I’m posting here a link to a discussion between Freakonomics co-author Stephen Dubner and Nobel Prize Winning Economist Gary Becker conducted on ExpertInsight.com last week. It’s a 30 minute discussion, amazingly packed with thought provoking questions and discussions. In particular I found very interesting the first video segment which focuses a lot on a market for organ donation and the second video which discusses opening up immigration to anyone who would pay an immigration fee (of say, $50,000).
As I watched the videos the key thread is applying markets to solve both economic and social problems. Obviously this should come as no surprise who know Becker’s work and also know that he is a University of Chicago economist. The free marketers have taken a beating over the last couple of years due to the financial meltdown, and it would be a shame of the average person or the politicians take their mistrust for markets too far, as some of the ideas Becker has recently proposed free market solutions to make a lot of sense. In the first and third segments of the interview he talks about applying a free market/pricing to the organ donation market. I’m sure this would dramatically increase the supply and also improve matching in the market as Becker notes.
He also proposes that a price be set to immigration, something like $50,000 to immigrate to the US; and that loan programs be put in place to allow immigrants who benefit from the better opportunities to pay some of that back to the US. He notes that this would both reduce objection to immigration from the public (because it will provide tax revenue) as well as making immigration more beneficial by bringing on average higher-skilled immigrants.
He mentions among the greatest achievements of economics the move towards free trade, the notion that price controls are bad, and the realization (though many thought the opposite for a time) that communism would not succeed as an economic system.
One thing I find distinctly absent in the conversation is the concept of equity aside that of economic efficiency. I think the work of economics in general has done a much better job in solving the problem of creating economic efficiency than they have in that of economic equity. The easy response to that is to solve for efficiency and then redistribute, but redistribution tends to be a much harder political task (at least in the US, and more certainly across international borders).
I’ve personally always thought of the current format of US immigration policy (or lack thereof) as a form of wealth distribution from the US to poorer countries, as our formal international aid is so meager (remittances end up being a form of international aid). Trade barriers are a very inefficient way (but still a way) to create a more equitably compensated labor force (though this may not benefit the poor/working class overall if they pay more for the protected goods). I think most economists feel more comfortable discussing economic efficiency than equity is that they can all agree that a bigger pie is better, and how the pie is cut up is a more philosophical discussion. Still – we know that only the very upper echelons of society in the US are better off now then they were 30 years ago, even with tremendous economic growth. If I had my 30 minutes with Gary Becker – I think I’d ask him about what level of equity he thinks is fair, and the best way – from both an economic theory/policy and political standpoint – to achieve it.