From last to first

Between 1950 and 1990 the fastest growing state was Nevada, with a 651% population increase.  The District of Columbia was last, down 24.3%.  West Virginia was the only other state that saw any decline in population.  Last year Washington DC became the fastest growing “state,” up a bit over 2%, Texas was second. Here’s Glenn Reynolds:

We don’t live in The Hunger Games yet, but I’m not the first to notice that Washington, D.C., is doing a lot better than the rest of the country. Even in upscale parts of L.A. or New York, you see boarded up storefronts and other signs that the economy isn’t what it used to be. But not so much in the Washington area, where housing prices are going up, fancy restaurants advertise $92 Wagyu steaks, and the Tyson’s Corner mall outshines — as I can attest from firsthand experience — even Beverly Hills’ famed Rodeo Drive.

Meanwhile, elsewhere, the contrast is even starker. As Adam Davidson recently wrote in The New York Times, riding the Amtrak between New York and D.C. exposes stark contrasts between the “haves” of the capital and the have-nots outside the Beltway. And he correctly assigns this to the importance of power.

Washington is rich not because it makes valuable things, but because it is powerful. With virtually everything subject to regulation, it pays to spend money influencing the regulators. As P.J. O’Rourke famously observed: “When buying and selling are controlled by legislation, the first things to be bought and sold are legislators.” But it’s not just bags-of-cash style corruption. Most of the D.C. boom is from lobbyists and PR people, and others who are retained to influence what the government does. It’s a cold calculation: You’re likely to get a much better return from an investment of $1 million on lobbying than on a similar investment in, say, a new factory or better worker training.

.  .  .

Under the original Constitutional plan, the federal government’s powers were to be few, and mostly concerned with external relations. Under those circumstances, the risk of corruption was comparatively low. Nearly all regulation would come from state governments. They might be corrupted — since they’d be the only ones worth corrupting — but problems would be compartmentalized (corruption in Rhode Island wouldn’t have much effect on Connecticut, much less Utah) and disciplined by competition with other states.

Well, it’s been quite a while since things worked that way; things started go go downhill with the federal expansion under the New Deal, and then really took off after the “regulatory explosion” under President Nixon, who created such entities as the Environmental Protection Agency and Occupational Safety & Health Administration.

It’s no coincidence that as the federal government morphed from an entity that did a few highly visible things well, to one that did a whole lot of not-so-visible things less well, respect for the federal government plummeted even as the political class’ wealth climbed.

One can envision the following five categories:

1.  Things Washington does not do, but should do (a carbon tax to reduce global warming.)

2.  Things Washington does that it should do (national defense, the earned income tax credit, etc.)

3.  Things that would be the Federal government’s responsibility if they were worth doing, but they aren’t worth doing (Sarbannes-Oxley, Dodd-Frank, and a whole lot more.)

4.  Things that Washington does that should obviously be done at the local level (Department of Education, highway spending, and a whole lot more.)

5.  Things Washington does that should not be done at any level (OSHA, FDA, War on Drugs, and a whole lot more.)

Although Washington should do more in a very few areas, overall we’d be far better off with a much smaller capitol city.

PS.  West Virginia should not completely give up hope for the future.  Eventually the Washington DC megalopolis will grow so large that its suburbs will spread into the hills of West Virginia.


Tags:

 
 
 

36 Responses to “From last to first”

  1. Gravatar of Squarely Rooted Squarely Rooted
    27. November 2012 at 13:34

    “PS. West Virginia should not completely give up hope for the future. Eventually the Washington DC megalopolis will grow so large that its suburbs will spread into the hills of West Virginia.”

    Too late, that totally already happened:

    http://greatergreaterwashington.org/post/14528/new-data-show-ridership-patterns-on-the-brunswick-line/

    West Virginia is beautiful and the whole northern part of the Potomac Watershed is actually filled with tons of fun stuff to do, unbeknownst to too many denizens of the DC area.

    I will note that unemployment in the District is around the same as it is in New York City, and I doubt that Prof. Reynolds has spent much time east of North Capitol St., where the bulk of the unemployment and poverty is concentrated.

    I think too much of DC’s recent growth has focused on the growth of government and not enough on investments in public transportation…note that San Francisco, New York City, Boston, and Chicago have all had their rail systems much longer than DC has.

  2. Gravatar of Daniel Daniel
    27. November 2012 at 13:36

    There are a growing number that commute from WV into DC daily.

    Traffic is so bad here that people actual have started to move into the city.

  3. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    27. November 2012 at 13:59

    I’ve long favored moving the capitol to Omaha, Nebraska, as DC is no longer in the center of the country. Spread the wealth, Barack!

  4. Gravatar of TravisV TravisV
    27. November 2012 at 14:00

    Prof. Sumner said:

    “Although Washington should do more in a very few areas, overall we’d be far better off with a much smaller capitol city.”

    Plus, as Bruce Bartlett can attest, conservatives in D.C. are much nastier than conservatives in Boston. Right?

  5. Gravatar of Doug M Doug M
    27. November 2012 at 14:10

    Mr. Reynolds suggests that the wealth of Washington rose as the power of the regulatory state grew in the Roosevelt, Johnson and Nixon adminstrations….

    Then why was growth slow 1950-1990? Something changed much more recently than that — in the last 25 years or so…an increase in lobying dollars?

  6. Gravatar of Chris Chris
    27. November 2012 at 14:30

    Here’s my problem with Reynolds’ narrative: It doesn’t seem to really fit the time series evidence. People complain nonstop about regulation today, but does anyone seriously want to argue that we weren’t more regulated in the 70s, say? Wage and price controls, airline regulation, regulation Q, etc., were far more extensive controls on the economy than exist today.

    Government spending as a fraction of GDP has been largely steady for decades. Moreover, the spending has shifted towards entitlements, which is exactly the kind that would be least susceptible to lobbying.

    So why was D.C. not fattening itself up on the country in the 1970s, when there was clearly more at stake to be gained by lobbying on regulatory matters and just as much money being spent, more of which was actually discretionary?

  7. Gravatar of woupiestek woupiestek
    27. November 2012 at 15:07

    Doesn’t the FDA solve some market failures caused by imperfect information? I thought this was one area where governments might actually do some good.

  8. Gravatar of marcus nunes marcus nunes
    27. November 2012 at 16:32

    When the subject matter is “Government” you´re sure to find a terrific quote from Friedman:
    “If you put the federal government in charge of the Sahara Desert, in 5 Years there´d be a shortage of sand”

  9. Gravatar of ssumner ssumner
    27. November 2012 at 17:40

    Chris, Good question, maybe it’s the type of lobbying. It would be interesting to know what the growth areas have been in DC.

    woupiestek, I see the FDA as just one more cog in the War on Drugs.

  10. Gravatar of Saturos Saturos
    27. November 2012 at 22:01

    Scott, with the carbon tax, if America goes first how do you propose setting the optimal tariff rate? In fact I’m still not quite sure how our country is dealing with that (with a lot of pork, probably).

    What’s wrong with Sarbanes-Oxley? And don’t you favor voucher-privatization of education?

    woupiesek, FDA is a classic example of a case where the market could solve its own failures, if it weren’t being crowded out.

  11. Gravatar of Eorr Eorr
    28. November 2012 at 08:15

    The government concentrated a lot of highly educated people that led to dc becoming a hotbed of tech companies in VA and biotech in MD. In general federal civil servants are better educated than their private sector equivalents. There has also been massive foreign immigration to the area.

  12. Gravatar of woupiestek woupiestek
    28. November 2012 at 08:51

    The FDA is also involved in food safety. Drugs safety is an important issue too: no one should overdose on legal drugs because the pills don’t contain what they promise.

    @ Saturos: The information asymmetry in food is quite substantial and food poisoning is deadly. Are you sure that such an imperfect market solves its own failures just as well as the government?

  13. Gravatar of Major_Freedom Major_Freedom
    28. November 2012 at 08:56

    The FDA is also involved in food safety.

    Yes, the FDA is a “captured” agency.

  14. Gravatar of Saturos Saturos
    28. November 2012 at 08:58

    woupiestek, to paraphrase McCloskey, if people knew how little inspecting was done by the inspectors whom they believe their lives depend upon, they’d send them to jail… what protects consumers is reputation and competition, as in most markets. The theory of assymetric information has rarely been successful in predicting the absence of successful and necessary markets.

  15. Gravatar of Saturos Saturos
    28. November 2012 at 09:01

    In any case, I’m sure you’ll agree there is no good rationale for prohibiting consumers from buying unlicensed products. So the question then becomes why you think the government is better at providing guarantees than the private sector would be…

  16. Gravatar of Doug M Doug M
    28. November 2012 at 09:36

    Saturos,

    The main critisim of SarBox is the high cost of compiance, and the lack of results. It has been used in a child pronography case, though.

  17. Gravatar of John John
    28. November 2012 at 13:28

    I think Paul Krugman wants that type of world where everyone can come to DC and compete for handouts. Problem comes when you run out of people to steal from.

  18. Gravatar of JVM JVM
    28. November 2012 at 14:51

    > Washington is rich not because it makes valuable things, but because it is powerful.

    Obviously the Feds do lots of horrible things that they should stop doing. But not making valuable things? Are you kidding me? Is the world’s best governance to be produced in bulk not a valuable thing? Good governance is relative not absolute and in the US it’s comparatively pretty good!

  19. Gravatar of dtoh dtoh
    28. November 2012 at 15:04

    Woupiestek
    Doesn’t the FDA solve some market failures caused by imperfect information? I thought this was one area where governments might actually do some good.

    Last time I checked the definition of “doing good” wasn’t 50 million cases of food poisoning resulting in 3000 fatalities a year.

  20. Gravatar of woupiestek woupiestek
    29. November 2012 at 12:01

    @dtoh: I am not saying governments are really good at certifying food safety. I fear that no government involvement would be worse. Hadn’t you noticed the words `might’ and `some’ in that last sentence?

    @Saturos: Maybe a system where the government just gave all items of food a safety grade would be a more optimal solution, if a simple prohibition of the worst products wasn’t much cheaper to implement, and much more resilient to regulatory capture. I don’t really know.

    I would like to know an example of a developed country where food safety is completely in the hands of the private sector, and where food is very safe. That would be useful information.

  21. Gravatar of MikeDC MikeDC
    29. November 2012 at 12:41

    I’m not sure the 1990-2012 period makes an exact demarcation, but my experience of spending most of my working life “inside the beltway” is that it’s not just “lobbyists” generically but:

    1. An outgrowth of the boom in financials and pharmaceuticals. These were already regulated industries, and regardless of whether the oversight was necessary or effective, as they grew, so did both the regulatory and lobbying apparatuses.
    2. Since late 2001, a huge increase in defense and intelligence spending.
    3. Pay scale for both government employees (and government contractors who are required by the government to have credentialed workers) has become that much more credentialized, so education has boomed and workers receive raises when they jump through enough educational hoops (not when they become more productive workers).
    4. There are some interesting rigidities in the labor market. Many jobs have been outsourced to private contractors in an effort to be more efficient, but this hasn’t had much of an effect that I can tell on the provision of government services, because those services have grown so dramatically. So what you get is a tiered system of government workers. You have a small pot of really good professional bureaucrats who get their pension then do a couple year tour in the private sector to finish off their retirement. So those guys aren’t very flexible, and their knowledge is very institutional.

    You’ve got a big pot of worthless bureaucrats who basically do nothing.

    Then, you’ve got a pot of private bureaucrats (my strongest skills, for example, are my knowledge of how specific government programs operate). Again, that knowlege is highly specific to certain tasks. So the government pays a lot more for it than my objective skill set is worth. If the government ever comes to its senses and simply eliminates the sort of programs I work on, I’d have to work for a lot less. And so would lots of other folks.

    So really, it comes down to a combination of growth in demand government services and, like many other markets, demand for labor becoming much more tailored to specific and intensive human capital requirements.

  22. Gravatar of MkeC MkeC
    30. November 2012 at 10:35

    The federal system for highway investment is far from perfect but highway spending should NOT be done at the local level. There should be(and is) abundant state and local involvement but history is replete with the problems of local control of highway investment. There was once a time when every farmer had a turnpike on his land and demanded a toll to let goods and people pass. A return to anything like that would be very bad.

    Imagine trucking goods from Atlanta to Dallas if every county in LA, MS and AL set its own road standards to fit its own highway spending – not pretty.

  23. Gravatar of Razer Razer
    30. November 2012 at 10:52

    Mike C,

    The free market can get materials from all over the world and assembled into something as simple as a pen or as complex as a working computer, but without the Feds, roads would just be impossible. Is that your contention? Let the market work and I’ll wager we get better, cheaper roads. I like the idea of farmers having their own roads, but then again I like the idea of liberty and property rights.

  24. Gravatar of Doug M Doug M
    30. November 2012 at 11:26

    MkeC,

    The federal highway system is managed by the states. The Federal governemnt gives block grants to the states, and the states allocate the resources.

    And then every car gets to the highway on a system of roads built and maintained by the municipality.

  25. Gravatar of MkeC MkeC
    30. November 2012 at 13:37

    Doug M.

    “The federal highway system is managed by the states.”

    That is kind of my point. The system you as it is now actually works pretty well when stacked up against other models, especially for a nation this size. Everyone should be aware that even with significant State management there is very concrete federal involvement in funding projects. This is what Scott seems to be saying they have no role in. I am saying they certainly do have a role there, and everyone would hate to see that role go away; but some people don’t realize that.

    Razer,

    If I had a nickel for every time I’ve seen a feckless County or Municipality get taken to the cleaners by private sector road-builders I could design build and operate a new superhighway myself! There are lots of stars in the industry but there are plenty of bad apples and NO this is not just an “iron triangle” problem.

    BECAUSE there is a humongous mismatch in technical capabilities AND because major road projects in many region are once every 15-30 year undertakings the incentives to cheat are way too strong. There has to be some actor with a broad enough scope to level the playing field. In the first instance that is the States but 6-10 of the of the States would be lost in the woods without Feds backing them up with money and expertise and setting the basic standards. This affects those 6-12 states and the 15-20 States that surround those 6-12 States. Bottom line: its a federal problem and we don’t wa

  26. Gravatar of MkeC MkeC
    30. November 2012 at 13:47

    Razer,

    Just to piling on here…

    Pens and Computers are commodities. Roads are not commodities. The exist in on place at one time. You can’t comparison shop for roads. There is never, ever perfect information. If you get a bad road project, you may not even know until the planning horizons are met in 10 years.

    In any case your pretty much stuck with it until you can fund another road project 15-30 years later. If the consultants and contractors that designed and built the road are still around there are no money back guarantees and no trade-ins.

  27. Gravatar of Razer Razer
    30. November 2012 at 19:11

    mike, this is nonsense. You could have a private road and charge for its use (toll road) and I could build one on my own land running parallel and compete with you for customers. Right?

    Roads would be a very competitive and valued product to provide because people want to travel. Why would the free market fail to provide this? Just because you cannot imagine it? You see what is perhaps the biggest boondoggle in the last 100 years (the Federal Highway system) and cannot imagine anything else. The free market wouldn’t have built those roads like that in the first place. A more efficient system would have sprung up instead.

  28. Gravatar of Bill Bill
    1. December 2012 at 05:22

    Oh the irony. Here we have a diatribe against regulation, and this advertisement is on the page:

    http://www.equitybuildfinance.com/ebf/v1/c2/?t202kw=1958360

    Gotta love this line:

    “Shaun Can Teach You How To Earn 12% And More In 100% Safe Secured Investments,So Start Earning Right Now !”

    Scott, what type of financial regulation do you think we should have? Should someone be able to make promises to investors with the philosophy that if those promises aren’t met then people will simply stop investing with them?

    Or is the philosophy that it’s the investors own fault if they fall for a promise? Especially if they’re told something like “You Only Need $20,000 and NO Special Skills.” but the fine print says they’re supposed to be accredited.

  29. Gravatar of Negation of Ideology Negation of Ideology
    1. December 2012 at 06:01

    Bill -

    I recall Obama saying something like “Just like if you sell a toaster to someone and it blows up, there should be consequences – there should be consequences if you sell a faulty financial product.” Or something to that effect. I think that was a very wise statement.

    I don’t know where the line is, but I think of it this way. Just because some slick talker can trick an 80 year old to sign a contract that lends money at say, 100% per day, does mean it should be enforced by the courts, and if the slick talker tries to collect they should be arrested.

    If that means I’m not a “libertarian”, or that I’m a “statist”, then so be it.

  30. Gravatar of Negation of Ideology Negation of Ideology
    1. December 2012 at 06:02

    That should read “doesn’t mean it should be enforced”.

  31. Gravatar of Major_Freedom Major_Freedom
    1. December 2012 at 06:32

    MikeC:

    I will echo Razer’s response about roads. MikeC, you are making some sloppy errors and you are overlooking some important points. You wrote:

    Pens and Computers are commodities. Roads are not commodities. The exist in on place at one time. You can’t comparison shop for roads. There is never, ever perfect information. If you get a bad road project, you may not even know until the planning horizons are met in 10 years.

    In any case your pretty much stuck with it until you can fund another road project 15-30 years later. If the consultants and contractors that designed and built the road are still around there are no money back guarantees and no trade-ins.

    1. Commodities need not be mobile. Commodities only need to be scarce goods that are valued and made an object of economic action. Office buildings and houses are not mobile, but they are commodities. Since you used immobility as a premise for the commodity to be monopolized by those in the state, then you would have to conclude that all land, buildings, houses, parks, statues, lakes, ponds, all of these things must be monpolized by those in the state as well. At any rate, mobility or immobility of a commodity is not a tenable justification for state monopoly.

    2. Immobile commodities like roads don’t even have to compete with other roads for them to be operated in a sphere of competition. A road owner is still competing for sales revenues that can be spent on everything else. People value other things besides roads you know. Road owners cannot charge a price and earn revenues equivalent to 100% of all sales revenues. They must charge a price that customers are actually willing to set aside for roads. Now, does this mean road owners can charge an exorbitantly high price? Not in long run they can’t. For if they did charge very high prices, then the profits in road production would be very high, and since road production is open to competition, investors will invest more capital in roads. But this will increase the supply of roads, and the prices will have to come back down.

    3. There is imperfect information in ALL trades between sellers and buyers.

    4. If people can’t know about a bad road until it’s too late, because of human error, then you can’t deny that this same problem exists with state monopolies of roads. What, are you saying the government solves the problem of human fallibility? Don’t make me laugh. The state is composed of humans!

    5. Many sophisticated private projects take a long time to complete. Airports, sports arenas, condos, and so on. Are you suggesting that all large scale sophisticated projects should be monopolized by the state?

    Your arguments are so incredibly weak. You just shouted the typical statist slogans of imperfect information and whatnot, and you believe you have made a cogent argument. You forgot transactions costs, negative externalities, and oligopoly! Tsk tsk. You almost convinced me.

  32. Gravatar of ssumner ssumner
    1. December 2012 at 07:18

    Saturos, I don’t know rthe optimal carbon tax, but surely it’s higher than zero.

    S-O imposes massive accounting costs, and produces little or no benefit.

    I do favor vouchers.

  33. Gravatar of Saturos Saturos
    1. December 2012 at 08:15

    Scott, no I meant foreign trade tariffs, to prevent the carbon production from simply being shifted overseas. How would you go about organizing those, if the world doesn’t move with your country?

    And how did it all go???

  34. Gravatar of Bill Bill
    2. December 2012 at 05:36

    MikeC, Its virtually impossible to have a reasonable conversation with Libertarians about where government involvement is superior to “pure” competition. Trying to argue that roads should be private is silly- just look at the Ambassador bridge

    http://www.businessweek.com/articles/2012-05-03/matty-moroun-detroits-border-baron

    Moroun’s really done a great job of providing superior service- yeah right.

    And while toll roads can be ok in certain places, there is huge economic productivity enhancement that comes from roads that are free to drive on. Too many people would resist paying the incremental cost and end up taking longer to get from A to B, or would forgo moving around at all.

  35. Gravatar of ssumner ssumner
    2. December 2012 at 07:47

    Saturos. I would oppose foreign trade tariffs. Some production would be shifted overseas, but most carbon use (transport, heating, electic power, etc) is for non-traded goods.

  36. Gravatar of samhorn samhorn
    4. December 2012 at 07:50

    As somebody who works at a chemical plant with frequent losses of containment, could you explain to be why we should eliminate OSHA? Thanks!

Leave a Reply