Bryan Caplan Understates Case for Immigration

In my very positive 2019 review of Bryan Caplan’s book Open Borders: The Science and Ethics of Immigration, I wrote:

While few people would accuse Caplan of understating the benefits from immigration, I am one of those few. Immigrants start businesses at a rate that is twice that of native-born Americans. Among the main beneficiaries of such immigrant employees, therefore, are American workers. Yet nowhere in his book did I find mention of that fact. It’s possible, of course, that this overstates the benefits to native Americans; think of the Korean dry cleaner that largely employs other family members. Still, the odds are high that most of these employers employ some non-family and non-immigrant workers.

It turns out that even I understated the case for immigration. I say that because of this interview by my Hoover colleague and fellow economist Steven Davis. He interviewed Rebecca Diamond, an economics professor at Stanford University. Here’s the takeaway:

Immigrants directly account for one-quarter of the economic value generated by U.S. patents. They account for more than one-third of that value after factoring in the collaboration benefits that immigrant inventors bring to native American inventors. Immigrant inventors also play a major role in the two-way flow of scientific and technical knowledge between the United States and other countries. Choking off the flow of immigrant inventors would hamstring the American innovation enterprise and slow the development and diffusion of scientific knowledge.

Now, you might say, “But if the U.S. government hadn’t let in a lot of those people, wouldn’t they have patented them elsewhere? In which case, we still would have gained.” (Remember that according to Nobel Prize winning economist Willam D. Nordhaus, 97.8 percent of the gains from innovation go to consumers, not the innovators.)

The answer is “No.” Some of them would have patented them elsewhere. But some of them wouldn’t have. With all its imperfections and government barriers, America still has one of the most vital dynamic economies in the world. Potential inventors here have others near them to work with: think Silicon Valley. So if the government had prevented a substantial number of them from immigrating, it would have prevented a substantial amount of innovation, and American consumers, along with other consumers, would have been deprived of gains from innovation.

Here’s the link to the underlying study.