Why did Texas create so many jobs?

by on August 16, 2011 at 7:01 am in Current Affairs, Economics | Permalink

Advance warning: this is not a post about Rick Perry!

Matt Yglesias writes:

My view is that Texas’ robust job growth is a consequence of its robust population growth

This is consistent with Paul Krugman’s column yesterday, and also consistent with Matt’s earlier writings praising Texas for not overdoing the zoning.  I agree, but I wonder who should be reassured by this answer.

I’ve read a lot of blog posts lately painting Texas as a low benefit, low Medicaid, not so great system of public education kind of state.  Let’s take this picture and run with it.  People are moving into the state, in fairly large numbers, and that suggests the state is doing something right (again, I’m not suggesting Perry has anything to do with this.)  By the way, Dallas-Fort Worth recently had 35 straight days of 100+ weather and that wasn’t even a record for the region.

I see four options:

1. Hispanics track other Hispanics to some extent, so if Hispanic population is going up, so is the population of Texas.  For sure, but this is by no means the entire population phenomenon.  Nor is New Mexico experiencing a comparably positive mobility effect.

2. Texas gets some policies right, some say low taxes, there is lots of debate here.  Sometimes conservative commentators argue that “being tough on the poor” is in fact good for the poor themselves, given “poor on poor” local externalities.

3. Texas gets right a lower-zoning policy, which leads to cheap rents.

4. People are moving to Texas because fossil fuel prices have been rising.  There’s something to that, but still those prices do not seem to predict employment in Texas, at least not in recent times.

Let’s treat #1 and #4 as exogenous to policy, for the sake of argument dismiss #2 altogether, and thus focus only on #3.  Is this a result progressives should feel happy about?

I am not sure.  There is no chance of Texas’s looser zoning being applied to Fairfax County; for one reason the “Mantua moms” (don’t ask) wouldn’t stand for it.  It’s not even an issue and it doesn’t matter which party is in power.  Those are the same Mantua moms who oversee and enforce one of the nation’s best public school systems.  Now, as a general matter, should the influence of the Mantua moms be stronger or weaker?

Well, we’ve decided to live with the Mantua moms, for better or worse.  The neighborhood is splendid, but boring, and the neighbors do not support good food.  Texas, it seems, doesn’t give nearly as much political power to its equivalent of the Mantua moms, for whatever reason (can anyone tell us why?).  That leads to cheaper land, cheaper housing, and inferior public school systems, not to mention better and cheaper food.  And poor people are voting with their feet to choose it.

I am well aware that marginal migrants do not necessarily reflect the preferences of the infra-marginals.  Still, I am not sure many of us should find this a comforting scenario.

I’m not sure that “don’t choose policies, choose interest groups” counts as a final truth, but it’s an interesting thought experiment to upset the usual ideological applecarts.

vak August 16, 2011 at 7:20 am

‘That leads to cheaper land, cheaper housing, and inferior public school systems, not to mention better and cheaper food. And poor people are voting with their feet to choose it.’

Consistent with the choice of all those immigrants who moved from Europe to US in the 19^th century.

Peter Schaeffer August 16, 2011 at 2:01 pm

Lots of folks seem to think that Texas has an inferior school system. That does not appear to be the case. Sure on average the schools don’t measure up to Fairfax country. However, save for elite liberals that isn’t a relevant comparison. A simple comparison of Texas vs California vs the U.S. shows that Texas’s schools are doing quite well and at a very low cost. .

The Gold Standard of educational testing is the NAEP. The NAEP data for each state are readily available online. As best I can tell, Texas student outperform California students across the board and by significant margins. Texas students also appear to substantially outperform the U.S. average. Of course, Texas spends much less per student. The NAEP tests many subjects. However, I think math, reading, and science should suffice to make this point.

Math – Grade 8 – 2009 (http://nationsreportcard.gov/math_2009/gr8_state.asp?subtab_id=Tab_1&tab_id=tab1#tabsContainer)

All Students White Black Hispanic Asian
CA 270 289 250 256 294
TX 287 301 272 277 313
US 282 292 260 266 300

Reading – Grade 8 – 2009 (http://nationsreportcard.gov/reading_2009/state_g8.asp)

All Students White Black Hispanic Asian
CA 253 269 243 241 266
TX 260 273 249 251 280
US 262 271 245 248 273

Science – Grade 8 – 2009 (http://nationsreportcard.gov/science_2009/g8_state.asp?subtab_id=Tab_4&tab_id=tab1#tabsContainer)

All Students White Black Hispanic Asian
CA 137 157 122 122 154
TX 150 167 133 141 170
US 149 161 125 131 159

The NAEP data covers other subjects (as mentioned above) and other grades. However, the results shown here are consistent with the rest of the data. As you can see, TX students always (no exceptions) outperform CA students and the differences are large in some cases. TX students almost always perform the US average (one exception) and the differences are large in some cases.

What about spending? The Census data (http://www2.census.gov/govs/school/09f33pub.pdf – Table 8) shows that California spends more per-student than Texas. In 2008-2009, California spent $9,657 per pupil. Texas spent $8,540 per pupil. The national average was $10,499. Note that these are current spending numbers. Total spending (including capital outlays – Table 11) is greater for CA, TX, and the US. A useful point in this context is that Utah which spends the least ($6,356) outperforms New York which spends the most ($18,126).

Of course, Hispanic students are lagging in Texas compared to whites and Asians. However, Hispanic students lag whites and Asians in virtual every jurisdiction. The more germane point is the Hispanics in Texas are easily outperforming Hispanics in California and the US.

The poor performance of Hispanic students nationally is beyond the scope of this note. However, it is worth noting that Latin America performs poorly in standardized tests (PISA, TIMMS) even adjusted for income levels. By contrast, Asian students (in Asian countries) excel even adjusting for income levels.

More broadly the PISA data shows that immigrant students lag (badly) in essentially every country. Germany has the worst performing immigrants. Canada has the best performing immigrant students (matching or slightly exceeding the natives). Of course, Canada’s immigration system is (partially) skill based and the demographics of Canada’s immigrants are drastically different than the U.S.

A related point is that if you adjust for demographics, America’s schools are doing rather well. Take a look at “The amazing truth about PISA scores: USA beats Western Europe, ties with Asia” (http://super-economy.blogspot.com/2010/12/amazing-truth-about-pisa-scores-usa.html). The author presents a wealth of data to substantiate his thesis.

P.S. Take a look at http://super-economy.blogspot.com/2011/01/california-vs-texas.html for another comparison of Texas and California.
P.S.S. I live in Texas and have sent my kids to the local public school. With one exception, I have never been impressed even though my school district is one of the best in Texas. The only counterpoint is that my daughter’s 9th grade biology class was at a near university level.

Peter Schaeffer August 16, 2011 at 2:15 pm

Sorry folks. The tables in the prior post didn’t display properly (a preview button would help). Here are the hopefully readable tables.

Math – Grade 8 – 2009 (http://nationsreportcard.gov/math_2009/gr8_state.asp?subtab_id=Tab_1&tab_id=tab1#tabsContainer)

All Students White Black Hispanic Asian

CA 270 289 250 256 294

TX 287 301 272 277 313

US 282 292 260 266 300

Reading – Grade 8 – 2009 (http://nationsreportcard.gov/reading_2009/state_g8.asp)
All Students White Black Hispanic Asian

CA 253 269 243 241 266

TX 260 273 249 251 280

US 262 271 245 248 273

Science – Grade 8 – 2009 (http://nationsreportcard.gov/science_2009/g8_state.asp?subtab_id=Tab_4&tab_id=tab1#tabsContainer)

All Students White Black Hispanic Asian

CA 137 157 122 122 154

TX 150 167 133 141 170

US 149 161 125 131 159

Steve August 16, 2011 at 9:22 pm

Interestingly, Texas 15 year olds outscored California 15 year olds in the federal government’s big 1960 Project Talent test that gave 2 days of tests to hundreds of thousands of kids.

While California in 1960 had superelite smart people at Cal Tech and Lawrence Livermore and the Skunk Works and HP, my hunch is that the oil industry attracted a whole bunch of pretty smart people to Texas for a long time.

Peter Schaeffer August 17, 2011 at 11:25 am

Steve,

Any numbers for the Project Talent test? Links?

My guess is that areospace (the big California industry back then) had higher mean education levels than oil in Texas. Probably a higher ratio of engineers to production workers.

No statistics though.

spencer August 16, 2011 at 3:44 pm

the spending data should be adjusted for differences in the cost of living in Texas and the other states.

I’m confident that would drastically change the Utah-NY comparisons.

Peter Schaeffer August 16, 2011 at 5:05 pm

“I’m confident that would drastically change the Utah-NY comparisons.”

No it would not. The 2006 ACCRA data puts NY at 30.4% above the national average and Utah at 3.9% below the national average. Overall NY is 36% more expensive than Utah. The school spending ratio is almost 3:1.

Of course, almost no one adjusts state level data using COLI indexes. Two reasons come to mind. First, there are no official indexes to use. The Census COLI data is from the ACCRA. Second, many of the supposedly rich (Blue) states start looking quite poor on a COLI adjusted basis and the supposedly poor states (Red Kansas) start looking quite rich.

Writing “What’s Wrong with New York” won’t make you a famous author.

Note that if you use the BLS data, state level COLI differences are very small. I find the ACCRA data closer to reality. Note that the BLS doesn’t provide explicit state level COLI data. However, you can take some very old BLS COLI data and try to extrapolate with other BLS city level trend statistics.

robbl August 16, 2011 at 7:21 am

Tyler,
It seems the not so sticky wages there are not helping too much!

Also, you forgot one factor about why people move to Texas. We are still in the historic “air conditioning migration” that results in people leaving places like Buffalo and Erie and Fargo, etc. to find some place where they don’t spend a large part of the year buried in snow. This is a major reason for population growth in all the Southern and Western states.

John Thacker August 16, 2011 at 8:17 am

It is a major reason, yes, but that’s part of why Tyler mentioned New Mexico as a comparison. Not all Southern and Western boats have risen equally, nor have all Northern and Midwestern fates fallen equally either. It’s still worth looking at differences.

We also were part of a historic California migration, until it stopped.

Dave Hansen August 16, 2011 at 9:14 pm

Have you ever lived in Houston or Dallas? The snow would have to be really, really bad to put up with an 100+ days over 90 degrees each year at high humidity. In the summer, you just don’t go outside. That’s not very fun. There are plenty of other places with better weather than Buffalo that aren’t Houston. The weather argument just does not hold up. Plus, as far as looks go, Houston is an eyesore.

Adolph August 16, 2011 at 10:06 pm

I went for a run around Rice this evening and it was quite nice, thankyouverymuch.

Tom T. August 16, 2011 at 7:29 am

Isn’t Yglesias perhaps reversing cause and effect?

albert magnus August 16, 2011 at 7:32 am

Are the people declaring Texas’s schools inferior taking demographics into account? My public high school in Houston was first-rate in every way and a national exemplary school when I was there, but I’m not sure that’s the case now that the neighborhood it’s in is 80% Hispanic.

Peter Schaeffer August 16, 2011 at 2:19 pm

am,

Texas schools are not inferior. Actually they are quite good. See my comments above on this point.

Ted Craig August 16, 2011 at 7:36 am

Texas has a good mixed economy, with high tech, oil and finance leading the way.
By the way, Dallas residents have some of the worst credit scores in the nation, so it may have replaced Florida and California as the place to go to escape from creditors.

Master of None August 16, 2011 at 7:40 am

I know a half dozen people who have moved from NYC to Texas (Dallas, Houston, or Austin) over the last 5 years, and all of them either cite the cheap cost of living as a motivating factor.

Also, for the non-poor, there are apparently good private school options available for much less money than the equivalent in other major cities.

TallDave August 16, 2011 at 7:58 am

One might argue on the same basis that North Korea’s economy has struggled because millions of people starved to death.

Kevin Williamson has thoroughly destroyed Krugman’s line of thinking.

Also, adjusting for ethnicities, there is nothing wrong with Texas schools.

(BTW, didn’t Krugman miss a more obvious explanation for Texas’ growth in the higher number of reported UFOs, alien abductions, and other extraterrestrial activity?)

John Thacker August 16, 2011 at 8:15 am

That is true about the schools, but don’t forget that for many people, living somewhere without the “wrong sort of people” in order to get the right sort of “public schools” is the whole point. They’re glad to pay high tuition to attend better schools, if that high tuition comes with nice countertops and they can still pretend that the schools are public, not private.

Andrew' August 16, 2011 at 8:41 am

If people could just come to terms that schools perform a babysitting(aka prison) function and an education function, and therefore part of their job is to separate the kids from those who don’t give a damn from those who do we could get down to business.

Brian J August 16, 2011 at 10:08 am

Williamson may think he destroyed Krugman’s thinking, like you do, but he did nothing of the sort.

? August 16, 2011 at 10:35 am

More information, please, Brian.

Brian J August 16, 2011 at 12:00 pm

He takes a few factors in isolation of one another and substitutes what may be the case for one metro area and applies to the whole state.

Dean August 16, 2011 at 12:38 pm

Going to have to agree with Brian J here. All Williamson argues are the two true propositions that Texas is (a) cheap to live in and (b) has lots of migrants from Mexico to explain low wages. No one disputes those facts. Krugman’s point is that Texas isn’t an economic miracle because they don’t have an especially low unemployment rate.

Williamson and Krugman both agree that migration to Texas is a pretty simple case of people moving from high cost to low cost areas. More people means more jobs. While those jobs don’t pay much on average, it doesn’t cost much to live there either.

Strick August 16, 2011 at 8:02 am

The “loose zoning” thing applies much more to anything-goes Houston than Dallas, yet Dallas is growing too. The simple fact of the matter is Texas just has more undeveloped land. Running out of houses? Move a little further west and build some more.

That and the fact that local banks remembered the S&L debacle of the 80s and the state didn’t suffer as much from the housing bubble, up or down, are what keeps housing less expensive in Texas.

John Thacker August 16, 2011 at 8:10 am

Strick, please read this article and the associated research by Ed Glaser and others. It completely destroys the facile argument that it’s about land availability.

Land is somewhat more available, but any influence of that is dwarfed by the value of having the right to build, which is a zoning and regulation issue.

Finch August 16, 2011 at 9:08 am

Heh! Fly over eastern Massachusetts sometime. It’s mostly trees and empty space.

Yet for some reason it feels crowded on the ground, and there are few new roads or developments.

VanL August 16, 2011 at 8:08 am

I live outside of Dallas, and I see lots of people moving in. The number one reason for the net in-migration is the cheap cost of living – which is primarily driven by the low cost of housing. There aren’t that many major cities/metro areas that have low housing costs. Texas has four (D/FW, Houston, Austin, and San Antonio).

Housing prices are low for a couple reasons. First, there is lots of land still available close to the major cities, which is an unusual circumstance in the US. This allows allows supply to grow consistent with demand.

The second has to do with Texas’ tax structure. Texas has no income tax, and instead funds all government through property taxes. That means that even at the height of the real-estate run-up, there were significant carrying costs associated with housing. Therefore, there were many fewer people with crazy mortgages that they couldn’t afford – if they couldn’t afford the mortgage, they certainly wouldn’t be able to afford the taxes. As a result, Texas didn’t have nearly as much speculation and price run-up as other places.

These days, the disparity between prices in other parts of the US and Texas means that people from California can sell their house 25% below where they wanted and still move into a bigger house in a nice suburb of one of the big cities and have the house all paid off. This is driving a number of people to move.

John Thacker August 16, 2011 at 8:13 am

It’s not just that land is available– it’s that getting the right to build on it is cheap as well. A nice graph here, which also references the academic research.

The graph compares the cost of two nearly identical homes, one on a quarter acre and one on a half acre lot, to the price of the home on a quarter acre lot minus cost of construction. You can see that in many places, the cost of simply getting an extra quarter acre of land is quite cheap compared to the cost of the right to put a house on it.

Peter Schaeffer August 16, 2011 at 2:40 pm

JT,

You are using the Glaeser model that tries to estimate land costs by measuring incremental land values. In other words, the price difference between two identical homes, one on 10,000 square feet versus 11,000 square feet. However, Glaeser’s approach misses the most important aspect of land. Even a small(er) lot gets you into the neighborhood. You get the same neighbors and the same school on 10K FT2 versus 11K FT2.

Stated differently, Glaeser’s model greatly underestimates actual land values and thereby overestimates regulatory costs.

Take a look at actual empty lot prices in “nice” neighborhoods (almost) anywhere in the U.S. They are huge and considerably above Glaeser’s estimated land values. Why did Glaeser’s use his approach rather than just checking lot values? Probably it was convenience. Empty lot values are hard to come by (nationally). Most neighborhoods don’t have too many and fungibility is a problem.

Slocum August 16, 2011 at 8:13 am

But it’s not clear Texas actually has inferior public schools (when you control scores for race & ethnicity). Remember this from a while back:

http://iowahawk.typepad.com/iowahawk/2011/03/longhorns-17-badgers-1.html

Obviously not a peer-reviewed journal article, but it seems sound. Certainly Texas does much better with its K-12 schools than California.

Tyler Cowen August 16, 2011 at 8:17 am

If you are thinking of moving, it is the unadjusted quality of the schools which counts…

John Thacker August 16, 2011 at 8:22 am

Ah, but if you’re thinking of moving, it’s the quality of the schools that your kids will attend which counts, too. Someone moving from a high cost of living area can easily upgrade their kids’ school quality if they are able to move from the worst school in a good district to the best school in a somewhat worse area.

Texas has some very good schools and good school districts. You don’t pretend that Fairfax or Arlington public schools are terrible simply because DC is nearby, do you? Then why do the same for, say, Sugar Land, Texas?

John Thacker August 16, 2011 at 8:26 am

You’re right of course that people simply don’t want to live near poor people nor have their children attend the same schools. However, public school and housing segregation by income happens in Texas as well, so the “Texas average” comparison makes as little of a difference to someone looking to move to one of the upper middle class suburbs as the poor quality of the DC schools does to someone looking to move to Fairfax or Arlington.

Andrew' August 16, 2011 at 8:34 am

I don’t mind the poor, I can’t stand the A-holes. I had a car stolen from my driveway. We got it back after paying the Police-Tow Yard complex $250 and ultimately sold it to a family friend’s kid for $1.

Andrew' August 16, 2011 at 8:52 am

“should the influence of the Mantua moms be stronger or weaker”

Are they adding value or just extracting it?

Rahul August 16, 2011 at 9:41 am

In Tyler’s world does diversity of food count a lot more than diversity of schoolmates? Gustatory multiculturalism but not academic multiculturalism?

TGGP August 16, 2011 at 9:50 am

You already know the ethnicity of your kid, it is not going to change by moving to Texas. So do you then conclude that minorities in schools impose negative externalities on the rest of the student body?

John Thacker August 16, 2011 at 10:35 am

Well, I hardly think that in either model that the ethnicity is really the causative factor, rather than a proxy.

But yes, plenty of people do want their kids’ schoolmates to be the “right sort of people,” though many of them at the same time want to achieve that through buying expensive housing in good public school districts, rather than paying private school tuition.

Rahul August 16, 2011 at 12:44 pm

One of the big US mistakes is the use of property taxes to pay for schools. It unnecessarily combines the problems of where I want to live with what sort of school I want to send my kids to.

Andrew' August 16, 2011 at 1:58 pm

School is largely normative. Of what actual value is diversity?

Jim August 16, 2011 at 8:22 am

>not so great system of public education

Interesting. I wonder why minorities in Texas have better SAT scores than minorities in Wisconsin.

Maybe because standardized tests are racist?

No… wait… that’s not right…. it’s because…. umm…..

Jeremiah August 16, 2011 at 8:23 am

People may be moving away from the coastal “Playgrounds of the Rich” to Texas because it is more important to have an affordable house than to send their kid to a top-tier school. Texas’ growth may indicate an acceptance that the wealth gap cannot be crossed in a down economy, and that the idea of paying high rents for unsafe conditions in NYC with the hope of vaulting into wealth is a losing strategy. Texas could grow as the economy collapses and more people decided the American Dream is unobtainable in NY/DC/LA. The greatest damange to the coastal areas’ gravitational pull would be ongoing exposure of corruption/failings in the public school system, since “good schools” are the biggest anchor for middle-class families. If the high rents don’t translate into good schools then what’s the advantage of high rents?

Dean August 16, 2011 at 12:41 pm

Except that demand for living in NYC, DC, and LA has been growing rather than shrinking.

Morgan Warstler August 16, 2011 at 6:40 pm

Perhaps those people who actually work move to Texas and those who want to live on the dole move to LA/DC/NY. Not so much the dole, but those who want to: be entertainers, finance people, or bureaucrats – the moral dole.

Elwood August 16, 2011 at 8:25 am

Don’t underestimate the importance of culture as well. Texas’ less restrictive laws, including zoning and taxes, reflect an individualist culture prevalent across the South. Texans exemplify a self-driven ethos of initiative and disregard for the opinion of ‘elites.’ The kinds of people (risk-takers, self-starters) who run the kinds of businesses which are thriving even in this down economy are naturally drawn to a place like Texas. That’s not to say that all migrants to Texas are like that, but enough are to change the balance. And culture drain from other states only exacerbates the problem.

dennis August 16, 2011 at 11:23 pm

Yes sir! The defense industry, the oil industry and aerospace all scream rugged individualism, independent of the evil state.

AndrewL August 16, 2011 at 8:27 am

This post confuses me: Right off the bat you dismiss the governor as having any effect of the state of affairs of Texas, then go on to offer 3 policy reasons for the success of Texas, then just dismiss them. Why did you mention Rick Perry again? twice no less? Moreover, you you dismiss Perry as having done nothing, so he dosn’t get any credit for the performance of Texas. While the whole country is crashing down around him, he doesn’t panic and sell his state into the ground. Is that wisdom or dumb luck?

I read both articles from Yglesias and Krugman and neither mention Virginia, How does “Mantua moms” relate?

all I read in this article is that you have an axe to grind with Rick Perry.

Andrew' August 16, 2011 at 8:37 am

I think you are getting it backwards. Krugman got it on for Texas because he wanted to attack Perry.

FYI August 16, 2011 at 8:31 am

Krugman’s piece is terrible as usual; all politics, no facts. The response from Kevin Williamson (thanks TallDave) is very good.

Also, isn’t it interesting how we have this incredible number of poor immigrants being credited for Texas success? Wasn’t that group of people the reason California was being destroyed? Take that conservatives. Oh, but wasn’t also that group of very fragile people who needs the most the blessings of the welfare state? Take that liberals.

The truth is always a bit more complex it seems.

Andrew' August 16, 2011 at 9:45 am

Yglesias: “Does Perry plan on drastically increasing the volume of legal immigration to the United States in order to replicate the Texas population boom?”

Now that would be something. Letting in more smart professionals and entrepreneurs to buy houses is the closest thing to a free lunch we have on the table.

John Mansfield August 16, 2011 at 8:44 am

Is there a problem with looking at the unemployment rate as a measure of the availability of jobs? Low unemployment in northern plains states could be part of a reaching a stable state where there is a job for everyone still there and none for anyone who isn’t there. Higher unemployment somewhere else like Texas could be part of a less stable economy with more chances to lose a job and more chances to find a job, the two kinds of chances being connected. Being employed is more or less a prerequiste for becoming unemployed..

Andrew' August 16, 2011 at 8:47 am

People are so exasperating. I get very little utility from insurance (although I carry it, but minimize it towards catastrophic as much as possible). If you pass two hospitals and a handful of clinics in your walk to work each day I can understand why everyone would love it as much as you do.

Bill August 16, 2011 at 8:49 am

Take out energy, severance taxes, federal outercontintal oil lease revenue handed to Texas in the last energy bill, (forgetting that.Texas never wants federal energy taxes,) and federal defense contracts and installation, and see what you get.

John Thacker August 16, 2011 at 8:52 am

Of course, that wouldn’t make much a difference in the Texas / NoVa comparison, considering how the NoVa area has benefited from federal spending and contracts, and even BRAC.

And it still begs the question of why federal money led to higher housing prices in VA and MD, but (even granting your claim) not in TX. And, as noted above, the research clearly shows that it’s not land availability or land prices– it’s the right to build a house.

Ted Craig August 16, 2011 at 9:01 am

Well,Honda’s finance division and Comerica Bank to name two. Both have moved to Texas in the past few years. Dallas is becoming a major financial center, especially for auto finance. What you describe sounds a lot more like Southern California.

Andrew' August 16, 2011 at 9:32 am

Okay, what do you get?

Bill August 16, 2011 at 4:24 pm

Here’s what I would do:: go to the decennial census, identify revenues by naic codes, identify growth over periods, and normalize for the US.

Hugh August 16, 2011 at 8:50 am

Oh OK Texas has done nothing special, it’s just population growth driving job growth. Nothing to see here, move along.

As analysis this is weak, weak, weak – and it’s still more than a year until the elections. We’re going to see some beauties in ’12 and that’s for sure.

John Thacker August 16, 2011 at 8:54 am

Unfortunately, and perhaps it’s your attempt at sarcasm, but I find this comment of yours to be near incomprehensible. I can’t tell if you’re being dismissive of those who claim that it’s population growth driving job growth, or being dismissive of those who don’t argue that.

Perhaps it’s me, but I don’t think you were clear at all.

Andrew' August 16, 2011 at 9:40 am

Summary: We are only hearing about it because of the status games. We can’t learn anything from a place that was run by a political leader we don’t like now that he may be in conflict with our guy.

Big picture question: Why is it better to have a lower but growing economy? Partly, we have a debt-based currency that requires constant growth, but are there other fundamental reasons?

Hugh August 16, 2011 at 1:57 pm

“Why is it better to have a lower but growing economy?”

For most people it just feels a lot nicer: if you lose your job you can find another one without too much difficulty.

Hugh August 16, 2011 at 1:09 pm

I do not think that population growth drives job growth (or it does so indirectly).

Job growth will be driven by having an expanding number of companies producing goods or services that find a market. Only to the extent that those goods or services are sold locally will population growth drive job growth.

Vance August 16, 2011 at 9:06 am

The thing that differentiates Texas is the energy business. The availability of energy jobs is what has ultimately driven the population growth that you are all talking about. The Barnett Shale and the Eagle Ford Shale is the origin of the job growth. Yes, the lower cost of living helps, but nobody is going to move there is there aren’t jobs. The cost of living is low in lots of places that didn’t have job growth.

The Engineer August 16, 2011 at 9:55 am

New York has a bigger shale play than Texas does, yet they seem to be strangling the baby in the cradle with regulation.

Vance August 16, 2011 at 9:10 am

Oh, and I disagree with point #4, namely that job growth in the energy business is exogenous to policy. Not at all. There is a lot more freedom to drill in Texas than in, say, Pennsylvania or New York, even though both places are home to a tremendous amount of shale fossil fuels. But in PA and NY the regulatory structure is cumbersome (or even prohibitive at times) which in turn limits the job growth. Note that the driving factor isn’t the price of fossil fuels (although that helps) as much as it is the amount of fossil fuels. Shale gas was barely a blip a decade ago. It drives the entire domestic energy business now.

D August 16, 2011 at 11:37 am

My (limited) understanding is that shale is very much about price. It’s much more expensive to extract than traditional oil wells.

Nick Bradley August 16, 2011 at 5:09 pm

Texas is also exempt from 99% of federal energy regulations because their grid does not connect to the rest of the US.

Bill August 16, 2011 at 9:30 am

Today’s Fiscal Times has a good article analyzing the hype and drilling into the stats of a state that ranks in the middle of unemployment during this recession.

Stats overstated and others ignored.

TGGP August 16, 2011 at 9:58 am

In a friction-less world, shouldn’t we expect people to move about the country until everyone is indifferent between places and they all seem middling? If a grand social experimenter could force the many migrants to Texas to instead go to other places, would we expect unemployment in those places to rise?

Ted Craig August 16, 2011 at 11:24 am

Most of the states ahead of Texas are fairly small. It ranks third in unemployment among the 10 largest states. That means some overhype, but not as much as you imply. What the article leaves out some of the major investments made in the state by other industries over the past decade. That set the state’s floor higher.
All states have internal advantages, like New York’s financial sector. But Texas has had growth in many fields in the past year.

Bill August 16, 2011 at 8:01 pm
Hupp August 17, 2011 at 2:04 am

That was not an “analysis”, it was a systematic attempt at explaining away Texas job growth using anything at hand.

Bill August 17, 2011 at 1:00 pm

What did you disagree with. All the stats were there.

mike davis August 16, 2011 at 10:02 am

One thing to understand about Texas is that there has always been tremendous diversity. True, zoning laws are not universally strict, but there are both private communities with contractually defined regulations and cities with very tight zoning. Similarly, Texas has more school districts than any other state, about 1200, as well as a strong network of private schools. This diversity makes it easier for migrants to find a place to fit in and the competition makes it cheaper to do so. I have no idea what a “mantua mom” is, but I’m pretty sure I could find her equivalent her in Dallas. I’m also pretty sure I could arrange my life to either join in her community or avoid her altogether

David August 16, 2011 at 12:53 pm

Your comment makes sense to me, and I think zoning diversity is more true in Virginia, even within Fairfax County, than Tyler lets on. The Mantua area, and most of Fairfax County, is highly-zoned and has great schools. There are areas of eastern Fairfax County, though, that appear to be more loosely zoned and the schools aren’t so great (Annandale, Springfield, Mount Vernon). Perhaps the zoning is identical in eastern Fairfax County, and the disparities are due to enforcement or pre-existing establishments, but it seems more likely that a lot of the zoning is done at the local level. This is certainly the case in Reston, in far western Fairfax County.

Fairfax County may actually be pretty similar to Texas – affluent areas with lots of zoning, and less affluent areas with looser zoning. I don’t know much about Texas, but I hazard a guess that a lot of Houston is unzoned, but The Woodlands is very highly zoned. Similarly, I don’t read Tyler’s food blog, but I would assume many of his favorite restaurants are in eastern Fairfax County, where the zoning is looser and there are more immigrants.

If that’s the case, living with the Mantua Moms might be a good trade-off. Nice neighborhood, great schools, and a fifteen-minute drive to good food. It also raises the question of whether Houston, Dallas, Springfield, and Annandale will become more highly-zoned as their very lack of zoning raises the level of affluence. Kind of a goose that killed the golden egg scenario. And, to the extent proximity to Annandale restaurants is a benefit, zoning in Annandale actually makes living in Mantua less desirable.

Peter Schaeffer August 16, 2011 at 2:18 pm

Dave,

Houston has no zoning. However, it has massive restrictive covenants. Allowing for restrictive covenants, much of Houston is very tightly zoned. It should surprise no one, that the best neighborhoods have tight restrictive covenants.

Alan Gunn August 16, 2011 at 10:32 am

Galbraith nailed it long ago in “The Affluent Society” (though he seemed not to understand what he saw). The private sector produces abundance; government, past a point that we passed long ago, produces squalor.

Nick Bradley August 16, 2011 at 5:10 pm

Can you expand on that a little bit?

E. Barandiaran August 16, 2011 at 11:55 am

Texas is large enough to be used for several narratives to support different views of developments since Perry became governor as well as different views about the “average” current state of Texas v. that of any set of other U.S. states.

Both Mexico and the other 49 U.S. states have always been close to Texas. So the obvious question is what we have learnt from Mexican and American migration into and out of Texas in the past 100/150 years. Then, we can ask what other long-term factors –in particular oil and state policies–may explain differences between Texas and other U.S. states in the past 10 years. I hope someone can provide good references to past research. And please take into account how large Texas is.

Tyler, I wonder why sometimes you seem too eager to engage the mercenary media fighting the November 2012 election.

Brian J August 16, 2011 at 11:56 am

A few things:

1. Texas has indeed had strong population growth, in absolute terms more than other states, which did at least have a small part in contributing to its employment growth, but it’s growth is somewhat exaggerated by its smaller base. California also had strong population growth, but it already had a lot of people, far more than any other state.

2. We keep hearing a lot about the movement from the North to the South, specifically the Midwest and Northeast to the Southwest, but this always takes the form of anecdotes. Perhaps this is the wrong information to look at, but the table from the link below, from 2009 which is the last year information was able from, doesn’t seem to suggest anything special about why people are coming to Texas. There could be any number of reasons for this–cultural similarities, for instance, or the fact that it’s easier to move from a closer state–but there there doesn’t appear to be any stronger of a link between New York and Texas than there is between Georgia and Texas, and there certainly appears to be a stronger link between, say, Colorado and Texas than other states that are in the supposed troubled spots.

http://www.census.gov/hhes/migration/

3. Felix Salmon has a good post on Perry’s record as a job creator.

http://blogs.reuters.com/felix-salmon/2011/08/15/perrys-employment-record-in-texas/

4. I’m not sure why nobody seems to mention Perry’s role in handing out subsidies to businesses. He’s certainly not alone in doing this–it’s become so prevalent that, whenever I hear about a factory that went into a sunnier, usually union-hostile state from a colder, union-friendly state, I check to see if subsidies or something similar were involved, and they usually are. I’m not looking to start a debate on whether this is a good or a bad thing, but I’d be astonished if this wasn’t a fairly significant factor in some of the growth in jobs.

TIME’s Massimo Calabresi has a good post, and not just about subsidies.

http://swampland.time.com/2011/06/27/the-cracks-in-rick-perrys-job-growth-record/

Ted Craig August 16, 2011 at 12:04 pm

2. The chart shows one massive shift: California to Texas. That does point to policy.

Ted Craig August 16, 2011 at 12:04 pm

I’m sorry, that should be to Texas, from California.

Brian J August 16, 2011 at 1:42 pm

Does it? Which cell or series of cells are you referring to? I

Ted Craig August 16, 2011 at 4:30 pm

2009 state-to-state migration, 66-J.

Brian J August 20, 2011 at 2:18 am

Doesn’t this spreadsheet also show sizable shifts in states with much smaller populations? If that is the case, then how can we blame everything on California and New York and how they tax and regulate?

Andrew' August 16, 2011 at 4:32 pm

4. Interesting point. I wonder if the peak returns in the jobs versus revenue tradeoff comes right around election time.

Urso August 16, 2011 at 12:13 pm

I’m really confused as to how your neighbors eating bland food negatively affects your way of life. Unless you’ve been stealing your dinner off their plates?

Barkley Rosser August 16, 2011 at 12:33 pm

Regarding housing two matters not mentioned so far are 1) the ease of annexation by central cities, which reduces the power of “Mantua moms” over land use controls (with zoning per se not necessarily the most important of these) and 2) much tighter regulation of mortgages since the S&L crash in the 80s,with much stricter rules for people getting mortgages, with the upshot that TX largely avoided the whole sub-prime mortgage mess and the spec bubble.

BTW, while TX has a low unemployment rate, the growth rate of its per capita GDP beat the national averages during 1987-2000, even though the price of oil was basically flat, but has been less than the national growth rate since then, when the price of oil has been rising and you know who has been the gov.

Matt August 16, 2011 at 12:42 pm

“3. Texas gets right a lower-zoning policy, which leads to cheap rents.”

I don’t know if this is the source of Texas’s success, but I completely agree that it cuts against Krugman et al’s narrative in an important way. Assume it’s true. So, “the success of Texas has nothing to do with Rick Perry’s small-government conservatism, and everything to do with the fact that Texas has reduced regulations for property ownership, construction, and opening new businesses”? The is a complete non sequitur.

I would also note that the logic behind zoning is not a trivial matter that is only ancillary to the major Left-Right debates. Zoning is economic planning on the municipial scale, and it re-produces all of the irrationalities, is accompanied by all of the same justifications, and is motivated by the same rent-seeking dynaimcs as those of liberal economic policies on the national scale. I don’t see how you could find it obvious that heavy zoning regulations are a bad thing, for example, and at the same time not find things like cash-for-cunkers, the federal governments adventures in the foreclosure markets, or a robust minimum wage to be at least presumptively misguided.

Dean August 16, 2011 at 1:17 pm

Zoning is important, but there’s no difference between the parties (with the exception of Ron Paul) in how they treat zoning. NIMBYism knows no party, and there are plenty of liberal advocates for loosening local regulations.

Brian J August 16, 2011 at 1:46 pm

Don’t we need more information to know the specific effect on different regions? Most of the growth has been in the cities, where costs are probably higher relative to other parts of the state.

Also, Krugman didn’t say those words in his column, but your quotation marks make it look like he did.

Aneesh August 16, 2011 at 1:27 pm

How can you compare and contrast zoning in suburban Houston to that of Brooklyn or Boston? Why would Houston need stringent zoning regulation in the first place. Will they have to deal with 2000+ apartment buildings being built along two-lane, one way streets, etc?

Dave August 16, 2011 at 1:36 pm

Does anyone else find ironic that Yglesias’s comments basically put him in the same camp as Casey Mulligan in that increased labor supply is responsible for job creation?

R Richard Schweitzer August 16, 2011 at 2:11 pm

As a former resident (1979-2007) of Great Falls (a CDP) -which I greatly miss, may I suggest that there are effects from the differences in the way segments of populations seek to preserve or advance their “special” interests.

There is also the the factor, very evident in much of urban Texas, that individuals still find themselves involved in diverse “interests” thus somewhat dulling the impact of “special” interests.

Purpleslog August 16, 2011 at 2:55 pm

This post covers the employment numbers:

http://www.politicalmathblog.com/?p=1590

Andrew' August 16, 2011 at 2:56 pm

“Who was that Republican guy from Texas who wants to beat the shit out of Bernanke.”

“Ron Paul?”

“No.”

Morgan Warstler August 16, 2011 at 6:48 pm

+1

Morgan Warstler August 16, 2011 at 6:47 pm

The basic fact is that in Texas, entrepreneurs are given the sense that you don’t need much permission. If you get into a fight with your tenant or workers, Texas sides with you. Nobody views the government or the status quo as insurmountable.

In Texas there is a general social agreement that if someone is losing it is their own damn fault. Tough love is the norm. “Beggars can’t be choosers” is the social norm.

As such, a certain kind of people of people move here. And whether folks like it or not, the kind of people that move here are the kind of people that get shit done.

Texas is Open for Business.

Bill August 16, 2011 at 8:06 pm

I like it when a Libertarian website claims that the government created jobs with the headline: “Why did Texas create so many jobs?”

As you would say, government doesn’t creat jobs.

And, by the way, the headline implies that the premise of the question is true, but dig deeper with this Fiscal Times article and find out Texas is unexceptional: http://www.thefiscaltimes.com/Articles/2011/08/12/Rick-Perry-and-the-Myth-of-the-Texas-Miracle.aspx#page1

Fiscal Times is usually conservative, by the way.

Ted Craig August 16, 2011 at 8:15 pm

I was thinking the same thing, Bill. If central planning can’t bring about economic growth, why do conservative governors run on job creation? The answer is, what else are you going to do? It’s politics.

Bill August 16, 2011 at 9:47 pm

You are truly a great mind who appreciates irony.

Steve August 16, 2011 at 9:43 pm

I don’t think level of zoning / environmentalism is a completely exogenous policy choice the way Ed Glaeser implies. The nicer the environment, the more environmentalists. Not surprisingly, Northern California was the home of the Sierra Club. As I wrote in 2005:

Contrast the Dallas-Fort Worth conurbation, the largest in red state America, to San Francisco, culturally the bluest spot on the entire map.

Exurban Dallas-Fort Worth can expand outward around 360 degrees of flat, adequately watered land, easily bulldozed into lots and streets. In sharp divergence, San Francisco sits on a peninsula, with the Pacific Ocean to the west, the San Francisco Bay to the east, and mountain ranges to the north and south. This makes for superb scenery, but also for vastly expensive homes within an hour’s commute of downtown San Francisco.

(Amusingly, there’s even a correlation between the quality of the views in a city and the local enthusiasm for environmentalist Democratic candidates. Scenic views create liberal views. On average, the denizens of hilly San Francisco can see farther from their backyards than the residents of flat Dallas, so they are more inclined toward not-in-my-back-yard opposition to unsightly developments.)

San Francisco therefore fills up with two kinds of people who don’t need as much space per paycheck — singles, most famously gays, and immigrants from countries where families don’t expect American-style square footage. Neither is likely to vote Republican. The Chinese in San Francisco might have conservative social views, but, as journalist Arthur Hu has perceptively pointed out, they tend to take their voting cues from their native neighbors, who are more often than not quite liberal.

White heterosexual couples who meet in San Francisco know that if they want to marry and have several children, they are likely to have to leave this adult Disneyland of scenic beauty and superb restaurants and move inland, perhaps as far as the hot, smoggy, and dull Central Valley. The ones who do make this sacrifice to have children are more likely to become Republicans, but the ones who stay will likely vote Democratic.

Overall, I don’t see much point in living in California unless you reside in the mellow coastal climate zone that runs from the beach to the first range of tall mountains. The Central Valley is dreary and California’s deserts strangely unattractive compared to inland states without the hassles of California’s budget disaster. This makes competition for the relatively small amount of level land along the ocean ferocious, which is one reason that Californians’ reactions to the enormous influx of illegal aliens in recent decades has been more negative than Texans’.

If immigration into the Los Angeles basin means that, if you want a spouse and kids, you’ll have to leave the wonderful Mediterranean-climate zone of L.A. and move over the 10,000′ tall San Gabriel Mountains into the searing hot winds of the Palmdale exurb, well, you might feel bitter too.

In comparison to California, the immense eastern half of Texas is all about equally mediocre. Unlike the western half of Texas, it has enough water and the climate is survivable with air conditioning, but that’s about all you can say for it (other than there is some pleasant hill country around Austin, which, not surprisingly, is the scenic blue dot in the middle of the broad red plains of Texas.)

If too many illegal aliens drive you from a suburb of Dallas or Houston to an exurb, well, no big loss. The terrain is all flat and hot.

http://www.isteve.com/2005_Dirt_Gap.htm

Steve August 16, 2011 at 9:45 pm

The bad news for Democrats from the Texas experiment is that it suggests that driving down the skill level of the population through mass immigration means that the only affordable, feasible kind of government in a future heavily mestizo America is a low tax – low spend – low regulation – conservative values Texas-style Republicanism.

The bad news for Republicans out of Texas is that just such policies attract in so many immigrants and encourage so much fertility among immigrants that the Republicans will eventually get swamped demographically.

Bill August 16, 2011 at 11:32 pm

If you go to Angry Bear, you will find that Texas’ GDP growth was….drumroll….17th in the country.

Interesting statistics: http://www.bea.gov/newsreleases/regional/gdp_state/gsp_newsrelease.htm

superdestroyer August 17, 2011 at 7:13 am

As some people above have pointed out, Texas has independent school districts are have boundaries that are independent of the boundaries of cities and counties. Thus, someone had live in Harris County and not have to send their children control by the politicians who control Harris Counties. One of the odd facts about Texas and since schools run indepedently, the best high schools are public schools and the best high school sports teams are in the public schools unlike California, Ohio, or Maryland.

Since someone above the Woodlands, it is spread between two counties but is in the Conroe Indepedent School District and thus the parents have more control and the parents in places like Fairfax County Virginia or Montgomery County Maryland.

The example for Manuta would be something like the Highland Park School District in Dallas.

ohwilleke August 17, 2011 at 5:36 pm

Re: Argument #4

It isn’t necessary that “People are moving to Texas because fossil fuel prices have been rising. There’s something to that, but still those prices do not seem to predict employment in Texas, at least not in recent times.”

It is merely necessary that fossil fuel and agriculture based local economies are doing better than manufacturing and real estate construction based economies. Texas looks good not because of its absolute economic figures but because it has been as deeply hit by a national trend as other places. A larger share of industries not hurt by the downturn, and a non-bubble starting point have buffered it relative to other states and made it look good now.

The impact of low housing prices may be not so much that Texas is more affordable, as that it wasn’t an attractive place for out of control real estate development. Therefore, because Texas had an underwhelming real estate bubble, it also had an underwhelming real estate bust. You can’t loose construction jobs that you don’t have to start with.

I’m also inclined to think that this is a recession where state real estate law really mattered. The states hardest hit by the real estate bubble were those perceived as being non-recourse mortgage states (e.g. Florida and California) or had real estate demand closely tied to real estate industry activity in non-recourse mortgage states (e.g. Arizona and Nevada).

Texas has a pretty unique set of laws related to the rights of creditors in residential real estate. Its almost unique homestead exemption laws made the residential real estate sector impervious to the impact of judgment liens that can cause a credit collapse to snowball, and Texas one of the least friendly state in the Union for home equity lending. The low real estate prices (due to the factors mentioned like lack of zoning, poor schools, etc.) also meant that people didn’t have much home equity due to appreciation to borrow against.

And, real estate lending was also influenced by the still present memory of the S&L crisis, which provided a cultural as opposed to a regulatory check in the home lending underwriting area against reckless home equity lending.

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