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From California Dreaming to California Leaving

It is often said that California foretells the nation’s future.  If so, we should really be worried about the cost of living. Wednesday’s New York Times ran an article about California that was candid about the high cost of living there although opaque about the reasons for it. It recognized that in the last seven years the state has lost more than two million people over twenty five years old to other states.  And the reasons for fleeing many give is the cost of living with the largest number going to Texas, a state renowned for a low cost of living.

This is a historic turnaround. California was famously the place to which Americans escaped—the place where dreams were realized and the living was easy. But today economists of all political stripes blame zoning and other regulations for running up the cost of housing.  Other regulatory costs are high and California is bringing in a minimum wage of 15 dollars an hour for cities and rural areas alike, which will also drive up the costs of goods and services.

You wouldn’t get this kind of analysis from reading the Times’ article. It focuses on one matter alone that may drive more migration—the coming limitations on state and local tax deductions in the Republican tax bill, the only context in which it references California’s already high taxes, the responsibility for which is also not discussed.

The reporter really should cultivate a better sense of causation.  Outside of quantum mechanics, causes happen before their effects. By his own account, people have been fleeing California for years before this change in the tax law was even on the horizon.  By highlighting a coming tax provision unpopular with left-liberals rather than focusing on the long-term causes of California’s plight the New York Times is offering its readers the journalistic equivalent of comfort food.

To be sure, many who want to be in tech or in films will still go to California for the network benefits of those places. If they make it big, they can afford to pay the high cost of living. But that just shows that California is adopting the political economy of many cities that caters to the rich and to the poor, but squeezes the middle class.

And we should also remember that Hollywood and Silicon Valley were products of California’s golden age. It seems much less likely that these places would have been chosen today given their high costs. California is living off a first mover advantage that may dissipate with time.

Reader Discussion

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on December 15, 2017 at 14:56:15 pm

Ah, the terrible plight of California. This explains why, much like in Puerto Rico, the population has been plummeting, and we observe the vast tracks of abandoned properties.

Oh, wait … Yes, that IS true of Puerto Rico—yet it seems oddly untrue of California. Why is it that the population of this hellscape has never been higher? Hmm….

Here’s a hypothesis: Maybe prices are high in California due to the operation of supply and demand. That is, maybe lots of people WANT to live there (high taxes, onerous regulations, and all), and all that competition from people striving to achieve that end is driving up prices?

Now, I wouldn’t be surprised to learn that California engages is a variety of practices that drive up prices. In economics, we call a California lifestyle a superior good. That’s not a moral judgment; it’s a reference to the idea that as people get richer, they tend to shift their consumption towards it. As society grows wealthier, but the amount of California real estate does not change, we see prices for these superior goods rise.

Now, it might ALSO be the case that California adopts expensive policies. Thus, for example, perhaps California adopts stricter environmental regulations because rich people are willing to spend more on such things. Maybe these policies drive up prices more than their worth. Or maybe they drive up prices equal to their worth. Or maybe they don't drive up prices at all--that is, maybe prices are rising simply due to increased demand, not increased costs, and adopting stricter public policies may be a way for society to extract some of those private rents for the public good.

If a California lifestyle is a superior good, does that mean that we should expect to see residential stratification based on wealth? Yup. Residential zones have stratified by wealth since the days of the pharaohs; what else is new?

I grew up in St. Louis. We had relatively low property values and relatively high wages. Heaven, right? Perhaps. Or perhaps you’d conclude that we had low property values because there was not much demand from people moving in, and relatively high wages because employers had to pay people a premium to live there. (Ok, a high degree level of unionization contributed to this outcome, too.)

Anyway: Market forces—it’s worth looking into.

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nobody.really
on December 15, 2017 at 18:21:42 pm

It would seem the only people who aren't leaving California are the Hollywood Stars who vowed they would leave the country if Trump was elected...

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Image of Paul Binotto
Paul Binotto
on December 15, 2017 at 18:44:14 pm

In fairness, they're just one earthquake away from fulfilling on that pledge.

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Image of nobody.really
nobody.really
on December 15, 2017 at 18:48:07 pm

"Why is it that the population of this hellscape has never been higher? Hmm…."

One may want to consider the demographics of the "replacements"

And yes, it could very well be, indeed I would be stunned if it were not true, that the rich do like a clean environment, etc EVEN if it means that their poorer neighbors may suffer undue economic hardship! But then againm they are rich and they (think) they control the market - Oops, they do the marketplaces of politics and opinion.

NOW that is a *market force* to be reckoned with.

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Image of gabe
gabe
on December 15, 2017 at 18:50:21 pm

Well now Paul, there is a good reason for that. As a condition iof their bail (for various sexual harassment charges) they are required to stay within the Court's jurisdiction.

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gabe
on December 15, 2017 at 18:59:00 pm

Ha! True, very true.

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Image of Paul Binotto
Paul Binotto
on December 15, 2017 at 19:08:06 pm

Didn't think of that Mr. Gabe. I guess its only fitting that the accused shouldn't be able to free themselves from the clutches of the Court no matter how unwelcome they may find them...

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Image of Paul Binotto
Paul Binotto
on December 15, 2017 at 19:38:59 pm

1) California is expensive because zoning laws wont let builders construct new homes, particularly if they are low or middle income homes.
2) California is a very leftist, socialist state with a huge bureaucracy and nanny state which the illegal and legal immigrants need because they vote democrat and vote for bigger govt with more social services.
3) California public schools are some of the most expensive in the country but they are education Mexicans, central americans, Africans and pacific/south/east Asians. Those from poor 2nd and 3rd world nations don't respect education, don't want to learn English, don't want to assimilate, are unpatriotic and hate America, have low IQs. They just want to live in their central American communities, their Mexican communities, etc and live off the govt.

So if you have a growing population but you restrict new housing units then prices will go up from competition. People will flee the state because they cant afford the housing and they cant afford the taxes to pay for citizen who live off the govt programs and don't contribute snot!

Of course people will move to where taxes are low and there is land to build a nice home to raise a family . If I had my way, Id take 1/3 of mexico for all of their population that has migrated to the US and I would close the borders to immigrants and refugees...and everyone in the world...then Id deport everyone here illegally.

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LouisM
on December 22, 2017 at 13:01:39 pm

[…] It is often said that California foretells the nation’s future. If so, we should really be worried… […]

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Image of Weekend Reads 122217 – rule 11 reader
Weekend Reads 122217 – rule 11 reader
on March 01, 2018 at 02:45:58 am

Louis you truly have shown your high IQ in this blog. I bet you hate other people just because of reasons....

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YourLord
on April 27, 2018 at 10:06:35 am

Louis is right on!

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Kelly

Law & Liberty welcomes civil and lively discussion of its articles. Abusive comments will not be tolerated. We reserve the right to delete comments - or ban users - without notification or explanation.