A well-known economist joke starts with an economist walking alongside a non-economist (in some versions of the joke it is an anthropologist, in others a sociologist). Suddenly the non-economist stops, looks down and says “There’s a 20 dollar bill on the sidewalk!” The economist, who has been trained under the notion of ‘efficient markets’, does not bother to look down and simply says: “That’s impossible, if there had been a 20 dollar bill on the sidewalk somebody would have already picked it up.”

The efficient-market hypothesis was developed by Eugene Fama, who was awarded the 2013 Nobel Prize in Economics for developing his theory. Designed for financial markets, it essentially states that it is not possible to obtain excess returns in financial markets (in other words, easy money). In plain terms, it reflects the notion that there should not be opportunities for big gains at small costs; that is, unless there is an exogenous restriction leading to a failure of economic rationality.

The estimates of several development economists, such as Dani Rodrick, suggest that a minor reduction in the barriers to labour movement from poor to rich countries could lead to an enormous increase in global welfare. However, even in the face of this potential gain, there is very little appetite for reducing restrictions to immigration in rich countries. This fact, together with the joke introduced above, has led to Michael Clemens, another development economist, using the phrase ‘Economics and Emigration: Trillion-Dollar Bills on the Sidewalk?’ as the title of one of his papers. Clemens’ estimates suggest that emigration of less than 5 per cent of the population from the poorest countries of the world to the richest countries of the world would expand the global economy by several trillion dollars.

If there is really so much to gain from more immigration, the trillion dollar question is: Why do rich countries maintain such strong restrictions to the movement of labour from poor countries? One of the reasons is that most of the welfare increase that results from additional immigration goes to migrants themselves. Still, we would expect migrant-sending countries to benefit from remittances, while host countries benefit from a cheaper labour force and increase productivity. On the surface more immigration could be seen as a win-win-win situation or, at least, as a Pareto improvement (in which one person is better off without making any other individual worse off), since the migrants and the home and host countries would all benefit in economic terms. However, the positive economic benefit in the home and host country, while likely to be true on average, is not true for every single person. Some people in home and host countries are likely to be worse off as a result of migration. If winners could use some of their gain to compensate the losers perhaps migration could be a Pareto improvement. However, there is no clear existing mechanism that can deliver this compensation, which in turn suggests that there will be no consensus to decreasing barriers to labour movement. In sum, keep looking down in case you happen to find a few of those bills on the sidewalk.


Clemens, M. A. (2011) ‘Economics and Emigration: Trillion-Dollar Bills on the Sidewalk?’, Journal of Economic Perspectives, 25: 3-106.

Rodrik, D. (2002) ‘Feasible Globalization’, NBER Working Paper 9129, National Bureau of Economic Research, Cambridge MA.

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