Texas Triumphant

January 8, 2011

by Jerry O’Driscoll  

Actually what is triumphant is the economic model of low taxes, light regulation and economic liberty. As Michael Barone clarifies in today’s (Weekend) Wall Street Journal (p. A13) no state has implemented these policies better than Texas. In “The Great Lone Star Migration,” Barone details the winners and losers by population since 1930. He breaks the period into two sub-periods: 1930-70 and 1970-2010.

He presents much data, and one statistic stands out: “Today one out of 12 Americans live in Texas – the same proportion that lived in New York City in 1930.” Other gainers by region are the Southeast and the Rocky Mountain states. The Plains and the interior South have also made gains. Regions that rose in the 1930-70 timeframe are now in relative decline due to bad policies in the states. The Pacific states are one example. The Northeast and Mid-Atlantic are two others.

No single measure measures the policy mix better than migration. People vote with their feet within and across nations. No one is going to Texas, or many of the other regional gainers, for the weather. They are going for the balance of economic opportunity, amenities and politics. Houston has an execrable climate, but is one of the most livable cities in the US.

As one who moved to Texas in the 1980s, none of this was obvious. Politics was still populist at the state level. Tort law was terrible.  Then the state experienced the oil bust, a real-estate bust and a banking crisis.  The Feds response was maladroit. It was by no means obvious that Texas would recover, much less prosper. But it did both. Throughout it kept low taxes and light regulation. One election, voters turned out all Democrat judges and replaced them with reforming Republicans. Two legislative reforms later, Texas Tort Law is a model. The state may move to a modified version of British law: loser pays.

19 Responses to “Texas Triumphant”

  1. David Says:

    Jerry: I’m working on a paper on interstate migration at the moment (I expect that it will take a few more months). And you’re right, Texas has gained and one of the reasons is relative economic freedom. But climate does matter: people move toward places with fewer “heating degree days” and more sunshine, given the level of economic freedom (and I’m not at all surprised: I moved from a place with an average temperature of 8C (46F) to a place with an average of 25C (77F) mostly because I hate cold weather). Crime rates are also important.

  2. Troy Camplin Says:

    I can’t imagine that anyone is moving to Texas for the weather. It’s unbearably hot through the summer. Tempterature-wise, it’s summer about 6-7 months, Spring and Fall for about two weeks, and Winter off and on in between. It’s not intolerable in the Winter, but it’s almost intolerably hot in the Summer. The only reason to come to Texas is the economy. And even there it’s a bit narrow. I’d like to move to NYC because it has more opportunities for someone in the arts and humanities.

  3. David Says:

    Troy,

    I think you’re in the minority. Where I live (Kaohsiung, Taiwan) it’s 90+ degrees for 7 months per year with 90% humidity, but most North Americans or Europeans I know here think it’s an improvement over home (the exception is people from southern California). Of course, I wouldn’t like it without air conditioning, but then again I would be dead without heating in the place where I was born!

    Anyway, according to my estimates the average person seems to be repelled by cold weather rather than attracted by hot weather (i.e. mild winters are most important).

  4. marmico Says:

    The Texas Triumph: “all hat, no cattle”.

    Some data:

    1. Below national median educational attainment;

    2. Slipping in the real GDP per capita rankings;

    3. Below national median household income;

    4. The highest health insurance uninsured rate in the country.

    Blah, blah about low tax rates, light regulation and economic liberty and the highest incarceration rate and death penalty rate in the nation.

  5. Roger Koppl Says:

    The growth of Texas probably couldn’t have happened without the rise of affordable air conditioning. But that doesn’t tell us why people have been moving from California to Texas, or why they are moving from LA, Atlanta and Miami to Dallas. Jerry is right, “No single measure measures the policy mix better than migration.”

    This interactive map helps tell the story:

    http://www.forbes.com/2010/06/04/migration-moving-wealthy-interactive-counties-map.htmlg

  6. Current Says:

    I visited Texas quite a bit when I worked for Dell. I don’t like the climate there and I can’t see why it’s a plus, but I guess that’s a matter of taste.

    I noticed a few other things that may be important there.

    * Because there is lots of desert there is little cost to expanding a city. It’s unlikely that species would be endangered by it for example, and the landscape isn’t very interesting, the only environmental problems are those associated with automotive transport. It’s not like that in many other places. In Cambridge in England, for example, there are very strict planning laws which basically prevent the city from being expanded in any significant way. To the elite the landscape around Cambridge is too valuable itself to be used for housing.

    * Mexican immigrants are closer to Mexico. I’m sure this must have many advantages for them. That will make them more likely to stay in Texas and take up low-wage jobs there than to do that in states further north.


  7. What Roger said, of course. Firms are leaving California to go to Texas and states like Utah and Idaho.

    An implication of Barone’s analysis is that the sunbelt model must be expanded in the more recent period. A/C was crucial to the South’s development, but it hasn’t helped Louisiana.

    Texas is an affront to conventional wisdom on state economic development. When I got there in the 1980s, people were complaining about the schools and saying they would stunt the state’s devlopment. Ross Perot got his start in politics over textbooks in public schools.

    By the 1990s, Texas was gaining at the expense in Silicon Valley in hitech. And I’m talking especially about North Texas (which includes the Dallas/Fort Worth Metroplex), which didn’t have a top tier university. Probably still doesn’t.

    At the K-12 level, there is huge variation among the quality of public school districts. Again the D/FW Metroplex illustrates this. There are some truly fine school districts and some that are not. People vote with their feet within a metro area, and pay for the level of public school services they demand. Sounds like choice to me.

    One form of school choice is a private school, and within the Dallas Independent School District that is the choice for a large swath of residents: Catholic, religious and secular schools.

    In short, Texas is proof that a pivotal role for education in development is wrong. Educated people moved in from outside. As population and incomes rose, the demand for schools expands. Just like for restaurants. Schools are endogenous and demand varies among hosueholds.


  8. Current hit several important points about Texas. It has benign land-use policies, and essentially housing is in elastic supply. Consequently, houses in Dallas and Houston are among the most affordable of any major city. There was no housing boom, and only a moderate decline in prices due to the national recession.

    I’ll add this staggering stat: one-half of all jobs being created in the US are being created in Texas.

  9. Not So Fast Jerry Says:

    Quoting”

    “Current hit several important points about Texas. It has benign land-use policies, and essentially housing is in elastic supply. Consequently, houses in Dallas and Houston are among the most affordable of any major city. There was no housing boom, and only a moderate decline in prices due to the national recession.”

    I lived the Dallas MetroPlex in the late 80’s. To say there was no housing boom is ridiculous on its face. I saw house after house where people could not sell due to the oversupply.

    Also, the zoning laws in Arlington were ridiculous. A co-worker had a 3 floor apartment building built right up against his property line in back of him, leaving him unable to sell his house, since who wanted 10 apartments behind you that can look straight down into your backyard.

    Another quote:

    “I’ll add this staggering stat: one-half of all jobs being created in the US are being created in Texas.”

    Gee, what a surprise that companies would create jobs where the laws are so heavily tilted towards the companies, and not the workers. Is this “Race to the Bottom” really best for the country overall?


  10. “Not So Fast Jerry” (whoever that is) misunderstands my point in two respects. In saying there was no housing boom, I was referring to the 2000s.

    Second, an elastic supply of a durable good, like housing, suggests there will be mostly a quantity response to an increase in demand. Since housing is a durable good,however, the response to a decline in demand is not symmetric. His charcterization of the housing market in the 1980s is basically correct. It was terrible time to be a seller, but an excellent time to be a buyer.

    For the remainder of his comment, I’ll just say that, if you don’t like Texas, don’t move there. Lots of people are moving there. so, for them, the benefits must outweigh the costs. Which, of course, was the point of my post.

  11. Current Says:

    Jerry,

    Do you think that if the Mexican population of Texas increases that they will swing more of the state to the democrats and undo these things?


  12. Current,

    Interesting question and one with implications for the entire Southwest. Texas has been becoming more Republican. The Republicans will be doing the redistricting and reinforce that trend.

    The Hispanic vote is contestable. GW Bush won it as Governor.

    The key thing is that a rising tide lifts all boats. The Republcians need to deliver continued growth.

  13. Current Says:

    Interesting.

    I brought it up because it’s one of the right-wing arguments against immigration you see these days. I’m pleased the vote is contestable that’s encouraging.

  14. marmico Says:

    I’ll add this staggering stat: one-half of all jobs being created in the US are being created in Texas.

    Which alimentary opening did you pull that regurgitated stat from?

    LAUS data.

  15. Pietro M. Says:

    Marmico. I think you should read your data. It basically confirms what O’Driscoll said. Thanks for the pointer. On 740,000 jobs created, 192,000 are in Texas, 26%. Texas is only 8% of labor force: 10 vs 130 millions.

    Texas has increased jobs by 190,000. It is followed by states which created 60, 50 or 45,000 jobs (or less). 11 states lost jobs, on 51 (including DC).

    Texas increased its labor force by 1.9%, third in rank in absolute terms. First was Columbia, land of the tax-consumers. That’s probably the real multiplier of the 1.5T$ deficit. :-D The second was tiny New Hampshire. Both DC and NH have 700,000 workers.

    So, it’s not 50%, it’s 26%, 3 times larger than the average, 4 times larger than the second in absolute terms, third in relative terms after one tiny state and one parasitic excrescence.

    Remarkable.


  16. The stat was reported last year around October. It was for the prior 12 months and so was likely for the period ending in August or September 2009. I suspect the study covered private-sector job growth. I am unaware of any update.

  17. lxm Says:

    …”But there’s one state, which is fairly high up on the list of troubled states that nobody is talking about, and there’s a reason for it.
    The state is Texas.
    This month the state’s part-time legislature goes back into session, and the state is starting at potentially a $25 billion deficit on a two-year budget of around $95 billion. That’s enormous. And there’s not much fat to cut. The whole budget is basically education and healthcare spending. Cutting everything else wouldn’t do the trick. And though raising this kind of money would be easy on an economy of $1.2 trillion, the new GOP mega-majority in Congress is firmly against raising any revenue.”

    Read more:

    http://www.businessinsider.com/texas-state-budget-crisis-2011-1


  18. Ixm,

    That figure is much in dispute. Some estimates bring the deficit in at half that. Texas was deep in the hole in the 1980s and grew out of it. It will do so again.


  19. Another interesting case study in migration is Texas’s neighbor–Oklahoma. Oklahoma has recently seen significant in-migration and from an unlikely source . . . California, call it the “reverse dust-bowl.” Here is the conclusion of the study I wrote:

    “In conclusion, people are most inclined to move to Oklahoma from places where state and local taxes are higher (including income taxes), union membership is higher, population density is higher, the cost of housing is higher, and temperatures are a bit colder. Or, to put it another way, people come to Oklahoma for lower taxes, fewer unions, more space, and more affordable housing.

    More telling, AGI is the most sensitive variable when it comes to state and local tax (and income tax) burdens and union membership. Clearly, Oklahoma’s low-tax reputation and recent adoption of a Right to Work law are attractive features not only for people but also for income to move into the state.”

    Full study here: http://www.ocpathink.org/publications/perspective-archives/april-2010-volume-17-number-4/?module=perspective&id=2406

    For those interested, I have similar migration studies being released in Illinois tomorrow and Rhode Island next week.


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