Krugman Doesn’t Quite Grasp Blue State Strategy: Fewer But Better Americans

Paul Krugman opines in the NY Times:

Wrong Way Nation
AUG. 24, 2014

Paul Krugman

Gov. Rick Perry of Texas is running for president again. … his national appeal, if any, will have to rest on claims that he knows how to create prosperity. And it’s true that Texas has had faster job growth than the rest of the country. So have other Sunbelt states with conservative governments. The question, however, is why.

The answer from the right is, of course, that it’s all about avoiding regulations that interfere with business and keeping taxes on rich people low, thereby encouraging job creators to do their thing. But it turns out that there are big problems with this story, quite aside from the habit economists pushing this line have of getting their facts wrong.

To see the problems, let’s tell a tale of three cities.

One of these cities is the place those of us who live in its orbit tend to call simply “the city” [for those lacking the patience to decipher Krugman’s coyness, he means New York[. And, these days, it’s a place that’s doing pretty well on a number of fronts. But despite the inflow of immigrants and hipsters, enough people are still moving out of greater New York — a metropolitan area that, according to the Census, extends into Pennsylvania on one side and Connecticut on the other — that its overall population rose less than 5 percent between 2000 and 2012. Over the same period, greater Atlanta’s population grew almost 27 percent, and greater Houston’s grew almost 30 percent. America’s center of gravity is shifting south and west. But why?

Is it, as people like Mr. Perry assert, because pro-business, pro-wealthy policies like those he favors mean opportunity for everyone?

I don’t think NYC Mayor Michael Bloomberg’s policies could exactly be characterized as anti-business, anti-wealthy.

If that were the case, we’d expect all those job opportunities to cause rising wages in the Sunbelt, wages that attract ambitious people away from moribund blue states.

It turns out, however, that wages in the places within the United States attracting the most migrants are typically lower than in the places those migrants come from, suggesting that the places Americans are leaving actually have higher productivity and more job opportunities than the places they’re going.

This is very sloppy for a (quasi) Nobel economist. “Lower” wages aren’t evidence, pro or con, that wages aren’t “rising” in the Sunbelt. And to say that Blue States have “more job opportunities” is also confused: Blue States tend to have higher quality job opportunities while Red States have higher quantity job opportunities. Finally, there’s the obtuse refusal to consider the elitist essence of Blue State strategy regarding Americans, which was explained in 1939′s Ninotchka (in a line I expect was written by Billy Wilder) by a Stalinist official played by Greta Garbo:

The average job in greater Houston pays 12 percent less than the average job in greater New York; the average job in greater Atlanta pays 22 percent less.

Sure, but there are differences in jobs. There are outstanding jobs in both Houston and Atlanta, but there aren’t many that rake it in quite like Wall Street guys do.

So why are people moving to these relatively low-wage areas? Because living there is cheaper, basically because of housing. According to the Bureau of Economic Analysis, rents (including the equivalent rent involved in buying a house) in metropolitan New York are about 60 percent higher than in Houston, 70 percent higher than in Atlanta.

In other words, what the facts really suggest is that Americans are being pushed out of the Northeast (and, more recently, California) by high housing costs rather than pulled out by superior economic performance in the Sunbelt.

Once again, would it require too much intellectual horsepower to notice that which places’ economic performance is superior depends upon elites versus masses. For example, Palo Alto is a great place to be Mark Zuckerberg, as Sean Parker explains to him in The Social Network that he’s wasting his life in a nowheresville like Cambridge, MA because all the venture capitalists who matter are in Palo Alto.

On the other hand, Palo Alto isn’t a great place to do business if you aren’t Mark Zuckerberg. The local attitude toward non-virtual businesses that require, say, bulldozers is not welcoming: the people who live in Palo Alto mostly like it the way it is and thus have erected endless snares for anybody trying to do normal development. Here, for example, is the story of a flood control and municipal golf course project in Palo Alto that began after dangerous rains in the last century and is still stuck in regulatory hell in 2014.

But why are housing prices in New York or California so high? Population density and geography are part of the answer. For example, Los Angeles, which pioneered the kind of sprawl now epitomized by Atlanta, has run out of room and become a surprisingly dense metropolis.

Part of this is the Dirt Gap: Blue State metropolises tend to be located on oceans or Great Lakes, preventing development outward in 360 degrees. Another part is the Scenery Gap: Los Angeles, for example, is surrounded by formidable mountains that take up a lot of space within reasonable commuting distance.

However, as Harvard’s Edward Glaeser and others have emphasized, high housing prices in slow-growing states also owe a lot to policies that sharply limit construction. Limits on building height in the cities, zoning that blocks denser development in the suburbs and other policies constrict housing on both coasts; meanwhile, looser regulation in the South has kept the supply of housing elastic and the cost of living low.

So conservative complaints about excess regulation and intrusive government aren’t entirely wrong, but the secret of Sunbelt growth isn’t being nice to corporations and the 1 percent; it’s not getting in the way of middle- and working-class housing supply.

And this, in turn, means that the growth of the Sunbelt isn’t the kind of success story conservatives would have us believe. Yes, Americans are moving to places like Texas, but, in a fundamental sense, they’re moving the wrong way, leaving local economies where their productivity is high for destinations where it’s lower. And the way to make the country richer is to encourage them to move back, by making housing in dense, high-wage metropolitan areas more affordable.

So Rick Perry doesn’t know the secrets of job creation, or even of regional growth. It would be great to see the real key — affordable housing — become a national issue. But I don’t think Democrats are willing to nominate Mayor Bill de Blasio for president just yet.

Oh, boy …

Krugman acts as if restrictions of housing development in Blue States is just some minor oversight, readily rectified if only the Democrats could get into the White House and wrest power from the One Percent. Or something.

Where liberals really run things, like the Ivy League, the powers that be are constantly increasing freshman class sizes to make admission less elitist. Oh, wait, that’s not happening

Look, practically the only people who are into this Ed Glaeser – Matt Yglesias idea of building Blade Runner-sized apartment blocks are Ed Glaeser and Matt Yglesias. Humans tend to imprint on the landscape where they lived at puberty and they both grew up in Manhattan landscape. De Blasio doesn’t want a million Texans moving to Manhattan, he just wants subsidized apartments in nice buildings for some politically connected voters.

But this anti-development strategy isn’t some inadvertent mistake, it’s the essence of contemporary liberalism: drive out Unsightly Average Americans (and replace them with Invisible Mestizos).