Alan Reynolds

 Although immigration policy has usually been left to immigration lawyers, it is entirely a matter of rationing and incentives -- the purview of economics. In April 1998 testimony before the House judiciary subcommittee on immigration, I said: "Immigration policy is about rationing something of great value -- the right to live in the United States. The question boils down to methods and criteria of rationing a relatively small number of spaces among a much larger number of people who would like to live in the United States. There are only four possible rationing methods -- the queue, the lottery, allocation by political or bureaucratic preference, or the price system (a fifth option, of course, is to immigrate illegally). Current policy mainly relies on a mixture of political preference categories and the queue, although the lottery is used, too."

 The problem is not immigration per se, but immigration policy.

 There is no quota for spouses and children of U.S. citizens, so marriage and adoption are two routes by which immigration became much easier and larger than Congress expected in 1990, when it set quotas on every other group except refugees and asylum-seekers (the latter are illegal immigrants with a lawyer). Since Mexico and the Philippines became the two leading sources of U.S. immigrants around 1970, the post-1965 U.S. preference for family members perpetuates that same Mexican and Philippine dominance of immigration queues. To patch over this congressionally mandated favoritism with masking tape, Congress added a ludicrous "diversity lottery" by which up to 50,000 immigrants are admitted by sheer luck, just to give members of the Taliban and Bath Party a fair chance.

 Relatives who are not part of the immediate family, such as siblings and adult children, are limited to 226,000 a year, and no one country can comprise more than 7 percent of that. As a result, the usual waiting period is a dozen years, but it's worse for those from Mexico and the Philippines. "In February 2005," said The Economic Report of the President, "Filipinos who immigrated as siblings of U.S. citizens had waited 22 years for their green cards."

 Such primitive non-price methods of rationing always work badly, partly because they cannot deal with varying intensity of motivation. Using long waiting lists to ration entry encourages frivolous and insincere applications, but discourages the most skilled or affluent people who have other attractive options, such as moving to Canada or Australia, where they are quite welcome.

 It would be easy to make partial use of the price system to alleviate such obvious rationing problems as 22-year waiting lists and lotteries. An auction of available spaces might be ideal. But a big step in that direction would be to simply charge a modest immigration fee, as Canada and others do, while offering a loan if immediate payment poses a hardship.

 Immigrants expect to obtain most of the benefits of immigration, yet taxpayers bear all the costs. U.S. taxpayers make other costly commitments to new immigrants, offering services and benefits, yet immigrants make no commitment to the United States other than the modest cost of transportation to and fro. Hundreds of thousands of legal immigrants return to their home countries each year, after a short stay in the United States.

 A modest one-time fee of $2,000 per immigrant (which could be paid by prospective employers) would significantly shorten the waiting lists by thinning-out those applicants with weak, uncertain motivation. That, in turn, would greatly reduce reliance on such clumsy devices as waiting lists and lotteries.

 Clumsy, politicized non-price rationing would doubtless continue. But the most economically destructive quotas -- those on people with superior education and skills -- could be easily fixed by eliminating them. Fortune's Geoffrey Colvin proposed eliminating the post-1990 cap on H1-B visas. Nobel Laureate Gary Becker, writing in The Wall Street Journal, added that we should welcome skilled workers on a permanent basis, not just for a few years. They're both right.

 The president's plans to register illegal immigrants and stem the flow are sensible, but they don't go far enough. Making at least some use of the price system to ration the right to live in the United States, while minimizing the crude alternatives of family preferences, quotas and queues, would provide a much better safety valve than indiscriminate illegal immigration. It would make immigration policy much more rational and successful, and therefore less controversial.


Alan Reynolds

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