A theory of California governmental failure

Jeff writes:

The underlying problem here is that California is simply a beautiful place to live.  It’s not just the climate, or the people, or the geography.  It’s that something floating around in the air that just makes you happy all the time you are there.  And then the second problem is that there is free entry.

So it really doesn’t matter what you do with the constitution.  You can fix the referendum system, you could change the budget process,  you could turn the government into Singapore.  But that only means that something else has to get hosed to bring the quality of life again back down to the level that maintains the zero-rent equilibrium condition with free entry.

Given that the question boils down to which part of California do you want to screw up in order to achieve that?  This is mostly a distributional question.  Bad state government saps rents in one way.  Give those back and bad local governments will do just fine to take up the slack.

Of course all that is really required for equilibrium is that the quality of life of the marginal resident (or resident-to-be) is sufficiently low.  This is completely consistent with high average quality of life but its not clear to me why a well-functioning government would be better at achieving such a distribution than the one they’ve got now.  That is, who but the marginal resident is more affected by high taxes and dysfunctional government?

(The cheapest way to target the marginal resident is to make it infinitely costly to enter.  But that gives huge rents to those lucky enough to live there already and the temptation to take those away would be too great for any government.)


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