In his monthly column at the NYT Greg Mankiw gave readers his economist's wish list. While I'd agree with several items, I also have some big differences. For example, why wouldn't economists want to tax speculation in oil and commodities just like speculation on lottery tickets and casino gambling? A modest financial transactions tax on futures, options, stocks, bonds, etc. would have almost no impact on normal transactions, while making life a bit more risky for speculators. And, it could easily raise $150 billion a year. I don't know why an honest economist would support leveling the playing fields for different types of gambling. But where I really take issue is with Mankiw's discussion of the economist's position on trade and high skill immigration. Mankiw implies that we have an open door policy for high-skilled immigrants and even goes so far as to claim that "economists very clearly practice what they preach. Many of the best economists at top American universities were born abroad." Mankiw knows better here. There are many prominent economists in the United States who were born abroad, but the fact that hard-working talented economists can have the opportunity to work in the United States does not mean that foreign economists do not face barriers. In effect, foreign born economists are allowed to compete on quality. The very best foreign economists are allowed to work as economists in the United States. However, the law prohibits them from competing on price. If we had genuine free trade in economists' services we could not doubt fill our universities with economists who are as good as our typical U.S. born economist, but willing to work for half the wage, since this would still be far more than they would earn in their home countries. (I remember a World Bank economist saying that all the best economists he knew were born in India. If we had genuine free trade in economists, all the mediocre economists he knew also would have been born in India.) If the United States had such open door policies for all highly-paid professionals (while maintaining quality standards), we could substantially reduce the price of health care, college education, and numerous other services and products. Thus far our trade policy has been a policy of one-sided protectionism in which barriers that protect non-college educated workers from competition with workers in the developing world are torn down, while the barriers that protect the most highly educated workers are largely left in place. Economists should be honest enough to acknowledge the protection from which we benefit.
--Dean Baker
