Truck and Barter

Today I was flipping through the channels on my radio when I stumbled across Bill O’Reilly discussing the porous border between the United States and Mexico. He offered a solution to the “problem” (whether or not it is actually a problem is another blog in itself). Mr. O’Reilly’s suggestion is that California, New Mexico, Arizona and Texas use their National Guard forces to patrol the border. He continued on saying that within a few months so many people will get caught that the “coyotes” who smuggle paying customers over land will no longer be able to charge high prices based on guaranteed success. Those high prices are what ensure that there are many “coyotes” in business. If the success is no longer guaranteed, the argument goes, prices will drop, “coyotes” will go out of business, and illegal immigration will decrease substantially. What about smuggling people over water? Bill says that it’s not efficient enough so no one will resort to it on a large scale. Using economics, the border would be secure if we simply take Bill’s advice. Right?
Unfortunately O’Reilly has failed to take into account the fact there will still be millions of people who want to cross the border. Think of immigration as a market. Safe border-crossings are the commodity, “coyotes” are the suppliers, and those who wish to come into America are the buyers. The National Guard may reduce the amount of safe crossings that are produced in the short-run. However, given the huge demand for safe crossing, “coyotes” are more likely to innovate new ways to sneak across undetected than they are to quit altogether. Furthermore, while I have extremely little knowledge of oceanic smuggling operations (about as much as O’Reilly, I’d guess), I know that if the price people are willing to pay is high enough, someone will figure out how to make it worth the costs. Remember, 70 years ago commercial air travel was thought to be unfeasible too.
Trying to reduce the incidence of a specific transaction, if both parties are voluntary participants, is pretty darn close to impossible. We can see that fact in the market for illicit drugs. America has focused on reducing the supply of drugs. Yet considering the quantity of the resources devoted to stopping the supply, most experts would agree that we don’t capture even half of the drugs that are sold in America (I believe 10%-15% is a more accurate estimate). Similarly, even if we reduce the supply of safe border-crossings we have done nothing to decrease the desire of people to enter the United States. Mr. O’Reilly falls prey to the assumptions that most politicians and pundits succumb to: a fundamental misunderstanding of the incentives that regulation creates. I suspect that “coyotes” will probably always have newer, smarter ways to deliver their goods because they have a keen financial interest in doing so. Maybe we should pay Border Patrolmen extra for each illegal border crossing they prevent. It might be more effective. At the very least it’s a more interesting debate.