Let them come and they will build it
17 Sep, 2015
In an op ed last week, Steve Hilton, a former advisor to the government in the UK, boiled the policy dilemma in Europe down to its essence:
Policy paralysis over the refugee crisis is convulsing Europe: Of course we want to help, but if we’re too generous, more will come.
To understand what Hilton means, it helps to use a model, an abstract representation that captures the essence of a complicated situation. Abstraction simplifies by stripping away inessential detail. It also helps us think logically, which in this case requires that we turn down the dial on our emotions.
So imagine that a service station offered customers who pull up to the pump a one-in-ten chance at a free tank of gasoline. What would happen? Cars will queue up.
Now imagine that the station owner interprets the queue as a sign of great need and decides to give away more gasoline by increasing the odds of winning from one in ten to one in five. What happens? The queue will double in length.
Why? People place some value, call it $V, on a free tank of gas. A lottery with a 10% chance of winning a free tank is worth 0.1 V. In this case, people will be willing to wait T minutes to get this prize. If the wait is shorter, more people will join the line and the wait will increase. If the wait is longer than T, it isn’t worth staying in line so the wait will fall.
If the odds of winning increase to 20%, the value of the prize doubles to 0.2 V. Now it takes a wait that is twice as long to get to the point where the time wasted in line just offsets the new higher value of the lottery.
This simple logic has several uncomfortable implications.
What happens if you open up 3 different lines to speed up the processing to see who will win and who will lose? The total number of people waiting in line will triple but the time that each person spends in line will be unchanged.
What if you make waiting more pleasant so the cost of each minute that people spend in line is lower? The line will get longer and the total time spent waiting in line will increase.
Feasible ways to make the line shorter would be to make waiting in line unpleasant, perhaps even dangerous; or to reduce the probability that anyone will win a prize.
The only humane way to get rid of the line is to make sure that everyone in town has a full tank of gas. If you have enough resources, you can do this by giving away lots of gas. If you don’t, you can give each person the opportunity to work and let him or her buy gas when they want it.
When doing the right thing (“be generous”) seems to make the problem worse (“more will come”), it is time to pull back and reconsider. What is the real problem? What would actually be the right thing?
The real problem is not that people are queuing up to get into Europe. Rather, it is that tens or hundreds of millions of people live in a place where a failing government precludes any chance at the basics that any person wants: safety, dignity, opportunity, hope.
When someone desperate for these basics shows up on our doorstep, our emotions naturally encourage us to respond with charity. When you see someone in desperate circumstances, you offer help.
Unfortunately, this innate emotional response is a very bad guide about how to respond to problems at the scale of tens or hundreds of millions of people. At this scale, we have to focus on opportunity, which can turn all these people into the resource that solves the problem. Our impulse toward charity leads inevitably to a lottery that is demeaning, wasteful, and horribly inequitable.
And don’t kid yourself. Only an official from a Kafka novel could believe that this lottery becomes more humane if you layer in bureaucrats tasked with separating the worthy refugees from mere migrants with the temerity to want for their children the safety, hope, dignity, and opportunity that we want for our own children.
To see what a real solution would look like, you need only remember three things:
1. It takes only a few cities, on very little land, to accommodate tens or hundreds of millions of people.
2. Building cities does not take charity. A city is worth far more than it costs to build.
3. To build a city, do not copy Field of Dreams. (“Build it and they will come.”) Copy Burning Man. (“Let them come, and they will build it.”)
How do we know that cities are worth more than they cost to build? Just look at the value of the land they sit on. Building a city on top converts land that used to be worth very little into land that is extremely valuable. The increase in the value of the land is the sign of the gains that can finance the cost of offering people a government that can create the conditions that offer residents safety, dignity, opportunity, hope.
Creating these conditions does require a local government; even at Burning Man, there is no libertarian free-for-all about where you can set up camp and where the public space will be. The local governing entity determines this before anyone shows up.
There are lots of details involved in putting such a plan into practice but these are all relatively easy to manage. People have been building cities for centuries. It is something we know how to do.
What holds us back is finding a few places. In today’s world, this presents a challenge, but one that can be surmounted.
If you think seriously about the alternative — more fiddling with the charity lottery and more Kafkaesque bureaucracy for separating the saved from the damned — it does not take long to convince yourself that offering land where people can build themselves a new city is the response that is more humane and more realistic.
paul romer
