“The first is the most bleak: the lazy immigrant who is unemployed and is living on social security. From a perspective of fairness, this is certainly unacceptable and typically frowned upon. But from an economic perspective, this kind of welfare immigration amounts to a stimulus package! His government checks turn into demand for the local economy, creating new jobs without taking existing ones.”
This is called the broken windows fallacy. This person isn’t a boom for the local area he costs them in taxes and inflation through borrowing. If he didn’t exist the community would have more capital to invest in productive enterprise. Very basic stuff.
This doesn’t exactly apply because most welfare spending (and in fact most government spend) is leveraged against future economic growth and inflation, so it actually is possible to create self-fulfilling prophecies via stimulus spending so long as that spend eventually produces real growth. This case might or might not be the most efficient way to do that, but governments are rarely trying to maximize efficiency at the expense of all else so we shouldn’t really count that against the argument. So this would seem a neutral, at worst, scenario rather than one of dead-weight loss as you argue.
What is your definition of productive enterprise, what is non-productive enterprise?
How about this? The person uses his social security to buy a new phone. This purchase increases the capital available to the manufacturer for R&D of new phones.
I googled the broken windows fallacy and this is the argument I got: “If he hadn’t paid for the broken windows, he could have gotten himself a pair of new shoes.” But the point is that he didn’t buy the pair of new shoes (he instead hoards the money), but he is forced to buy the new window (since it’s windy otherwise), creating demand.
The idea behind the broken windows fallacy is that when you move money from point X to point Y, and start talking about the effects of having more money at point Y, it would be fair to also mention the effects of having less money at point X. Otherwise you are drawing a false picture.
To highlight the mistake you made, let’s take the situation into extreme. Imagine that there are so many immigrants that the population literally doubles. Let’s assume that all of them are the lazy type: none of them gets a job, ever, all of them are living on welfare. To prevent starvation, the government issues a law that everyone who previously had a job must now work for 16 hours a day, to produce enough goods to satisfy everyone’s needs.
I suppose we would agree that such outcome would be a bad thing… for those working 16 hours a day. (We could make a utilitarian argument that by improving the lives of those on welfare it is still a net good. But it makes it obvious why most of the original population would try to prevent such outcome.)
Now let’s look at your argument: economy is growing, there is more work—fantastic, isn’t it?
By the way, the argument “more economy = better” is itself problematic. First, it probably should be measured per capita; having X% more whatever because you have X% more people, leaves the same amount for everyone, on average. But even measured per capita: I think that a hypothetical Western society where people consume 20% less, but only work 4 hours a week, is not obviously a worse place. (I am not talking about societies where “consuming 20% less” = literally starving, of course.) Similarly, working 6 days a week and consuming 20% more, is not an obvious improvement.
“The first is the most bleak: the lazy immigrant who is unemployed and is living on social security. From a perspective of fairness, this is certainly unacceptable and typically frowned upon. But from an economic perspective, this kind of welfare immigration amounts to a stimulus package! His government checks turn into demand for the local economy, creating new jobs without taking existing ones.”
This is called the broken windows fallacy. This person isn’t a boom for the local area he costs them in taxes and inflation through borrowing. If he didn’t exist the community would have more capital to invest in productive enterprise. Very basic stuff.
This doesn’t exactly apply because most welfare spending (and in fact most government spend) is leveraged against future economic growth and inflation, so it actually is possible to create self-fulfilling prophecies via stimulus spending so long as that spend eventually produces real growth. This case might or might not be the most efficient way to do that, but governments are rarely trying to maximize efficiency at the expense of all else so we shouldn’t really count that against the argument. So this would seem a neutral, at worst, scenario rather than one of dead-weight loss as you argue.
What is your definition of productive enterprise, what is non-productive enterprise?
How about this? The person uses his social security to buy a new phone. This purchase increases the capital available to the manufacturer for R&D of new phones.
I googled the broken windows fallacy and this is the argument I got: “If he hadn’t paid for the broken windows, he could have gotten himself a pair of new shoes.” But the point is that he didn’t buy the pair of new shoes (he instead hoards the money), but he is forced to buy the new window (since it’s windy otherwise), creating demand.
The idea behind the broken windows fallacy is that when you move money from point X to point Y, and start talking about the effects of having more money at point Y, it would be fair to also mention the effects of having less money at point X. Otherwise you are drawing a false picture.
To highlight the mistake you made, let’s take the situation into extreme. Imagine that there are so many immigrants that the population literally doubles. Let’s assume that all of them are the lazy type: none of them gets a job, ever, all of them are living on welfare. To prevent starvation, the government issues a law that everyone who previously had a job must now work for 16 hours a day, to produce enough goods to satisfy everyone’s needs.
I suppose we would agree that such outcome would be a bad thing… for those working 16 hours a day. (We could make a utilitarian argument that by improving the lives of those on welfare it is still a net good. But it makes it obvious why most of the original population would try to prevent such outcome.)
Now let’s look at your argument: economy is growing, there is more work—fantastic, isn’t it?
By the way, the argument “more economy = better” is itself problematic. First, it probably should be measured per capita; having X% more whatever because you have X% more people, leaves the same amount for everyone, on average. But even measured per capita: I think that a hypothetical Western society where people consume 20% less, but only work 4 hours a week, is not obviously a worse place. (I am not talking about societies where “consuming 20% less” = literally starving, of course.) Similarly, working 6 days a week and consuming 20% more, is not an obvious improvement.