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Eisenhower was a forceful defender of immigration, more out of a sense of duty to those fleeing oppression than as a strategy to import more brainpower. Nevertheless, it had both effects. In his January 12, 1961, State of the Union speech, he noted that

over 32,000 victims of communist tyranny in Hungary were brought to our shores, and at this time our country is working to assist refugees from tyranny in Cuba. Since 1953, the waiting period for naturalization applicants has been reduced from 18 months to 45 days. The Administration also has made legislative recommendations to liberalize existing restrictions upon immigration while still safeguarding the national interest. It is imperative that our immigration policy be in the finest American tradition of providing a haven for oppressed peoples and fully in accord with our obligation as a leader of the free world.

A few years later, under President Lyndon Johnson, the immigration pillar of our formula was further expanded when Congress liberalized laws that had severely restricted Asian immigration. The Immigration and Nationality Act of 1965 opened the doors for the massive immigration of brainpower from India. Today there are nearly three million Indian immigrants, many of them scientists, doctors, and academics, greatly enriching America’s talent pool. “In the 1970s something on the order of 80 percent of the engineering graduates of the Indian Institutes of Technology (IITs) came to America to do graduate studies and research, and the vast majority of them became permanent residents and citizens,” said Subra Suresh, the current director of the National Science Foundation, who was one of them. A large number of them became leaders in academia, industry, government labs, and start-ups in the United States. In 2009, only about 16 percent of the graduates of the IITs came to the United States for graduate studies and research. “If this trend is sustained from IITs and other similar institutions in other countries, it could have a huge impact for our research enterprise. More than 40 percent of the 375 faculty members in the School of Engineering at the Massachusetts Institute of Technology (MIT) are foreign-born,” added Suresh, who served previously as MIT’s dean of engineering.

The government has provided three of the five parts of the American formula—education, infrastructure, and research and development—through the use of taxpayers’ money. A fourth, immigration, is governed by laws Congress passes. The fifth part of that formula involves the use not of the government’s money but of its power.

Government regulation of the economy seems to contradict the fundamental principle of free-market economics. Like the social safety net, the proper extent of regulation is the subject of ongoing debate; and just as Social Security and Medicare have grown too expensive in their present form for the country to afford, so regulations have become more complicated than may be good for the health of the American economy.

President Obama admitted as much when he declared in The Wall Street Journal (January 18, 2011) that he was ordering “a governmentwide review of the rules already on the books to remove outdated regulations that stifle job creation and make our economy less competitive.” As with the social safety net, however, while it is sensible to prune the thicket of regulations within which American business operates, it would be utterly foolish to do away with government regulation altogether.

Markets are not just wild gardens that can be left untended. They need to be shaped by regulations that promote risk-taking but prevent recklessness on a scale that can harm everyone. The need for regulations arises from an unavoidable feature of any free-market economy, one that economists call “externalities.” These are the costs of free-market activities that are not captured by prices, for which, therefore, nobody pays, and that can injure the society as a whole. To correct this