Two Problems about Europe’s Migrant Crisis the Left should consider

Two important points here:

(1) the evidence is building up that about 50%, or possibly even a majority, of the migrants entering from the Balkans are actually economic migrants, not genuine refugees (see here, and here). In essence, and even if it bursts the self-righteous bubble some people on the left like to live in, many of them are dishonest illegal immigrants. Isn’t letting so many people into Europe grossly unfair to the honest and law-abiding people from the Developing World who apply to immigrate legally and properly?

This is reinforced by (2) below.

(2) even worse, a significant number who claim to be from Syria are actually not, but are economic migrants using fake passports to gain access into Europe (see here, here, here, and here).

A spokesperson from the German interior ministry has even been reported as saying that the German government itself estimates that about a third of people claiming to be from Syria arriving in Germany are not from that country (here and here).

I won’t even dwell on unspeakable atrocity committed a few days ago by religious homicidal maniacs in Paris. We have all seen the news reports.

But now we learn that one of the lunatics gained access to Europe by a fake Syrian passport obtained in Turkey.

I wonder: do more and more left-wing people in Europe privately think that Merkel’s 800,000 was a disastrous mistake? That it was a terrible mistake on security grounds alone? That Europe’s social services and welfare states will be put under more and more strain? That it is a gift to the populist right?

Now the left in Europe is up in arms at the sight of the populist right soaring in the opinion polls all over Europe, such as the Sweden Democrats, the Dutch Party for Freedom (PVV), the French National Front, and UKIP (now the third most popular party in Britain in terms of percentage of the vote). All of them have something in common: they demand an end to mass immigration.

Finally, a hard question: is the populist right attracting left-wing votes? And if so, why?

None of this means a decent left shouldn’t accept a fair and reasonable share of genuine refugees (especially women and children), after careful vetting. But, as critics have pointed out time and again, why aren’t the oil-rich gulf states taking any of the refugees?

Two Problems with Real Business Cycle Theory

Here are two simple but devastating problems with real business cycle theory:

(1) Bewley (1999), a major empirical study of wages and labour markets, found no evidence of the real business cycle theory idea that real exogenous productivity shocks cause recessions.

Bewley states:

“I mention in passing that I found no support for real business cycle theory. During hundreds of hours of contact with businesspeople, I never heard one description of an exogenous productivity decline. Rather, I heard of decline in product demand and of successful efforts to increase productivity.” (Bewley 1999: 239).

That is, demand shocks in terms of quantity of output demanded are the major cause of reductions in employment and production, according to empirical evidence.

(2) in the real business cycle theory models, the normal market economy is assumed to have wages and prices that are perfectly or near perfectly flexible, so that markets have a strong tendency to clear.

Imperfections in price and wage flexibility, then, are attributed to government and union distortions (as in Ohanian’s [2009] explanation of the Great Depression).

But the very prior assumption that real world market economies have a normal or “default” tendency to rapid wage and price clearing is utterly untrue, and the empirical evidence is clear on this (here for prices and Bewley [1999] for wages).

It is no surprise that real business cycle theory models are something of a joke even amongst some mainstream neoclassicals.

Another datum is that there appear to be no real business cycle theory models proposed to explain pre-1914 businesses cycles, a task which seems hopeless given how the empirical evidence contradicts these models (Hanes 2013: 128).

BIBLIOGRAPHY
Bewley, T. F. 1999. Why Wages Don’t Fall During a Recession. Harvard University Press, Cambridge, MA.

Hanes, Christopher. 2013. “Business Cycles,” in Robert Whaples and Randall E. Parker (eds.), Routledge Handbook of Modern Economic History. Routledge, Abingdon, Oxon and New York. 116–135.

Ohanian, Lee E. 2009. “What – or Who – Started the Great Depression?,” Journal of Economic Theory 144.6: 2310–2335.