It’s obvious that nations are places, right? But somehow that fact is lost in much of the debate over trade and immigration. Instead, the argument usually goes something like this: Trade and immigration help some people and hurt others, though gains should exceed losses in the aggregate. How do we weigh benefits to winners against harms to losers?

But trade and immigration policy don’t just affect people. They affect places. Why should that matter? Places experience neither pleasure nor pain. Places do not love. If you prick them, they do not bleed. Isn’t it right that economists ignore places, and focus on how policy affects human beings?

No, it is not right. It is dangerously obtuse. You will often hear economists laud the indirect benefits of market economies. Where markets flourish, virtues such as tolerance, diligence, entrepreneurialism, and creativity thrive as well. Markets depend upon trust, and market-based societies tend to develop unusually strong habits of trust between unrelated strangers, as well as institutions for punishing violations of good faith impartially. Where there are markets, there is industry, human capacities are exercised, and profitable collaborations are encouraged. Markets promote wealth, and affluence leads to beautiful private spaces, and then beautiful neighborhoods and vibrant cities for all. Markets create incentives for human beings to improve themselves even more than their homes, filling the world with interesting, passionate, talented people.

These indirect effects of economic activity amount to what I’ll call “emergent public goods”. These are distinct from (but complementary to) traditional public goods, like roads and parks, that governments explicitly purchase. But here’s the thing: In successful nations, access to emergent public goods is the single greatest asset most citizens have. Why would so many people from broken countries give up whatever wealth they’ve accumulated to live in the United States or Western Europe? Because access to the public goods on offer in those places is worth more than all that they own, and more than the awfulness of having to start over in a strange place, confused, mute, and alien. Even when direct public goods are withheld (for example, from illegal immigrants), emergent goods flow like air to everyone, simply by virtue of where they are. “Opportunity”, the fudge by which economists turn the pain immigrants endure into net-present-value enhancing rationality, is nothing more than an emergent public good. And opportunity, like other emergent public goods, is attached to place.

I am (very reluctantly) trade-skeptical at the moment, and not because I think that the United States’ present aggregate losses are larger than its gains from trade. On the contrary, I wish to see Americans’ current debt-for-goods trade stop despite any aggregate gains, because I think that this trade pattern is undermining America’s capacity to sustain and enlarge its portfolio of public goods. It is not that unbalanced trade is hurting people (although of course it is hurting some and helping others). Unbalanced trade is hurting the place, and the place, the privilege of living in this extraordinary country, is the most important asset Americans have, however long they’ve lived here.

Trade in services (i.e. outsourcing) and immigration have broadly similar distributional effects. There is little economic difference between a programmer in India writing code very cheaply and the same individual coming to the United States and doing the work for less than the local prevailing wage. Nevertheless, I’m inclined to favor the immigration, but not the trade, under present circumstances. Why? Because when a worker immigrates, the productive economic activity happens here, in this place, and that is oxygen to America’s portfolio of public goods. When Americans trade debt for services performed overseas, the good side effects of human industry happen somewhere else, and the bad side effects of accumulating debt happen here. It’s all the same to the people. But unbalanced trade hurts the place.

Nations are places. Quality of place is incredibly valuable, and potentially fragile. Any consideration of trade or immigration that tallies up gains and harms to people is incomplete if it fails to take into account how different economic arrangements affect the quality of places.

This entry was posted on Monday, June 4th, 2007 at 12:46 pm PDT.
You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.