John Cochrane

John Cochrane

John H. Cochrane is a senior fellow at the Hoover Institution. He is currently the AQR Capital Management Distinguished Service Professor of Finance at the University of Chicago’s Booth School of Business. He is also a research associate of the National Bureau of Economic Research and an adjunct scholar of the CATO Institute. Before joining the Booth School in 1994, Cochrane was at the Economics Department of the University of Chicago. Cochrane earned a bachelor’s degree in physics at MIT and his PhD in economics at the University of California at Berkeley. Cochrane frequently contributes editorial opinion essays to the Wall Street Journal,, and other publications. He maintains the Grumpy Economist blog.


The immigration policy discussion and legislative proposals suffer from a huge gaping problem: nobody can articulate what the point is. What are the objectives? People want to come to the United States, work, pay taxes, start businesses, buy houses, and join our society. Why are we keeping them out?

Well, obviously, people who don’t work and want to come only to receive government checks and other benefits are a drain. But our immigration policies and proposals are not crafted to solve that problem. And it’s easy to solve: require a payment at the border, or post a large bond, say $10,000, which is refunded after five years or so of paying taxes, having a job and health insurance, and staying out of jail.  Obviously, we don’t want criminals and terrorists, but that desire hardly explains our laws or the proposals on the table.

The vague charge that immigrants will “take jobs” and lower American’s wages is not established at all in economics, and it doesn’t make much sense anyway.  It surely doesn’t explain why we keep out people who want to start businesses.  Our ancestors didn’t steal Native Americans’ jobs to get rich; they created new businesses and opportunities. Land and capital are plentiful in the United States, so why would we expect new immigrants to be any different?

Furthermore, whether an immigrant works in a US factory and produces a good which undercuts that good produced by a US worker, or whether the immigrant works at a factory in Mexico and produces the same good–probably cheaper–the effect on US wages is the same. By keeping the immigrant out, the factory just moves to Mexico.

Finally, even if keeping foreigners out boosted Americans’ wages, such a policy is a pure transfer. Would the US government send marines to Mexico, to steal a prospective migrant’s cow, or take his wages and send the cow or the wages as a subsidy to US workers? And then charge a sales tax on both the Mexican and the US product, raising its price and sending that as a subsidy to American workers as well? That’s exactly what restricting immigration to prop up wages accomplishes, as it is exactly what trade restrictions accomplish.  We send foreign aid and development assistance to lots of countries (well, to their governments, but the intent is to help people). We then try to impoverish them to our benefit. Click to read more.