The Volokh Conspiracy

Temple law professor Peter Spiro has an interesting New York Times column arguing that supporters of immigration should not fear a Supreme Court decision upholding Arizona’s draconian anti-illegal immigrant law, because interjurisdictional competition is likely to take care of the problem. By contrast, he fears that if the Court strikes down the law, the result could be the enactment of much more dangerous federal legislation:

Arizona is one of several states, including Alabama, Georgia, South Carolina and Indiana, that, frustrated by Congress’s idling on immigration reform, have challenged federal authority by taking it upon themselves to devise draconian policies for undocumented immigrants….

Such laws are misguided at best, mean-spirited and racially tainted at worst. The conventional wisdom among immigration advocates is that immigrant interests will be best served if the Supreme Court makes an example of Arizona’s law by striking it down.

But in the long run, immigrant interests will be better helped if the Supreme Court upholds S.B. 1070….

Undocumented immigrants may themselves be politically powerless, but they have powerful allies. In Alabama and Georgia, dismayed farmers have watched crops rot in the fields for want of immigrant labor. Arizona is estimated to have lost more than $140 million from convention cancellations made in protest.

Even more important is the prospect of lost foreign investment. Caught in the net of Alabama’s law in November was a German Mercedes-Benz executive, who left his passport at home while out for a drive and as a result found himself in a county jail. Mercedes has a plant in Tuscaloosa that employs thousands of Alabamians and adds many hundreds of millions of dollars to the state economy. That embarrassment will make the next foreign company think twice as it scouts out a location for a manufacturing facility in the United States….

In those states that have enacted laws, there are moves to roll them back. The Alabama House of Representatives has approved a Republican-sponsored bill to soften its current law….

Even if some of these state immigration laws survive political, corporate and consumer opposition on the ground, it’s better to have the scattered imposition of state laws than the blanket coverage of a federal measure. Other states and localities are welcoming immigrants, legal or not. That fact gets lost in the common indictment of state and local immigration measures as a “patchwork.” One of federalism’s core virtues is the possibility of competition among states. Competition in this context is likely to vindicate pro-immigrant policies.

I am much less certain than Spiro that a decision striking down the Arizona law is likely to be followed by punitive federal legislation. Congress is deeply divided on the subject, and the Obama administration is likely to oppose any such law. Even if Mitt Romney becomes president and has a narrow Republican congressional majority, passage of draconian federal legislation is far from certain, especially given the large number of competing political priorities that a new GOP administration would face.

That said, Spiro is right to suggest that interjurisdictional competition is likely to constrain the spread of Arizona-style illegal immigration laws, and possibly lead to the repeal or reform of some of the laws already enacted in various states. Even if a few states do retain these sorts of laws, businesses and individuals can effectively “vote with their feet” against them by moving to other states. As Spiro points out, this makes ill-advised state laws in this field much less dangerous than comparable federal ones.

UPDATE: I have revised some parts of this post for clarity.

UPDATE #2: I should note that there is one way in which the Arizona immigration law may be worse than a comparable federal law would be. I explained in detail in this 2010 post.

Yale Law Professor Heather Gerken, a prominent federalism scholar, has an interesting article in Democracy urging her fellow liberals to take a more favorable view of federalism:

Progressives are deeply skeptical of federalism, and with good reason. States’ rights have been invoked to defend some of the most despicable institutions in American history, most notably slavery and Jim Crow. Many think “federalism” is just a code word for letting racists be racist. Progressives also associate federalism—and its less prominent companion, localism, which simply means decentralization within a state—with parochialism and the suppression of dissent. They thus look to national power, particularly the First and Fourteenth Amendments, to protect racial minorities and dissenters from threats posed at the local level.

But it is a mistake to equate federalism’s past with its future. State and local governments have become sites of empowerment for racial minorities and dissenters, the groups that progressives believe have the most to fear from decentralization. In fact, racial minorities and dissenters can wield more electoral power at the local level than they do at the national. And while minorities cannot dictate policy outcomes at the national level, they can rule at the state and local level. Racial minorities and dissenters are using that electoral muscle to protect themselves from marginalization and promote their own agendas.

Much of Gerken’s argument is based on the simple but important point that groups that are relatively weak minorities at the national level often wield greater influence in state and local governments where they are a much higher proportion of the population. In these situations, political decentralization benefits minorities by shifting power to the level of government where they have more political clout.

This will not come as news to students of federalism in countries outside the US. Many federal systems were established in the first place precisely because some ethnic groups that are minorities at the national level are majorities in a province or state. Federalism therefore protects them against domination by the national majority. Canada, Switzerland, Spain, India, and many other federal systems are examples of this pattern.

In the United States, of course, this aspect of federalism has largely been ignored because we have had very few cases of states where a national minority was a majority within a single state. The Mormons in Utah are an important exception, but one that few federalism scholars have paid attention to. However, as Gerken points out, racial and other minorities have increasingly become majorities in some state and local governments. In others, they at least form a much larger proportion of the population than they do at the national level and therefore have greater power. This helps explain why such causes as gay rights have made much more progress at the state level than in Washington in recent years.

Gerken rightly emphasizes that political empowerment through federalism enables minorities to be active agents protecting their own interests, as opposed to comparatively passive recipients of federal largesse, where their fate is in the hands of the national majority or the federal courts. Unfortunately, she ignores a different way in which federalism empowers minorities: By enabling a diversity of policies to arise in different jurisdictions, minorities are able to “vote with their feet” for the jurisdiction that serves them best. For reasons I describe in this article, foot voting is often of even greater benefit to unpopular minority groups than others. A century ago, millions of African-Americans improved their lot by migrating from the South to northern jurisdictions that had less racist policies. Today, ironically, many northern blacks are moving to the South in part because southern states have fewer regulations that artificially impede employment and inflate housing prices.

Gerken’s argument would be stronger if she were more willing to question the conventional wisdom about the history of American federalism, which holds that decentralization has almost always been an enemy of minorities, while the federal government is usually their friend. There is no doubt that state governments have engaged in severe oppression of minorities throughout much of American history. But the same can be said of the federal government, which was guilty of such sins as the Fugitive Slave Act; federally imposed segregation in the armed forces, the federal civil service, and the District of Columbia; the expulsion of Native Americans from much of their land; and the brutal internment of over 100,000 Japanese-Americans during World War II.

In an era when racial minorities were widely hated and wielded little political power, extensive discrimination against them was probably inevitable, regardless of whether the political system was unitary or federal. At many points in American history, however, centralization would likely have made minorities worse off than federalism did. For example, a unitary policy on slavery in 1787 would probably have led to a nationwide law in its favor, since nearly all states were still slave states at that time. A unitary national policy on racial segregation circa 1900 would likely have led to nationwide Jim Crow (though probably a less severe version than existed in the deep South) and nationwide denial of the right to vote for African-Americans. The point is not that federalism was always good for minorities (it clearly was not), but that our history is far more complicated than a morality play in which evil states oppress minorities until the latter are rescued by a benevolent federal government. I discussed these historical points about federalism and minority rights in greater detail here.

Finally, it’s worth noting that Gerken’s progressive defense of federalism coexists uneasily with her apparent rejection of judicial enforcement of structural constitutional limits on federal power. If federalism today is good for minority groups because they often have greater influence at the state and local level than in Washington, it logically follows that minorities could benefit from stricter enforcement of constitutional limits on federal authority. Otherwise, a hostile national majority can use its control of the federal government to override the locally powerful minority’s gains.

Much more can be said about Gerken’s article. For now, I would add only that it’s a valuable contribution to the ongoing reconsideration of federalism on the political left, as well as the broader debate on the subject.

In this recent post, University of Texas constitutional law professor Sanford Levinson calls for a reassessment of our federal and state constitutions:

[I]nstead of being fixated on what the Constitution means, one instead asks whether the Constitution, given a stipulated meaning that may in fact not be at all difficult to discern, is in fact wise. One might call this a “Jeffersonian” approach to the Constitution inasmuch as it invites relentlessly asking whether the Constitution is serving us well. This is, incidentally, an especially important question if we agree on constitutional meaning. Disagreement, after all, suggests the possibility of legitimately interpreting the Constitution to achieve what we might describe as “happy endings.” The situation is decidedly different, however, if we agree on constitutional meaning, but believe that it sets us up less for happy endings than for driving over a cliff….

I have recently published a new book, Framed: America’s 51 Constitutions and the Crisis of Governance (Oxford University Press), that focuses almost exclusively on the wisdom of constitutional structures that are, almost without exception, obvious in their meaning. Evidence of this obviousness is that they are rarely brought up in law school classes precisely because there is nothing to “argue about” in the only sense that lawyers and their professors define that term, which involves debates about meaning…

An important theme of the book is that there are fifty-one constitutions within the United States if one takes into account the fifty states. More to the point, these state constitutions can teach valuable lessons of their own. Some of them, as with the national constitution, may offer cautionary lessons inasmuch as they help to explain the dysfunctionalities of given state politics.

I agree with much of what Sandy says in this post. We should not blindly venerate the Constitution. And we should give serious consideration to the possibility that some parts of it are flawed or even dysfunctional. As I explained in this post, a few parts of the Constitution are indefensible and some others are at least open to serious question. Sandy is also right that legal scholars should pay more attention to the effects of the clear “hardwired” parts of the Constitution and to state constitutional law. The latter is sadly neglected by most constitutional law academics, and rarely gets its due in the law school curriculum. Hopefully, Sandy’s important book will help change that.

On the other hand, I am far less confident than Sandy that we should push for a major restructuring of the Constitution at this point in our history. As Richard Epstein notes in his response to Sandy’s post, such an effort could easily do more harm than good. We should not abjure all efforts constitutional reform. But I would prefer to use a scalpel rather than a meat cleaver. For that reason, I am skeptical of calls for a new constitutional convention, which has been advocated by some on the political right, as well as by Sandy himself.

I also disagree with some of Sandy’s specific criticisms of federal and state constitutions. For example, he writes that California’s state constitution is flawed because of “the near-inability to raise any taxes, given the constitutional requirement of a two-thirds vote in the legislature, coupled with the ability of the California electorate to pass legislation and even constitutional amendments through mechanisms of ‘direct’ democracy.” However, California has in fact been quite successful in raising taxes. It has the third-highest state income tax rate of any state (trailing only Hawaii and Oregon). The highest rate (9.3%) kicks in at an annual income of just $48,029. The state also has an above average state sales tax rate (6.25%). California’s fiscal crisis is the result of unusually high spending, not unusually low tax rates.

However, Sandy is not entirely wrong to believe that California’s problems have a constitutional dimension. As I explained in this post, the state’s dysfunctions are in part the result of its vast size and its favorable geographic location, which make it difficult for citizens to “vote with their feet” against excessive taxation and regulation. Only in the last few years have things gotten so bad that the state has begun to suffer net outmigration to other states. Californians would have been better off if the state were broken up into several smaller jurisdictions that would have to compete with each other for residents. But that option is rendered almost impossible by the federal Constitution.

UPDATE: The Tax Foundation reports that California has an additional 10.3% tax rate on incomes of over $1 million per year.

UPDATE #2: Mike Rappaport has posted a thoughtful response to Sandy’s post here. I agree with many of Mike’s points, though I a more sympathetic than he is to reforms that would make the US Constitution easier to amend.

My 2011 article “Foot Voting, Political Ignorance, and Constitutional Design” is now available on SSRN, after a delay due to policies of the publisher. Here’s the abstract:

The strengths and weaknesses of federalism have been debated for centuries. But one major possible advantage of building decentralization and limited government into a constitution has been largely ignored in the debate so far: its potential for reducing the costs of widespread political ignorance. The argument of this paper is simple, but has potentially important implications: Constitutional federalism enables citizens to “vote with their feet,” and foot voters have much stronger incentives to make well-informed decisions than more conventional ballot box voters. The informational advantage of foot voting over ballot box voting suggests that decentralized federalism can increase citizen welfare and democratic accountability relative to policymaking in a centralized unitary state.

Ballot box voters have strong incentives to be “rationally ignorant” about the candidates and policies they vote on because the chance that any one vote will have a decisive impact on an electoral outcome is vanishingly small. For the same reason, they also have little or no incentive to logically evaluate the information they do know. By contrast, “foot voters” choosing a jurisdiction in which to reside have much stronger incentives to acquire information and use it rationally; the decisions they make are individually decisive.

Political ignorance is far from the only factor that needs to be considered in determining the degree of centralization in political systems. But it deserves greater attention than it has received so far.

Tad DeHaven of the Cato Institute has a good post highlighting the data on state governments’ growing dependence on federal funds. Since 2001, federal grants have risen from 25.7% of state government spending to 34.1% today. Most of that growth has occurred since the present recession began in 2008.

One of the main distinctive benefits of American federalism is that, historically, state governments have had to raise most of their funds from their own taxpayers, rather than relying on grants from the feds. This gives states incentives to compete for taxpayers and improve the quality of their policies and public services, thereby increasing the effectiveness of voting with your feet. I cover these points in more detail here.

In most other federal systems, the central government provides the lion’s share of subnational governments’ funding. If present trends continue, the United States may join this trend. State governments will increasing look to Washington for most of their funds, and incentives for competition and innovation will be undermined. It’s possible that fiscal policy will return to “normal” as the economy improves. But state governments are likely to lobby for current grant levels to continue even after the recession ends. Current federal subsidy levels could easily become the new normal.

Political scientist Jason Sorens presents some interesting new data showing that people tend to “vote with their feet” for states with greater freedom when they make migration decisions. He shows that, controlling for other variables (such as climate and cost of living), people tend to migrate towards states with greater economic and personal freedom, and away from states with lower levels of either. The state freedom ratings are based on his excellent recent study Freedom in the Fifty States, coauthored with William Ruger. Economic freedom is defined by levels of government spending and regulation, while personal freedom is defined by such policies as regulation of sexual freedom, drugs, gambling, and so forth.

Sorens finds that migrants may find economic freedom attractive in part because it is associated with increases in income. Economically freer states experience higher income growth (though, surprisingly, in Sorens’ data it’s less clear that income growth is associated with higher in-migration). By contrast, personal freedom is not correlated with income growth. Migrants apparently find it attractive for its own sake. This last result contradicts Richard Florida’s famous theory that the economic growth of localities is highly dependent on its attractiveness to the “creative class,” which greatly values personal freedom. Perhaps the creative class is a less important engine of growth than Florida argues, or perhaps they don’t value personal freedom as much as we think they do. Regardless, many migrants apparently value personal freedom even if it doesn’t do much for their income.

I previously wrote about the tendency of migrants to vote with their feet for greater economic freedom here and here. In this article, I explain why foot voting decisions are generally likely to be better-informed and more rational than ballot box voting.

Riverside County Supervisor Jeff Stone recently called for southern California to secede and form a new state:

Is the state of California about to go “South”?

Riverside County Supervisor Jeff Stone apparently thinks so, after proposing that the county lead a campaign for as many as 13 Southern California counties to secede from the state.

Stone said in a statement late Thursday that Riverside, Imperial, San Diego, Orange, San Bernardino, Kings, Kern, Fresno, Tulare, Inyo, Madera, Mariposa and Mono counties should form the new state of South California.

The creation of the new state would allow officials to focus on securing borders, balancing budgets, improving schools and creating a vibrant economy, he said.

“Our taxes are too high, our schools don’t educate our children well enough, unions and other special interests have more clout in the Legislature than the general public,” Stone said in his statement…..

Stone said he would present his proposal to the Board of Supervisors July 12.

The new state would have no term limits, only a part-time legislature and limits on property taxes.

Even if Stone succeeds in getting other southern Californians to support his plan, it faces very long legal and political odds. As Bill Whalen points out, the Constitution does not allow a state’s territory to be divided without its own consent. And the admission of a new state to the Union requires approval by Congress. Obviously, the California state legislature is unlikely to agree to the secession. And even if it does, congressional Democrats are unlikely to approve the admission of a state with two new Republican senators unless a new majority-Democratic state is admitted at the same time (e.g. – Puerto Rico or the District of Columbia).

Ironically, the Constitution is far more clear about making it hard for territories to secede from a state than about the secession of states from the Union, a subject on which it is conspicuously silent. No successful secession from a state has occurred since West Virginia broke off from Virginia during the Civil War. And that secession may have violated the Constitution, since the Virginia legislature did not consent to it at the time.

This is one of those areas where I think the Constitution gets things wrong. Seceding from a state should not be easy. But it also should not be as impossibly difficult as the Constitution currently makes it. Some of our present states are probably too big, and California is perhaps the best example of this phenomenon.

Normally, dysfuctional state policies are constrained by the possibility of “voting with your feet.” If a state imposes overly high taxes, adopts flawed regulations, or provides poor public services, people and businesses will tend to migrate elsewhere, thereby incentivizing the state government to clean up its act in order to preserve its tax base. For reasons I discussed in this article, foot voters usually have incentives to be better-informed and more rational in their decision-making than ballot-box voters.

In California’s case, however, this dynamic has been undercut by the state’s size and favorable geographic location. Because California is extremely large and controls most of the warm-weather coastal territory on the West Coast, people have been willing to put up with a lot of bad policies for the opportunity to live there. Competitive pressure on the state government would be much greater if there were three or four states occupying California’s present territory instead of one.

In recent years, conditions in California have gotten so bad that the state has finally begun to experience a net outmigration to other states
of approximately 140,000 per year. And the state government has belatedly begun to reform itself, with Democratic governor Jerry Brown proposing to cut spending and abolish the state’s abusive redevelopment agencies. But these trends did not take hold until after the state had dug an extremely deep hole for itself that it will take years to dig out of. A smaller California that faced more interjurisdictional competition probably would not have become so dysfunctional to begin with. And if it did, it would have had to mend its ways sooner, since people would have started to leave earlier.

Obviously, given the existence of economies of scale in government, we would not want states that are too small. However, California and a number of other states have several times more people than many European countries whose governments function as well or better than those of other democracies, including Switzerland, Belgium, Denmark, and Sweden. Indeed, California has many more people than Canada. No serious scholar argues that Switzerland and Denmark are missing out on important economies of scale. The same goes for states such as Virginia and Massachusetts, as well as the hypothetical new state of southern California.

It’s also worth noting that secession from a state doesn’t raise nearly as many difficult moral and political issues as secession from the Union. People who secede from a state would still be under the federal Constitution and would still enjoy its guarantees of individual rights. They will also still be subject to other federal laws. So even if you are more skeptical than I am about secession from nation-states, you can still favor loosening restrictions on the formation of new states within a nation.

In a reversal of historical trends, many black New Yorkers are voting with their feet and moving to the South. In the early twentieth century, hundreds of thousands of southern blacks moved to northern cities in part to escape southern racism and oppressive Jim Crow laws. Today, as the New York Times reports [HT: Josh Blackman], the migration is going the other way:

The economic downturn has propelled a striking demographic shift: black New Yorkers, including many who are young and college educated, are heading south.

About 17 percent of the African-Americans who moved to the South from other states in the past decade came from New York, far more than from any other state, according to census data. Of the 44,474 who left New York State in 2009, more than half, or 22,508, went to the South, according to a study conducted by the sociology department of Queens College for The New York Times.

The movement is not limited to New York. The percentage of blacks leaving big cities in the East and in the Midwest and heading to the South is now at the highest levels in decades, demographers say….

The movement marks an inversion of the so-called Great Migration, which lasted roughly from World War I to the 1970s and saw African-Americans moving to the industrializing North to escape prejudice and find work.

Spencer Crew, a history professor at George Mason University who was the curator of a prominent exhibit on the Great Migration at the Smithsonian Institution, said the current exodus from New York stemmed largely from tough economic times. New York is increasingly unaffordable, and blacks see more opportunities in the South.

Ms. Brown, who spent 35 years investigating welfare fraud for New York State, may have seemed the embodiment of the black American dream in New York City.

In the 1950s, her parents moved to Harlem, and then to Queens, from Atlanta. Her grandmother was a maid; her grandfather was a brick mason. One generation later, her parents were prospering. Her father became a senior tax official for the state; her mother was an executive assistant to the state corrections commissioner.

But Ms. Brown says New York is now less inviting…..

“In the South, I can buy a big house with a garden compared with the shoe box my retirement savings will buy me in New York,” she said.

Many of the people quoted in the Times article cite the high cost of housing in New York as a major factor in their decision to depart. As Harvard economist Edward Glaeser explains, that cost is in large part the result of New York’s restrictive zoning, construction permit, and rent control policies. By contrast, Glaeser points out, many southern cities, such as Houston, impose far fewer restrictions on new housing construction, with the result that homes are far more affordable there, especially for the poor and lower middle class.

The other major complaints cited by the movers are the difficulty of finding employment in New York and the high cost of living. That too is in large part due to differences in government policy. Glaeser points out that state and local taxes are also far higher in New York City than in the South, especially Florida and Texas, which has no state income tax. The modestly higher property taxes in Texas do not come close to fully offsetting the difference.

Like their early 20th century counterparts, today’s African-Americans are “voting with their feet” for better government policies, or at least against worse ones. Obviously, today’s New York City overregulation is nowhere near as bad as Jim Crow was. But the underlying dynamic of foot voting is similar. Many of those moving may not fully understand the extent to which differences in government policy underpin the differences between the city they are leaving behind and the places they are moving to. But that does not prevent them from making effective use of information to vote with their feet in a rational way. Similarly, as I describe in this article, early 20th century blacks who moved North were able to acquire the information they needed, even despite the extremely low levels of education many of them had under Jim Crow.

Obviously, this reverse migration would not have occurred if it were not for the decline of racism in the South since the Civil Rights Movement. White racism has not disappeared from the South, but it has certainly diminished greatly. Some of the people quoted by the Times even claim that race relations in the South are now better than in New York City, though I suspect that this is far from uniformly true.

Passover is perhaps the ultimate holiday for people like me who celebrate the freedom-enhancing potential of voting with your feet. After all, it’s about people who voted with with their feet to escape slavery. Economist Arnold Kling, however, is more skeptical. He poses the following “libertarian seder questions”:

1. Why did the Egyptians not attempt to escape to freedom with Moses?

2. Why did the Hebrews not escape much sooner?

One answer to (1) might be that Egyptians were not as desperate to leave. They were not as brutally enslaved as the Hebrews.

One answer to (2) might be that the Hebrews were not so badly off under previous Pharoahs. The story reads that there arose a cruel Pharoah who made life unbearable for the Hebrews. That implies that previous Pharoahs were not so unbearable.

Both of these answers pose problems for libertarians. They suggest that for most people, freedom is relative, not absolute. Moreover, it is bound up with other issues, such as economic well-being and relative status. Perhaps the Egyptians did not feel unfree, because others were even more clearly enslaved. Perhaps the Hebrews tolerated the rule of Pharaohs as long as the dictatorship was relatively benevolent. Perhaps there are many conditions under which large numbers of people will not choose freedom.

I am a bit more optimistic than Kling. I think the Passover story suggests that both the Egyptians and the Hebrews chose the option that gave them greater freedom than the available alternatives.

The answer to Kling’s question 1 is that running away with Moses would not have made the Egyptians more free than they were before. After all, the Israelite polity led by Moses and Aaron was no libertarian or even liberal paradise. It was a repressive theocratic oligarchy. Any Egyptians who fled with Moses would not, for example, have been allowed to continue worshiping their pagan gods. If they persisted in their traditional religious ceremonies, they might have suffered the same grisly fate as those Jews who worshiped the golden calf. Given that the Egyptians, unlike the Hebrews, were not enslaved and that Pharaoh was willing to let them worship their own gods freely, I’d say that the Egyptians were more free as a result of choosing to stay than they would have been had they gone with Moses.

As for why the Hebrews did not leave under the previous, less oppressive pharaohs, the answer is that there was nowhere to go that was better. At that time, virtually any area that the Hebrews could have realistically moved to was under the control of rulers similar to the pharaohs in respect to the amount of freedom they granted their subjects. Indeed, thanks to Joseph’s influence, the Hebrews probably got a better deal from the earlier pharaohs than they could have gotten elsewhere.

Only when the new, more cruel pharaoh enslaved the Hebrews did the Egyptian government become more repressive than the available alternatives. When that happened, the Hebrews acted accordingly and voted with their feet for greater freedom. Moses was no Frederick Douglass when it came to promoting liberty for former slaves. But he was a big improvement over the new pharaoh.

Ultimately, both the Egyptians and the Hebrews chose the lesser evil among severely flawed alternatives. That isn’t the traditional interpretation of Passover. But it captures the real world experience of voting with your feet well. There is no perfect promised land out there. But being able to choose where you live is still tremendously empowering because it can greatly increase your freedom relative to where it would be otherwise.

That’s not to deny that people, including libertarians, weigh considerations other than freedom in deciding where to live. However, extensive evidence from both international and domestic migration patterns suggests that people routinely choose freer jurisdictions over less free ones, often in large numbers.

Why is this holiday different from all other holidays?

Because it’s the only one that celebrates voting with your feet for greater freedom!

UPDATE: A commenter refers me to Exodus 12:38, which states that “a mixed multitude” of other people fled along with the Hebrews. That actually reinforces my argument. After all, some Egyptians were more oppressed by Pharaoh than others, and there were surely many non-Jewish slaves in Egypt. Some of these people had it so bad under Pharaoh that living under Moses’ rule would increase their freedom, even if that were not true for the majority of Egyptians.

Cornell lawprof William Jacobson detects a potential contradiction in Republican politicians’ view on constitutional federalism [HT: Steve Bainbridge]. Many of them claim that the Obamacare individual mandate falls outside of Congress’ power, but simultaneously support federally mandated tort reform that would override state tort law:

If we are against the federal government forcing us to purchase health insurance, shouldn’t we also be against the federal government telling us which state common law remedies we can pursue and on what terms? Isn’t this a matter for the states? …

I think there are distinctions which could be drawn between the mandate and tort reform, since tort reform does not require that one purchase a product. Most people who are against the mandate would acknowledge that the federal government can regulate the health care system, but that the mandate is a step too far….

Tort reform needs a careful airing of the constitutional issues before any vote; but at this point I’d be inclined to leave it to the states. If you don’t like your state’s tort system, do the same thing you would do if you didn’t like its tax or other systems: Move.

Federally mandated tort reform is surely permissible under current Supreme Court precedent, which allows Congress to regulate virtually any “economic activity.” Certainly, tort litigation falls within that category as currently defined by the Court, which encompasses any activity involving the “production, distribution, and consumption of commodities.” By contrast, the individual mandate goes beyond this by regulating inactivity and forcing individual citizens to purchase products they don’t want. So if your only objection to the individual mandate is that it goes beyond what current Supreme Court precedent allows, you can still consistently believe that it is unconstitutional, while federal tort reform is not.

In my view, however, current precedent is badly misguided in allowing Congress to regulate virtually any “activity.” Therefore, I think most federally mandated tort reform is in fact unconstitutional, even if the Supreme Court would permit it to go forward.

Federal reform is also largely unnecessary to solve the problem of excessive tort awards. Interstate competition can be just as effective as federal mandates, often more so. If a state allows excessive tort suits, many businesses will refuse to operate there or charge higher prices. This in turn reduces state tax revenue, forcing state legislatures to curb their courts. Over the last 20 years, numerous states have enacted tort reforms that do just that. Even Alabama, notorious for being the nation’s worst tort “hellhole” in the 1980s and 90s, has to a large extent cleaned up its act. Alabama ultimately replaced its pro-plaintiff state supreme court justices with ones that took a dimmer view of tort litigation. State leaders worried that Alabama would lose business if they did not. In most cases, “voting with your feet” is an excellent solution to the problem of runaway state tort law.

For a more extensive discussion of the reasons why federal tort reform is both unconstitutional and largely unnecessary, see this 2004 paper by my colleague Michael Krauss and Bob Levy. As Krauss and Levy point out, federal controls may be needed to curb state efforts to use tort law to regulate economic activity that takes place outside their borders. Voting with your feet is far less effective if the state can “come after you” even after you have left. That, however, is a limited intervention permissible even under a fairly narrow view of federal power. After all, the original meaning of the Commerce Clause was precisely to limit states’ ability to constrain interstate commerce and extend their regulatory authority beyond their borders.

UPDATE: I previously wrote about the same issue in this 2007 post.

New Zealand economist Eric Crampton has responded to my post commenting on his query about why so few libertarians move to New Zealand despite the fact that New Zealand is (slightly) freer than the United States. I actually agree with much of what he says in this post, which makes several good points. But I do have several reservations.

Eric disagrees somewhat with my claim that the difference in freedom between New Zealand and the US is fairly marginal. The points he makes are valid, but none strike me as upsetting the bottom-line conclusion. Most of them are very minor differences. For example, in an age where almost everyone has cable, I don’t think it matters very much that, in New Zealand, “South Park and HBO series air, unedited, on broadcast [TV].” Moreover, each such point can be countered by an offsetting marginal edge for the US (e.g. – New Zealand has hate speech laws). The one really substantial New Zealand advantage Eric cites is their much less aggressive prosecution of the War on Drugs. However, this difference has little effect on the lives of most committed libertarians, since the vast majority of them are middle class professionals. The War on Drugs inflicts most of its harm on the poor, especially inner city minorities. Libertarians, of course, would like to eliminate the War on Drugs even if it doesn’t affect them much personally; but moving to New Zealand won’t do much to achieve that goal. Ultimately, Eric doesn’t seem to disagree much with my conclusion that the very small differences in freedom between the US and New Zealand are outweighed by the high costs of moving.

Eric also has an interesting analysis of the residency patterns of 56 of the libertarian activists who wrote autobiographies for Walter Block’s recent book I Chose Liberty:

I took a quick flip through the contributors to Block’s libertarian autobiographies. When I could match a contributor to a US state of residence through a Google search, I did. Of the 56 I think I’ve placed correctly, ten lived in California (Mercatus score -0.413), eight in Virginia (0.275), six in New York (-0.784), six in Texas (0.346), four in Arizona (0.279), four in Alabama (0.092), and others elsewhere. The median freedom score enjoyed by this set of libertarians is 0.019. None seemed to live in the four most-free states: New Hampshire (0.432), Colorado (0.421), South Dakota (0.392), and Idaho (0.356). Lots lived in the least free state: New York.

The median… libertarian lives in a state like North Carolina (0.019) while the median American lives in a state like Delaware (-0.008). At least the difference is in the right direction; I’d feared that the median libertarian would be in a less free state than the median American because of the number of academic jobs in the Cal State and New York systems.

Unless already living in one of the most free states, it’s hard to imagine anything a libertarian can do to increase the level of freedom he enjoys that is more effective than moving.

The Mercatus score Eric refers to is this study, which rates the freedom levels of all the states, weighing economic and social freedom equally.

Eric is certainly right to suggest that most of these libertarians seem willing to trade off some degree of freedom for other goals in deciding which state to live in. As Eric recognizes, there is nothing unusual or hypocritical about that. Commitment to libertarianism or any other ideology doesn’t require people to make that the sole factor in choosing where they live. How many principled left-wing academics turn down good jobs at Texas universities on the grounds that Texas is a “red” state with very conservative policies?

That said, I think Eric’s data does in fact show a significant preference in the sample for living in freer states, though of course it’s hard to say how representative these 56 cases are.

It’s important to remember that most of these 56 libertarians are either academics or policy intellectuals. In the US, people in these professions are heavily concentrated in New York, California, and Washington, DC – three of the least libertarian jurisdictions. That makes it fairly striking that the median libertarian in this sample actually lives in a state with a higher than average freedom rating. If you compare these libertarian intellectuals to nonlibertarians with similar professional backgrounds, the difference between the two groups is likely to be very great, and at least partly explicable by the libertarians’ greater preference for living in more libertarian states. On that score, it’s worth noting that eight people in the sample live in Virginia, while virtually none live in Maryland or Washington, DC. Virginia is by far the most libertarian of the three Beltway jurisdictions, and it seems to be the home of choice for libertarians whose professional commitments require them to live near the capital (which is a common location for academics and public policy experts). For what it’s worth, this is a large part of the reason why I chose to live in Virginia rather than DC or Maryland myself.

Finally, libertarians, like other people, can disapprove of government policies that restrict freedom in ways that don’t affect them much personally. The vast majority of the libertarians in the Block sample are upper middle class academics or intellectuals. Many of New York’s or California’s most egregious restrictions on freedom don’t restrict activities that people in their class and profession are likely to engage in. It makes sense for libertarians (and others) to move in order to avoid restrictions on freedoms that they personally wish to exercise. But it’s much less logical to move away from restrictions that mostly affect other people. Such a move won’t do much to increase freedom for either the mover himself or those left behind. For example, I strongly disapprove of Virginia’s participation in the War on Drugs and its ban on gay marriage. But since I don’t want to use banned drugs or enter into a single-sex marriage myself, leaving Virginia would not increase my freedom, nor would it increase the likelihood of forcing Virginia to change.

If libertarians value liberty so much, wonders New Zealand-based libertarian economist Eric Crampton, why don’t more of them move to New Zealand?

The latest Heritage [Foundation] survey puts New Zealand again above the US on economic freedom. If we care about a bundle of freedoms rather than just economic freedom, I think NZ does better than the folks above it on the Heritage list: Australia (widespread internet censorship, thuggish police), Singapore (heavy restrictions on personal liberties), and Hong Kong (much better than Singapore?).

How much libertarianism is just cheap talk? Or, rather, what price do libertarians put on liberty? I’d outlined some of NZ’s advantages on EconLog four years ago….

We’ve ranked at or above US levels of economic freedom since Heritage started keeping score. And I’m rather sure we’re still better on civil liberties. If you want to have your junk mauled by someone in uniform, you’d have to pay for it in one of our numerous legal brothels; you don’t get it for free at the airport.

By the general axiom of revealed preference, the increment of liberty isn’t worth the loss of income (and inconvenience of moving and living abroad) for the vast majority of libertarians.

Eric Crampton is right that New Zealand may be freer than the United States right now, and that few libertarians value the difference enough to move there. But I don’t think that proves that libertarianism is just “cheap talk.” The difference in economic freedom between New Zealand (82.3 on the Heritage scale) and the United States (77.8) is relatively small. Moreover, it has often been smaller still in past years, and could easily shrink again in the future. The difference in noneconomic freedom is probably also minor, and in some areas (especially freedom of speech and gun control) may cut in favor of the US.

The real test of whether libertarians (or anyone else) are willing to move to secure greater freedom is the pattern of migration when people have a choice between jurisdictions where the difference in freedom is substantial. Here, there is plenty of evidence that people tend to “vote with their feet” for societies with greater economic freedom.

In Europe, large numbers of Germans have fled high taxes and restrictive labor regulations and moved to neighboring Switzerland, the most free market nation in Europe according to the Heritage study (now ranking slightly above even the US). Switzerland (81.9, ranked 5th in the world) beats Germany (71.8, 23rd) on the Heritage scale by a hefty margin. The Swiss have even begun to complain about an “invasion” of “arrogant and rude” Germans.

Hundreds of thousands of French have moved to Britain for similar reasons. So many that French expatriates in the UK are about to get their own representative in the French parliament, and French President Nicolas Sarkozy even made a campaign appearance in London when he was running for the office back in 2007. Not surprisingly, the gap between Britain (74.5) and France (64.6) on the Heritage scale is similar to that between Switzerland and Germany.

Here in the United States, migration patterns strongly favor states with lower taxes and levels of government spending. New Hampshire, the American state with the highest level of economic freedom, has been inundated with migrants from its more statist neighbor Massachusetts, to the point where some 25% of the state’s population consists of my fellow former Bay Staters.

All of the above cases involve people moving from one reasonably prosperous, generally market-based polity to another. Migration patterns in favor of economic freedom are even more stark when we look more broadly, and consider people who risk their lives fleeing socialist or communist states such as Cuba.

For reasons I discuss in this new article, and Part V of this older one, people often make better-informed decisions when they vote with their feet than at the ballot box (where economic liberty is, of course, much less popular). And the verdict of “foot voting” generally favors societies with greater economic freedom. In assessing that verdict, it’s worth keeping in mind that even a person who values freedom very highly might still not move if they also face high moving costs (including the cost of finding a new job and adjusting to a new culture and society). In a world with little or no moving costs, foot voting for freedom would be even more common.

To be sure, few of these foot voters are ideological libertarians. Most just want greater opportunity for themselves and their families. They don’t value economic freedom for its own sake, but the prosperity and opportunity it creates for them. At the same time, the migration decisions of people without strong ideological commitments are in many ways a stronger indication of institutional quality than those of people who do.

Obviously, economic freedom is not the only factor driving migration patterns. Proximity and cultural compatibility also matter, for example. It’s not surprising that Germans pick nearby Switzerland, where German is the majority language, and many Massachusetts residents pick neighboring New Hampshire. At the same time, it’s also significant that Switzerland is by far the freest of Germany’s neighbors, and New Hampshire by far the freest of the states near Massachusetts.

High economic freedom countries that have only recently liberalized their economies after decades of statism (e.g. Estonia and Mauritius) are not going to attract as much migration as better-established states that have had free economies for longer periods, and have had more time to build up their prosperity.

It is also fair to observe that none of the relatively freer societies discussed above are perfectly libertarian or close to it. The available evidence doesn’t allow us to gauge the appeal of a society that scored 95 or 100 on the Heritage scale rather than 81 or 82. Finally, I’m not aware of any data on whether ideologically committed libertarians are more likely to move to more libertarian polities than otherwise comparable people who adhere to different ideologies. Despite these caveats, the evidence suggests that foot voters with a choice generally opt for more economic freedom over less.

UPDATE: I should note that I don’t mean to suggest that the Heritage ratings are perfect indications of relative economic freedom. Given the methodological difficulties involved, I wouldn’t put much stock in small differences between countries of 2 or 3 points on the 100 point scale. On the other hand, I do think that large differences on the scale are likely to be valid. I don’t doubt that there really is a big difference between Switzerland and Germany or Britain and France. For what it’s worth, the rival Cato/Fraser Institute survey, which uses a somewhat different methodology, gives fairly similar ratings for all the countries discussed in the post.

UPDATE #2: I have revised this post in order to correct a few minor, but in my view annoying, phrasing and organizational flaws.

Megan McArdle summarizes the post-”snowmageddon” state of Washington, DC, which isn’t good:

You will probably have noticed that I did not post this morning. That’s because sometime before 8 am, I decided that I should get to the grocery store and pick up my lung medicine in the hiatus between snows.

Four hours later, I returned with a trunk full of whatever could be scavenged from the grocery store shelves. You have never seen a city as completely incompetent at dealing with snow as Washington DC.

I mean, two feet of snow is inconvenient anywhere. But in DC, only the main streets have been plowed. And by “plowed”, I mean that one meager lane has been cleared, so that even major arteries like New York Avenue frequently narrow to one lane. The side streets have been turned into defacto one-way streets–except that no one knows which way. The result is a lot like driving on a country road in Ireland, where you are apt to come upon someone going the other way, and then spend precious moments staring at each other until one party reluctantly backs up to a wider spot.

In fairness, a jurisdiction that gets massive snowstorms as rarely as DC can’t be as well-prepared for them as a northern city. If it was, that would be a sign that DC authorities have invested too many resources in snowstorm preparation. That said, things are a lot better where I am in northern Virginia. Until the second round of snow began tonight, the main roads were completely cleaned, and I was able to drive out to buy last minute supplies in Arlington and Falls Church with minimum trouble. Our own street (a small side street) was only just barely driveable, but still could be used. Much of the difference between DC and Virginia is probably attributable to DC’s famously incompetent municipal government. I’m very glad that I “voted with my feet” against them when I first moved to the region.

Megan also describes major shortages in DC stores. Again, things seem to be less bad in Northern Virginia. We were able to buy many things in Whole Foods and Safeway yesterday and today, though only Trader Joe’s had salad greens available. After searching several stores, I was even able to restock my supply of ice-melting salt at Bed, Bath & Beyond, which had a large supply. Apparently, many Virginians don’t realize that you can buy such supplies there.

We did have an interesting adventure trying to purchase ice-melting salt at Home Depot earlier. The salesperson there said they were all out, but advised us to come back Wednesday morning when they expect to get a new shipment in. I pointed out that another major snowstorm will be raging at that time, and asked if I might be able to come back on Thursday. He said the new supply would probably be exhausted by then. If they expect the new shipment to be exhausted that quickly, why not simply order more to begin with? The Bed, Bath & Beyond people told me that they got a new shipment in this afternoon, which leads me to wonder why Home Depot couldn’t get equally prompt suppliers.

Ultimately, however, it’s understandable that businesses, consumers, and local governments would make mistakes in reacting to such a rare event. At least in Virginia, things haven’t been as bad as I might have expected. Of course, I may change my mind once I get down to the work of scheduling makeup sessions for all the classes I had canceled this week….

Stanford economist Paul Romer suggests an overlooked strategy for helping Haitians – letting them move abroad to countries with better political and economic institutions:

Even if the motivation is humanitarian, letting a military intervention morph into a long-lasting occupation in some part of a country would risk the kind of violent opposition that colonialism generated in the past. There is no reason to take this risk. We should retain the current strategy. Military interventions should involve the shortest possible duration, should be used only to establish the necessary minimum of legitimate governance, and should not impose irreversible commitments on a nation.

However, we must recognize that this strategy, by itself, will not bring good governance or rapid economic growth anytime soon. It is the strategy that has been followed in Haiti for decades, to little good effect. It is the strategy that left Haitians in a position so precarious that an earthquake killed many tens of thousands.

There is a natural complementary approach that is a much better bet than giving colonialism another chance—letting Haitians migrate somewhere with better governance and rules. This is the surest answer to the question posed in the beginning. It can give them access to the urban infrastructure, buildings, equipment, and the know-how that can support jobs in areas like garment assembly.

Competitive pressure from emigration might also speed up progress toward better governance in Haiti. Demonstrated successes for Haitians who live together in other places with better rules might offer a model for reform that people in Haiti could follow. Even then, good governance may not emerge there. But if there were places where all Haitians could go, no one would have to be trapped by this failure.

As I have argued in my academic work and elsewhere, “voting with your feet” is a powerful tool for helping the poor and disadvantaged improve their lives and choose the government they wish to live under (e.g. here and here). Many Haitians have already transformed their lives by moving to the United States and other developed countries. Undoubtedly, many more would do so if given the chance. And, as Romer points out, migration puts competitive pressure on governments to improve their policies and promote economic growth at home; growth is also aided by the remittances emigrants send to relatives who remain at home. Haiti is one of the poorest and worst-governed nations in the world, so emigration from that country creates truly enormous gains for those who leave, as well as their relatives who may remain.

I’m sure some will argue that Haitians should be forced to stay in their country and work to improve their own government. However,as Romer points out, both Haitian reformers and numerous foreign interventions have tried to do just that for decades, with little or no success. Perhaps the present occupation by US and UN forces will work better than previous efforts along the same lines. I am not as pessimistic about the ability of intervention to improve governments as Romer is; however, Haiti is clearly an unusually difficult nut to crack. The success of this latest effort at good governance is far from guaranteed. If I were a Haitian, I certainly wouldn’t bet my life on it. Actual Haitians should not be forced to do so either. Obviously, not all Haitians can emigrate, and some who could may not want to. But that reality should not prevent us from allowing those who wish to leave to migrate freely. No one deserves to live in a hellhole of misgovernment through no fault of their own.

Finally, it’s worth noting that allowing free migration by Haitians need not even be considered a form of charity by the US and other Western nations. For reasons discussed in this excellent paper by philosopher Michael Huemer, it is merely getting out of the way of voluntary efforts by migrants to help themselves. Increased Haitian immigration might actually benefit current US residents. Anyone who lives in the Washington, DC area, as I do, can see the various ways in which Haitian immigrants benefit the economy by founding small businesses and doing many kinds of work.

We can argue about the merits of free international migration generally. But denying immigration rights to people living in conditions as horrendous as those in Haiti condemns them to a life of poverty and oppression, and often a very early death.

UPDATE: The Wall Street Journal makes some similar points in an editorial endorsing President Obama’s decision to give temporary refuge to Haitians scheduled for deportation from the US:

The Obama Administration acted properly, and humanely, late yesterday in extending temporary amnesty to Haitians who were illegally inside the U.S. before this week’s catastrophic earthquake. Some 30,000 Haitians had been awaiting deportation but will now be allowed to stay in the U.S. and work for another 18 months.

You might even call this amnesty of a sort, if we can use that politically taboo word. But we hope even the most restrictionist voices on the right and in the labor movement will understand the humanitarian imperative. The suffering and chaos since the earthquake should make it obvious that Haiti is no place to return people whose only crime was coming to America to escape the island’s poverty and ill-governance.

For that matter, we don’t mind if they stay here permanently. Haitian immigrants as a group are among America’s most successful, which demonstrates that Haiti’s woes owe more to corruption, disdain for property rights and lack of public safety than to any flaw in its people. Their remittances to Haiti also help to sustain the impoverished population. Haitians received some $1.65 billion from overseas in 2006, according to the Inter-American Development Bank.

For reasons discussed above, the WSJ’s argument applies almost as strongly to Haitians still in Haiti, as to those already in the US illegally.

The Financial Times runs a story today by Francesco Guerrera and Nicole Bullock on the looming problems of underfunded public pensions at the state and local level in the United States.  The news story cites a new study by Orin Kramer, chairman of New Jersey’s pension fund:

The estimate by Orin Kramer will fuel investors’ concerns over the deteriorating financial health of US states after the recession. “State and local governments are correctly perceived to be in serious difficulty,” Mr Kramer told the Financial Times.

“If you factor in the reality of these unfunded promises, their deficits will rise exponentially.”

Estimates of aggregate funding requirement of the US pension system have ranged between $400bn and $500bn, but Mr Kramer’s analysis concluded that public funds would need to find more than $2,000bn to meet future pension obligations.

Two trillion dollars?  One question about these obligations is whether taxpayers will stick around to pay them, or instead will vote with their feet.  (“Vote with their feet” is something that has been discussed in various ways at VC – as an aspect of a federal system and states with their own laws.)  Many of these pension obligations have been incurred by municipalities and others by states, and in some cases the obligations are intertwined.  But what happens if voters-taxpayers move out?

The assumption has long been that taxpayers are stuck, on account of jobs and other circumstance.  But query whether that is necessarily true as the baby boom generation retires.  In that case, it might find itself far more mobile, in circumstances where rising taxes at every level make relocation a more valuable decision at the margin.  For that matter, if otherwise desirable locales manage to tax their businesses away, will the baby boomers’ kids and grandkids have reason ever to locate in places that lack jobs?  They might have been raised there – but would they go back?

Would people leave California? They are leaving now, true, but would they leave in the future specifically for this reason or generally on account of the tax burden, particularly as retirees?  Or New Jersey?  What about the city of Oakland?  Or even smaller cities, such as the towns in California – not large at all, small towns, that have already declared bankruptcy over pension obligations?  It’s easy to move out of those towns.  For that matter, what about a municipality declaring bankruptcy in anticipation of un-meetable pension burdens down the road – in other words, you know it can’t be met, you know that your tax base will move out, and even though you are solvent now, you see that you won’t be down the road – and if you restructure now, you can save a much worse situation by not driving out your taxpayers.  But is that available under bankruptcy?  I’m not a bankruptcy specialist – it might not be possible to do so as a matter of law; someone can tell me in the comments.

In theory, all parties should be able to see the train wreck coming and renegotiate now, but the reality is, parties won’t do that, because they will lock horns over how much of promised benefits can get paid by increased taxation, and many other things.  That’s why bankruptcy judges have much of their discretionary power to impose things on parties nearly all of whom have varying degrees of hold-up.  Query too whether less heavily obligated jurisdictions might woo people to come, and perhaps pass measures as part of state constitutions limiting levels of indebtedness and writing in provisions that would cover future contingent pension payments.

How might the heavily indebted jurisdictions respond to taxpayer exit?  (Their position becomes a little like the position of utilities with “stranded” costs – and presumably that is how they would present their case, not as having profligately promised benefits as politicians to favored public employee constituencies, but instead as having provided services to taxpayers over decades but now getting stuck with the check.)  One way would be to try and impose taxes (and perhaps “fees”) that “follow” people who leave the jurisdiction.  More likely, I would think, would be an effort to federalize the pension bill.  Alternative one would simply  have the federal government assume the burdens, and presumably set the rules for future pensions.  Alternative two would be to leave the debts where they are, but have series of federal transfers to state and local jurisdictions to cover them, the unending bailout-stimulus.

The alternative to all of these, of course, would be for states and localities to declare bankruptcy and have a judge restructure the obligations and, one assumes, lower the obligations and the benefits.  It is an alternative often touted.  I worry, however, that people who call for it assume that the bankruptcy system, which was created to deal with mostly manageable private bankruptcies and the occasional huge corporate wipeout and the occasional public finance disaster, would somehow stay above politics and remain the same essentially apolitical system it is now.  That, after all, is what people who look to the bankruptcy system to resolve all these public finance messes seek – a set of neutral, apolitical rules of the kinds that govern private bankruptcy.

When relatively apolitical systems of these kinds are asked to take on, however, not just the occasional role in deeply politicized issues, but instead to take them on as a whole endemic category, now and into the future – it is very hard to see that the apolitical nature of the system is not inevitably changed.  How could it not be, over time?  (The same is true of the Fed, I would think.)  A bankruptcy system that contains, for good reasons, much discretionary authority on the part of the judge, and the ability of Congress to revise the rules, and then gradually takes on as its most visible and public function the resolution of public (and hence political) finance questions, it seems to me, will sooner or later lose the elements of neutral, apolitical decision-making arising from a system fundamentally about private bankruptcy and corporate restructuring.  It will become something else.  Institutions and systems of governance are not static.

(Realistically, however, what happens regarding public pensions is a political function of  the political power of the public employee unions, at all levels of government, as highly organized, interested, focused political groups – as against disorganized publics as taxpayers, represented in theory, but often not in fact, by politicians in state and local government.)

Last week I blogged about a very interesting article in the Manhattan Institute’s City Journal by Claremont Review of Books contributing editor William Voegeli titled “The Big-Spending, High-Taxing, Lousy Services Paradigm” (Autumn 2009).  It compared the tax-services models of California and Texas.  VC commenters were spirited as ever and raised a number of important questions.

Although I haven’t had the pleasure of meeting William Voegeli, I took the liberty of contacting him through the Claremont Institute and asked if he might have any additional thoughts for us, particularly responding to VC commenters.  Mr. Voegeli was kind enough to say yes, and has sent along the following response, below.  Let me add, on behalf of the VC community, myself as well as readers and commenters, our great thanks for engaging with us.  And let me add to the VC commenting community, that in the spirit of the original article, you might call Volokh Conspiracy a … Low-Taxing, High-Services blog!  Mr. Voegeli:

Dear Prof. Anderson:

Thank you for bringing my City Journal article (http://www.city-journal.org/2009/19_4_california.html) on California and Texas to the attention of the Volokh conspirators, and for your generous and thoughtful analysis (http://volokh.com/2009/11/02/the-california-versus-texas-model-and-public-choice/) of the piece.  Your post elicited many . . . spirited comments.  It would be cumbersome to address them individually, but I can offer a few points that speak to some of the general questions your readers brought up.

My essay argues that it’s not enough to look at how much states and localities spend because how well they spend is very important.  I understand several people in the comments section to be saying that this principle applies to the tax side of the equation, too.  Thus, California’s problem is not so much that it is a high-tax state but, as one commenter says, that it is a “constrained-and-erratic tax” state.

That’s a fair point.  The combination of direct democracy and the state’s belief that vast optimism could overcome mundane realities left Californians believing they could somehow be “taxed like libertarians, but subsidized like socialists,” as Troy Senik recently said (http://www.nationalaffairs.com/publications/detail/who-killed-california) in National Affairs.  Not only did it prove impossible to achieve the best of both worlds, but the political impotence created by undertaking the effort helped bring about the worst of both: “In a grim irony, Californians are now being taxed like socialists and subsidized like libertarians.”

Proposition 13 is certainly not beyond criticism.  Some things need to be said in defense of the law and its advocates, however. Lots of poorly drawn laws and state constitutional amendments have been passed at the ballot box.  The ballot initiative is never going to be a precision instrument, however, and it’s unfair to hand the voters an axe and then judge their work as if they possessed a scalpel.

The best way to have averted the enactment of Proposition 13 would have been if California’s political establishment in 1978 had put forward a better alternative, one that addressed Californians’ anxieties about tax escalation without 13’s flaws.  Instead, Gov. Jerry Brown and the Democratic legislature held off for as long as possible in offering any sort of response to the people angry and fearful about rapidly rising property taxes, in the hope that the political problem would blow over.  When it didn’t, they finally devised a tax limitation alternative to 13 whose distinguishing feature was that it didn’t guarantee that anyone’s taxes would be limited.

In the 31 years since Proposition 13 was enacted that bait-and-switch problem crops up over and over.  When people here complain that taxes are too high, especially given the doubtful quality of the public services they purchase, the enlightened response is always that taxes aren’t high so much as they’re arbitrary and complicated.  The correctives proposed to enhance the quality of the citizen’s tax-paying experience all purport to make taxes fairer and simpler, but their one clear outcome is that taxes would be higher.  Thus, the reforms that would streamline how California’s governments collect money would have the consequence of relieving those governments of any obligation to devise better, smarter and fairer ways to spend it.  It takes a trusting spirit to believe that this outcome would be an accidental byproduct of tax reform.

A final note.  One commenter argued that government is expensive in California largely because housing is expensive, thus disproving the idea that California governments spend their money in undisciplined, ineffective ways.  Two points:

• 1) California’s state and local employees are the best compensated in the country (http://www.census.gov/compendia/statab/tables/09s0448.pdf) and the differences between them and their counterparts in states that are also expensive are not trivial.  Local government employees make 11.5% more in California than Connecticut, and 21.4% more than those in Massachusetts.  State workers in California make 13.1% more than New York’s and 19.9% more than those in Massachusetts.
• 2) The high cost of living in California, especially the high cost of housing, is a problem for government, in that it puts pressure on it to increase the pay scale for public employees.  That fact does not preclude the possibility that the high cost of housing is, in significant measure, a problem caused by California’s governments.

Let me close on this point by bringing in an expert witness, Edward Glaeser of Harvard’s economics department and Taubman Center for State and Local Government.  In a Los Angeles Times article (http://www.latimes.com/news/opinion/commentary/la-oe-glaeser4-2009mar04,0,4085382,print.story) earlier this year he said:

Although California is a populous state, it still has plenty of land. Santa Clara County, the home of Silicon Valley, only has about 2.2 people per acre. Even in denser places, such as Los Angeles, there is plenty of room to build.

California’s growth has slowed because the state has made it increasingly difficult to build new homes. There is an almost perfect correlation between the growth of an area and the amount of housing that is permitted in that area. California has some of the toughest land-use regulations in the country, which are often justified as environmental measures. When high housing demand is met with restrictions — not construction — California homes become unaffordable and new construction goes somewhere else.

Best regards,

Bill Voegeli

William Voegeli, a contributing editor at The Claremont Review of Books, has an excellent essay in Manhattan Journal comparing the economic performance of California and Texas.  (I believe a short opinion page version appeared recently in the LAT.)  Among other things, the article provides a good example for how a public choice analysis can be applied to show, in this case, capture of public revenues and the process of increasing public revenues by public employees in California.

The most interesting feature of the article, however, is that it does not start out from a position of hostility toward California and its high tax model.  On the contrary, it says that there is a tradeoff that different people will make differently with respect to high tax/ high public services jurisdictions and low tax/ low public services jurisdictions.  There is a perfectly good argument for the former as well as for the latter.

It’s true that many people are less sensitive to taxes and more concerned about public goods, and these consumer-voters will congregate in places with extensive services. But it’s also true, all things being equal, that everyone would rather pay lower than higher taxes. The high-benefit, high-tax model can work, but only if the high taxes actually purchase high benefits—that is, public goods that far surpass the quality of those available to people who pay low taxes.

I grew up in California and despite my Upper Upper NW DC address, will always count myself a Californian, product of its public schools and a proud graduate of UCLA.  I was a beneficiary of the high tax/ high benefits model, and gravitate toward it.  The problem, as Voegeli documents, is two fold.  First, California is today a high tax/ low benefits model, while Texas, even with relatively low taxes, has managed remarkably to catch up and even pass California in ways I would not have believed possible.  But Voegeli’s data, as I have discussed it with other Californians and Texans, seems to me pretty robust.  His conclusion?

“Twenty years ago, you could go to Texas, where they had very low taxes, and you would see the difference between there and California,” Joel Kotkin, executive editor of NewGeography.com and a presidential fellow at Chapman University in Southern California, told the Los Angeles Timesthis past March. “Today, you go to Texas, the roads are no worse, the public schools are not great but are better than or equal to ours, and their universities are good. The bargain between California’s government and the middle class is constantly being renegotiated to the disadvantage of the middle class.”

Similarly, the CEO of a manufacturing company in suburban Los Angeles told a Times reporter that his business suffered less from California’s high taxes than from its ineffectual services. As a result, the company pays “a fortune” to educate its employees, many of whom graduated from California public schools, “on basic things like writing and math skills.” According to a report issued earlier this year by McKinsey & Company, Texas students “are, on average, one to two years of learning ahead of California students of the same age,” though expenditures per public school student are 12 percent higher in California.

State and local government expenditures as a whole were 46.8 percent higher in California than in Texas in 2005–06—$10,070 per person compared with $6,858. And Texas not only spends its citizens’ dollars more effectively; it emphasizes priorities that are more broadly beneficial. In 2005–06, per-capita spending on transportation was 5.9 percent lower in California than in Texas, and highway expenditures in particular were 9.5 percent lower, a discovery both plausible and infuriating to any Los Angeles commuter losing the will to live while sitting in yet another freeway traffic jam.

What happened?  According to Voegeli, two things.  One is that scarce tax dollars in Texas are spent on priorities that have broad appeal, while California spends far more of its tax dollars on transfer payments to particular groups with political clout.  Second (and a subset of the first, really) is that the tax dollars in California go to public employees, public employee pensions, public sector unions – nominally to the service providers of the “high benefits” received in exchange for high taxes.  Voegeli reports that they soak up the additional revenue but provide increasingly poor services at an ever increasing cost.

In California, by contrast, more and more spending consists of either transfer payments to government dependents (as in welfare, health, housing, and community development programs) or generous payments to government employees and contractors (reflected in administrative costs, pensions, and general expenditures). Both kinds of spending weaken California’s appeal to consumer-voters, the first because redistributive transfer payments are the least publicly beneficial type of public good, and the second because the dues paid to Club California purchase benefits that, increasingly, are enjoyed by the staff instead of the members.

Californians have the best possible reason to believe that the state’s public sector is not holding up its end of the bargain: clear evidence that it used to do a better job. Bill Watkins, executive director of the Economic Forecast Project at the University of California at Santa Barbara, has calculated that once you adjust for population growth and inflation, the state government spent 26 percent more in 2007–08 than in 1997–98. Back then, “California had teachers. Prisoners were in jail. Health care was provided for those with the least resources.” Today, Watkins asks, “Are the roads 26 percent better? Are schools 26 percent better? What is 26 percent better?”

Watkins is not referring to the mythical golden past in which I grew up outside of LA; this is a mere decade ago.  But Voegeli observes that the task for California is inherently harder for it than for Texas; there is an asymmetry baked in:

If California doesn’t want to be Texas, it must find a way to be a better California. The easy thing about being Texas is that the government has a great deal of control over the part of its package deal that attracts consumer-voters—it must merely keep taxes low. California, on the other hand, must deliver on the high benefits promised in its sales pitch. It won’t be enough for its state and local governments to spend a lot of money; they have to spend it efficiently and effectively.

Agency capture of public institutions, their tax mechanisms and their benefits, is far from an unknown phenomenon.  But I have to say that the idea that California could ever be surpassed on any of the metrics above – education, liveability, transportation, quality of life, etc, – by Texas is … shocking.

(Note – and before everyone gets all p-o’d in the comments.  I do freely admit and guilty as charged that I feel pretty much about my home state as every Texan I’ve ever known feels about Texas, so no need to abuse me in the comments.  And I will also say that if I were able to move back to California today, and not have to worry about gainful employment as a law professor, I would move to … Carson City, Nevada, just below the Nevada side of Tahoe, on Highway 395 in the Eastern Sierra Nevada corridor, and have two-thirds the benefits of California (the mountains and the desert, minus the Pacific and the California coastal foothills) without the taxes.  I’m headed out to give a talk at Stanford Law School next week, and while terrifically excited to go talk about robots and war and grateful for the invite, I have serious regrets about not being able stay just long enough to drive over the Sierras.)