Grow for it!

New Zealand, population 15 million. That's the target for 2060 in a new NZIER working paper making the case for substantial New Zealand population growth.

A population target of 15 million by 2060 (2.5 times that now projected) is not only “feasible”, it is also likely to be sufficient to achieve the benefits from scale. It would allow four main cities with a population of three million or more each. This would foster competition within New Zealand to create conditions amenable to building local firms that can foot it internationally. It would bring New Zealand’s population into close proximity of the Netherlands (but still nowhere near the population density of that country).

There's an awfully good case to be made for growth. Ed Glaeser's recent book makes a compelling argument that ICT is far more a complement to than a substitute for density - it makes everything better, but it makes New York better faster than it improves New Zealand. Australia will continue to benefit from agglomeration effects; stagnation relative to Oz fuels out-migration and worsening outcomes. Bill Kaye-Blake says we're doing fine given our distance - and he's right.

This changes the tone of the policy recommendations. It isn’t about claiming that the institutions (the tax system, the science system, the education system) are messed up and need to be fixed. Instead, it is about recognising that we’re pushing this economy uphill and asking what tools might help.

I think increased immigration should be on the policy agenda as a tool that can help in that context.

New Zealand is shifting immigration priorities to de-emphasize the family route and pull in migrants from higher up the income ladder. TVHE reminds us of the harm we do to poor foreigners abroad by such moves; we also do harm to ourselves to the extent that lower skilled workers are complements to high skilled labour - I'd certainly appreciate lower-cost domestic help.

The best counterargument is that there are potential external costs from lower-skilled immigration if we expect that income correlates with intelligence, intelligence is heritable, and intelligence matters for the long-term quality of policy in a democratic system and for overall productivity. Here's Garett Jones on how IQ matters.

So it's not crazy on the face of it to try to encourage high skilled immigration to New Zealand if we care about outcomes here rather than overall global welfare (I care about the latter, but that's me). But I would note that income will be a poorer proxy for IQ or skill differences if we're looking at individuals in a pooled international cross-section than within countries. Moreover, there's no real "lump of migrants" beyond which we can't accept more people. Why not make it easier for high income, high skilled people to move here while keeping the current family immigration route?

Potential policy moves that encourage immigration, and especially higher-skilled immigration? First on my list would be immediate permanent residence for any foreign student completing a Bachelor's degree at one of the New Zealand universities. This will not only boost foreign student enrolments (helping to cross-subsidize domestic students) but also provide a nice selection mechanism for those who are most likely to really make a contribution. We could also draw in high skilled American migrants by not losing our comparative advantage in civil liberties and sane copyright legislation.

Complementary to increased immigration would be fixing local land use policy that forces up housing prices, but that's also well worth doing for its own sake.