'Folk' international economics.

THE BATTLE OVER IMMIGRATION reform is a recent manifestation of a long debate over the relationship between the United States and other counties. It is a continuation of earlier debates over outsourcing, and of even earlier disputes regarding international trade and tariffs. There is now even a

To economists, these issues are easy. Since at least the work of David Ricardo (1772-1823), economists have known that international trade is desirable and beneficial for both trading partners. Recently, over 500 economists (including me) signed a letter advocating eased immigration standards.

But the continuing debate over these issues is evidence that many citizens have difficulty understanding or accepting the wisdom of economists. When there is such disagreement, it is useful to look for the causes of the dispute rather than merely decrying the "ignorance" of non-economists.

SELF-INTEREST AND BEYOND Part of the answer is self interest and rent seeking. Domestic producers, including firms and workers, are happy to argue for tariffs or other import restrictions on the goods they produce. They will use whatever arguments are available and politically powerful to support their positions. Similarly, workers (or their representatives, such as unions) who compete with immigrants are eager to seal the borders.

All interest groups would like to use the power of government to increase their wealth, but some appeals by self interested parties are more easily accepted than others. It is useful to ask why self-serving arguments are so easily accepted in the case of foreign goods and workers; there are reasons why some arguments are believed and others are not.

Part of the reason for the relative success of protectionist arguments has to do with the evolved beliefs and understandings of citizens regarding economics--what has been called "folk economics." The argument is that we have certain tendencies and beliefs that may have been useful in evolutionary times, but they are now counterproductive. For example, in the previous issue of Regulation, I used such an argument to explain incorrect beliefs about oil prices ("Oil Prices and 'Folk Economics'," Summer 2006).

There are two aspects of the evolutionary environment that particularly affect human understanding of international economics. First, the environment was approximately zero sum. This meant that resources and incomes were fixed, and more for one person meant less for another. In the international context, this evolved belief easily translates into a fear of loss of jobs. If Mexicans are finding jobs in the United States, then it "must" be that American citizens are finding fewer jobs because, in a zero sum world, the number of jobs is fixed. Similarly, if we are importing goods from China, or outsourcing tasks to India, then the Americans who would otherwise make those goods or perform those tasks must be losing jobs.