Posted by: Jeff | April 23, 2010

Get Me the Data: California vs. Texas Edition

The post by Mark Perry over at the American Enterprise Institute blog is over a month old, but it’s a good example of a common fallacy. Since it also involves comparisons between my home state of Texas and my current state of California, it seemed apropos.

We’ll start with what Perry gets right: Texas’ unemployment rate has been lower than that of the country as a whole, and much lower than California’s, for around the last three years. Furthermore, in reaction to the 2008 crash, Texas’ employment level merely plateaued for a time, while California’s dropped like a rock. (Check out his post. The graphs are pretty spectacular.)

So what did Texas do right? This being AEI’s blog, Perry has a ready-made answer:

By any relevant economic measure, the low-tax, business-friendly, right-to-work state of Texas has survived the recent economic downturn surprisingly well, while the high-tax, big-government, forced unionism approach of California has been a prescription for major job losses, high unemployment, and a net outflow of people and businesses. Unfortunately, as Michael Barone points out in his commentary, “the Democrats in Washington are trying to impose policies like those that have ravaged California rather than those which have proved so successful in Texas.”

A conservative blogger thinks Texas’ conservative economic policies are the reason it has survived the recession in much better shape than California? Shocker! The problem is, Perry provides no evidence for this link. He simply assumes it. Which is to say, he fails to isolate his variables.

Could California’s dismal performance be instead linked to how much more severely it was effected by the housing bubble? (More here.) Or to California’s rather unique constitution, which hamstrings its legislature’s ability to respond to fiscal crisis in a way Texas’ political system simply doesn’t have to deal with? Those are two possibilities I can think of off the top of my head. How do we know the economic policies of the two states are not simply sideshows to their economic performance? I mean that seriously. It’s entirely possible. How do we know the correlation is not just a coincidence?

I bring this up because it ought to be a relatively easy hypothesis to test. We would simply need to compare the economic policies of various states, then compare their economic trends, and see if conservative policies cluster with better economic performance: less debt, less unemployment, etc. More specifically, we could see how different states performed during the recession, and once again if better performance clusters with greater conservatism.

I have to confess I don’t have the information in front of me to test this hypothesis. If I have the time (probably not) I’ll try to see if I can dig it up via Google. What bugs me is that Perry works for AEI, where he presumably has far more resources and research capacities than Joe or I do, and it didn’t occur to him to actually take the time to gather the research by which he could test his assumptions. I’d honestly really like to see the data.

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