Immigrant employment as an externality

I’m often never quite sure with Cato reports whether the writers are attempting to hoist liberals on their own theoretical petards, or whether the writers are serious. Here’s an example:

Economist Gordon Hanson has a piece in this issue of The Cato Journal. His argument comes down to the idea that immigrant employment is an externality that employers could be made to internalize.

Now, there’s a point where Pigou-based arguments run into moral hazard, and I would think that Cato folks in particular would be sensitive to using labor-wage labor as an exemplar of an externalities. Libertarians tend to be fond of dismissing externality arguments–and for good reason–because externality arguments are a simple and convincing argument for market failure, which provides a rationale to those who would have government intervene. Playing the externality card should not be allowed with mere annoyances, given the potential hazards of government intervention. It’s hard for me to wrap myself around a libertarian argument where low-wage labor market outcomes have external costs in any real way, or if they do, counterbalance much more compelling libertarian principles such as self-ownership.

I need to re-read the paper, and re-read the whole issue, to get a better sense of what is going on. In the end, Hanson is looking for a sweet spot in policy where immigration can occur and native populations can feel compensated for it, so it’s not a mean-spirited portrayal or policy prescription at all.

Adam Ozimek over at Modeled Behavior takes up the paper at length:

Immigrants as negative externalities « Modeled Behavior:

Gordon Hanson is just trying to find ways to make immigration more acceptable to Americans so that there can be more of it, so I don’t begrudge him for proposing an unpalatable solution. After all, most pragmatic solutions to convincing Americans to tolerate more immigration seem to have some unpalatable aspect to them. But I think accepting that the fiscal burden of low-skilled immigration represents a real externality generated by employers is both untrue and an unproductive framing of the problem.

(Via modeledbehavior.com)