the opposite of what he wants. Regardless this article really made me think so thank you.
https://www.dallasfed.org/research/economics/2024/0702
I like this article, it's very interesting and takes a unique perspective. You've convinced me of the premises of your argument but I want to disagree with your conclusion. I would not congratulate Biden for saving the economy in this manner. I believe it's an incredibly short sighted approach which works to the detriment of country long term. Why? Because this essentially a temporary fix, a temporary fix ontop of a thousand temporary fixes. Putting aside cultural arguments which I do find relevant to this issue, assuming they were all allowed to stay and the economy adjusts, the average American is much poorer in real terms. And this effect already began to take shape prior to the election which I think is the number one reason Trump won. The economy should have been allowed to crash, we are still producing a bunch of stuff no one demands, I believe Trump just might cause that crash despite it being the opposite of what he wants. Regardless this article really made me think so thank you.
Thanks for the thoughtful comment. I'm really glad it made you think. That's what all my posts are really about, just trying to change people's probabilities.
As far as your argument goes, I have to say I disagree that the average American is poorer in real terms. It's true inflation increased, but it did so across the world. That was a necessary step in order to get us out of a recession that was the worst since the Great Depression. The question was, like I said above, whether the U.S. and other countries could achieve a soft landing.
How long inflation would go on, how high unemployment would get because of interest rate hikes, and so forth. The U.S. did a remarkable job. But of course "real wages" might seem lower because of past inflation. But I have the graph about grocery prices going down, and when you look at other data, you can see that wages, during the pandemic actually increased more than inflation did. And the poorest workers experienced the highest wage growth. I'm getting this from this article:
https://www.americanprogress.org/article/americans-wages-are-higher-than-they-have-ever-been-and-employment-is-near-its-all-time-high/
Their sources are from the Bureau of Labor Statistics, so I have a high probability it's good data.
Also this is just plain old real earnings, FRED:
https://fred.stlouisfed.org/series/LES1252881600Q
So anyway I'm pretty skeptical about real wages going down recently. Perhaps because of tarrifs, but I don't think real wages were down by the end of Biden's term. Of course, maybe they rose in spite of extra immigration. But I think the fact that they rose during such record numbers of immigration lowers the probability that immigrants decreased them. And aside from empirics, we have all this great economic theory that points to immigrants increasing them! Immigrants positively contribute to GDP growth because of economies of scale and extra innovation (1/4 of entrepreneurs are immigrants) and increased output and productivity and so forth.
So I'm also skeptical about it being a temporary fix, when increased GDP growth, which I link above is empirically connected to higher immigration, is of course a long term good. And I don't think the economy should have been allowed to crash. C'mon man that would create hysteria. And think of all the lost potential GDP growth if it took 3 or 4 years to claw back up. That has serious long term effects.
Also, if goods nobody wanted were being made, we would expect the inventory to sales ratio to get much worse as stocks pile up. But in the U.S. it's historically pretty low:
https://fred.stlouisfed.org/series/RETAILIRSA
Fundamentally, I believe in free trade, free economic mobility, freedom to sell whatever you want, freedom to buy whatever you want, etc. Of course there are edge cases like "Oh well should people be able to buy crack or child pornography?" and that can be debated morally, but in terms of principle, I generally think that we've become so rich the last couple centuries not because of new technology or science but because we finally let the average person have the freedom to make their own choices. And when you give people economic freedom under the rule of law and a good patent system and a couple other tweaks, you get pretty great stuff! You know, imagine if suddenly the rest of the U.S. cut themselves off from trade with California or something. No immigration, and no trade of goods. It would obviously be worse! Because in thriving places like Texas, they wouldn't get as many productive workers filling in the needed jobs, in Arizona, farms would cultivate avocados and sell them to east coasters for higher prices because they're growing them on less efficient land. Etc etc. There's a million reasons the rest of the union would be worse off the more you restrict people. That's generally the philosopby I then bring to looking at our current restrictions on British people, Kenyans, the Japanese, and so forth.
I agree with all the statistics you have presented and I find them very worthwhile. I think there's two things you are missing in this response to me.
1) illegal immigrants being of the same type as legal with regards to benefits for innovation, you are correct that immigrants are great for economies of scale, however those immigrants which are capable of contributing to productivity increasing technology do not need to immigrate illegally (for the most part.)
2) I'm not giving you a critique from a restricted trade pov, I'm giving you an Austrian critique, this is why I said the economy should crash. The true meaning of "goods are being produced that people don't actually want" is that if we were in the natural state of the economy without government controlled interest rates and inflation, we would likely see a massive decrease in spending and also a massive shift in investments. This is because artificially created conditions have made people switch their value orders and invest in what is likely to be desired given the created conditions, rather than what people naturally demand. In other words people's time preferences are being forceably increased. This is not good and until the economy is actually allowed to crash and re-adjust we will forever be chasing our tails trying to stave off the desired adjustments.
Nicely reasoned. I have to let this soak in for a minute.
Thanks Daryl! Corrected it.
Why? Because this essentially a temporary fix, a temporary fix ontop of a thousand temporary fixes. Putting aside cultural arguments which I do find relevant to this issue, assuming they were all allowed to stay and the economy adjusts, the average American is much poorer in real terms. And this effect already began to take shape prior to the election which I think is the number one reason Trump won. The economy should have been allowed to crash, we are still producing a bunch of stuff no one demands, I believe Trump just might cause that crash despite it being the opposite of what he wants. Regardless this article really made me think so thank you.