It doesn’t seem right that I have to question the economic reasoning of someone who won a Nobel Prize in economics, but Paul Krugman has once again shown that he values the political goals of the progressive left over actual economic reality.
In a column in the New York Times on Sunday, Krugman asserts that southern states, Texas in particular, aren’t seeing an influx of people from blue states like New York and California because of the free market causes of low taxation and limited regulatory burdens.
“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.”
Krugman says this can’t possibly be true. He asserts that Texas, and other red states seeing massive population growth right now, are only catering to “the 1 percent,” and people are only moving to red states from blue states because the housing is cheaper in red states.
Why is the housing cheaper, you ask?
“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.”
Yes, Mr. Krugman himself admits that it is largely because there are fewer zoning restrictions and regulations in the south than there are in blue states.
So how does he justify his argument that regulations aren’t pushing workers out?
Here are a few facts about the cost of living environment in Texas compared to that of New York.
The cost of housing in NYC is nearly three times as much as it is in Texas. Furthermore, as Krugman points out in his article, average income is only 12 percent higher in NYC than it is in Houston. The relative difference of these two stats is a key component of why so many workers are exiting NYC and greater New York State for more favorable living environments.
When Dr. Krugman makes the argument that moving from New York, where wages are higher, to Texas where wages are lower but the difference in cost of living more than makes up the difference, is a loss in productivity he is showing his complete disdain for the most basic of market principles.
Krugman says that it is wrong for workers to move from New York (where they are paid more) to Texas because, “they’re moving the wrong way, leaving local economies where their productivity is high for destinations where it’s lower.” Quite to the contrary, the work of a computer programmer living in New York City is not inherently more valuable than someone doing the same job in Houston, just because they are paid more. The high barriers to entry and burdensome regulations of blue states like New York and California lower the ability of a worker to use their money toward the things they value most.
The workers moving from New York to Texas may be making less in nominal dollars, but they are able to use more of their income toward pursuing a higher standard of living. Not to mention the fact that many people don’t want to be told how much salt they can put in their food, how much soda they can drink, or whether or not they can allow customers to smoke in their places of business.
Krugman’s solution to high housing prices in New York and other large, blue cities seems to be building high-density rent-controlled apartment complexes—one of the things that is driving high prices in the first place.
This migration toward more free-market states makes very clear that what is good for workers is often good for business, and vice-versa. The lower cost of living and favorable regulatory and tax environment of Texas is a model that states across the nation will need to emulate if they expect to stay competitive. If Krugman truly wants to advocate for policies that will benefit “the 99 percent” he would be among the first to suggest we lower taxes and remove excessive regulations.