To reliably select immigrants who are more qualified, the government could look at the prices of new financial assets that track the net fiscal impact of each immigrant, conditional on them being admitted to the United States.109 For every immigrant admitted, the government could track how much that person pays in taxes each year and how much the government spends on that person via benefits whose costs can be measured individually. The government could then assign individual costs for schools, Medicare and Medicaid, law enforcement, and other government services.
For types of costs or benefits that the government cannot measure individually, the government could assign to each immigrant some average cost for residents of their location and demographic type. When there are doubts, the government should err in the direction of estimating higher costs and lower benefits so that the measures are biased against immigrants adding value and risk averse regarding uncertainty.
From these cost and benefit estimates, we could produce a conservative net fiscal value number for each immigrant for each year; the number could be positive or negative. Also, from these numbers, the government could create two kinds of financial assets that pay annual dividends proportional to each of these two numbers, conditional on that person immigrating.
In the speculative markets that would be trading these cost and benefit assets, traders who guessed right would make money at the expense of traders who guessed wrong. For example, if an immigrant turned out to be a net‐fiscal contributor after being admitted, then traders who purchased the proposed financial assets betting that the individual immigrant would be a net‐fiscal drain would then lose their money to those who purchased the assets thinking that the immigrant would be a net‐fiscal contributor. This is roughly how online betting markets work for political candidates.
The key is that the government would create and sell these financial assets after immigrants apply for admission but before they are admitted. The government would then watch the market prices for these assets, adjust, and offer prediction‐market visas to the immigrants who are trading at the highest market prices, which would indicate the market’s choice for the immigrants expected to have the best positive net‐fiscal contribution. In other words, the government would use the predictions of traders who have put real cash on the line to select immigrants whom the market thinks will be net‐fiscal contributors. Because the monetary payout for the financial assets would be based on their actual real net‐fiscal impact, traders would have an economic incentive to investigate and place well‐informed bets about immigrants. Policymakers could then rely on these market prices giving decent estimates of the current present financial value of this stream of future revenue.
Given these market prices, the government would admit the immigrant applicants for whom such market prices are highest. By using a high threshold, the government could ensure a high confidence that each immigrant applicant would produce a positive net‐fiscal impact.
New financial assets would be issued each year for new immigrant applicants. For instance, those immigrants who want to arrive on January 1, 2022, could apply by January 1, 2021. The government or another entity would then create the financial assets representing those applicants. The financial assets would trade for a period of time before the government identifies those with the highest market prices and awards them prediction‐market visas.
Those who are skeptical about particular immigrants, or about immigration in general, could insure themselves against bad immigration choices via trades in these markets—trades from which they expect to profit if their skepticism turns out to be accurate. These markets could trade financial assets representing individual immigrants on a prediction‐market visa until the immigrant naturalizes.
It is easy to set up markets where people can trade such financial assets, as the popularity of political betting markets shows.110 If the government allows trading in such financial assets regarding immigrant applicants, with those trades being conditional on individuals being admitted, then such prices would estimate the net financial value of potential immigrants conditional on their being accepted. This is a straightforward application of the idea of decision markets or “futarchy,” on which I have written often before.111