A Tale of Two Pueblos
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June 16, 2006, 01:30 PM
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Prominent economist and unskilled Hispanic immigration supporter Tyler Cowen writes on his Marginal Revolution blog about two Mexican villages he`s visited in the state of Guerrero:
A tale of two pueblos

San Agustin [Oapan] is filthy. The streets are full of pig **** and drunks. Ameyaltepec is not quite Geneva, but it is clean. The pigs are kept off the street. Drunks are nowhere to be found. Homes are much better maintained. Families are at least twice as rich as in Oapan. ..

I don`t know why the two pueblos are so different. I do know that many people see some of the worst features of Oapan in Mexican migration to America. Much of this is rooted in fact; problems with gangs for instance are very real. When I look at Ameyaltepec I see contingency, culture, and incentives at work. I don`t see why most parts of the United States cannot manage a comparable success with regard to Mexican-Americans...

The tale of two pueblos is one reason - but not the only one — why I think large numbers of Mexican-Americans in the United States will work out well.

Cowen argues that, if we`re lucky, unskilled Mexican immigrants in America will wind up like the Mexicans in the good village. Of course, he`s skipping over the other possibility: that, if we`re unlucky, they`ll end up like in the bad village. The obvious question is: Why should we, the citizens of America, take the risk?

The best-case scenario for the outcome of massive unskilled immigration from Mexico sounds, from Cowen`s description, lacking in much payoff for American citizens: by Mexican standards, the good village is terrific, but by American standards, it`s well below average.

In contrast, the worst-case scenario, from Cowen`s description, sounds awful.

So, why is it rational for American voters to, in effect, bet the nation on a coin flip? A basic concept in financial economics is that risk requires a higher expected reward to make it worthwhile. What`s the higher reward that unskilled Mexican immigration is granting us that outweighs the risk?