Monday, October 15, 2007


Immigrants Fight Deportartion and Inflation

At times you wonder if anyone at the Post has any economic training. Today’s edition featured a piece by Shankar Vedantam entitled: When Immigration Goes Up, Prices Go Down. Yep, now immigrants are anti-inflation tool:

“Immigration, economist Saul Lach recently found, plays a powerful role in holding down prices. For every 1 percent increase in the ratio of immigrants to natives, prices go down by about 0.5 percent, according to Lach's new study about the effects of 200,000 Jews immigrating to Israel from the former Soviet Union in 1990.”

For some reason, Mr. Vedantam thinks the purported impact of 200,000 welcomed, legal immigrants, coming out of a repressive society and into a more productive one where all were eager to see them successfully assimilated; he thinks all that may be somewhat comparable to our situation here in America and, more specifically, here in the DC area:

“Lach's research has particular resonance given the contentious debate over immigration that has recently roiled the Washington area and the nation….If Lach's thesis is correct, however, successful measures might have the opposite effect than the one desired -- as immigrants are pushed away, prices on everything from diapers to dairy items might go up.”

He may already have seen this in action:

Noting that a gallon of gas cost $2.99 in Bethesda vice $2.63 in Wheaton, he speculates:

“The difference in gas prices may have to do with the fact that Wheaton has many more immigrants who are not yet fully assimilated into the economy than does Bethesda.”

He’s right to a point – an overburdened Wheaton is less desirable than Bethesda (hey - don’t shoot the messenger; that’s the verdict of the overwhelmingly liberal and Democratic Montgomery County Real Estate Market). More Desirable = Higher Land Costs = Higher Purchase Costs...and Higher Real Estate Taxes.

Methinks that has more to do with the difference in gas prices. Besides, using Bethesda for gas price comparison can make almost any other Maryland community look good. Now compare Wheaton with its $2.66 to Aberdeen and it’s $2.55 at the local Wawa – is the influence of immigrants even greater than Wheaton or…

Further indicating he may not fully grasp his subject matter, Mr. Vedantam querys:

“Why would the same company charge you 14 percent more for an identical product in one location?”

..and he answers:

“Because it can…. If you are willing to pay extra for the convenience of filling up...why blame Exxon for taking your money?”

…especially since Exxon isn’t the one taking your money. Don’t know the two gas stations he is talking about but I’m going to guess they don’t have common ownership. So the same company isn’t charging you “14% more for an identical product in one location”.

Depressed land prices and decreased profits for the businesses that serve them is not a particularly strong resume to present on behalf of immigrants – legal or otherwise. This reads like the kind of scholarship that would impress Steve Pearlstein but probably not those with a real business/economic background.

Side Notes: Reading Mr. Vedantam’s piece more closely, he seems to be telling us that immigrants are significant contributors to global warming. By keeping gas prices down, they work to keep us less economically inspired to seek alternative fuel sources. And more ominously, there’s this:

“Lach said in a new paper published in the Journal of Political Economy that immigrants tend to do what Bethesda drivers do not do often enough: They go the extra mile to the cheaper gas station.”

Hmmm – immigrants “go the extra mile” – focusing just on illegal immigrants and with an estimated 12,000,000 of them here, let’s say 4,000,000 have cars. Conservatively estimating just one fillup a week, that means illegal immigrants alone are selfishly driving over 200,000,000 extra miles a year – all to save a few pennies on gas while ignoring the impact their thriftiness has on global warming.

Alright!! Enforcement Firsters are the new Greens!!

(BTW – The latter part of this posting is my contribution to Blog Action Day. It feels good to give something back)

MC, you were too kind to this fool.

I do occasional work for an attorney of your acquaintance who has office space in the Westfield tower in Wheaton next to the Mall. The space is professional but hardly luxurious. Compared to the glass and brass ego palaces in Bethesda, it is modest. Bethesda has 20 times as much such space, and at "high A" grade, replete with excellent transit - which is not useful for a motorist but is useful for the motorist's business activities (other employees, customers, etc.) Wheaton is a little less conveniently served, and is lower density over all. Bethesda is urban and Wheaton is clearly suburban, with a much lower parking problem.

Urban economics will tend to push lower value-added activities away from the tall towers and out to the perimeters (i.e. no warehouses on Wisconsin Avenue.) Bethesda gas is more expensive not because the local motorists are "non-immigrant" but because the attorneys and financial professionals who are willing to park in high-density Bethesda at high direct or indirect prices are less price-elastic. Another factor is time: Wheaton is less ridiculously jammed than Bethesda so the time-income costs of traveling down the highway with a low tank are lower per mile. Rent including gas station rent (or imputed rent through costs of capital) is higher in Bethesda, as you noted.

Wheaton is not the same location as Bethesda for opportunity costs, rent costs or price elasticity. Finally, how do high-income Pakistani radiologists and other high-income immigrants fit into Vedantam's theory, some of whom probably have professional space in Bethesda? While Hispanic immigrants may be lower income, many other immigrants are clearly not. The singles ads in Farsi on Montgomery County's cable system that I have seen do not advertise "low income" - indeed, you don't need to know Farsi to pick that up.
thank you Bruce - his piece would be a great jumping off piece for a semester worth of how economies function
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