When I wrote the op/ed on Robert E. Lucas in the the wall street journal last week I was unaware of an article he wrote in 2004 for the Federal Reserve Bank of Minneapolis. This is Robert E. Lucas, Jr.,”The industrial revolution: past and futureMay 1, 2004.
It’s quite good. (HT2 Art Carden.)
And here is the last paragraph.
Among the tendencies that undermine sound economics, the most seductive, and in my view the most poisonous, is the focus on distributional issues. At this very minute, a child was born into an American family and another child, also beloved by God, was born into a family in India. The resources of all kinds that will be available to this new American will be around 15 times the resources available to his Indian brother. This seems to us a terrible wrong, warranting direct corrective action, and perhaps some such action can and should be taken. But of the vast increase in the well-being of hundreds of millions of people that has occurred over the 200 years of the Industrial Revolution to date, virtually nothing can be attributed to the direct redistribution of resources from the rich to the poor. . The potential for improving the lives of the poor by finding different ways to distribute current production is Nothing compared to the seemingly unlimited potential for increased production.
The article as a whole, which examines economic growth over long periods, reminds me of my favorite study by economist Brad DeLong of the University of California at Berkeley. It’s called “Cornucopia: The Pace of Economic Growth in the Twentieth Century», NBER Working Paper 7602, March 2000. DeLong quotes a famous passage from Karl Marx and Friedrich Engels, The communist manifesto, in which Marx and Engels rave about the incredible achievements of capitalism in the 19th century. The bourgeoisie, wrote Marx and Engels, was:
the first to show what human activity can produce. He performed marvels far beyond Egyptian pyramids, Roman aqueducts and Gothic cathedrals; he led expeditions that overshadowed all the ancient exoduses of nations and crusades….[It has], during his reign of barely a hundred years…created more massive and colossal productive forces than all previous generations put together. The subjugation of the forces of nature to man, to machines, the application of chemistry to industry and agriculture, steam navigation, railways, electric telegraphs, the clearing of continents whole for cultivation, the channeling of rivers, the conjuration of whole populations out of – which previous century had even sensed that such productive forces slumbered in the bosom of social labor?
So DeLong writes:
Yet, compared to the pace of economic growth in the 20th century, every other century – even the 19th century that so impressed Karl Marx – stood still.
DeLong supports it, by the way.
The other person doing something similar to what Lucas is doing, but with an imaginative and illuminating video that shows the link between income growth and increased life expectancy, is Hans Rosling. Here is his “200 countries, 200 years, 4 minutes, the joy of statistics.” I highly recommend it: educational and entertaining.
Now let’s go back to the paragraph from Lucas that I quoted at the beginning.
The last line is particularly important. If we focused on creating the right conditions for economic growth, then distribution would become less important: a rising tide lifts almost every boat – and has lifted almost every boat.
Something is missing, however. Economists who see large price discrepancies tend to think of arbitrage. I would have expected Lucas, a top-notch economist if there ever was one, to remark that the huge wage and productivity gap between India and the United States, for example, would lead to a movement of resources – labor – from India to the United States. One way to achieve a huge increase in global productivity over a period as short as ten years is to allow hundreds of millions, if not a billion, of people to move from poor to rich countries. In other words, allow a lot more immigration. In all the work I read by Lucas, and I read a lot when I wrote his Biography In The Concise Encyclopedia of EconomicsI don’t remember seeing him talk much about immigration.
Do any of you know if you have written or spoken in favor of greater immigration?
Postscript: If you read Lucas’ article carefully, you’ll notice that someone made a mistake in labeling the vertical axis in Figure 1. It’s titled “Population Growth Rate.” It should be labeled “Population”.