Monday, November 16, 2015

State Governors on Refugees are Like the FDA on New Drugs

The incentive structure that the FDA faces in approving new drugs is well known to be skewed in such a way that slows down innovation implementation of potentially life saving treatments. It goes something like this: If the FDA does not approve a drug that would have saved thousands of lives, no one will know. If the FDA approves a drug that kills a few people, everyone will know. Therefore, the incentives are such that decisions will skew towards caution even if a different policy would have saved more lives. The combination of availability bias and costless risk aversion yields a system which is detrimental to those who most need help, and it is this same combination that now threatens Syrian refugees.

Today seems to be official “governors against refugees” day. In the past several hours the governors of the majority of U.S. states have specifically come out in opposition to or banned by executive order their state taking in more refugees from the war in Syria citing security concerns and an inability to background check new entrants.

There are several problems with this logic. First, it is not that hard for a state to run background checks on a few thousand people. Connecticut Governor Dan Malloy (one of only two governors to support refugee acceptance today, the other being Peter Shumlin of Vermont) says that his state plans to continue to accept around 1,600 Syrian refugees and can easily complete background checks before entry. Second, states don't have have the authority to stop resettlement of refugees and there is not really any way to prevent refugees from moving between states even if states could bar them initially. Third, and most interestingly, the extreme precautionary principle being applied in these cases ignores economics and is detrimental to both natives and refugees.

The economic argument for open immigration is iron clad; it simply is the case that immigrants improve and do not harm the domestic economy in the country to which they move. Given this fact, there should be a pretty high burden of proof on those who want to impose restrictions on visas to refugees as doing so harms not only those fleeing the monstrous conflict in the Middle East but also the domestic economy.

Surely these governors think they have a pretty good reason in the form of security concerns. They don’t want an event like the Paris attacks to happen their state. I do not doubt the purity of their motives, but the nature of incentives and unseen costs makes the seemingly obvious case for caution more complicated. In short, overly precautionary restrictions on immigration have opportunity costs. But because these costs are not as visible as the potential security threat from allowing in a few bad actors, there is incentive to place an irrationally high value on safety.

No one will miss the additional innovation and production that could be brought about by allowing in refugees who will buy goods, pay taxes, and maybe even settle down and start businesses. All the economic benefits of immigration apply to refugees as well, but it is difficult to mentally account for what might have happened.

Terrorism, on the other hand, is obvious to the eye. The images and stories from Paris in the past few days provide firm footing for a call to greater caution. If we admit Syrians to the U.S. and one act of terrorism occurs, everyone will know. If we do not admit Syrians to the U.S. when doing so would have saved many lives and economically benefited both parties, no one will know.

This is not just an academic triviality; there are real lives at stake. In the case of the FDA, policy makers are beginning to understand the perverse incentives involved, and the adoption of “right to try” laws as increased. Unfortunately the same is not true of the refugee situation. Republicans have often been the ones in favor of reducing FDA control over patients’ decisions, but they seem to forgo this logic in the refugee issue; today’s loudest voices against refugee admittance, including many of the governors listed above and Presidential candidates Carson, Cruz, and Paul, have been from the GOP. The events in Paris seem to have shocked the rationality out of decision making, and the fate of many refugees will now be decided by the fears of policymakers rather than by measured composure that could save lives.

Availability bias is always a danger in making balanced security policy, and, in this case, state executives are allowing it to mercilessly drag them around. The opportunity costs of keeping out immigrants of any kind are very real and very harmful, but in the case of Syrian refugees they are even higher. Keeping these refugees out condemns them to horrible situations, and even if you don’t want to help these people, we should at least not slam doors in their faces.

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