Wednesday, November 24, 2010

Natural Economic Experiments

In trying to make the case that economic freedom is the best way to end poverty while centralized planning of the economy by government fiat is a cause of poverty, the following "natural experiments" are frequently refereed to:

East vs. West Germany
North Vs. South Korea
China Vs. Taiwan and Hong Kong

Now there is a new one:

California vs. Texas

"California has become a cautionary tale of mismanagement of what by all rights should be the country’s most prosperous big state. Its poverty rate is at least two points above the national average; its unemployment rate nearly three points above the national average...Texas’ trajectory, however, looks quite the opposite. California was recently ranked by Chief Executive magazine as having the worst business climate in the nation, while Texas’ was considered the best. Both Democrats and Republicans in the Lone State State generally embrace the gospel of economic growth and limited public sector expenditure...Since 1998, California’s economy has not produced a single new net job, notes economist John Husing. Public employment has swelled, but private jobs have declined. Critically, as Texas grew its middle-income jobs by 16%, one of the highest rates in the nation, California, at 2.1% growth, ranked near the bottom. In the year ending September, Texas accounted for roughly half of all the new jobs created in the country."

Read more here.

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