Freedom, Justice, and Economics

To sign up for a National Insurance number at the 7 Worcester St building in Oxford, United Kingdom, one must walk up three long, narrow flights of stairs– just like in the private health insurance market.

From the Inundation Department. Sitting in a coffee shop one afternoon, I saw a young woman feeding her infant inattentively while she chatted away with a gaggle of friends. Meanwhile, the six-month-old was waving her hands and feet in what I took to be furious indications of satiation. Lying on her back in her stroller, bottle propelled into her mouth, I could only imagine her sense of desperation.

There’s something that makes me uncomfortable about many discussions of anti-Semitism. I can’t put my finger on it exactly, but it has to do with (i) the extent to which I think about being Jewish as racial versus religious, and (ii) how I feel about proponents’ tight linkage between the State of Israel and Judaism.

More or less, I think of Judaism as a religious thing, as a set of beliefs, rituals, and cultural factors that can in principle be separated from bloodlines. I’m aware that at this point in my life, many of these “cultural factors” are so deeply ingrained in me that they might as well be racial characteristics. But I nonetheless resist the absoluteness of the racial definition, in no small part because it aligns me with people like the ultra-Orthodox who are more different from me than (say) many secular Christians and Muslims.

Second, I think of Israel as a state– a political entity– rather than a dream.  As a result, to my mind a priori exclamations that “Israel has a right to exist!” don’t suffice. To what extent does any state have a “right to exist”? Who decides? On what principles?

It was recently decided that Iraq didn’t have a right to exist in its form as a repressive Baathist regime; some might argue that Sudan doesn’t have a right to exist now in it’s current genocidal incarnation. Broadly, the question is when states engage in sufficiently awful behavior that the international community can “legitimately” contemplate infringing on sovereignty. After thirty years of severely restricting the political and economic freedoms of a third of the population it controls, a serious (though perhaps not ultimately convincing) case can be made for Israel’s illegitimacy.

On many of these matters I’m obviously different from other Jews. They purport to speak for me when they insist on equating criticisms of Israel and challenges to Israel’s “right to exist” with Anti-Semitism, but my feelings obviously differ. As a result, despite my cultural and philosophical loyalty to Judaism, I’m stuck outside of the political debates. I’m pleased for the possibility of high-level international discourse about Anti-Semitism, but concerned that noone will represent my voice, and that the absence of this kind of moderate perspective — which rigidly separates hatred of a group from hatred of a State — will make true reconciliation less likely.

Missing from the recent immigration debate, and crucial to its wise resolution, is a coherent view of any long-term objective of reform of immigration rules. To wit, I propose one such objective:

In one century all nations should have open borders.

Freedom, Justice, and Economics provide three independent rationales for this position.

Limitations on movement directly compromise freedom. If someone wants to move to a new country, immigration rules generally should not prevent the implementation of that free choice. And people do want to move, for reasons including rejoining family members, fleeing persecution and war, and pursuing economic opportunities. Quotas turn away applicants arbitrarily, limiting the freedom of potential pioneers and pilgrims.

Justice could be enhanced by opening borders because the location in the world of someone’s birth should not determine his or her fortune in life. More specifically, cross-country inequality and inequality of opportunity are enormous, and it would be just to allow people to migrate through the golden door.

Economic arguments tend to support free movement of the factors of production. Immigration restrictions prevent labor from moving freely to the places where it can efficiently be employed. Immigration generally raises average income among the original population of countries that receive immigrants; and presumably the migrants would themselves be “better off,” evidenced by their free choices to venture abroad. Economists have been irresponsible in strongly advocating free movement of capital while keeping quiet about the economic benefits of allowing free movement of people.

So, principles of freedom, justice, and economics all suggest that, at least in the long run, people should be able to move wherever they want in the world. In the short run, I see no inherent problem with temporary holds for security checks; strategies for anticipating and mitigating possible cultural clashes; techniques for ensuring that existing populations can protect community standards; and other ways to promote smooth integration of migrants and the countries that welcome them.  However, the aspiration should be that we all have much to gain from immigration: much to learn about the world, and much to trade with each other. Looking toward to a century of policymaking with the objective of open borders in mind, we can chart a smooth path to that world of greater freedom, justice, and prosperity.

Senate Democrats succeeded in June in preserving the estate tax. To assess this outcome, first some facts.

The IRS website reports that before 2004, only estates worth more than $1 million were subject to the tax. In 2006-2008, only estates worth more than $2 million will be taxed. Most estates are smaller than these thresholds, and some estates carry exemptions, so only about 2% of estates are subject to the tax. According to the BBC story above, the estate tax is projected to raise about $1 trillion over the next decade.

Philosophical arguments about the estate tax:

• (con) Double taxation should not be allowed. People are taxed on their income when they earn it. After the remainder is received, it should be free and clear.
• (pro) Resources should be earned, and kids have not earned their parents’ wealth.

Economic arguments about the estate tax:

• (con) Saving promotes economic growth, and most standard analyses imply capital should not be taxed. Thus estate taxes, which reduce the returns to capital accumulation, ought to be eliminated.
• (pro) Without estate taxes, inequality can grow without limit.
• (pro) Estate taxes motivate (tax exempt) charitable giving.
• (pro) Estate taxes, which are only incident upon the extraordinarily rich, have only minor consequences for their wealth accumulation: people with taxable estates are so rich that their saving is driven by much more than the bequest motive.
• (pro) The marginal utility of wealth to the extraordinarily wealthy is much lower than the marginal utility of wealth to the typical individual in society. Estate taxation is a great way to redistribute.
• (pro) People with estates subject to tax will be able to escape some of the taxes anyway by making gifts during their lifetimes and setting up trusts and other tax shelters.

On balance, estate taxation is very compelling for philosophical and practical reasons. It justly implements the principle that wealth should be earned. And the freedom it takes from the dying is less than the freedom it creates for others through efficient redistribution.

In fact, the inexorable conclusion for me is that justice and freedom would both be best celebrated by extremely high estate taxes. Since this way of playing Robin Hood is so economically sensible, in a utilitarian sense it is a brilliant way to expand freedom. And since equality of opportunity is so obviously enhanced by taxing transfers of wealth, in a philosophical sense it is a brilliant way to expand justice. When I think about estate taxes my ultimate question is: Why shouldn’t we raise estate tax rates to 100%?

One justifiably prominent question as we approach the fifth anniversary of the 9/11/2001 attacks is: Why have there been no subsequent attacks on American soil? I propose a politically suicidal answer that may nevertheless have some merit: Al Qaeda and the other terrorists aren’t really such a big deal. They don’t have the skills, the determination, the incentives, or the resources to pose a particularly great threat.

This is an obviously controversial position. I cursorily propose eight reasons to take it seriously:

1. The 9/11 attacks did not make use of unconventional weapons.
2. Al Qaeda members and leaders were “surprised” that the 9/11/2001 plane-projectiles caused the collapse of the WTC towers.
3. The passengers of United Flight #93 demonstrated that hijackers would never again be able to use a plane as a projectile.
4. Al Qaeda financial resources, so far as they are publicly documented, amounted to only a few tens of millions of dollars per year prior to the 9/11/2001 attacks.
5. Subsequent attacks on the US would provide no benefit for Al Qaeda in its hypothesized efforts to topple the Saudi regime.
6. Radicalized Muslim communities are uncommon in the US.
7. Vulnerabilities abound in the US: it wouldn’t take much sophistication to pull off a major attack.
8. Whatever the size of the threat, domestic politicians have strong incentives to exaggerate it.

If, with the trillions of dollars the US has spent on homeland security and defense since 9/11/2001, further attacks hadn’t been “prevented,” I would have been surprised.