So some of my students have sent me this WSJ piece citing Joel Kotkin about the future of California. According to him, California's future looks terrible: due to the welfare and regulatory state. The piece is written by Allysia Finley, and here's the bit of information that should scare us a bit:

Nearly four million more people have left the Golden State in the last two decades than have come from other states. This is a sharp reversal from the 1980s, when 100,000 more Americans were settling in California each year than were leaving. According to Mr. Kotkin, most of those leaving are between the ages of 5 and 14 or 34 to 45. In other words, young families.

The pithy quote:


"The new regime"—his name for progressive apparatchiks who run California's government—"wants to destroy the essential reason why people move to California in order to protect their own lifestyles.

Kotkin's point, a bit overstated perhaps, is that Californians are making it so miserable to
to try to start up a new business or buy a house that they are cutting their own legs out from under themselves--and they are doing it not because they really wish to protect the environment, but because they want to maintain the exclusivity of their neighborhoods and schools.

Leaving aside Kotkin, who comes off as abrasive in this piece, it's hard to justify the regulatory and approvals process in California when you read stories like this one about Julie Pries working for two years in a recession to start up an ice cream shop in San Francisco.

Ms. Pries said it took two years to open the restaurant, due largely to the city’s morass of permits, procedures and approvals required to start a small business. While waiting for permission to operate, she still had to pay rent and other costs, going deeper into debt each passing month without knowing for sure if she would ever be allowed to open.

The mayor's response: a $1.5 million fund to help small businesses, which is chump change in a place where commercial rents are very high. How about just cutting approvals time in half, for starters, instead?

And that's Kotkin's point, once you cut through the WSJ's "let's all hate on California" nonsense, is a sound one: California is not doing itself any favors with this stuff, given how the state's economy is not bouncing back. And Kotkin's point about the state being divided into a playground for the rich and a haven for the poor simply echoes a point made by Californian's superstar historian Kevin Starr several years ago. Like it or not, those of us with financial security in the state seem to feel little urgency to change the regulatory and approvals process to help out those who need a job at an ice cream shop.

Dowell Myers, one of my brilliant colleagues, just released a major report showing that the state's growth numbers are not good. Here's the shorter news story.


The analysis also estimated that growth among California’s seniors, those 65 and older, will quadruple within the next 20 years, driven by the aging of the large baby boomer generation.

At the same time, growth among the main working-age population ages 25 to 64 is expected to slow, and virtually all the projected growth, or 98 percent, is comprised of native-born children of immigrants, or second-generation immigrants.

“In less than 20 years, the baby boom generation will all be senior citizens, and these projections show their replacements in the workforce will be the children of immigrants,” Pitkin said.

So basically, California turns into a great, big retirement village. Will those seniors stay or will they go? It's hard to tell: if it's difficult for people to start up the sort of businesses that help seniors cope with their new needs in the market, seniors just might leave for places that are more friendly to them where housing costs are lower. That means some of the concern about housing prices might alleviate.

All of this, however, is bad news for the bullet train, the other object of Kotkin's scorn. The projected use for the train and justifying investment has hinged on population numbers that don't fit the state's new reality of economic stagnation. Myers is too optimistic and polite to say it, but that's essentially what his report shows. If there aren't any new opportunities, people can't be pulled to the state.

All that just brings up the typical Keynesian arguments that if you spend state money on the train, the economy will grow, there will be jobs, etc etc and so what if we over-estimated the future population of the potential customer base? If you are not a Keynesian, spending billions on the train makes little sense in the light of these projections.