MitchellMusings 1-17-11

Mitchell’s Musings 1-17-11 Walls and Futures Let’s start with walls. The New York Times in its 1-15-11 edition carries the story of the Great Wall of the US that has already cost a billion dollars and won’t be built on the US-Mexico border. It was supposed to be a high-tech virtual fence that would spot illegal border crossers electronically. Apparently, the technology isn’t what it was supposed to be. See http://www.nytimes.com/2011/01/15/us/politics/15fence.html Now I know that immigration advocates sometimes argue that “walls don’t work” and that people will come “anyway.” That is not quite true. It depends on the wall, the probability of being caught, and the penalty. If you have ever been to the Checkpoint Charlie museum in Berlin – which commemorates the Berlin Wall – you should have learned this simple point. Although the museum is dedicated to the courage of those who made it over the wall, the fact is that only a handful ever did. The Berlin Wall was effective because the East Germans and Soviets were willing to spend handsomely on fortifications and to shoot anyone who tried to cross. The US would not be likely to build anything as effective and harsh as the Berlin Wall, but it could – given enough money – make the border more difficult to cross than it is now. That doesn’t mean that it should do so.

The issue is whether wall technology is the best way to limit border crossings. Back in 2006, Michael Dukakis and I noted in an op ed in the New York Times that an alternative approach to walls was to raise the minimum wage and enforce labor standards. If you are a conservative who believes that a) raising the minimum wage cuts jobs and b) illegal immigration should be discouraged, the two objectives go together. People cross the border for jobs, primarily low-wage jobs. If there are fewer of those jobs available, fewer people will come, regardless of the wall and its technology. What’s not to like?

You can find the op ed at http://www.anderson.ucla.edu/Documents/areas/fac/hrob/mitchell_dukakis_wages.pdf Of course, enforcing labor standards has some costs. But such enforcement is likely to be less costly than high-tech walls that turn out not to be feasible.

The Future A journalist called me the other day about the future, specifically what jobs will look like 25 years from now. The US Bureau of Labor Statistics is a bit more cautious. It forecasts ten years at a time. Its latest forecast runs from 2008-2018. You can find the BLS forecast – it prefers the word “projection” – at http://www.bls.gov/news.release/pdf/ecopro.pdf The problem with making really long projections is that the temptation is to extrapolate some immediate trend that won’t persist or, alternatively, to make up a future that reflects what we want – not what is likely to be. In the film 2001, made in the late 1960s, computers by the turn of the century had become sentient beings capable of evil. These computers, however, were clearly mainframes and they had very poor graphics. People flew routinely to the moon on Pan Am (defunct before 2001) and

made video calls from space on the Bell system (also defunct) in large phone booths. No cell phones were apparent.

In the film Bladerunner, made in the early 1980s and depicting Los Angeles in 2019, the dominant ethnic influence on the city seems to be Japanese (not Latino). The air is polluted but apparently not by cars, since people fly through the air in some kind of vehicle. Biotech is so far advanced that “replicant” humans are on the loose along with other biologically engineered creatures. Both 2001 and Bladerunner represent projections of events at the time they were made (moon voyages, Japanese manufacturing success) that did not turn out to progress linearly.

On the other hand, as noted above, there is wish fulfillment. In Looking Backwards, the utopian novel of the late 19th century, by 2000, no one works for wages. Everyone receives what he/she needs including universal health care. And folks retire to a pleasant life in their forties. That did not quite happen.

It is not just entertainments that feature false forecasts. When Social Security was being created in the mid-1930s, demographic projections were made for funding purposes. However, the demographers were unaware that the post-war baby boomers would begin arriving in a decade. Indeed, they did not know there would be a war. Keep that in mind when you read about 75-year projections that are regularly released nowadays about Social Security.

The current version of projecting seems more likely to make the error of projecting immediate trends linearly than wish fulfillment. The big event of recent times is the Great Recession and its high unemployment rate. It is increasingly fashionable to argue that the current 9+ percent unemployment rate is the result of a structural imbalance between job skills of job seekers and what employers want.

The problem with structural arguments is that the labor force is like molasses. Structural imbalances can occur, but they accrue slowly over time.

But the Great Recession happened very fast. Unemployment does not suddenly shoot up for structural reasons. But such structural labor market interpretations can be self-fulfilling. If we make the mistake of assuming that the unemployment rate is caused by some structural characteristic – and therefore that little can be done about it – the European evidence does suggest skills can erode during prolonged unemployment. Doing nothing can turn a demand problem into something intractable. And at present we are not doing much.