Saturday, 8 October 2011

Exit!

I occasionally needle American libertarians that, if they really don't want to be contributing a fifth of their paid taxes to blowing up people with whom they'd prefer to be friends, and if they really don't like being molested or ogled by the kind of people who select into jobs that allow them to molest or ogle a captive audience and who then sue you if you call it what it is, then their best option is to leave. The elasticity of policy to your vote is trivial; why not just move to somewhere that's more free?

Bill Watson points to some new work by Davies and Winer showing that the potential for exit constrains national policy. Once the Americans made it hard for Canadians to escape to the US, we got Trudeau's policies; once the Americans opened things up to skilled workers through H1B and TN visas, Chr├ętien had to worry about the brain drain. Here's Watson:
In Closing the 49th Parallel, a fascinating new paper in the academic journal Canadian Public Policy, the Canadian economists Stanley Winer of Carleton University and James Davies of the University of Western Ontario argue that the Americans’ decision to foreclose the possibility of an easy escape to the United States created a captive tax base for the Canadian politicians of the 1960s and 1970s and lowered the political cost to them from raising taxes and building up the Canadian welfare state. As the chart shows, there does seem to be a widening of the gap between Canadian and American non-military spending that hinges around 1965. In effect, though the American government didn’t create Pierre Elliiott Trudeau and his Just Society, its closing of the immigration door substantially enabled him.
...
The spending and tax gap that did open up between Canada and the United States in the 1960s and 1970s closed somewhat during the 1990s. In part this may simply be a case of Canada having come to its senses: Government spending briefly hit 50% of GDP in the early 1990s and just about everybody but the far left of the NDP understood that unless tectonic change somehow floated us away from North America, that simply couldn’t last.

But Winer and Davis point to NAFTA’s re-liberalization of migration, at least for professionals, as having also contributed to the subsequent decline in the relative size of government here. The reopening of the safety valve to the United States, even on a partial and limited basis, contributed to the brain drain that became such a hot political issue here at the end of the 20th century and helped persuade the Chr├ętien government it needed to first do away with income surtaxes and then reduce the top marginal rate of income tax and raise the income at which it kicked in.
It isn't inconceivable that American libertarians do more good for American policy by leaving than by voting...doing well by doing good.

2 comments:

  1. "...why not just move to somewhere that's more free?"

    do you have a suggestion? Every place I've heard of is even more government ridden than the US.

    ReplyDelete
  2. @Anon: NZ's ok and, though in absolute decline, still does well in relative freedom - the US is getting worse faster than NZ is. Honduras is soon to be opening a charter city. You could get in on the ground floor in Iceland. Parts of Eastern Europe aren't doing badly and may well yet give Brussels a two-fingered salute.

    Where you'd want to go would depend a lot on which bits of freedom you most value.

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