Garret Jones on culture, immigration, and (macro)economy

I can’t remember who recommended the read, but I thoroughly enjoyed the third book in Garret Jones’ trilogy: Hive Mind (on IQ and economy), 10% Less Democracy (on democracy as over-rated), and now, The Culture Transplant. I’ve only read reviews of HM. (Apparently, it’s somewhat provocative– in the face of certain religious allergies– but along the lines of other authors who emphasize the role of intellect in economic development). LD was a useful and provocative take on democracy vs. the elites– and how it’s easy to trash the latter and be too optimistic about the former. (I discuss his thesis in a section of my Cato Journal article, “The Limits of Democracy“.) 

Broadly, Jones’ work fits into the “institutional” literature in economics. What are the impacts/roles of govt, culture, religion, social values, etc. on microeconomic outcomes and macroeconomic growth? Thomas Sowell has written a ton on this topic– much of it quite accessible to laypeople. For example, instead of lumping all black people together, Sowell notes that black people come from all sorts of places and backgrounds– and that this matters. (Ironically, the common assumption otherwise– common on the Left– is…well, racist!) 

Economists think of “institutions” as the “rules of the game” with respect to law, culture, society, and economy. Or you can think of institutions as the environment in which economic activity occurs. Obviously, some environmental factors are helpful or harmful to promoting productive economic activity. Economists without an institutional bent have tended to underestimate their importance. But Jones (4) notes that institutional economists have tended to put too much weight on legal factors, while downplaying or ignoring cultural factors. 

Jones discusses the role of trust (in a world of imperfect info) and notes that trust varies by individual but also notably between cultures (13-15). Honesty/morality (real) and trust (based on perceived honesty/morality) are keys to facilitating trade. In the jargon of economists, they reduce transaction costs, reducing the expected costs to engaging in trade. 

In Chapter 3, Jones wrestles with the extent to which people influence places through immigration. The conclusion of the literature is that people have a more substantial impact than usually assumed. So, the sort of people who immigrate is important. All things equal, more skills are preferred to less skill. But beyond that, people with greater honesty/morality and trust are preferred to those with less. 

In Chapter 5, Jones speaks to diversity: it can have value, but it also introduces risks. From economics, worker heterogeneity is an opportunity for specialization in one’s comparative advantage. But heterogeneity of values and vision can increase transaction costs to communicate vision, monitor effort, etc. Jones shares the results of a fascinating experiment in the Kenyan flower industry, where worker diversity across tribes (Luo vs. Kikuyu) was harmful to productivity, especially when there was external conflict between the tribes (78-80).

Similarly, the value of diversity generally requires access to low-cost screening mechanisms to be more effective (84-85). Jones notes that we usually assume “skills diversity” (what he calls “Firefly diversity” with an analogy to the crew on the TV show) and assume away diversity-based difficulties, resulting in an overestimation of its potential benefits and an underestimation of its potential costs. Jones discusses the Williams & O’Reilly paper on diversity at work and productivity, finding little compelling evidence. Among other things, one would expect trouble with causation/correlation (93). There may be gains in terms of demand for diversity by diverse customers (90). But the impact of productivity per se is not likely to be high. This shouldn’t be all that surprising since capitalistic profit-mongers should pursue productivity gains as an easy means to their desired ends. 

Jones drops a great one-liner on this topic, labeling “our diversity is our strength” as “the cultural equivalent of second marriages: a triumph of hope over experience”. (89) Ouch! And he compares the social science research around diversity to “ivermectin…possibly good, possibly bad, possibly pointless.”  (99) Ironic/ouch! (Jones also shares the findings in the literature that cultural/ethnic diversity tends to reduce “public goods” spending. Not surprising in light of economic theory and the difficulties of any form of collective choice [e.g., govt or firms] in the face of heterogeneity [98].) 

In Chapter 6, Jones explores innovation and the “I-7″ (the top seven countries in terms of innovation)– and not surprisingly, he finds that institutions matter. But in Chapter 7, he’s back to the theme of “people matter”, especially the Chinese, finding a positive impact wherever they have emigrated. including Africa! In Chapter 8, Jones teases out legal vs. illegal immigration and the importance of certain (more productive) ancestries, rather than valuing diversity per se. Jones closes with perhaps the most important thing to understand here– and a thought he has explained along the way: Always beware of simple stories about complex phenomena (152).