Interview with Alex Nowrasteh – Migration, Freedom, and Economy

von Redaktion

„The default should be that you can move unless there is a good reason why you can’t. Meanwhile, the default is nobody can move unless there’s a good reason for them to be able to move.“ Der Freydenker’s big interview with Alex Nowrasteh, the director of economic and social policy studies in Cato Institute about migration and freedom.

Der Freydenker: When was the first time in your life that you recognized the value of freedom?

Alex Nowrasteh: When I was a kid. I think I was like eight or nine. I would go up to the local store to buy ice cream and I saw on the sign it said it was $0.55 for a single scoop of ice cream. And if you know how they price food or anything in the United States, you know, they add the sales tax onto any price. When I went to my piggy bank at home, and I got exactly $0.55 and I went to the store and it ended up being about $0.60 because of taxes. And that was the first time that I really realized what taxes were and had a negative experience with them. And that’s a small example.  I was just an eight year old kid and couldn’t get the ice cream that I wanted. But that’s a good example of the value of individual liberty and freedom- I had the freedom to go up to the store to get what I want. But then the government stopped me with taxes that were opaque and difficult to understand prior. So that’s when I think I realized at least the benefits of freedom in my own life.

Der Freydenker: That’s very nice, especially since it is a childhood experience. Because most of the time when we talk about freedom, we try to go into philosophy and things that only adults usually understand. But even small children could understand the idea of freedom from their own perspective.

Alex Nowrasteh: Yeah, it’s funny. I do it a little bit with my kids, like a joke. So I have three little kids and we take them out on Halloween to go trick or treating to get candy. And at the end of the evening, I joke around with them, and I take a third of their candy. And I say, well, these are taxes that you need to pay to your parents for supporting you and everything else. And they get very upset. But I just tell them that I’m joking because I would never be that cruel to my children. But taking a third of income from somebody would actually be a fairly low overall tax rate in an OECD country. Typically, 40 to 50 percent of GDP is controlled by the government. So that would be actually a fairly low tax rate, a third of overall income.

Der Freydenker: Which book has influenced you the most in general?

Alex Nowrasteh: That’s a really difficult question to answer. I would say a couple of books have influenced me quite a bit. One is a book by Milton Friedman called Capitalism and Freedom. I read that when I was a kid, and that was very influential on how I thought about the world and how I went about answering questions, and it informed my philosophy of liberty. I’m much more interested in the consequences of liberty than I am in basic ethical and moral concerns around them. Ethical and moral concerns are very important, but the consequences of freedom are what really animate me in my thinking, and Milton Friedman’s approach and Capitalism and Freedom really informed and influenced how I think about that question.

I think another book that I read that influenced me quite a bit was Chasing Ghosts by John Mueller and Mark Stewart. It’s about foreign policy and terrorism, about trying to estimate the actual risks from terrorism. And it was just eye-opening because I think the state should be involved in foreign policy, should be involved in national security, doesn’t mean that what it does is efficient. We should seek efficient and right policies, not just policies focusing on a specific area. And that was very eye-opening.

And then a normal book that influenced me quite a bit was Lolita by Vladimir Nabokov, and what influenced me so much about that book was that you can have a book that is beautifully written about a really terrible and horrible subject. The lesson was don’t pay attention so much to the language used or the type of wrapping or marketing that goes along with an idea or a book to pay attention to the substance because oftentimes you can be distracted by marketing or by a pretty cover or by some pretty words, but don’t be distracted by pretty words. Take a look at what’s underneath and what’s really being said and meant, and you can get a really good idea of what’s going on. That’s essential. The essence or the meaning of something is much more essential and important than the words actually used.

Der Freydenker: So, like, more critical thinking?

Alex Nowrasteh: Yeah. Like delve into the meaning of a subject rather than just being distracted by the individual pretty words used. Delve into the meaning of it. Don’t just be distracted by nice rhetoric or a nice sales pitch. You know, I wish our friends on the right and the left would do this a lot. Our right-wing friends talk a lot about the nation and nationalism and all these fancy words that are just empty nonsense where they stand in for other things that are really bad. And our friends on the left talk about equality and socialism and community and all this other stuff. And when you drill down into both of these, what they really mean is they want more state control over our lives just for different reasons. And I think it’s important to look beyond the rhetoric and look at what they actually mean. I try not to listen to speeches that are really pretty and have my mind changed and try to always think about, well, what are the ideas underneath them? So never get distracted by pretty words and rhetoric. I’ll always take a look at what’s underneath and what it’s really about.

Der Freydenker: For me, that’s sometimes hard, especially if the speaker has some kind of very nice, attractive way of speaking. Who is your favorite intellectual, your favorite researcher or scientist or public figure?

Alex Nowrasteh: It’s hard for me to say. I admire different thinkers for different reasons. I admire Milton Friedman for his approach, for his insights, and for his approach to understanding economics. I admire John Mueller for applying risk analysis to national security. So, taking an intellectual insight from one field and applying it to another field of study. And I admire Richard Posner for writing and creating an entire field of study on his own. That is the study of law and economics by blending two fields to such an extent that he created a whole new endeavor of study. I disagree with all these writers on a great many issues, but they are all three of them enormously important for understanding how I understand the world and for inspiring me to do better as a researcher.

Der Freydenker:  For me, Hayek was the first who liberated my mind. What are your thoughts on his book Constitution of Liberty?

Alex Nowrasteh: I read that book 15 years ago or so, I enjoyed it for what it was. He does have some sections in there on immigration that I don’t think are very good, that don’t comport with empirical facts. There are a couple of things I like about Hayek. I think he’s largely right on almost all of his major points. His way of analyzing how human institutions change, I think, is largely correct. But on a lot of small points I think he’s wrong, and he makes a lot of statements that just are not supported by empirical reality that concern me. He has a statement in there about how the only reason that immigrants assimilated in the United States is because there are large immigrant assimilation programs put in place by the state. And that’s just absolutely false. There’s no evidence that that was the case. And there’s a ton of evidence that attempts by the US government to assimilate immigrants actually backfired and slowed the assimilation of immigrants, especially German immigrants, in the United States in the early 20th century. I also think that Hayek is a terrible writer. Maybe he’s better in German. I took German for five years, but of course I took German in American school, so I don’t speak or understand any German. So maybe he’s better in the original German than he is in the English translations.

But I find him hard to understand. And he writes about the knowledge problem, which sounds very interesting. But as an explanation for the failure of socialism, I think an incentive problem is better able to explain than knowledge problems. Knowledge problems are absolutely real, and what he describes in terms of knowledge being decentralized and constantly created, I think that’s absolutely correct. But if you think about a central planner facing different problems, like if you give a central planner the really bad incentives that a central planner has, but perfect knowledge, you would have socialism, not too different from the socialism that you actually have. But meanwhile, you give a central planner the correct incentives that market actors have, but really bad information like market actors have, you’ll get a much better outcome. So that’s the way I try to approach it. That being said, Hayek is a tremendously important thinker. He deserved the Nobel Prize in economics for his work. It’s just that when it comes to a thinker who has influenced me and changed the way that I view the world, I find a lot of problems with Hayek. Now obviously, I’ve spent a lot of time thinking about Hayek, so that’s a testament to how important a thinker he is. So, I don’t want to seem too critical of him.

Der Freydenker: That’s a really good argument about central planning. I had the opposite idea and now I’m thinking about it more critically.

Alex Nowrasteh: One way to think about it is principal agent problems in economics. Given the economic calculation argument by Mises or knowledge problems by Hayek, you would expect production to be randomly distributed and that in some areas there would be enormous surpluses, in other areas enormous shortages. But what you see across the board in socialist economies are enormous shortages except in areas where the state has a particular interest in and where it helps it maintain its power. So, in the Soviet Union, you had an enormous amount of production of arms, and enormous surpluses and things that help spread propaganda, which are what the state thought could keep it in power. So, incentives were more aligned there to keep production up. But in almost everything else there were enormous shortages across the board, and so with that knowledge problem or the economic calculation problem being the primary reasons why socialism failed, you wouldn’t expect that to be the case. You would expect it to be random, but it’s not random. And because it’s not random, that tells me that it’s probably principal agent problems and the incentives misaligned in socialist economies that lead to these really bad outcomes.

Der Freydenker: How would you describe the relationship between economics as a science and freedom? Would you say that they have some kind of reciprocal relationship or is it that one happens and triggers the other like a linear relationship?

Alex Nowrasteh: That’s a really tough question. I don’t think it is a reciprocal relationship. I guess it is linear with some sort of correlation. What I think economics has uncovered is that value is subjective and marginal and that individuals, often through voluntary organizations, tend to make choices that are better for themselves. And organizations left to themselves without state or coercive interference tend to behave a little better. Now, there’s exceptions to all of these rules. There are problems of public goods and externalities that we need to think deeply about as libertarians and as supporters of a free economy. But generally, free choice and free enterprise and individual liberty lead to much better results for everybody and that people are happier with these results. And that tends to be fairly consistent with the basic sort of models that we understand from economics about individual choice and rational choice and everything else. So, I think that’s a very powerful sort of economic insight, that it should inform our thinking on individual liberty and economics.

Der Freydenker: In the Solow model of economic growth, there is something called total factor productivity, which is the residual of everything. I wanted to ask you about your opinion. Is there a relationship between free movement of people and this total factor productivity, or is it random?

Alex Nowrasteh: One of my problems with total factor productivity (TFP) is that it’s the error term in a regression. It’s the residual. And I think a big part of the explanation for what it is and why it has gone down is that statisticians have gotten better at counting physical and human capital over the years. So, our way of cataloguing it is improving, which shrinks the error term over time. I’m not sure if there is much of a TFP to begin with, if that makes sense. I think we’re probably vastly overestimating it.

That’s a controversial opinion. But some other people have written about this in some Brookings working papers. I’ve written about how isn’t it a coincidence that TFP goes down as we get better at measuring human and capital inputs to production? And I don’t think it’s a coincidence.

But what affects underlying productivity if we think that TFP is really important? There’s really a million things that could be involved in there, but free movement is certainly a contributing factor because there are a lot of human characteristics and attributes that are difficult to impossible to measure. Motivation: How interested are you in just doing well? Ambition: You know, some people are very happy with a job that pays $50,000 a year and they don’t want to do any better than that. While somebody else who may have the same intelligence and same physical skills may want more than that and may be more ambitious, and that person is more productive as a result. These are things that are very difficult to measure. And what immigration and migration does is that they select individuals based on their motivation, based on their desire to do well. That might be sort of that secret sauce in there that really helps. That’s a totally unsatisfying answer. But I think there is something to human motivation that is obviously not being captured in statistics.

Der Freydenker: One of the critiques of open borders policy nowadays is that there is a fear of creating ethnicity-exclusive areas instead of having social integration. What is your opinion on that? Is it something inevitable or is it due to some factors that could be optimized?

Alex Nowrasteh: Almost every society that has immigrants has areas where these immigrants go first, that are kind of separate from the rest of the society. You know, to be around their fellow co-ethnics and it’s sort of like a bridge. You’re coming from a different society. You need to get integrated in your new society, but you need to learn about that new society first. And living around people who are more like you, sort of helps you bridge that. I think it’s a necessary and most of the time a successful steppingstone to integrating successfully in new countries. But one of the things that is important is getting out of those areas eventually so that you can have more opportunities inside of the wider society that you’ve immigrated to. And I think one of the great ways that a government can help with that is actually by getting out of the way, by reducing barriers to access the labor market, by reducing labor market regulations, by reducing minimum wages, by reducing the necessity to bargain with unions, for instance, to make it easier for people to leave these ethnic enclaves and to be able to get a job in the wider society.

„I think one of the great ways that a government can help with that is actually by getting out of the way, by reducing barriers to access the labor market, by reducing labor market regulations, by reducing minimum wages, by reducing the necessity to bargain with unions, for instance, to make it easier for people to leave these ethnic enclaves and to be able to get a job in the wider society.“

This is something that the United States does better than most European countries, for instance, by having fewer labor market regulations so people can leave and get good jobs more rapidly and integrate more successfully, more quickly. So that would be the number one thing I think that I would recommend to do. Another one is to get rid of a lot of public housing for new immigrants. Sometimes, public housing distributes people randomly, but oftentimes it just so happens that they get distributed amongst their co-ethnics and they get sort of locked into the welfare benefits. So, I try to get rid of those benefits as well to make sure that people have to work for themselves and support themselves. And then they’ll just be much more likely to live in other areas of the country.

Der Freydenker: So, most of the time it is those barriers that are the extreme factors.

Alex Nowrasteh: Yes, I think that’s what explains it. I think you’re going to have some of it no matter what, but you’re definitely going to have more of it that is worse when the government gets involved.

Der Freydenker: Which leads us to the following question which is about the Syrian refugee crisis in Europe. We have seen politicians arguing, either disagreeing with the whole idea of immigration or saying immigration is good, but the specific policies were wrong.  What is your opinion on that?

Alex Nowrasteh: My opinion is that it has worked a lot better than people thought it would. I think Syrians have integrated better in the German economy than people thought they would. This is partly due to the labor market reforms in Germany that took place a decade before the crisis. So, a lot of lower skilled Syrians were more easily able to get into the labor force more quickly, which was, I think, a very good thing for the Syrians and for the Germans.

There are some issues around crime. Part of the issues in Europe is that the native-born population has a very low crime rate. So, by comparison, almost any group that comes in just has a higher crime rate just because of the comparison. Now, we don’t know for sure about the Syrian refugees because the data are not great, but a lot of evidence indicates a higher crime rate. That’s always a problem with immigration. But it’s a problem where I think you need targeted enforcement. Like trying to pick out Syrians who are criminals individually, deporting those individuals who are criminals, who reveal themselves to be later. It’s probably a wise move so that we can make sure that those who want to integrate and assimilate into German society are able to stay. It’s not a problem in the United States. Like if these Syrians have come to the United States, they have a much lower crime rate than native born Americans. And that’s because native born Americans are much more violent and crime-prone than pretty much anybody else in the developed world, which I think all your listeners probably know. The homicide rate in the US last year was around nine or ten times higher than it is in Germany in any given year. It’s like seven per 100,000 here and in Germany it’s about 0.8 or 0.9 per 100,000 homicide rate per year. It’s much higher here in the United States. So, if a Syrian comes in and their typical homicide rate is two and a half or three per 100,000, that’s higher than Germans, but a lot lower than Americans.

You have to make these comparisons and it’s what you’re comparing to that really counts. But it also means that policymakers need to be aware of the trade-offs of immigration. And I do think the benefits are so great that we should vastly liberalize immigration, obviously, but we shouldn’t liberalize it for people who are very likely to violate the rights of other individuals. And by people, I mean individuals who are very likely to violate rights. I don’t want to paint all Syrians or all Middle East and all Muslims in a bad light. But I think the individuals who are most likely in these groups to be criminals or have been criminals, it’s fair to exclude them. Of course, you’re judging them as individuals, but that should be basically the guidance of immigration policy: You should be allowed to move as an individual, unless there’s a good reason why you yourself should be blocked.

Der Freydenker: Judging them on an individual level, not on a group or community level?

Alex Nowrasteh: Yes. Judging you individually. But the default should be that you can move unless there is a good reason why you can’t. Meanwhile, the default is nobody can move unless there’s a good reason for them to be able to move. So, it’s the exact opposite of what it should be.

Der Freydenker: Which is sometimes really funny. I personally came to Germany with a visa. I entered legally and to enter legally I had to wait for around a year to get the visa, while at the same time I had been able to go illegally with a much lower price and much faster.

Alex Nowrasteh: It’s certainly a dilemma for the immigrant. And that’s why you have large numbers of illegal immigrants in both the United States and in Europe. It’s because the legal system makes it so difficult to come legally that of course, you have black markets. And this is the same thing we see with drugs where there are black markets for drugs. People want drugs, so they’re going to take them, and they’re going to buy them and consume them, and other people are going to supply them. And it’s the same thing with immigration and black markets.

Der Freydenker: Do you think that more liberty-oriented policies could help the world to get out of the bottleneck it has been in during the pandemic?

Alex Nowrasteh: You mean the bottleneck in terms of supply chains?

Der Freydenker: Yes, also inflation.

Alex Nowrasteh: Yes, those things are definitely going to help. I mean, a lot of the big reasons why we have these problems is because of tariffs put in place in response to the pandemic, but also before the pandemic that just got a lot worse. You have a lot of limitations on the movement of people, many more than there used to be, that are having serious repercussions and reverberations across the entire global economy. Therefore, I think a great way to make the biggest headway would be to lower tariffs, eliminate them where possible, eliminate quotas and remove a lot of these other regulatory restrictions. There are laws in the United States that make it very difficult to raise the price substantially of expanding American port facilities like you have to hire an American dredging company to dredge a harbor. And those companies typically charge like 25 to 50% more than a lot of European companies do. And there’s no reason to have this. It’s just like imposing a tax on every single American consumer just for the benefit of a few small companies that are politically connected. So that’s just one great example of how liberalization and freedom can help with a lot of the current problems of supply chains.

„You have a lot of limitations on the movement of people, many more than there used to be, that are having serious repercussions and reverberations across the entire global economy. Therefore, I think a great way to make the biggest headway would be to lower tariffs, eliminate them where possible, eliminate quotas and remove a lot of these other regulatory restrictions.“

Der Freydenker: There are many success stories of immigrants who went on to found great companies and became great entrepreneurs. Could they be considered as a precious asset?

Alex Nowrasteh: I mean, immigrants are scarce, they are a scarce resource in the way that all human beings are scarce. It’s just that immigrants are a particularly more limited supply due to legal restrictions. So, I would view immigrants as a particularly scarce resource, as a resource that I think most economies, at least developed economies, could use very well to expand production. I think viewing immigrants as a scarce resource and the way that we view all people as a scarce resource is the right way to go about it.

Der Freydenker: In your latest book, with Benjamin Powell, you examined the influence of immigrants on institutions. Can you sketch why institutions are so important in the first place?

Alex Nowrasteh: What we mean by institutions, what economists mean are basically the rules that govern economic exchange, both the cultural rules, the informal rules, as well as the formal rules, the government laws on contracts and property rights. A theory that I like a lot is that the reason why countries like Germany and the United States are wealthy is because we have better institutions that incentivize more productive behavior, more productive wealth-expanding, positive-sum behavior.

And the worry is that immigrants who typically come from countries with bad institutions, if enough immigrants come to the United States or Germany or other developed countries, they could bring those bad institutions with them in some way or another. So that’s why it’s important to study that. I think the most important and potentially best counterargument to my position of liberalizing immigration is that it could lead to a degradation of institutions in developed countries. And in that case, more immigration could end up killing the goose that laid the golden egg. Now, I don’t think that that’s the case. And my book is about why I don’t think that that works. And the empirical evidence is really bad for it, and that immigrants in many cases actually improve economic institutions. But regardless of that, it’s an important question to try to analyze, and it’s an important question to try to answer.

Der Freydenker: As Students for Liberty, we support the idea of free movement as an inseparable part of the individual’s freedom, because, as you said before, it should be the default that people have the right to move. Although sometimes it is tricky to include empirical evidence. So, would you recommend some fields of research for graduate students who are interested but cannot completely fathom the starting point? Where should they start? What should they understand? Which books would be helpful for them as beginners?

Alex Nowrasteh: Immigration is a wide field. It touches on every area of social science and that makes it difficult to begin. I would say economics is probably the best, just because it’s the king of the social sciences, and the methods that you learn in economics will help you understand anything else in the social sciences. For social sciences in terms of understanding there is a book that I think is really good. It’s called Global Migration and the World Economy by Jeffrey Williamson and Timothy Hatton. It’s an economic history of immigration, and I think it’s a great place to start studying immigration just because economic history can inform us so well of the lessons and effects of immigration over time. And that’s a good area to start and to read about.

Der Freydenker: What would be your advice for young graduates just about to enter professional life? What’s the advice they should listen to? And what’s the advice that they might usually hear but they have to ignore?

Alex Nowrasteh: When you’re young, before you have a family – if you choose to have a family – that’s the time to really work hard. That’s the time to work on the weekends and to double down on your career – when you’re in your twenties and early thirties, before you have kids, before you get married. Your twenties are a time to build and invest for your future. I spent my twenties working hard, working weekends, working lots of jobs, and I don’t regret it one bit. I have a lot of friends who went traveling and had fun and yeah, they had a good time, but I think I chose the right thing to do. So, being young is a great time to invest in your career and by doubling down on what you want to do. And a lot of that just requires working a lot, working extra, going the extra mile and dedicating yourself to a field of research or an endeavor or a career. So do it when you’re young. Start when you’re young.

Der Freydenker: Thank you very much! Do you have anything else that you would like to share? A word for the readers?

Alex Nowrasteh: I research immigration mainly from an American perspective, and the United States has had immigration since before it was a colony. It is natural to have a society that helps to integrate and assimilate immigrants. Europe is becoming an immigration society. As Europe becomes an immigrant society it is very important for European social scientists and others to study how that happens and try to make it happen in a much more productive and better way, so the immigrants become Europeans and the native Europeans accept them.

The interview was held on 10th of May 2022 via video conference. The interviewer was Amjad Aun.

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