A billion(er)-dollar question is whether sending federal money to distressed areas ever made any damn sense. It makes a lot more sense to send cash assistance directly to distressed families than to pick winning and losing towns, pick winning and losing employers, futilely attempt to prop up towns that no longer offer any economic advantage, and thus waste the money all while thwarting innovation and creative destruction and creating new opportunities for graft.
Looking at migration patterns looks like potentially valuable information, are people leaving or congregating at a place. I think that will tell us a lot about the economic prospects of a place.
But I am not sure that tells us where the money should be going - does it really make sense to subsidize a stagnating place? Much better maybe to fund a "hungry place" - one with both a lot of poverty and population influx, to encourage people to flock towards emerging opportunity.
High cost of living is a symptom of over-investment relative to local appetites for growth. Injecting more money is going to make things worse, not better, no?
At most you can change the set of winners by subsidizing your favored cohort so much that they can outbid high-end market incomes. But that hardly seems like a stable equilibrium. Fundamentally there are only two ways to increase anyone’s housing security: disempower and disenfranchise the community, or un-house someone else.
High cost of living normally means that the local population is less interested in growth than people outside that city are in living there.
(Should point out of course that "high cost of living" often only affects newcomers when you're talking about housing. Somebody who bought in San Mateo County in the 1980s is not spending nearly as much on housing -- hell, it might be zero if their mortgage is paid off -- than somebody who just got hired by Google.)
As a New Yorker, I’d like to see New York dwarf Tokyo and Shanghai as an urban behemoth of monstrous size and power, but that would mostly be done by sharply exacerbating the brain drain from places without subways and leaving them in even deeper relative obscurity and poverty. It’s also very clear to me that any federal program to achieve that end would not fly in a senate that represents the other 47 states (Connecticut and New Jersey are part of my NY Megalopolis), which is why it’s so deeply frustrating that NY politicians from city council on up have zero interest in growth
You can also make a pretty strong argument that targeting SPM would be counter-productive as more dollars chasing scarce housing would simply drive up the cost of housing even more.
I’d like to see a study on how much geography immobility is due not to economic factors, but entertainment and non-family social considerations. For example if you wanted entertainment decades ago you pretty much had to go to a larger city. Plenty of a small town and rural options too but nevertheless numerically fewer options and less diversity of them. Are Netflix and TikTok substitutes such that the lifestyle impact and motivation is washed out at the margin?
Relatedly, LGBTQ status or any sort of "non-traditional" life choice is probably less likely to be an incentive to move than it once was. (Cf. the decline of dedicated gay and lesbian bars and other LGBTQ cultural facilities in urban areas.)
If somehow our marriage stopped being recognized in Texas we'd probably move out but the federal recognition of the things I care about most has made that unnecessary.
I'd rather just focus on helping individuals. At least at the federal level, somebody making $30k with two kids should get the same amount of help in Mississippi as they get in Los Angeles. Ideally, state and local governments should top up the assistance in high cost states.
Having said that, I'm also not opposed to Matt's idea of "move the Census Bureau to Cleveland." I have no problem trying to stimulate struggling economic areas, nor am I opposed to offering carrots and sticks to high cost states to induce them to build more housing, but I don't think the federal government should effectively subsidize the housing problems in places like California. That is all.
Yeah I'm open to some carrots and sticks for sure. But "California is expensive therefore the welfare state should give CA residents more money" just lets CA policymakers off the hook.
No discussion on state or local fiscal capacity. Shame. Many times, poorer places have less fiscal capacity to address local poverty issues, whereas high cost of living cities have self-induced problems--that shouldn't be subsidized IMO--and have the fiscal capacity to address should they choose to. If anything, my prior is that federal money isn't sent enough to low cost of living areas, which tend to be poorer. Open to changing my mind, but I didn't find this very convincing.
Good background on the different metrics and mixed signals they can provide depending on how you weigh each one.
sure, but when deciding how to allocate scarce resources to poorer members of society, we should up-weight areas that are poorer and down-weight areas that are richer but who's policy decisions have increased the cost of living both because of moral hazard but also because the people are poorer and have less opportunity in those communities and because the local and state functions that could help them have less capacity to do so.
Time to plow a bunch of nature preserves and parks to build 3 bed 2 bath 1,500 sq ft single family homes. Not sure how you fix this otherwise. A starter home in my town is now over $1mm. The whole place is along with neighboring towns is unbuildable land owned by the town, state, or some trust dating back to a mayflower family. Need more Levittowns.
The problem with this approach is that the vast majority of federal land isn't actually within reasonable transportation distance of otherwise growing metropolitan areas.
I’m talking about the huge amount of preserved land in and around major cities that could provides thousands of homes in very desirable locations. The only other answer is to start new communities out in the middle of nowhere.
Maybe the approach is wrong. Child poverty dropped significantly with the 2020-2021(?) Child Tax Credit and it’s not a targeted program. This was low overhead/bureaucracy program. Maybe targeted programs should be relegated to a 5-10% infill of a broad non-targeted program.
The headline observation that geographic inequality is widening is very striking and feels explanatory of recent political trends in ways that other commonly identified culprits (including, notably, income inequality) really aren't. But after squinting at the first chart for a while, I wonder how robust it is? What does the trend look like if you adjust for local cost of living AND transfers?
I think we're starting from a presumption that regional inequality is an ill that must be cured, which isn't obvious at all to me. In fact, the spatial concentration of certain industries seems like an indication of efficiency. Coal mining is never going to be as productive as tech, but we certainly wouldn't want to reallocate 50% of tech to West Virginia and make 50% of Californians go look for some coal to mine out there. On this basis, it seems appropriate for WV to be poorer than CA. Ideally, we'd just want the smart kids from WV to be able to move to CA if they got interested in tech, so maybe measures related to education/mobility are most appropriate. (But keep in mind that human capital is heritable through several channels...)
Anyway, each program is trying to accomplish some specific thing, so it's probably appropriate to just ask "what are we trying to do?" for each program and come up with a corresponding measure to decide how to allocate the money. It's not really clear that in most cases, the marginal benefit of allocating money somewhere is going to be related to some sort of inequality measure. (At least we haven't seen the evidence here.)
"Ideally, we'd just want the smart kids from WV to be able to move to CA if they got interested in tech, so maybe measures related to education/mobility are most appropriate."
But this already happens! The reason regional inequality is a concern is, well, the kids who aren't particularly smart or interested in tech who are left behind in WV are doubly screwed because the kids who are interested in tech probably grew up in CA because their parents (also interested in tech) moved there a generation ago.
What the post sort of glosses over is that a big reason geographical mobility is down is that the big geographical sort already happened. Post-WW2 the movers and strivers got promoted and moved by Big Corporation they worked for, which led to an already-budding concentration of the most skilled workers in a few large cities (and this consolidated even further with mergers, etc.) Then a handful of edge cases moved subsequent to that, but basically, if your family was still in Appalachia after all this then, well, let's just say that you're *probably* not the sort who'd be in any sort of real demand for high-end jobs that you can only find in a large city. (The "landed" class in rural areas is a bit different, though functionally a lot of them have become a rentier class that's increasingly absentee from the land that's been in their family for a hundred years until it's time to retire.)
Californians are pretty clear that they think white kids from elsewhere in the US moving there for tech jobs is morally wrong and that public policy should pump the brakes on it as much as possible.
I can't speak for the rest of the Slow Boring commentariat, but I'm trying to accomplish two things:
1. Help people who suffer, especially those who suffer through no fault of their own: children born to poor families, people with disabilities, people who drew the short straw in the intelligence/talent lottery and hence don't have a hope of getting a well-paying job;
2. Make sure that there isn't a pissed-off, hopeless, angry lumpenproletariat/underclass that sees The Elites (like me, a college professor) as The Enemy and that is eager to vote for a douchebag con artist like Agent Orange.
Inequality has gone down in the past few years and yet resentments against "the elites" have increased. Obviously Fox, etc, is a big factor, but reading this post, I really wonder if geographic inequality is not playing a role that I have been unaware of.
Yeah, from experience (grew up in TN), telling these people to move *even to the next county over* (never mind to a big metro area in a different state) is more likely to lead to "pissed-off, hopeless, angry lumpenproletariat/underclass" than it is to solve any real problems. This gets you at least 50% of the way to explaining why ancestrally Dem parts of TN have swung violently right since 2000.
This was the subject of disagreement at a conference I attended by the Economic Innovation Group. The organization is especially focused on place based economic policies and the theme of the conference was essentially how the Biden admin could use industrial policies to rebuild some economically distressed areas.
The economist Adam Posen was kind of the turd in the punchbowl during the lead panel when he basically said, "Industrial policy is inefficient in of itself and especially inefficient if it's purposefully placed in economically distressed areas."
I have a similar feeling about income inequality, but my opinion with regard to regional inequality is even stronger: IMO, the relevant metric should be poverty, not inequality. We want to get rid of poverty and not be so concerned about inequality (IMO).
Agree! Related, I’ve never seen an argument for an optimal level of inequality. It certainly isn’t zero. So as you travel upwards from zero, when does inequality become “bad”? It seems to me people have been adopting the Potter Stewart standard of “I know it when I see it.” That standard has been rightly mocked for decades. But the people who talk about income inequality have tacitly adopted the standard. Unless there’s a good analysis/argument I haven’t yet seen.
Isn't a major thrust of this piece that poverty is itself relative to local cost of living? Taking into account geographic variation is important to understanding who is actually struggling with material deprivation.
Double like. It’s understandable that some programs should allocate more funds to high-cost living areas based on their specific aims (e.g., SNAP). Other programs, however, should recognize migration as a key part of addressing the issue—for example, addressing high unemployment among non-college workers.
Yes, many people hold a “pie in the sky” dream that no one should ever have to move for employment and that instead all communities can sustain vibrant economies tailored to their current demographics. But at best, that’s a distraction, and at worst, it misleads individuals in these communities into avoiding the short-term pain of moving by falsely promising future economic opportunities without sufficient justification.
Great idea. More radical still (and no, this ain't likely to happen any time soon, but a fella can dream): render the NIMBY housing production veto unconstitutional, in that it's become a de facto, constitutionally suspect bar to interstate freedom of movement (a fundamental right enjoyed by Americans under the Privileges and Immunities Clause of Article IV ). There are lots of *naturally* occurring phenomena that will impede the ability of Americans to settle where they will: land values, general cost of living, wage differentials, availability of jobs, climate, and a million other things. But states aren't allowed to add to these by hanging out a "DO NOT ENTER" sign. And yet that's exactly what they're doing.
Let's put it this way: if a state legislature really did want to come up with a way to impede freedom of movement they hoped would be sufficiently "under-the-radar" to dupe the guardians of our constitution, making new housing illegal would be exactly how they'd do it.
A billion(er)-dollar question is whether sending federal money to distressed areas ever made any damn sense. It makes a lot more sense to send cash assistance directly to distressed families than to pick winning and losing towns, pick winning and losing employers, futilely attempt to prop up towns that no longer offer any economic advantage, and thus waste the money all while thwarting innovation and creative destruction and creating new opportunities for graft.
If anyone is so interested in this topic that you want to read a few hundred pages more... HUD has put considerable effort into trying to measure "need" and assess whether the Community Development Block Grant effectively targets places with high need. See https://www.huduser.gov/portal/publications/An-Evaluation-of-the-CDBG-Formulas-Targeting-to-Community-Development-Need-2023.html and https://www.huduser.gov/portal/periodicals/cityscape/vol26num3/article4.html for the latest iterations of that work.
Looking at migration patterns looks like potentially valuable information, are people leaving or congregating at a place. I think that will tell us a lot about the economic prospects of a place.
But I am not sure that tells us where the money should be going - does it really make sense to subsidize a stagnating place? Much better maybe to fund a "hungry place" - one with both a lot of poverty and population influx, to encourage people to flock towards emerging opportunity.
High cost of living is a symptom of over-investment relative to local appetites for growth. Injecting more money is going to make things worse, not better, no?
At most you can change the set of winners by subsidizing your favored cohort so much that they can outbid high-end market incomes. But that hardly seems like a stable equilibrium. Fundamentally there are only two ways to increase anyone’s housing security: disempower and disenfranchise the community, or un-house someone else.
High cost of living normally means that the local population is less interested in growth than people outside that city are in living there.
(Should point out of course that "high cost of living" often only affects newcomers when you're talking about housing. Somebody who bought in San Mateo County in the 1980s is not spending nearly as much on housing -- hell, it might be zero if their mortgage is paid off -- than somebody who just got hired by Google.)
As a New Yorker, I’d like to see New York dwarf Tokyo and Shanghai as an urban behemoth of monstrous size and power, but that would mostly be done by sharply exacerbating the brain drain from places without subways and leaving them in even deeper relative obscurity and poverty. It’s also very clear to me that any federal program to achieve that end would not fly in a senate that represents the other 47 states (Connecticut and New Jersey are part of my NY Megalopolis), which is why it’s so deeply frustrating that NY politicians from city council on up have zero interest in growth
You can also make a pretty strong argument that targeting SPM would be counter-productive as more dollars chasing scarce housing would simply drive up the cost of housing even more.
I’d like to see a study on how much geography immobility is due not to economic factors, but entertainment and non-family social considerations. For example if you wanted entertainment decades ago you pretty much had to go to a larger city. Plenty of a small town and rural options too but nevertheless numerically fewer options and less diversity of them. Are Netflix and TikTok substitutes such that the lifestyle impact and motivation is washed out at the margin?
Relatedly, LGBTQ status or any sort of "non-traditional" life choice is probably less likely to be an incentive to move than it once was. (Cf. the decline of dedicated gay and lesbian bars and other LGBTQ cultural facilities in urban areas.)
If somehow our marriage stopped being recognized in Texas we'd probably move out but the federal recognition of the things I care about most has made that unnecessary.
Grindr also hasn't helped there.
I don't think that's an "also," it's a substantial part of what makes LGBTQ status "less likely to be an incentive to move than it once was. "
Sorry I wasn't clear. I meant specifically the decline of gay bars.
I'd rather just focus on helping individuals. At least at the federal level, somebody making $30k with two kids should get the same amount of help in Mississippi as they get in Los Angeles. Ideally, state and local governments should top up the assistance in high cost states.
Having said that, I'm also not opposed to Matt's idea of "move the Census Bureau to Cleveland." I have no problem trying to stimulate struggling economic areas, nor am I opposed to offering carrots and sticks to high cost states to induce them to build more housing, but I don't think the federal government should effectively subsidize the housing problems in places like California. That is all.
> I don't think the federal government should effectively subsidize the housing problems in places like California.
Not without some supply-side reforms, that’s for sure
Yeah I'm open to some carrots and sticks for sure. But "California is expensive therefore the welfare state should give CA residents more money" just lets CA policymakers off the hook.
No discussion on state or local fiscal capacity. Shame. Many times, poorer places have less fiscal capacity to address local poverty issues, whereas high cost of living cities have self-induced problems--that shouldn't be subsidized IMO--and have the fiscal capacity to address should they choose to. If anything, my prior is that federal money isn't sent enough to low cost of living areas, which tend to be poorer. Open to changing my mind, but I didn't find this very convincing.
Good background on the different metrics and mixed signals they can provide depending on how you weigh each one.
We are all responsible for poverty wherever it exists regardless of whether someone decides that the problems of a local community are self-induced.
sure, but when deciding how to allocate scarce resources to poorer members of society, we should up-weight areas that are poorer and down-weight areas that are richer but who's policy decisions have increased the cost of living both because of moral hazard but also because the people are poorer and have less opportunity in those communities and because the local and state functions that could help them have less capacity to do so.
Time to plow a bunch of nature preserves and parks to build 3 bed 2 bath 1,500 sq ft single family homes. Not sure how you fix this otherwise. A starter home in my town is now over $1mm. The whole place is along with neighboring towns is unbuildable land owned by the town, state, or some trust dating back to a mayflower family. Need more Levittowns.
The problem with this approach is that the vast majority of federal land isn't actually within reasonable transportation distance of otherwise growing metropolitan areas.
I’m talking about the huge amount of preserved land in and around major cities that could provides thousands of homes in very desirable locations. The only other answer is to start new communities out in the middle of nowhere.
I think greenfield cities on BLM land is an unexplored option.
Shit, we should just invite South Korea to build them
Do we even know that mobility is declining? Tax based data sharply disagrees with the census data on this
https://www.fcsm.gov/assets/files/docs/2023-conference-docs/F2.5_Foster.pdf
Maybe the approach is wrong. Child poverty dropped significantly with the 2020-2021(?) Child Tax Credit and it’s not a targeted program. This was low overhead/bureaucracy program. Maybe targeted programs should be relegated to a 5-10% infill of a broad non-targeted program.
Thanks, Jed! This was very informative and added some important depth to how we think about geographical inequality.
The headline observation that geographic inequality is widening is very striking and feels explanatory of recent political trends in ways that other commonly identified culprits (including, notably, income inequality) really aren't. But after squinting at the first chart for a while, I wonder how robust it is? What does the trend look like if you adjust for local cost of living AND transfers?
Excellent post
I think we're starting from a presumption that regional inequality is an ill that must be cured, which isn't obvious at all to me. In fact, the spatial concentration of certain industries seems like an indication of efficiency. Coal mining is never going to be as productive as tech, but we certainly wouldn't want to reallocate 50% of tech to West Virginia and make 50% of Californians go look for some coal to mine out there. On this basis, it seems appropriate for WV to be poorer than CA. Ideally, we'd just want the smart kids from WV to be able to move to CA if they got interested in tech, so maybe measures related to education/mobility are most appropriate. (But keep in mind that human capital is heritable through several channels...)
Anyway, each program is trying to accomplish some specific thing, so it's probably appropriate to just ask "what are we trying to do?" for each program and come up with a corresponding measure to decide how to allocate the money. It's not really clear that in most cases, the marginal benefit of allocating money somewhere is going to be related to some sort of inequality measure. (At least we haven't seen the evidence here.)
"Ideally, we'd just want the smart kids from WV to be able to move to CA if they got interested in tech, so maybe measures related to education/mobility are most appropriate."
But this already happens! The reason regional inequality is a concern is, well, the kids who aren't particularly smart or interested in tech who are left behind in WV are doubly screwed because the kids who are interested in tech probably grew up in CA because their parents (also interested in tech) moved there a generation ago.
What the post sort of glosses over is that a big reason geographical mobility is down is that the big geographical sort already happened. Post-WW2 the movers and strivers got promoted and moved by Big Corporation they worked for, which led to an already-budding concentration of the most skilled workers in a few large cities (and this consolidated even further with mergers, etc.) Then a handful of edge cases moved subsequent to that, but basically, if your family was still in Appalachia after all this then, well, let's just say that you're *probably* not the sort who'd be in any sort of real demand for high-end jobs that you can only find in a large city. (The "landed" class in rural areas is a bit different, though functionally a lot of them have become a rentier class that's increasingly absentee from the land that's been in their family for a hundred years until it's time to retire.)
Californians are pretty clear that they think white kids from elsewhere in the US moving there for tech jobs is morally wrong and that public policy should pump the brakes on it as much as possible.
I have never heard anything like this in California, even in Berkeley — not in writing, in discussions with neighbors, anywhere, anytime.
Though strangely they don't seem to mind kids from other countries moving there for tech jobs.
Just a loud minority.
But yeah, it would be better if we could accommodate rapid population growth in new greenfield cities than disrupt existing arrangements
"What are we trying to do?"
I can't speak for the rest of the Slow Boring commentariat, but I'm trying to accomplish two things:
1. Help people who suffer, especially those who suffer through no fault of their own: children born to poor families, people with disabilities, people who drew the short straw in the intelligence/talent lottery and hence don't have a hope of getting a well-paying job;
2. Make sure that there isn't a pissed-off, hopeless, angry lumpenproletariat/underclass that sees The Elites (like me, a college professor) as The Enemy and that is eager to vote for a douchebag con artist like Agent Orange.
Inequality has gone down in the past few years and yet resentments against "the elites" have increased. Obviously Fox, etc, is a big factor, but reading this post, I really wonder if geographic inequality is not playing a role that I have been unaware of.
Yeah, from experience (grew up in TN), telling these people to move *even to the next county over* (never mind to a big metro area in a different state) is more likely to lead to "pissed-off, hopeless, angry lumpenproletariat/underclass" than it is to solve any real problems. This gets you at least 50% of the way to explaining why ancestrally Dem parts of TN have swung violently right since 2000.
This was the subject of disagreement at a conference I attended by the Economic Innovation Group. The organization is especially focused on place based economic policies and the theme of the conference was essentially how the Biden admin could use industrial policies to rebuild some economically distressed areas.
The economist Adam Posen was kind of the turd in the punchbowl during the lead panel when he basically said, "Industrial policy is inefficient in of itself and especially inefficient if it's purposefully placed in economically distressed areas."
I have a similar feeling about income inequality, but my opinion with regard to regional inequality is even stronger: IMO, the relevant metric should be poverty, not inequality. We want to get rid of poverty and not be so concerned about inequality (IMO).
Agree! Related, I’ve never seen an argument for an optimal level of inequality. It certainly isn’t zero. So as you travel upwards from zero, when does inequality become “bad”? It seems to me people have been adopting the Potter Stewart standard of “I know it when I see it.” That standard has been rightly mocked for decades. But the people who talk about income inequality have tacitly adopted the standard. Unless there’s a good analysis/argument I haven’t yet seen.
The standard is “inequality is fine so long as no one has more than me”
Isn't a major thrust of this piece that poverty is itself relative to local cost of living? Taking into account geographic variation is important to understanding who is actually struggling with material deprivation.
Double like. It’s understandable that some programs should allocate more funds to high-cost living areas based on their specific aims (e.g., SNAP). Other programs, however, should recognize migration as a key part of addressing the issue—for example, addressing high unemployment among non-college workers.
Yes, many people hold a “pie in the sky” dream that no one should ever have to move for employment and that instead all communities can sustain vibrant economies tailored to their current demographics. But at best, that’s a distraction, and at worst, it misleads individuals in these communities into avoiding the short-term pain of moving by falsely promising future economic opportunities without sufficient justification.
Great idea. More radical still (and no, this ain't likely to happen any time soon, but a fella can dream): render the NIMBY housing production veto unconstitutional, in that it's become a de facto, constitutionally suspect bar to interstate freedom of movement (a fundamental right enjoyed by Americans under the Privileges and Immunities Clause of Article IV ). There are lots of *naturally* occurring phenomena that will impede the ability of Americans to settle where they will: land values, general cost of living, wage differentials, availability of jobs, climate, and a million other things. But states aren't allowed to add to these by hanging out a "DO NOT ENTER" sign. And yet that's exactly what they're doing.
Let's put it this way: if a state legislature really did want to come up with a way to impede freedom of movement they hoped would be sufficiently "under-the-radar" to dupe the guardians of our constitution, making new housing illegal would be exactly how they'd do it.
Law is more strictly enforced for interstate and intercommunity movement and eligibilities than for international and cross-border.