Transtemporal Economics

Tyler Cowen considers the economics of time travel. Actually, he starts with the economics of interstellar travel, but if you take relativity seriously, it’s the same thing. Tyler is most interested in how time travel in the presence of time dilation would affect interest rates (e.g., what happens if someone saves a penny and then travels into the future?; what happens if everyone tries to do that?).

I’m more interested in the effect of time travel on migration and trade. If wages are expected to be higher in the future, then once the cost of time travel falls low enough, we can expect people to start migrating in large numbers into the future – just as they migrated from Europe to the North America from the 1500s onward, and just as they migrate from Mexico to the U.S. today. A simple model of transtemporal migration would therefore predict equalization of wages over time, as wages rise in the present (from reduced labor supply) and fall in the future (from increased labor supply). But wage equalization does not even clearly result from international migration today. New arrivals, aside from increasing the supply of labor, both (a) increase the demand for goods and services, and (b) to the extent they are willing to work for less, lower the price of goods and thus increase purchasing power. The future might be able to absorb the time-traveling arrivals with little impact.

Moreover, there could actually be increasing returns from larger populations, because more people interacting with each other generate more ideas and innovations that can benefit larger numbers of people. Maybe the future would leave the present behind, not just temporally but economically, as its population grows while ours shrinks.

And that’s assuming time travel is only possible in a forward direction. (I think time dilation only makes forward time travel possible, but I confess that I’ve never fully wrapped my head around relativity.) If backward time travel is also somehow possible, maybe firms in the future will choose to outsource some of their operations to the past, locating their manufacturing and other services in lower-wage time periods. This opens the possibility of transtemporal gains from trade... assuming, of course, that governments don’t implement effective trade barriers. Would America-3000 place tariffs on goods from America-2000? Would temporal nativists call for the construction of a time-wall to keep out the trans-temporal immigrants -- even if those immigrants were, in fact, their own ancestors?

* I use ‘transtemporal’ to refer to economic phenomena related to time travel, since ‘intertemporal’ already has an economic meaning without time travel.

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What and How to Think About Immigration

It’s Kerry Howley versus Megan McArdle on immigration. Kerry favors a guest-worker program, while Megan opposes it (see here, here, here, and here.

I won’t weigh in on the topic itself, fascinating though it is. I’m more interested in trying to parse why they disagree. One interpretation of Kerry vs. Megan is that they differ in their preference ordering. Kerry’s preferences look like this:

{more legal immigration}
pref {guest-worker program}
pref {status quo}

whereas Megan’s, apparently, look like this:

{more legal immigration}
pref {status quo}
pref {guest-worker program}.

That is, Kerry and Megan would both ideally like to see expanded legal immigration, but since that’s a political dead letter, they are consulting their second preferences. Their second preferences differ, because Megan thinks the negative consequences of a guest-worker program are bad enough to make it worse than the status quo.

But here’s an alternative interpretation of Kerry vs. Megan: They have the same preferences (both consider a guest-worker program superior to the status quo, as in the first ordering above),but they have different political strategies. Kerry, thinking that expanded immigration is not going to happen, pushes her second preference for a guest-worker program. Megan, thinking expanded immigration might still be in the cards, opposes a guest-worker program because it could siphon support from the superior alternative.

(Clearly, it’s Megan’s position that I’m less clear about. Without citing specific passages, I’ll just say I think there’s support in her posts for both interpretations.)

It might appear, from these two interpretations, that Kerry and Megan disagree on either their policy preferences or the political likelihood of their shared first-best option. But there’s a third interpretation that combines the two. Perhaps both have the same preference ordering (the first one), and both think there is some (small) chance of expanded immigration. But they differ in the intensity of their preferences: Kerry thinks a guest-worker program is a lot better than the status quo, while Megan thinks it’s just a little better. This preserves the shared preference ordering, but it makes Megan willing to gamble the benefits of a guest-worker program for even a small chance at expanded immigration. Kerry, given her more favorable assessment of the gains from a guest-worker program, is unwilling to take that gamble.

I find it useful to parse Kerry and Megan’s debate in this way because it relates to a broader question of philosophy-and-policy: to what extent should perceptions of “political reality” affect the positions we advocate? I’ve been pondering that question a lot lately, and the more I think about it, the thornier it seems. But that discussion will have to wait for a future post.

P.S. The syntax of this post's title is dedicated to Neal.

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