Economics

Jayhawk Down

Economic freedom may be just another word for nothing else to do

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Hey, Frank Sinatra, start spreadin' this news: When it comes to "economic freedom"—as determined by a secret formula factoring in almost 150 variables, ranging from taxation to legal exposure to environmental regulations—New York is the worst state in the union and Kansas—that Great Flatland of Gopher Holes!—is top of the list, king of the hill, A number one.

Can you dig it, pally? New York is the pits, the absolute pits, according to Forbes' new "U.S. Economic Freedom Index," which was put together in conjunction with the venerable San Francisco-based, free-market think tank, the Pacific Research Institute.

As The New York Sun summarizes, "The study says the states that have the most economic freedom are those that offer the fewest obstacles, in terms of taxes and regulation, to starting a business or finding a new job. The ranking compared the states based on what was termed 'government intervention' in such areas as fiscal policy, welfare spending, size of government, regulatory climate, and the judiciary." Rounding out the Top 10 are Colorado, Virginia, Idaho, Utah, Oklahoma, New Hampshire, Delaware, Wyoming, and Missouri. Golden California came in 49th and, according to the Sun, Northeastern states Massachusetts, New Jersey, Pennsylvania, Rhode Island, and Connecticut comprised the study's "nether regions" (alas, not a good place to be in this instance).

Asks the invite to a recent Gotham City event featuring the report's principal author, Lawrence J. McQuillan, "If you had to relocate your headquarters or start a new office, would you choose New York? Or would you consider Kansas?" Well, in an age of Metro vs. Retro and all the rest, there's a question worth pondering! And while we await our invites to the grand opening of the brand-spankin' new Salina headquarters of Forbes and Pacific Research, let me play Red State Socrates for a minute and respond with a slightly different query: If you had to choose somewhere to live, would you really go to Kansas if you could figure out any way, short of acting in porn or in a dinner-theater version of Rent, to stay in New York?

It's not a hypothetical concern for me (the move to the vast middle of America, not the porn option). Until July, I spent the past eight years in what F. Scott Fitzgerald dolefully called the "rolling fields of the republic," where the land is plentiful, the houses cheap, and (sometimes) the taxes low—in other words, roughly speaking, an area of economic freedom. From '96 to '98, I lived in small-town Texas and from '98 until this summer, I lived in small-town Ohio. My takeaway from the experience: Fewer tax and regulatory hassles and, most important, a tremendously lower cost of living are, in the end, probably not that important to people.

Rather, I suspect the number of opportunities, for businesses and consumers alike, and something we might dub as "action"—a rough metric of buzz, restaurants, cool shops, weirdness, culture of all sorts—are far more important to most people in deciding where to live and work. Indeed, if a low cost of living—and of doing business—were the main factor in figuring out where to live, you just wouldn't have the population distribution we have in the United States or anywhere else, in which people almost inevitably cluster in relatively more expensive and constrained areas, leaving huge swatches of perfectly decent land—Kansas, say—basically alone.

Allow me to provide some roundabout background: I was born in Brooklyn and raised in New Jersey, so I know those nether regions of economic unfreedom firsthand. I've also lived in Philadelphia—a regulation-choked burg that dropped from the fourth-largest to fifth-largest city in the U.S. upon my arrival there in 1988 and still had the chutzpah to charge residents a city income tax to pay for incompetent municipal services (anything to be like New York!). And I spent three years in Buffalo, the colon of the Empire State and quite possibly the country, a city with all the high taxes, regulatory hassles, and none of the dynamism of New York, New York (the city so nice they named it twice). Buffalo is such a sad sack of a place that it, along with the all-too-aptly named Pittsburgh were the only two major metropolitan statistical areas to have actually lost population during the '90s.

And back in 1996, I was California dreamin', living the high life in Los Angeles, working for this very magazine as a senior editor, when I pulled a reverse migration and headed deep into the heart of small-town Texas. Why? My wife had scored her first tenure-track academic position at a place called Sam Houston State University (most famous alum: one Dan "Proportional Font" Rather) in the toddlin' town of Huntsville (biggest claim to fame: it's the site of the free world's most rootin', tootin' death chamber). Counting inmates in the nearby prisons and the students at Old Sam (and yes, it was sometimes easy to confuse the two), the population there was around 35,000, a number that swelled all the way up to 35, 250 when Karla Faye Tucker took the needle for her role in pickaxing two people to death.

One of the main attractions of that move was not gaining economic freedom per se, but relative economic abundance. My forward-thinking then-boss—herself now a Lone Star State resident—and I hatched a plan for me to telecommute so I could keep my job at Reason. Besides instantly becoming a two-income household, my family was moving to a place with no state income tax and cheaper-than-dirt housing prices. We ended up renting a three-bedroom house for around $750 a month, which was $250 less than we'd paying for a two-bedroom apartment in La La Land. Four- and even some five-bedroom houses could be had for $100,000 or less. In my old neighborhood in West L.A., termite-infested two-bedroom bungalows without driveways were going for $300,000 to $500,000 back then.

Later, when we moved to Ohio, a relatively high-tax state, one of the main benefits still was an amazingly low cost of living compared to cities such as New York, Los Angeles, San Francisco, or Washington, D.C. We bought two houses during our time in Oxford, home to Miami University, located about 30 miles outside the slumping metropolis that once was Cincinnati. Because it's a college town—guaranteeing stable property values and relatively sophisticated amenities—homes in Oxford go at a premium, but by coastal standards you can't complain. We bought a four-bedroom house with about 2,000 square feet for $137,000 and a massive five-bedroom, full-basement behemoth boasting around 3,500 square feet for $205,000. We now live just outside D.C., where our rent for a three bedroom apartment is over a $1,000 more than our last mortgage payment in the Buckeye State.

If something like economic freedom was all that important, why would we have ever left Huntsville, where we paid little in taxes and had a huge disposable income? Partly because it was, relatively speaking, boring as hell. There just wasn't that much to do, and not simply for the prisoners. Everything was a long drive away, the population was relatively spare, etc. In short, the things that helped to make the place cheap also guaranteed that it was pretty lean. Living in Huntsville and, less dramatically, in Oxford taught me that the price of a house didn't simply reflect the cost of living but also the demand for living in a given area. If you can't move a five bedroom house at $100,000, there ain't a lot of living going on.

Now to be sure, there are always folks like Oliver Wendell Douglass, the back-to-the-garden patriarch of TV's Green Acres, who famously eschewed Times Square for fresh air. And with a hagiographic biopic of Alfred Kinsey hitting screens across the country right now, it only seems right and proper to remind ourselves of the adage about different strokes for different folks. But it's worth remembering that one stroke is generally more popular than the others.

The economic freedom index, notes the Sun, "said workers are voting with their feet, with the top 10 states gaining population in the last five years, while the bottom 10 have been losing residents." I haven't been able to get a copy of the study, so I can't vouch for the accuracy of that description, much less the methodology involved in the report itself. But the last time I checked, there were a helluva lot more people and jobs in New York than in Kansas. And recent Census data doesn't suggest that's going to be changing anytime soon. According to the government, between April 1, 2000 and July 1, 2003, Kansas' population grew 1.3 percent; private nonfarm employment dropped by almost 1 percent between 2000 and 2001. The corresponding figures for the Empire State? Population went up by 1.1 percent and jobs grew by 1 percent.

The simple fact is that many people—arguably most people—are ready, willing, and able to pay a premium to live in more densely populated areas where things cost more money and take more time, where there are more regulations, higher taxes, bigger annoyances, you name it. That is, where the hassle factor, including man-made petty annoyances such as taxes and regulations, are higher. Take my home state of New Jersey: It may well be hell on earth when it comes to economic freedom—and yet its unparalleled population density suggests that the Garden State is pretty damn well-loved by its denizens. Otherwise, there wouldn't be so many. It's useful to think of any given area as making a deal with people who might live there: We'll throw off this much employment opportunity, this much fun, etc. at a given price (a figure that includes not only money but all the sorts of petty tyrannies that zoning and planning boards routinely generate).

There are times and places where that deal isn't considered worth it—witness the relative emptying of many American cities during the '60s, '70s, and '80s and a shift to the Sunbelt. But even in those cases, most people didn't hightail it to Kansas or the other states that are ostensibly the bastions of economic freedom. Instead, they camped out near the old cities, sucking as much warmth out of the dying beasts as possible, or quickly turning new low-cost utopias into versions of that which they left behind (Phoenix, anyone, which is by all accounts rapidly becoming Los Angeles without the ocean?).

In this sense, the economic freedom metric may be pretty far down the list, if not quite irrelevant, to what drives most people's—and businesses'—decisions about where to hang out. Yes, regulations are always and everywhere too high. Gov. Arnold is right to bemoan the anti-business tax and regulatory policies in California; New York would be a better state if the government taxed (and spent) less. On the margins, higher taxes are a bad thing. But the margins aren't the whole ball of wax. That's especially true in major cities, which often have Third World-style bureaucracies and kleptocracies in place to rip off the very people who keep the places afloat in cash, commerce, and coolness. But somehow, New York City seems to be doing just fine even—or perhaps especially—as it costs more and more to live there (in terms of money and psychic energy).

And the folks at Forbes and the Pacific Research Institute are unlikely to be trekking en masse to Kansas anytime soon. Why is that? Because most of the time, economic freedom's just another word for nothing else to do.