Tuesday, November 5, 2013

Importing Poverty

Vivek Wadhwa has reservations about importing poverty.

Here's poverty...
















It's an Afghan mother and her child scavenging a garbage heap.  This is what Wadhwa does not want to import.   But what if it was just the child on the garbage heap.  Would Wadhwa be against importing an orphan?  Is he against allowing children to be adopted from all countries or just poor countries?

Imagine there's a childless couple in the US...and a parentless child in Afghanistan.  All things being equal...why not allow the American couple to adopt the Afghan child?  Wouldn't that be a more efficient allocation of resources?

Obviously it wouldn't be a more efficient allocation of resources if the American couple already had "enough" children and/or the Afghan child already had parents.

So perhaps Wadhwa is arguing that there aren't enough available jobs in the US.  If so, then why would he be against allowing poor people to choose which countries they move to?  If there aren't enough available jobs here in the US...then why would the Afghan mother make the effort to vote with her feet for the US?

Maybe it's because Wadhwa would lie to the Afghan mother?  Perhaps he would tell her that there were plenty of jobs available here when in reality there were precious few.  Why would Wadhwa do that?

The problem is that Wadhwa doesn't understand the importance of true signals in markets.  This is why he wants to raise the minimum wage.  He wants to lie to poor people all over the world by telling them that we value unskilled labor more than we really do.  So of course he has reservations about allowing resources to freely flow.  We'd be deluged by all the poor people he lies to.

Hey Wadhwa...resources can't flow to where they are most valued if we don't know how much society values the various uses of society's limited resources.  The Afghan mother can't make an informed decision as to which country will provide her with the best option if wages do not honestly communicate which country has the biggest shortage of labor.

Therefore, if you actually and genuinely care about helping the Afghan mother...then you should support the elimination of minimum wages.  Once minimum wages are eliminated...if poor people make the effort to come to the US...then it will be because we could honestly use the help.  Therefore the new allocation of labor would be an improvement...it would be mutually beneficial.  Value would be created.