Sunday, November 01, 2009

More Null Hypothesis

Voting with our feet:

In 1956, the economist Charles Tiebout provided the framework that best explains why people vote with their feet. The “consumer-voter,” as Tiebout called him, challenges government officials to “ascertain his wants for public goods and tax him accordingly.” Each jurisdiction offers its own package of public goods, along with a particular tax burden needed to pay for those goods. As a result, “the consumer-voter moves to that community whose local government best satisfies his set of preferences.” In selecting a jurisdiction, the mobile consumer-voter is, in effect, choosing a club to join based on the benefits that it offers and the dues that it charges. ...

... Unpacking the numbers is even more revealing—and, for California, disturbing. The biggest contrast between the two states shows up in “net internal migration,” the demographer’s term for the difference between the number of Americans who move into a state from another and the number who move out of it to another. Between April 1, 2000, and June 30, 2007, an average of 3,247 more Americans moved out of California than into it every week, according to the Census Bureau. Over the same period, Texas saw a net gain, in an average week, of 1,544 people. Aside from Louisiana and Mississippi, which lost population to other states because of Hurricane Katrina, California is the only Sunbelt state that had negative net internal migration after 2000. All the other states that lost population to internal migration were Rust Belt basket cases, including New York, Illinois, New Jersey, Michigan, and Ohio.

As Tiebout might have guessed, this outmigration has to do with taxes. Besides Mississippi, every one of the 17 states with the lowest state and local tax levels had positive net internal migration from 2000 to 2007. Except for Wyoming, Maine, and Delaware, every one of the 17 highest-tax states had negative net internal migration over the same period. Conservative researchers’ technical explanation for this phenomenon is: “Well, duh.” Or, as Arthur Laffer and Stephen Moore wrote in the Wall Street Journal earlier this year: “People, investment capital and businesses are mobile: They can leave tax-unfriendly states and move to tax-friendly states.”

A great example of why we should leave demography to the Wall Street Journal.


Stephen Gross said...

A few quick comments:

* I'm willing to believe that, to some extent, people choose where to live as a reflection of their values. However, this "choice" is limited by a number of factors:

* Career: Let's say you work in advertising. Well, if you want to have a successful career, you're limited to a few major cities in America (LA, NYC, etc.). It doesn't matter if you love love love St Louis; there just aren't that many advertising jobs there.

* Cost-of-living: It doesn't matter if you love love love NYC and all that urbanist wonderland. The fact is, it costs a fortune to live there. So it's not like you're free to "choose" to live there necessarily.

* Complete knowledge: As everyone who has read Adam Smith knows, the free market works when economic actors have access to all relevant information. That may be meaningful for, say, buying gasoline in a metro region (it's a commodity, the price is clearly indicated, etc.), but choosing a city to live in? It's not like there's some central city-information-exchange where potential residents can research exactly what they're looking for.

* Although it's tempting to think of city governments as service providers that respond (or don't respond) to a market for residents' preferences. However, city government are a big mishmash of intersecting political interests. It's not like a corporation with a hierarchical system of control that ships out a product.

Ok, so in sum I agree tentatively with the thesis that *some* people "shop" for cities. But there are significant limitations to that argument.

Jim Russell said...

Now Joel Kotkin is getting in on the act:

I'm in hell.