Voting With Their Feet

Bill Murchison
Tuesday, October 5, 2010

"Californians, here they come -- right back where they ... " Wait a minute, hold on, this ain't the place they mostly "started from" -- Texas, I mean; my home state. But, gosh, are "they" coming, here and elsewhere, to escapes the miseries of unemployment and high taxation in the once-Golden State?

California remains, in many respects, a wonderful state, and I don't have the slightest interest in bashing it. How could a state that nurtured Ronald Reagan not have wondrous, praiseworthy attributes? I recently spent some time there at the Hoover Institution, located at one of my alma maters, Stanford. I can attest to the continuing worth of these noble institutions and to the beauty of their surroundings. I like California, even if more people, reportedly, are leaving it rather than getting there for the first time. My point is a larger one -- a good Leninist point, I might add.

The late -- hardly to be lamented -- Lenin observed during his campaign to enslave Russia that, as respecting where the Russian people wanted to live or not live, they were "voting with their feet." A memorable phrase. People do vote that way. They do it all the time. They register their approval or disapproval of a place, and its living conditions, by staying put or moving along.

A corollary proposition is that the people in charge, unless they happen to be stupid or else as mean and vicious as Lenin, need to notice what's going on. The people in charge don't want to lose a referendum like that. A place gets drained that way -- of talent, resources, initiative, gumption and other indispensable commodities. When the first-rate people move on, a first-rate place becomes second-rate or worse.

California's brains-and-people drain came to notice several years ago. From 1985 to 2000, 111,000 Californians moved to Colorado; another 199,000 sidled over into neighboring Nevada -- though whether the real estate collapse there has propelled some of the new immigrants in new directions, we don't know just yet.

Various websites exist to guide Californians toward acclimation to Texas. One Californian headed our way noted that in Texas, "I can have a five-bedroom, 3,000-square-foot (plus) home with a pool for one-third the price of my 1,350-square-foot home near the freeway." That's assuming, no doubt, he's got a buyer for his home near the freeway. He goes on: "I can put 10-12,000 extra in my pocket each year due to no Texas state income tax." (California's top marginal rate is 9.3 percent.)

The point -- to reiterate -- is that the patience of ordinary people cannot be taken for granted by those who govern them. Hard as it is to get up and move, not least in markets where unemployment is large and home sales are tiny, move is what many do. This kind of truth compels those at the top of a state's pecking order to decide how inhospitable to business they want regulations and taxes to be. A reduction in one or both commodities is a friendly signal: We want people to live here who like to work. We make it easy for them to do so and prosper.

It's sort of the pleasure/pain syndrome. You like pain? Fine. But we haven't got that much of it. What we've got -- in economic terms, and to the extent we can manage it -- is pleasure and delight.

"Never trifle with the marketplace" is an axiom that the present species of American politician needs some help in retaining. The marketplace both purrs and bites back, depending on how it's treated. Example: California. Example: Health insurance companies cutting and leaving markets in which, thanks to ObamaCare, they can't make a profit, such as children's insurance.

The attraction of so-called "Austrian" economics -- which makes a big thing of these marketplace signals -- is much talked of nowadays in analysis of the tea party movement. Why not? The marketplace, when left free enough, tells a free American what he needs to know. You want one more reason why tea party folk desire more freedom from overbearing government? That's it.