How can the Rust Belt be helped? (Can it be helped?)

Noah Smith has a column at Bloomberg, discussing the economic plight of the Midwest:

When big Midwestern states like Michigan, Pennsylvania, Wisconsin and Ohio voted for Donald Trump, they chose to roll the economic dice. It’s not clear yet whether President-elect Trump will or can follow through on his promises to revamp U.S. trade policy. It’s even more dubious whether that will have any kind of positive effect on the Midwest. But it’s obvious that his promises resonated with a lot of people in that region.

There are a number of economic and political lessons to take away from Trump’s Midwestern conquests, but the first one should be that the Midwest needs help. . . .

I propose four new pillars of a regional revitalization policy for the Midwest.

No. 1 Infrastructure

Sick economies and shrinking population have left Rust Belt states and cities unable to pay for infrastructure improvements. As a result, many cities look like disaster areas. The federal government should allocate funds to repair and improve the Midwest’s roads, bridges and trains, and to upgrade its broadband. Sen’s pension bailout idea could also be instrumental in helping states buff up their infrastructure. Better transportation makes it easier for people and goods to flow between cities in a region, and for the region to export products to other places. Infrastructure is doubly important in a region like the Midwest, where winter weather can quickly make travel difficult.

No. 2 Universities

Universities are helpful for regional economic growth. The Midwest has a number of good schools (I went to one of them for my Ph.D.), but more could be built, and existing universities could be expanded. Perhaps even more importantly, local and state governments in the Midwest could work with universities and local companies to create more academic-private partnerships and to boost knowledge industries in places like Ann Arbor, Michigan, and Columbus, Ohio. As things stand, Midwesterners tend to move away as soon as they graduate from college. Creating more industries specifically for these graduates would keep talent in the region.

No. 3 Business Development

Some cities in Colorado have embraced a development policy it calls economic gardening. The program helps provide resources for locals to start their own businesses. It furnishes them with market research and connects them with needed resources. Small businesses provide more employment than large ones, and offer a ticket to the middle class. They also have a chance of growing into large businesses. The Midwest should consider emulating Colorado’s plan, which seems to be getting results.

No. 4 Urbanism

Tech hubs like San Francisco and Austin, Texas, are using development restrictions to keep their population densities in check. That gives Midwestern cities an opening to attract refugees from the high-rent metropolises of the two coasts. Cities like Detroit and Cleveland can work on creating neighborhoods that are attractive to the creative class, while allowing housing development to keep rents cheap. College towns like Ann Arbor can reduce their own development restrictions and allow themselves to become industrial hubs. And cities can copy the crime-fighting techniques of cities like New York and Los Angeles that have become much safer during the past few decades.

Let me take these points one at a time.  There is no single Midwest, as it’s a mix of different economies.  Trump did unusually well in Iowa, which is not a rust belt state at all, but is a state that would be hurt significantly if he pursues a protectionist trade policy regime. (I doubt he will, given that his nominees generally supported the TPP treaty.)

1.  Since I grew up in Wisconsin, and visit there occasionally, let me focus on that state.  I really don’t see how better infrastructure would help.  The Madison and Milwaukee airports seem fine, much better than Boston’s.  The roads in Madison are better than in affluent Newton MA (where I live now.)  Wisconsin doesn’t have a big problem with traffic jams, compared to America’s two coasts.

2.  Wisconsin certainly doesn’t need either more universities or better universities. The University of Wisconsin system has many campuses with more than 180,000 students in all, in a state of only about 5 million people.  And there are also some fine smaller private colleges.  The Madison campus is easily an above average quality university, better than the best state university in many larger and more prosperous states.  Whatever ails Wisconsin, it’s not a lack of good universities.  At best they might want to spend a bit more on the Madison campus, as they seem to have slipped a bit in the rankings.  (They were around #10 when I was young, now they are probably around #15 or #20 for US universities.)  On the other hand, it’s hard to get Wisconsin taxpayers to pay more when the graduates often end up leaving the state (as I did).

3.  There’s always been an emphasis on business development, and Madison has lots of companies that are spin-offs from the University.  The Wisconsin Alumni Research Foundation (WARF) invented the drug that saved my father’s life (Warfarin). The problem is that metro Madison is only about 10% of the state.  It’s the rest of the state that is struggling.

4.  Milwaukee is the largest city, but has not been able to reinvent itself for the post-industrial economy that way Minneapolis, Pittsburgh and lakefront Chicago have. Unfortunately, there is only a market for a limited number of those cities in the Midwest, and Wisconsin’s only realistic prospect is small (Madison.)

So what’s my solution?  I don’t really have any good ideas.  In fact, I’d guess that Wisconsin is doing about as well as it can, given the headwinds it faces.  And what are the headwinds?  I see two big ones.  Wisconsin is second only to Indiana as a manufacturing state (per capita).  If that surprises you, recall that Wisconsin is heavily German.  Unfortunately, the entire world is switching from manufacturing to services.  The 4.4% unemployment rate in Wisconsin is actually pretty good, given that the state concentrates in the “wrong” sectors.

The other big headwind is weather.  Today’s forecast calls for a high of minus one in Madison.  (For you international readers, that’s more like 18 below zero centigrade–as a high temp!)  And it’s technically still fall, winter starts in a few days.  So far the state has been held together by a strong civic culture.  The college and professional football teams have unusually rabid support.  The culture is a bit “tougher” than on the coast, composed of Northern Europeans used to cold weather and snow, although I’m told it’s softer than when I lived there.  Unfortunately, some aspects of the culture are a turnoff to certain highly educated millennials (deer hunting, meat eating, heavy drinking, etc.)  When I lived in Wisconsin the educational levels in the state were well above the national average.  Today I’d guess they are only slightly above average.  (This site has them #10, but I’d guess it would be lower if you controlled for ethnicity.)

I don’t mean to suggest that literally nothing can be done.  I’m sure if you took a close look you could find 100 things the state government could be doing better. But I doubt any of them would be a game changer.  On the plus side, it’s possible to have a perfectly enjoyable life in Wisconsin.  There are many fewer hassles than in cities like Boston, and the cost of living is much lower.

And we aren’t West Virginia!  (Even when I was young, in the 1960s, “hillbillies” were regarded as a sort of degenerate group off in the mountains of Kentucky and West Virginia.  We all saw Deliverance, and vowed to stay the hell out of there.)

My mom got married in 1948, and the same year Life magazine named Madison the best place to live in America:





78 Responses to “How can the Rust Belt be helped? (Can it be helped?)”

  1. Gravatar of Justin Justin
    18. December 2016 at 14:01

    I live in Northeast Ohio, and I would agree that most of Noah’s pillars are already being implemented in cities like Cleveland, Akron and Youngstown. Marginal progress is being made to keep young people around after they graduate, but nothing on the scale necessary to replace lost manufacturing jobs.

    The main problem seems to be an aging and declining population (which probably has a lot to do with the weather), which will continue to diminish the political power of these areas, despite the outsized attention they are currently receiving in that light.

    Young people weren’t sticking around here in the manufacturing heyday either, but the jobs were being filled with immigrants from eastern Europe. So I guess that’s one thing they could do, attract more immigrants, but that seems to be off the table.

  2. Gravatar of Rob Rob
    18. December 2016 at 14:19

    Don’t understand the idea of big infrastructure investments in cities with shrinking populations well below their historical peaks. Won’t it just be like the Detroit people mover?

    Yglesias’ idea of moving various govt stuff out there makes some sense to me and has been used in the UK.

  3. Gravatar of Scott Freelander Scott Freelander
    18. December 2016 at 14:21

    It seems ridiculous for a macroeconomist like Smith to think there should be federal proposals to try to essentially just warp the national econony in favor of the rust belt. Just have a federal wage subsidy that only applies to states willing to abolish their minimum wages, and abolish the federal minimum wage.

  4. Gravatar of Major.Freedom Major.Freedom
    18. December 2016 at 15:34

    Noah Smith is not an economist. He is a partisan political hack/stooge.

    He will not be able to understand the plight of the rust belt states with the warped beliefs he has in his broken tool chest.

    His politics will prevent him from being capable of understanding the root cause for the rust belt being perpetual, year after year government budget deficits, which converted much needed investment for replacement capital, into wasteful government spending.

  5. Gravatar of E. Harding E. Harding
    18. December 2016 at 16:15

    “but the first one should be that the Midwest needs help. . . .”

    -With what? The best predictor of Obama-Trump swing in a county was not income, but education. The richest county in Michigan (Livingston) had more Trump votes than Romney votes and fewer Clinton votes than Obama 2012 votes.

    Noah does not want to help the Midwest. He wants to turn it into Los Angeles. That is fairly easy to do. But it’s not “help”.

    Bernie would have won Michigan and Wisconsin, as he would have inspired the youth. Maybe PA, as well.

  6. Gravatar of engineer engineer
    18. December 2016 at 16:23

    Most Americans from blue states don’t think there is is a solution for Wisconsin. Return the land to the Indians and Buffalo and move all the people to coastal cities. Once the cities like Madison are abandoned it will take a few hundred years for most of the buildings to collapse, but the land will slowly return to the splendor that existed before the white man came. There may need to be some work in gracefully closing down some systems (like gas pipelines, dams, nuclear stations, etc, so that they don’t cause an environmental problem), but with some help from the Federal government it can be done.

    BTW, do you realize that Russia the highest education levels in the world …53% of the working age population have college degrees. It has not helped Siberia very much…

  7. Gravatar of Chris Chris
    18. December 2016 at 16:32

    Seems like the best “help” for the rustbelt would be to implement most of these ideas in the big coastal cities. Make those cities more efficient in transportation and housing creation, and you’d make it cheaper/more realistic for the folks currently stuck in the rustbelt to leave for areas with better economic conditions.

  8. Gravatar of ssumner ssumner
    18. December 2016 at 16:39

    Engineer, You said:

    “Once the cities like Madison are abandoned it will take a few hundred years for most of the buildings to collapse, but the land will slowly return to the splendor that existed before the white man came.”

    I hope you are joking. Madison is one of the most highly educated cities in the entire country, and is booming. Why would you shut it down?

  9. Gravatar of Potato Potato
    18. December 2016 at 16:58


    How do you think a human capital flight model would fit the current data? It should be everything libertarians love: freedom of movement for capital and labor. Valuable people, human capital wise, move to NYC, LA, and SF. As the Midwest faces human capital outflow, its regions stagnate and decline over time (vis-a-vis coastal cities, it’s important to recognize that comparative value matters, not the absolute).

    In another sense, public finances in Wisconcin are subsidizing capital outflows to NYC. Their best will go be investment bankers and venture capitalists. The ones with the poorest job prospects stay. Compared to usual human capital flight models, they’re even worse off, as they don’t receive remittances.

    Or is the capital generation sufficient to justify the expenditure? Maybe the fact that the best of the Midwest will leave is already priced into the model. The 50th to 75th percentile is enough to keep the economy going in some parts of the state, and keeps middle class families from moving away since they can get their kids to stay in state another 4 years.

    Would like to hear your thoughts.

  10. Gravatar of foosion foosion
    18. December 2016 at 17:09

    Scott Walker Takes $250 Million From U. Wisconsin, Gives $250M To Billionaire Sports Team Owners UW did manage to find some other sources of financing.

    They seem to have cut tenure protections.

    Oddly, some faculty members don’t like these developments.

    We’ll see how well UW and Madison do going forward.

  11. Gravatar of dtoh dtoh
    18. December 2016 at 18:13

    Perspective from someone who chairs a company that recently built a new factory in the rust belt. Here’s what important.

    Proximity to markets (requires infrastructure)
    Availability of employees with the right technical skills
    Cheap utilities
    No unions
    Low taxes
    Cheap land
    Rail access (sometimes)

    Weather is not a factor except to the extent a particular business is dependent on agricultural raw materials.

    I’m not saying that attracting manufacturing is necessarily a desirable societal goal, but if it is then you need to satisfy the criteria above. From that point of view, the things government could/can do are: lower taxes, liberalize utilities/energy (including nuclear), focus educational dollars on technical subjects, and pass right to work laws.

    Infrastructure is a complex subject so I won’t comment on that.

    BTW – I would also eliminate minimum wage laws. I don’t think it would help manufacturing, but it would reduce prison populations.

  12. Gravatar of Matthew Waters Matthew Waters
    18. December 2016 at 18:32

    What about all of the various rural towns in the rust belt? Many were based around some transportation advantage, such as the Erie Canal in Upstate NY. I have a lot of family there and there are perpetually plans to remediate places like Binghamton.

    But I don’t see any real path forward for places like Binghamton, Buffalo and Rochester. The Internet was supposed to allow remote workers from anywhere, but it actually increased returns to density and specialization. The towns now have pensioners who don’t have to move and then the service industries around them.

    In some ideal world, there wouldn’t be any government “fixes” for this. The towns would slowly decline in population back to farming towns. Politically, the leaders will keep trying things, but I can’t see a way to avoid these things failing.

  13. Gravatar of engineer engineer
    18. December 2016 at 19:04

    “I hope you are joking”

    Yes, of course, I was just being sarcastic.
    Wisconsin is just like many other areas of the country that are struggling. They just need to find their niche. I’ve been to the Oshkosh air show…a very good time…I was working on a project with a couple guys from U of Madison. Windmills, cows, the fracking sand boom……it has a lot going for it.

  14. Gravatar of ssumner ssumner
    18. December 2016 at 19:06

    Potato, There is some truth in that, but keep in mind that Wisconsin is not a poor state, it’s average. If you adjust for cost of living differences it might be richer than New York.

    foosion, It’s more complicated than that (the money wasn’t necessarily going to the UW, and the net cost is lower than the headline figure), but there’s also some truth in those articles.

    dtoh, You said:

    “Weather is not a factor except to the extent a particular business is dependent on agricultural raw materials.”

    This is why it’s not a good idea to put a businessman in the White House. Of course weather it a huge factor, as it affects the supply of qualified labor. It’s not a good idea to look at economic issues from a businessman’s perspective. Remember, it’s supply and demand.

    I agree about eliminating minimum wage laws.

    Matthew, Upstate NY has a bleak future, much worse than Wisconsin. Bad weather and bad state government.

  15. Gravatar of Jamie Jamie
    18. December 2016 at 20:14

    A question that is not asked enough is why should we care about revitalizing depressed regions? Instead the objective should be to help people. It may be unpopular but making it easy to move out is probably the most effective policy prescription. Just have to do something about that coastal city rent prices…

  16. Gravatar of Will Will
    18. December 2016 at 20:23

    As someone who graduated from UW-Madison in 2015, I would be pretty disturbed if it is currently considered top 20 in the US (even though I suppose it would benefit me). Was not impressed.

    Really easy city to live in, however.

  17. Gravatar of B Cole B Cole
    18. December 2016 at 22:43

    I am surprised Scott Sumner does not mention something like “free enterprise zones” of “no-zone zones.”

    Declare a couple square miles of space in or near your Midwest city wide-open, no regulations other than those pertaining to bona fide health and safety concerns. See if you can get the Feds to go along to make the zone tax-free.

    Why not at least try this for 10 years?

    This idea would probable work better in Los Angeles, where it would lead to an epic building boom.

    But perhaps the Midwest could attract enterprise. After 10 years they could decide to shut down a no-zone zone or keep it. I bet they would keep it.

    Oh, and have the Fed print a lot of money.

  18. Gravatar of Brett Brett
    18. December 2016 at 23:03

    You could do what happened with California, and scatter future defense projects in the area. That might work particularly well with a good university system, as in California.

    Or, as you mentioned, these are places that are perfectly capable of being livable. So pay the locals to fix the places, maybe repair some of the damage from now-derelict industrial production.

  19. Gravatar of ChrisA ChrisA
    18. December 2016 at 23:42

    I think that there are some megatrends here that are just going to be irreversible. Over the last 6 to 8 thousand years the trend has been that people move from the countryside to cities. Just recently I believe we passed the milestone that now more than 50% of humans live in cities. The trend is largely driven by increasing productivity of farming, resulting from mechanization (more recently) and in the past by more efficient farming technologies, like plows. The industrial revolution probably slowed this tendency at least in the early days, as factories tended to be situation either close to cheap power or cheap raw materials, or some logistical advantage (Detroit for instance has very good water transport links for bulk cargoes).

    No however manufacturing is going the way of farming, the number of people needed will be a vanishingly small percentage of the population. There is no way to stop this process save extreme Luddism.

    So cities are where the growth in jobs and hence population must occur (or we will have people simply starving to death or living on the dole). Why are cities such good job generators? The reason is something of a mystery, but certainly propinquity has something to do with it, those coffee shop conversations create new business links. Another reason is about specialization – in a big city you can afford to have people who can specialize even in the smallest detail of any processes. An accountancy firm in the big city for instance can have a specialist in accounts of key cutters as a random example, because there are so many of them. Whereas in a small town the accountant does the accounts of all the firms. It is clear who would be the most efficient accountant if you are a key cutter. Allie to this is competition. In the largest cities you are going to find many accountants who specialize in key cutting firms, thus they are likely to be innovating more just to keep competitive.

    If these two factors, propinquity and specialization, are valid, then one thing is clear, larger cities will have the edge over smaller ones. So the longer term trend is not only urbanization, but bigger cities growing at the expense of smaller ones. People, especially younger ones without the commitments of older people, are going to move to bigger cities to get the best jobs, which is a self amplifying trend.

    So the future is bleak for smaller cities like most in the mid-west. I don’t see any “investment in infrastructure” that will stop this trend. It’s like investing in your 18 year olds bedroom furniture to keep them at home. Even if it could work, do you really want it to work?

    Longer longer term, I think we will see just a few mega-cities per continent, with the rest of the country either a deserted agricultural factory, or the occasional cute museum town where people holiday.

  20. Gravatar of Dtoh Dtoh
    19. December 2016 at 03:41

    So you don’t think businesses are concerned about the supply of labor? That’s why it’s not a good idea to put an academic in charge of ANYTHING! 🙂

  21. Gravatar of Dtoh Dtoh
    19. December 2016 at 03:46

    That should read are NOT concerned

  22. Gravatar of Ray Lopez Ray Lopez
    19. December 2016 at 05:05

    Sound post by Sumner, in part due to this admission: “So what’s my solution? I don’t really have any good ideas”

    If only Sumner was as humble about macroeconomics. But he would lose his chance at a Fed chair if he admitted (as he knows is true in his heart of hearts) that money is largely short-term neutral.

    PS–as pointed out in Marginal Revolution, these days even places like Detroit, hillbilly Appalachia, and the Rust Belt are largely about the same in GDP/capita when adjusted for cost of living. Put another way: living on 15k USD/yr in the Philippines means you ‘live like a king’ since you’re triple the national average, if you don’t want the benefits of living in big city USA (largely creature comforts you can do without IMO). Same in rural America, which is somewhat subsidized by big city folk.

  23. Gravatar of foosion foosion
    19. December 2016 at 05:49

    “Upstate NY has a bleak future, much worse than Wisconsin. Bad weather and bad state government.”

    Compared to many other state governments, it’s not bad. NY is a major source of funds for the rest of the country, which might mean something positive about its government (hard to run counter-factuals). No question that there’s a lot of room for improvement.

    “If you adjust for cost of living differences [Wisconsin] might be richer than New York.”

    The cost of living may be high in NY, but that’s because it’s such a desirable area. Many parts of Wisconsin are lovely, but the advantages of NY add to the wealth of its residents, financial and otherwise. For example, it’s worth something to be within walking distance of world class museums.

  24. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    19. December 2016 at 06:03

    Self-parody doesn’t get more hilarious than this column from Noah Smith (Hey, look at how smart I turned out thanks to a Phd!). Especially when he writes a truth;

    ‘Governments are notoriously bad at picking winning industries….’

    But the implications of that go right over his own head. I.e., governments are notoriously bad at picking policies that will lead to more productive economies…because they listen to self-unaware intellectuals like Noah Smith.

    People who don’t bear the costs of their own bright ideas, but are in positions where they can double down on them when they fail, are the problem. Until the nation wises up to that, there is no hope. A start would be ridiculing the nerds like Noah Smith and those ‘experts’ who regularly pop up on TV talk shows to offer their ‘wisdom’ to the rest of us deplorables.

    The Tragedy of Excess Self-esteem poster boy is Noah Smith.

  25. Gravatar of A Definite Beta Guy A Definite Beta Guy
    19. December 2016 at 06:47

    I think you’re focused on the wrong story here. Noah Smith is constructing a narrative where the Midwest is suffering because we’re a bunch of uneducated hillbillies that don’t know how to maintain roads and get good jobs. The solution is more “Education and Infrastructure” because it sounds awesome, oh and let’s bail out the pension-holders, too. And build more walkable neighborhoods for yuppies! And planned economic growth like Economic Gardening, which is Hocus Pocus as far I as can tell.

    Yeah it’s not going to work, but that says a LOT about Noah Smith and Blue Tribe in general.

    Mrs. ADBG’s family is all over Wisconsin, so I’ve been all over, too. Eau Claire, Steven’s Point, Wausau, Appleton, Green Bay, Sturgeon’s Bay, blah blah blah. There’s definitely nothing going to appeal to Yuppies, but that’s the same in most states.

    I think your real problem is that Milwaukee is pretty gross. I don’t think you’ll be able to compete with San Francisco and Boston, or even Minneapolis and Chicago, but it just looks like a damned nightmare in most places. I really don’t think it has to be. There’s other mid-size cities that have developed some nicer downtown areas in the last few decades. I am thinking, like, Nashville.

    But yuppies aren’t enough to fuel an entire state. You need something for everyone else to do.

    Thought: Per the Tax Foundation, Wisconsin and Illinois have 11% tax burdens. Why not try bumping that down a little bit? However, those pension obligations are a nightmare. Cook County is a slow-motion train-wreck.

  26. Gravatar of flow5 flow5
    19. December 2016 at 06:48

    “that money is largely short-term neutral”

    We already know the Gospel. And Sumner’s idea of N-gDp targeting is meritorious. The idea that the Fed never targeted N-gDp I think is false. It’s an appropriate target (esp. compared to interest rate targeting), but the Fed’s “arm chair” economists just don’t know how to do it.

    And the idea that money is short-term “neutral” is demonstratably false (see below). Money flows, proxy for real-output now predicts that the economy will decelerate. And money flows IS based on the short-term money stock. My model has NEVER been wrong for over 100 years:

    01/1/2016 ,,,,, 0.068
    02/1/2016 ,,,,, 0.020 stocks bottom
    03/1/2016 ,,,,, 0.043
    04/1/2016 ,,,,, 0.041
    05/1/2016 ,,,,, 0.045
    06/1/2016 ,,,,, 0.073
    07/1/2016 ,,,,, 0.109
    08/1/2016 ,,,,, 0.111
    09/1/2016 ,,,,, 0.112
    10/1/2016 ,,,,, 0.039 Alfred Marshall’s NSA paradox
    11/1/2016 ,,,,, 0.127
    12/1/2016 ,,,,, 0.132 stocks top
    01/1/2017 ,,,,, 0.100
    02/1/2017 ,,,,, 0.071
    03/1/2017 ,,,,, 0.075

    The economy will decelerate. 1st qtr. 2017 R-gDp will be lower than 4th qtr. 2016 R-gDp.

  27. Gravatar of Art Deco Art Deco
    19. December 2016 at 08:04

    There are selected metropolitan zones which have been shrinking demographically and, to a degree, in production levels. The whole region is not shrinking and the only state which has struggled demographically is West Virginia. Even Michigan is holding its own. Suggest responses might be particular to local circumstances.

    Among your first tier cities, the one with a decline in the population of the whole settlement in the last generation has been Detroit, and it’s a single-digit decline (IIRC, about 3% since 1980). None of his suggestions address Detroit’s signature problems.

    Among the 2d tier cities, the problem loci are Buffalo and Cleveland (St. Louis is borderline). Buffalo at this point may have finally hit bottom. The situation is worse among 3d tier cities: the strugglers are Scranton / Wilkes-Barre, Youngstown, Toledo, Dayton, Flint, Peoria, and the Quad-cities. There are a number of 4th tier cities which are doing poorly, among them Utica, Binghamton, Elmira, Johnstown, Altoona, Erie, Saginaw, Battle Creek, Duluth / Superior, Rockford, Kankakee, Decatur, Anderson, Muncie, Terre Haute, Huntington, and Charleston.

    The suggestion that places invest in higher education seems misplaced. We already have a large student census and West Virginia in particular has a hypertrophied higher education sector, with enrollments nearly 2.5x what you’d expect.

  28. Gravatar of ssumner ssumner
    19. December 2016 at 08:05

    Jamie, I agree.

    Will, As an undergrad? These rankings are generally based on research, not teaching.

    ChrisA, It seems that highly skilled people simply prefer to live in cities, on average.

    Dtoh, You said:

    “So you don’t think businesses are concerned about the supply of labor? ”

    No, that was your claim when you said weather only matter for agricultural industries. The main impact it has is on the supply of labor, which is declining in the north due to bad weather.

    Foosion, You said:

    “Compared to many other state governments, it’s not bad. NY is a major source of funds for the rest of the country, which might mean something positive about its government (hard to run counter-factuals). No question that there’s a lot of room for improvement.”

    You missed the point. The state government is acceptable for NYC, but it’s totally unsuited for upstate. It’s upstate NY that is a disaster area. Upstate NY needs an Indiana or Tennessee-type state government, lower taxes and pro-business.

    You said:

    “The cost of living may be high in NY, but that’s because it’s such a desirable area. Many parts of Wisconsin are lovely, but the advantages of NY add to the wealth of its residents, financial and otherwise. For example, it’s worth something to be within walking distance of world class museums.”

    Upstate is not within walking distance of world class institutions, last time I looked, so I don’t follow this at all.

    Beta, Good comment. Nashville has better weather, fewer labor unions and no state income tax, that’s probably part of the difference.

    flow5, That data is absolutely stunning. Ray should take a close look.

  29. Gravatar of Majromax Majromax
    19. December 2016 at 08:24

    I think an important question is, ‘where is the catch-up growth?’

    We know that absent totally dysfunctional markets, changes in institutions, infrastructure, and culture can affect the long-run GDP level compared to a control, but it should not affect the long-run GDP growth rate. If a less-optimal (say worse weather) environment falls behind a better-situated peer, the factors of production become progressively cheaper. At some point, the weather gets priced into the cost of living.

    Where is that with Wisconsin or West Virginia? Housing at least is in fact cheaper than in the big cities.

    Is it a problem of a suboptimal monetary union? Should Wisconsin have its own Midwest$ that could depreciate compared to the Coastal$? Since that’s impossible, does it mean the US needs more inter-regional transfer?

  30. Gravatar of ssumner ssumner
    19. December 2016 at 08:33

    Majromax, You said:

    “Is it a problem of a suboptimal monetary union? Should Wisconsin have its own Midwest$ that could depreciate compared to the Coastal$? Since that’s impossible, does it mean the US needs more inter-regional transfer?”

    The Midwest is close to average, so it would not benefit much from transfers. AFAIK, it’s a net contributor to the government (or at least Wisconsin was when I lived there). It doesn’t get much military spending, for instance.

    A flexible currency would not help very much–that’s just a short run placebo.

  31. Gravatar of engineer engineer
    19. December 2016 at 09:12

    The election results in Wisconsin is simply part of a trend in that state. The state is looking more like other Midwestern states in which the economy is primarily based on exploitation of natural resources versus manufacturing and those states overwhelmingly vote republican. The reversal of the great migration back south will mean Wisconsin is a red state going forward and Pennsylvania will be a true battleground, while North Carolina and even Georgia will be increasingly Blue.

    Hilary lost Wisconsin and Pennsylvania the minute she decided that she had to move to the left on fracking. Both states have been major beneficiaries of the technology. These are high paying blue collar jobs. Wisconsin is never going to compete for low wage manufacturing jobs that are not somehow advantaged by being in Wisconsin, unions or no unions.

    In other words, it you want to assign blame, blame the Green party once again.

  32. Gravatar of LK Beland LK Beland
    19. December 2016 at 09:16

    What’s the matter, really? Households in Pennsylvania and the Midwest have higher purchasing power than the rest of the nation. One of the highest in the world, really.

  33. Gravatar of Art Deco Art Deco
    19. December 2016 at 09:31

    But I don’t see any real path forward for places like Binghamton, Buffalo and Rochester.

    Well, look again. The Genesee Valley has been demographically somnambulant and is comparatively less affluent than it was in 1969. It does not have a shrinking population and local income levels as a ratio of national means were at their nadir around 1998. They’ve rebounded a bit since then. All this is so in spite of the principal employer evaporating over a generation. Rochester has quality-of-life and governance issues, but it has flat nothing to do with anything he is discussing.

    As for Buffalo and environs, the latest data from the Census Bureau and the Bureau of Economic Analysis gives a tentative indication that it may have hit bottom. This town (alongside Cleveland) has been the most troubled of 2d tier cities in this country and experienced an industrial implosion worse than Detroit’s. It has the same quality-of-life issues and governance issues as Rochester, and some extra ones to boot.

    Binghamton and the Southern Tier generally haven’t hit bottom. Except for wretched traffick engineering, Binghamton had a fine quality of life with no true slums and prosperous and public-spirited employers.

    The way forward is for local civic leaders to do what they should be doing and correct deficits which lead to incremental losses in population and income from the decisions employers and aspirant employers make on the margin. You have building stock, human capital, and social relationships in place. People like Megan McArdle sometimes talk as if cities which have hundreds of thousands of people in them are going to evaporate like Rome and Byzantium in the Middle Ages. We aren’t suffering from a breakdown in civilization. There’s just been a redistribution in comparative advantage and some aspects of that are (one might wager) played out by now (e.g. air conditioning making Southern living less disagreeable).

    The difficulty you get with economic development strategies is that they fall victim to local intelligence deficits and rent-seeking behavior. An example of the former would be the efforts of Flint, Michigan to promote tourism (see Michael Moore’s skewering of this in Roger & Me. Less pathetic and more expensive versions have been Convention-and-Visitor’s-Bureau lallapaloozas. Rochester’s Fast Ferry is what you get when con men intersect with lapsed social-worker mayor and a city council staffed with school teachers. The wretched irony in Rochester is that it’s political class has spent more than four decades failing to address real problems because they cannot bear to think outside the boxes they’ve climbed into, even though it really would not require much ingenuity.

  34. Gravatar of Art Deco Art Deco
    19. December 2016 at 09:36

    It’s upstate NY that is a disaster area.

    It’s not a disaster area, and it’s most salient problems find their source in ineffectual local government. The state imposes costs, but these constrain Downstate as well. The big problem in New York is inertia: nothing gets fixed because the public is demobilized and insiders don’t take an interest in aught but their own business opportunities.

  35. Gravatar of Art Deco Art Deco
    19. December 2016 at 09:58

    because they listen to self-unaware intellectuals like Noah Smith.

    No, because they listen to consultants who know their audience and what that audience would rather not be told (and what they don’t want to be told is things which offend pressure groups, things that would induce a property tax increase, and things which offend baseline emotional commitments). And they talk themselves into stupid s***. And they pursue projects which they can put on brochures and which might gin up excitement among local TV news reporters.

  36. Gravatar of Art Deco Art Deco
    19. December 2016 at 10:52

    So the future is bleak for smaller cities like most in the mid-west.

    Tell me why half the 3d and 4th tier cities in the Rustbelt are not suffering any demographic declines.

  37. Gravatar of Doug M Doug M
    19. December 2016 at 11:01

    Wealth attracts wealth. The educated and the ambitious are attracted to those paces where there efforts will be rewarded. Once a city builds economic momentum that momentum tends to self-perpetuate. But, it is not guaranteed to perpetuate indefinitely.

    The university system might do something to generate some brain-gain, but without some organic growth and wealth generation your university grads are going to move back out to where the opportunities are. It only solves part of the problem.

    The next issue is population growth / declines. Our institutions do well with growth. When we hit a point of population stagnation and decline, there are not enough people to maintain the cost of the existing infrastructure, much lest pay the cost to modernize. At which point it makes a lot of sense as a resident to get out of town and start clean, then to pay the cost of the infrastructure deficit.

    The smart civic planner needs to see the problem then, before it becomes a problem, because once the decline begins it is difficult to reverse.

  38. Gravatar of A Definite Beta Guy A Definite Beta Guy
    19. December 2016 at 12:00

    Of the top 100 cities by population, which are shrinking, all are in the Midwest or Upstate NY: Toledo, Cleveland, Detroit, Buffalo, St. Louis, Pittsburgh…

    Denver, Seattle, Fort Worth, Atlanta, etc. are posting 10%+ growth rates in the last 5 years, per the Wiki figures.

    Really hard to say the Midwest isn’t falling behind.

  39. Gravatar of Sean Sean
    19. December 2016 at 12:06

    Rust belt is unsavable other than a managed shrink. The only way to save the midwest would be to turbo-charge global warming. The resources the midwest provided years ago (pre-AC, and needs of manufacturing) are no longer as important.

    People will move to the sun-belt. Unless population is really booming we simply have more than enough land in this country that the entire midwest could move south to a better climate. We are at a stage of development where lifestyle factories are more important than the manufacturing clusters of the midwest. Proximity to water and warmth dominate.

  40. Gravatar of Michael Bedard Michael Bedard
    19. December 2016 at 12:13

    The issue that people drop all the time is that these areas have had their tax base destroyed. Effectively we engaged in a policy of taking a total of $10 out of our economy via mfg and getting back $20. Which is fairly accurate from a ratio POV… so great deal for the USA as a whole.

    Unfortunately how we did that was by having one region pay about $8 of the $10 but when the $20 came in we cave $16 of it to NoVa/CA/NY $2 to the south and $2 to the Midwest.

    Whenever I see the suggestion that people move a little piece of me gets it – but then I remember… that doesn’t occur in a vacuum. So who do we move?

    Lets move the mobile poor – those who can get a solid education and contribute to moving forward. OK so when we do that we effectively take those who were responsible in the region buying starter homes when they were the mobile poor 15 years ago and we send them a great big – you’re f’ed greeting card. Because we’ve destroyed any chance of their home being able to be sold at any point. Effectively we destroy property values even further. That means – lower investment in schools, greater issues with pension liabilities, etc. etc.

    Effectively this is going to create a no win cycle – you can’t just jam millions of people into an area and expect it to have no impact on the coasts and if you pick and choose -the reality is you’re punishing everyone you don’t choose with what is, effectively, a financial death sentence.

    These areas are economically distressed – but they’re not devoid of value, devoid of business, devoid of exceptionally smart people who have made it work and have done well. You still have million dollar mansions in the Detroit area, you have $400k homes, you have $250k homes, you have $150k homes, and, yes, you have $10k homes. At what point do you want to draw the line and say – you’re worth saving and the pricetag for us saving you is that we create an absolute new wave of poor by dragging down those who were ahead of you previously in the same region.

    I’d much more subscribe to the Vox and elsewhere solution – its time to look at our federal government’s centralization in DC/NoVa/MD and start moving entire governmental departments… and not just into the Midwest hinterland – but to areas across the country. We’ve created a self fulfilling set of uber regions by choice and, frankly, that results in what is, at least, perceived as poor political decisions.

    We are – in effect – telling these areas – stay poor, shut up, and vote how we want. The system was arguably designed to ensure that we don’t do that because we are not a singular state – we are a union of 50 states. While CA may have more population than NV they are both 1 member of 50. And while CA/NY/DC may have some legitimate vitality that NV/MS/MI/PA don’t have – the entire purpose of the arrangement is so that CA/NY/DC doesn’t become a ruler over those areas.

    If I were to suggest all of this would have been avoided by, instead of having 250% property value inflation in 5 markets with 15% loss in 40 markets over a 30 year period to have only 175% inflation growth there with 20% gain elsewhere… boy golly gee whiz – I’d have taken that deal in a heartbeat. Perhaps those of us who are coastal workers(I work in NY I live in MI for instance) should be a little more in line with making sure we don’t create political hinterlands that we just expect to fall in line with our world view no matter how depressed their region becomes. Because I assure you – for all the talk we’ve fed them about hope and change – they’ve seen nothing remotely indicating that we care about positive change for them and we’ve taken their hope and effectively utilized it to do whatever the hell we want for other regions while theirs decline.

  41. Gravatar of Michael Bedard Michael Bedard
    19. December 2016 at 12:23

    Flint is a tremendous example for this election cycle I would note. Flint’s turnout was significantly down and skews about 90-95% Democrat over the last 4 cycles. If you turned out that city in whole you could have flipped MI.

    OK so the memo to Flint over the last 2 years is what from the GOP? The memo is your local leadership, Democrat exclusively, f’ed up so bad that they lost control to the state – right or wrong. That decision led to entirely fiscally based decisions that led to an incredible failure of state and federal governance to provide basic clean drinking water.

    Seeing that – you’d think a Democratic president would move heaven and earth to help that community. I mean MI dollars have been flowing to FL and LA and MS and CA for disaster relief for a hundred years – hurricanes? No problem we’re in to help. Earthquakes – our dollars will help rebuild…

    But in this case? You’d think an executive order would be justified… but they got nothing – not one thing done by the DNC – well. They did show up one night, talk nice, and then got out as quickly as possible and never came back… but those people were expected to be the blue wall of turnout. Why were we expecting them to turn out? We essentially told them – tough about that water thing, that’s gotta’ suck. Remember to vote for us and you know… good luck with that… we’re hear for you… don’t expect anything… but the key is – vote for us again in November and check back in a few years.

  42. Gravatar of foosion foosion
    19. December 2016 at 13:04

    Scott, I suppose I did miss your point. However, “Upstate NY needs an Indiana or Tennessee-type state government, lower taxes and pro-business.” Why does NY state’s govt work for NYC but not upstate? Is it pro-business in NYC and anti-business upstate?

    Indiana seems to mirror national trends.

    I’m less familiar with Tennessee.

  43. Gravatar of foosion foosion
    19. December 2016 at 13:08

    Scott, Kansas seem to have lowered taxes and tried to be pro-business. It appears to be a disaster. Why might that be?

  44. Gravatar of foosion foosion
    19. December 2016 at 13:15

    Scott, “pro-business” can cover a multitude of things. It can mean pro-existing businesses, pro-new business, anti-consumer protection. It can even mean funding an educated populace with a good safety net, making for better workers and making it easier to be an entrepreneur. Crony capitalist actions, including transferring public resources to favored businesses, are viewed by many as pro-business

    What exactly do you mean?

    Sorry for seriatim posts.

  45. Gravatar of Christian List Christian List
    19. December 2016 at 13:24

    If sunny weather is so important than why do places like Canada, the British Isles and Scandinavia even exist? And why are they doing pretty well?

    And why are most of the warm regions of the world so poor while states like Wisconsin are actually pretty rich if you adjust for living costs.

    And why are so many poor cities in the South?

    You can even better observe this on a global scale: Closer to the equator usually means poorer, further away means richer.

    And what happens if all those mainstream climate change apocalypticists are correct? Should you really bet your money on the warm regions and coasts?

  46. Gravatar of sean sean
    19. December 2016 at 13:31

    I think sunshine being opposed to wealth is from the old economy where industry was easier in the north (or just happened through culture with the european people mostly moving to those regions).

    But within a rich nation like the USA where the institutions are already set it seems to me like the move south will continue (or coastal).

    Not sure on Canada. I’d argue they’ve down well because they are easier for Asian immigrants to move to and other minorities; while its tougher for the already present canadians to move south to the USA than it is for a person from the rust belt to move to arizona.

  47. Gravatar of Art Deco Art Deco
    19. December 2016 at 13:37

    It appears to be a disaster.

    What disaster? They have some fiscal problems which CBPP plays up to advance their advocacy. CBPP is an advocate for public expenditure, NOS.

  48. Gravatar of Art Deco Art Deco
    19. December 2016 at 13:44

    Toledo, Cleveland, Detroit, Buffalo, St. Louis, Pittsburgh…

    Bufflao and environs has been stable in recent years, as has St. Louis. Detroit’s experience very slight growth. What’s happening in Detroit is that suburban growth is balancing out implosion in the core city. What’s causing the core city to implode hasn’t much to do with sectoral or regional shifts, but failures in crime control.

  49. Gravatar of Art Deco Art Deco
    19. December 2016 at 13:48

    Wealth attracts wealth.

    Up to a point. Metropolitan commuter belts have an advantage over the remainder (income levels about 25% higher). AFAIK, that’s a stable differential. There are some quite affluent metropolitan centers (the Bay Area, Washington, New York, Boston), but it’s atypical to rise more than 15% or so above national means for personal income per capita, at least for any length of time.

  50. Gravatar of Art Deco Art Deco
    19. December 2016 at 13:50

    led to an incredible failure of state and federal governance to provide basic clean drinking water.

    Water provision is a local function. No clue why you’re blaming the state or the central government.

  51. Gravatar of Art Deco Art Deco
    19. December 2016 at 13:55

    Michael Bedard, it’s hard to parse much of your stream of consciousness. The thing is, I suspect where you have collapsing home values, you have escalating quality of life deficits. Sectoral shifts haven’t been kind to Detroit or Flint (worse for Flint than Detroit), but your most pressing problem is that TPTB (with the assent of the public) have permitted your core cities to decay into crime-ridden hell-holes. Sorry, that’s what Detroit is and Flint’s hardly better. Need to address that problem.

  52. Gravatar of John Hamilton John Hamilton
    19. December 2016 at 14:41

    Oh c’mon Scott, you mention Madison and don’t mention its absurd land-use regulations? (Note that I’m a native of Rockford, IL, from just across the border.) No building can be built downtown that’s higher than the state capitol building. Thus Madison managed to copy the very worst and damaging regulations usually associated with NYC and San Francisco. Since Madison is the best site of long-term economic growth in WI, this needs to change now (c’mon Walker, get on this).

    Personally I hate summer and can’t stand the heat, and I also love winter and the snow. WI is my favorite state. You also didn’t mention one of WI’s best natural resources: its numerous lakes (even more than Minnesota).

  53. Gravatar of Cooper Cooper
    19. December 2016 at 16:10

    Based on the demographic data, it looks like the Rust Belt is about to get whacked with a huge increase in retirees and declines in the working age population.

    The best hope for this region, demographically speaking, is to attract a large number of young migrants who will expand the labor force and encourage new economic development. Otherwise the tax base will keep on shrinking, pulling everything down with it.

    But these states just voted for the guy who wants to slash immigration so clearly there’s no local political will to pull in hundreds of thousands of foreigners. Worse, if social capital collapses in the face of increased diversity, that folksy midwestern friendliness could disappear too.

  54. Gravatar of ssumner ssumner
    19. December 2016 at 17:33

    Sean, Don’t confuse the “rust belt” (a set of cities between St Louis and Buffalo, including Detroit and Cleveland, with the entire Midwest, which includes lots of more prosperous areas.

    Foosion, Places like NYC and California can do OK with a high tax and high regulation model, because they are so productive. Lots of firms and even entire industries with monopoly power. Great amenities that the rich are willing to pay for. Upstate New York is competing in a model much closer to perfect competition, with lots of other similar areas of the country. It’s can’t afford to with NY’s high tax high regulation model. Especially with the bad weather and lack of cultural amenities upstate.

    Indiana’s doing relatively well for a state in the middle of the rust belt. Kansas cut taxes slightly, but South Dakota and Texas have far more pro-business models—so what would attract people to Kansas? Tennessee is doing far better than neighboring Kentucky, as it has no state income tax.

    BTW, progressives were saying Kansas was a “disaster” in 2014, and were sure that its governor would lose. He was re-elected.

    Christian, Your comment is so silly I’m not going to even respond.

    John, I did not think my readers would be interested in knowing that businesses move to Middleton because of Madison’s overly strict zoning regulations. But it’s not San Francisco we are talking about here, there’s lots of land available to develop on East Wash., just 6 blocks from the capitol. In any case, Madison is doing fine.

    I doubt we have more lakes than Minnesota. But yes, Wisconsin is prettier than the corn belt states to the south (the “I” states.)

  55. Gravatar of Art Deco Art Deco
    19. December 2016 at 17:41

    Based on the demographic data, it looks like the Rust Belt is about to get whacked with a huge increase in retirees and declines in the working age population.

    Per the American Community Survey, 5.8% of the population of the United States is between their 60th and 65th birthday. Let’s see what it is locally:

    Illinois: 5.7%
    Indiana: 5.8%
    Michigan: 6.3%
    Minnesota: 5.9%
    Missouri: 6.0%
    New York: 5.8%
    Ohio: 6.3%
    Pennsylvania: 6.3%
    Wisconsin: 6.2%

    Any bluff will do to make the case for open borders, I guess.

  56. Gravatar of Jp Jp
    19. December 2016 at 19:41

    Haven’t read all the comments yet. But on number 3, speaking as one of those who grew up in the rust belt and left immediately after college a huge reason was to get away from the type of people who voted for trump. That’s not a snipe or a smart ass comment. People in these states ignore the fact that they make it somewhat undesirable to live there.

  57. Gravatar of Philip Crawford Philip Crawford
    19. December 2016 at 19:53

    WI spends about $2k per capita more than MN on prisons. Maybe there is opportunity for tax savings there.

    WI could consider legalized pot. That sweet, sweet tourism $$$ from Chicago and MPLS could go a long way and much of the northern half of the state is based on tourism already. Hunting & Pot, Packers & Pot, The Dells & Pot. It would be yuge.

    Oh, @A Definite Beta Guy, the WI pension is fine. Defined contribution.

  58. Gravatar of Benjamin Cole Benjamin Cole
    20. December 2016 at 04:56

    OT–but is Trump ever OT anymore?

    The National Review—remember, the guys who devoted an entire issue to gutting Trump—have turned gushy to our President-to-be.

    Trump has been cunning, while little condescending weenies sniped at him!

    That was written NRO contributor Victor Davis Hanson, a senior fellow at the Hoover Institution and the author, most recently, of The Savior Generals.

    A senior fellow at the Hoover Institution is writing paeans to Trump!

    And then David Henderson and Tyler Cowen have been making positive noises regarding Trump.

    “Why some of Trump’s appointees are likely to be highly effective”–Cowen.

    Not just effective, but “highly effective.” It may sound like advertising for an acne medicine, but that is what Cowen wrote.

    I still say, when Trump reveals which astrologers he uses—we will know Ronald Reagan has returned!

    Reagan had to wait a couple decades before the hagiographers set in. Trump seems to have an advance party going in.

    I see greatness—greatness!

    Invest in statuary outfits. Could be a huge demand for Trump icons, more than life size. Study heroic poses.

  59. Gravatar of ssumner ssumner
    20. December 2016 at 05:48

    Jp, I don’t think that’s a big problem—I find Midwesterners to be nicer than people on the East Coast.

    Philip, Goods ideas. (I doubt the accuracy of your prisons numbers, do you have a link?)

    Ben, You forgot that Tyler said “for better or worse”. But I agree about the National Review. I wrote a post on that, but haven’t posted it yet.

  60. Gravatar of Plucky Plucky
    20. December 2016 at 08:41

    I had a family member live in Madison for a few years in her mid/late 20’s a few (~3) years ago. In her telling,
    – Madison’s biggest problem is a very severe shortage of rental living (both houses and apartments) driven by restrictive building regs and an effectively oligopoly in the ownership of rental housing which has an effective implicit collusion to keep rental prices high. In terms of outright cost and value (niceness per dollar) Madison is worse than Chicago and closer to the premium/luxury cities than it is to what a University town ought to be. Given Madison’s income level it is even more egregious
    – Related to the rental shortage, it is extremely difficult to find acceptable living arrangements when moving there except for a very limited window of time. The overwhelming majority of rental stock operates on year-long leases that start in August (i.e. matching up with the academic calendar), and if you don’t sign a lease then, you might find yourself either serial craigslist slumming for weeks or paying an extortionate rate to buy someone out of a lease.
    – In her telling, the local culture varies from mildly to very hostile to people who move there for work (her social sphere had little to no people associated with either the university or state gov’t FWIW). She moved there for a job with technical skill requirements for which there was (in her telling) literally no one else in Madison qualified. Nonetheless, she was on multiple occaissions accused (verbally, to her face) of “stealing” a job that rightfully ought to have “belonged” to a local. (Again, in her telling,) There really is a combo blue collar and semi-socialist mentality that jobs are the collective property of native MAdisonians and that the world owes them good ones, regardless of qualification.

  61. Gravatar of MikeDC MikeDC
    20. December 2016 at 09:20

    My first idea, which seems to also have been independently thought of by Arnold Kling, would be to relocate several governmental agencies to the rust belt.

    Instead of special tax treatment or giveaways, the Federal government could simply reassign a bunch of sinecures to Detroit, Milwaukee, St. Louis, and Jackson, MS. At the margin, 50,000 white collar jobs spread amongst those locales could go a long way toward improving the local economic outlook at little to no net cost against the federal budget (I’d spend a bit more because I’d spring for relocation and retention “bonuses” just to be nice, but primarily we’re just sending the same checks to different addresses).

  62. Gravatar of ssumner ssumner
    20. December 2016 at 10:21

    Plucky, You said:

    “effectively oligopoly in the ownership of rental housing”

    You lost me here. Don’t believe everything you hear.

    I’ve lived in Madison and Chicago and Boston, and Madison is far and away the friendliest city of the three.

    MikeDC, If we are going to do that it ought to save lots of money, as the cost of living is far lower in those cities–so the salaries could also be lower.

  63. Gravatar of Pllucky Pllucky
    20. December 2016 at 10:46


    apologies, I realized after I posted that the sentence had turned into an edit-mangle. I meant to say there there was (allegedly) an oligopoly structure in which an implicit collusion situation seemed to be stable, that despite the high rents there was little to no new stock being created. I suspect the family member in question didn’t necessarily get a broad slice of the city in her experience there and is of a somewhat cynical disposition to begin with, but I don’t doubt her at all on the difficulty of finding decent housing

  64. Gravatar of ssumner ssumner
    20. December 2016 at 11:00

    Plucky, I don’t doubt that the housing market near campus is tight around August. But housing is also dramatically cheaper than in Boston.

  65. Gravatar of dtoh dtoh
    20. December 2016 at 13:17


    You said, “No, that was your claim when you said weather only matter for agricultural industries. The main impact it has is on the supply of labor, which is declining in the north due to bad weather.”

    No my claim was that it was not a factor in making a decision on where to build a manufacturing facility, which is totally different. Weather can effect the labor supply, but that’s only important if labor is a constraining factor.

    Suppose there are 1000 engineers in Michigan with PhDs in statistical process control and 100 of them in South Carolina. If it snowed less in Michgan there might be 1050 such engineers in Michgan and only 50 in South Carolina. So am I not going to build a factory in Michgan because it snows there?

    Like I said, never put an academic in charge of anything. 🙂

  66. Gravatar of ssumner ssumner
    20. December 2016 at 14:35

    dtoh, It’s about supply and demand. Business goes to where the labor is and labor goes to where the business is. It’s a simultaneous system. Elsewhere you argued that people don’t understand thinking at the margin, and then you provide an example of that here. If 50 engineers move from Michigan to South Carolina, that leads to more businesses investing in South Carolina, and fewer in Michigan, at the “margin” you recently emphasized in another post.


  67. Gravatar of ssumner ssumner
    20. December 2016 at 14:36

    And this is not about “unemployment”, which is lower in many midwestern states than in many sunbelt states. It’s about supply of labor.

  68. Gravatar of dtoh dtoh
    20. December 2016 at 16:05

    Scott, let me put it this way, (excluding places like northern Alaska) weather has virtually no impact on the marginal elasticity of the supply of labor needed for manufacturing. If it did, businesses would take it into consideration in site selection for new facilities.

  69. Gravatar of Philip Crawford Philip Crawford
    20. December 2016 at 16:35


    You’re correct on my prison cost per capita quote. I messed up the maths.

    It’s about $100 per capita or $500M difference b/w MN and WI (per year)

  70. Gravatar of Larry Larry
    20. December 2016 at 17:49

    Great discussion!

    – the Feds could help by moving functions to the Rust Belt and by removing regulations that impede growth. The area surrounding DC is now the country’s richest. Share the wealth!
    – Mfg productivity is zooming up. Not a big job source. Lights out factories starting to appear.
    – Dying areas should look to thriving flyover areas (Tx) for policies.
    – Removing barriers to mobility will help reduce the cultural and economic burdens on growth.
    – showing some respect/solidarity for distressed areas is worth something (it would have saved Clinton).
    – healthcare has become the biggest employer in many places. Mayo and Cleveland Clinic are examples of how to make that work.
    – Hillbilly Elegy is a fantastic read on the Rustbelt.

  71. Gravatar of Art Deco Art Deco
    20. December 2016 at 21:19

    The area surrounding DC is now the country’s richest. Share the wealth!

    This business cycle, personal income per capita in the Washington, DC commuter belt has ranked behind the Connecticut Coast, the Bay Area, and the Boston belt. It exceeds the New York – New Jersey blob by about 5.4%. Again, about 20% of the local workforce are federal employees.

  72. Gravatar of Art Deco Art Deco
    21. December 2016 at 06:17

    – Dying areas should look to thriving flyover areas (Tx) for policies.

    The ‘dying areas’ are rural areas and small towns (< 15,000 people) in the Plains. Rustbelt cities may be stagnant and shabby, but their demographic leakage is slow and they're not getting poorer in an absolute sense.

    You might consult Mark Hinshaw's work and his bibliographies for ideas on how local governments can build conduits to property re-development. You're generally asking for trouble if it incorporates municipal government as venture capitalist.

    Institutional adjustments could get the ball rolling many places. Why not limit county government to exurban, rural, and small town zones and have metropolitan government with adjustable boundaries in the cities? Each metropolis would be a federation of boroughs which would provide certain services and maintain a zoning board and building inspectorate. Law enforcement would be in the hands of a metropolitan authority. Youngstown has a homicide rate of 33 per 100,000. They need a unified police department following best practices to address that. And, of course, the side-car passenger of the crime problem will be school disorder.

  73. Gravatar of ssumner ssumner
    21. December 2016 at 12:55

    dtoh, Again, businesses take into account the supply of labor, which is influenced by weather.

    Larry, Good comment, but don’t confuse the Rust Belt with hillbilly country.

  74. Gravatar of Dtoh Dtoh
    21. December 2016 at 17:56

    Unfortunately a logically fallacious argument. 🙂

  75. Gravatar of Greg Greg
    23. December 2016 at 15:01

    Scott, great article. Excellent discussion everyone participating.

    I was raised in Racine WI and now work in Boston. I would consider going back to WI if there were jobs appropriate to my skill, but they do not exist. Personally I doubt that weather is a driving factor. My employer easily attracts needed talent from Sun Belt to Boston.

    – Dying areas should look to thriving flyover areas (Tx) for policies.

    Agree with the sentiment. But I consider that the policies that work for a rich oil state may not carry over to a poor manufacturing state. Which policies do you think might merit adoption?

    – The ‘dying areas’ are rural areas and small towns (< 15,000 people) in the Plains.

    In Wisconsin, the dying areas are in the cities: Milwaukee, Racine, and Kenosha. In 2014, over 25% of Racine county employment was (still!) in the manufacturing sector. Racine county achieved -0.3% increase in inflation-adjusted per-capita income over the last ten year compared with 9.0% for Wisconsin and 10.4% for the United States. Welcome to the rust belt.

  76. Gravatar of ssumner ssumner
    23. December 2016 at 15:19

    Greg, I was in Racine a few years ago–saw the Wingspread FLW house.

    I agree that the area is struggling. I’d suggest abolishing the Wisconsin state income tax. States with no state income tax almost always do better than their neighbors. The idea would be to get high income people in the northern suburbs of Chicago and the Twin cities area to move over the border into Wisconsin. That could significantly help Kenosha County, and the county near the Twin Cities.

    The problem is that Wisconsin would then have to sharply raise the state sales and property taxes, so my proposal is not politically feasible. But the lack of income tax explains why states like South Dakota, Tennessee, Washington, New Hampshire, etc., tend to do better than their neighbors.

    The other problem is that this policy would have worked better 30 years ago. The recent trend to move back to big metro areas is a problem. For instance, New Hampshire used to steal lots of jobs from Massachusetts, but now the draw of Boston living is so strong that it no longer does.

    Madison has drawn in a lot of tech jobs (Epic is really big there) and so if Milwaukee can somehow do the same that would help. It lacks an elite college (like Pittsburgh’s Carnegie Mellon), and that hurts.

    If Madison made it easier to build then that would help Wisconsin, but the greens are pretty powerful out there.

  77. Gravatar of Student Student
    27. December 2016 at 21:27

    On the infrastructure and urbanism stuff… what if rather than building traditional Madison and Milwaukee were linked to a cheap high speed transportation nextwork (who cares about type) that would make commuting between there and Chicago a 30 minute commute while also maintaining/enhancing local amenities and urban asthetics… theyd prolly grow and keep young people in their commuting environment.

  78. Gravatar of Student Student
    27. December 2016 at 21:28

    *traditional infrastructure

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