David R. Henderson  

Curley Effect in California

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Diamond Age Watch... The Bettor's Oath...
James Michael Curley, a four-time mayor of Boston, used wasteful redistribution to his poor Irish constituents and incendiary rhetoric to encourage richer citizens to emigrate from Boston, thereby shaping the electorate in his favor. Boston as a consequence stagnated, but Curley kept winning elections.
This is from Edward L. Glaeser and Andrei Shleifer, "The Curley Effect," May 2002.

In their paper, Glaeser and Shleifer write:

We call this strategy--increasing the relative size of one's political base through distortionary, wealth-reducing policies--the Curley effect. But it is hardly unique to Curley. Other American mayors, but also politicians around the world, pursued policies that encouraged emigration of their political enemies, raising poverty but gaining political advantage. In his 24 years as mayor, Detroit's Coleman Young drove white residents and businesses out of the city. "Under Young, Detroit has become not merely an American city that happens to have a black majority, but a black metropolis, the first major Third World city in the United States. The trappings are all there--showcase projects, black-fisted symbols, an external enemy, and the cult of personality" (Chafets 1990, p. 177). Zimbabwe's President Robert Mugabe abused the white farmers after his country's independence, openly encouraging their emigration even at a huge cost to the economy.

I think something similar is happening in California. California has become a heavily Democratic state. The majority Democrats in the legislature and the Democratic governor are pursuing highly wasteful projects: a "high-speed" rail that probably won't be high-speed but will surely be high-cost, and higher marginal income tax rates (already among the highest in the United States) on the highest-income people, to name two. They don't seem to be restrained by the worry that many of the most-productive people will leave and are leaving the state. You can attribute this simply to ideology, and I'm sure that's an element. But I also think one of the Democrats' goals is to reduce the population of potential anti-Democrat voters so that their majority is assured.

Will that hurt many of the people who vote for them? Sure. But we need to distinguish between the fortunes of those who vote Democrat and the fortunes of the Democratic politicians. The California state government pays legislators pretty well in pay and perks when you consider the opportunity costs of many of them. And the state government is larded with high-paying sinecures for those few who ever lose an election or get redistricted out.


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CATEGORIES: Public Choice Theory



COMMENTS (32 to date)
Brian writes:

I'd be careful with making this sort of argument. It sounds like a Fully General Counterargument against the political group of your choice, which is never a good sign. I'm not saying it doesn't happen, but it probably happens a lot less than you think it does. (for example, evolutionary group selection theories were in vogue several decades ago, because they worked so well as a Fully General Argument in support of any theory you wanted to support)

N. writes:

@Brian --

Really? It sounds to me like a fairly cut-and-dry example of getting more of what you subsidize and less of what you tax. At the margins, isn't that the way of things?

Philemonloy writes:

Seems to fit within the explanatory framework of de Mesquita, Smith, Siverson and Morrow (2003) quite nicely.

Andy writes:

I don't know if this is actually the plan of the Democratic government, but I don't think that it's working as well as your other examples. After all, it's a much more significant change to move out of a state than into a suburb.

Ken B writes:

What an interesting idea. I take it that intent is necessary to classify it as the Curley effect; otherwise it looks like a Mancur Olson style ratchet mechanism. I as a politician find pandering to green eyes buys me votes, this leads me to policies detrimental to brown eyes, and brown eyes leave my district. No intent just feedback and concetrated concern.

So to diagnose intent, absent a paper trail, one might look at rhetoric. Us vs them, essentialist thinking. Seems to fit Detroit from what I know, and seems to fit California pols from the little I see. Brian's point is a good one (and there is little I enjoy more than a dig at group selection) but maybe there's something here.

sourcreamus writes:

This seems directly contradictory to what Caplan writes about immigration. You and him should have a little debate about it.

Alex Nowrasteh writes:

Sourcreamus,

If immigration is to blame for CA's demise, how do you explain Texas? They both have massive immigrant communities but very different public policies. Could it be that the GOP in California declared war on immigrants, so they got clobbered after a few years and the Texas GOP hasn't been that stupid? Could it be that the Texas state government's structure and institutions are biased toward better policies? Something else?

david writes:

Don't the high-income in California vote disproportionately Democratic? The electoral map is almost uniformly an urban/rural divide rather than an income class divide. Or an ethnic one.

Jeremy, Alabama writes:

I made a similar point in a thread about education, but I'm glad to learn that the effect has a name.

In Alabama, if you don't like the school you are zoned for (and there are plenty of bad ones) you have to move house (and there are plenty of good schools, too). So, school zones self-select into parents that don't care or won't undertake the inconvenience, and those that do.

Collin writes:

David,

Careful what you saying as you starting sound like Pat Buchanan.

David R. Henderson writes:

@david,
Don't the high-income in California vote disproportionately Democratic? The electoral map is almost uniformly an urban/rural divide rather than an income class divide.
You may well be right: that would certainly undercut my claim.
@Collin,
Careful what you saying as you starting sound like Pat Buchanan.
Or like Harvard economists Edward L. Glaeser and Andrei Shleifer.

Daniel Klein writes:

Great post.

Even if there is no deliberate intent, the mechanism has a logic in it. I've been wondering if this is happening to California.

It also has some applicability in case of academia.

Yancey Ward writes:

I honestly can't see this as a deliberate strategy, but there can be no doubt that the incentives will push migration patterns in exactly this way.

Foobarista writes:

One of the things that is happening is an odd optimization to jobs that both pay well and involve little in the way of "ick". The marginal overhead involved by regulation is less on jobs that pay well since the cost tends to be fixed per headcount, and since Hollywood and tech seem "clean", rich eco-warriors can fly their private jets without guilt as long as they tithe to Al Gore (using carbon credits).

If there's a "model", it would seem that the idea is to tax the people with the good jobs so you can subsidize the people who can't find more ordinary jobs in the now-gone private sector, either by having them work for the government or collect benefits. For the low-skill businesses that have to exist, let them hire illegals so they can avoid regulatory red-tape while still providing cheap services (and you effectively cut off this labor market from citizens).

Unfortunately for this "model", overhead still matters, so Silicon Valley becomes a place where you have your head office, while you have big body-counts elsewhere in tech work that involves lots of bodies.

Tony L writes:

I just wish the Democrats would stop leaving and going to Northern Virginia. My low tax and low regulation state is now being overrun by Democrats that don't want to live in the northeast anymore because of taxes. Of course, once they come to Virginia they want more taxes and more government. Uggh.

cassander writes:

The strategy doesn't have to be conscious to be successful. If you adopt a program that just happens to chase out the people who aren't in your coalition, you'll win elections whether you planned it that way or not. The Democrats in California do not want to ruin the state, and do not think they are ruining the state, but in ruining it, they will get elected regardless.

SheetWise writes:

david writes: "Don't the high-income in California vote disproportionately Democratic?"

The rich that are highly visible tend to support Democrats -- but I don't believe they vote that way as an income group.

"The electoral map is almost uniformly an urban/rural divide rather than an income class divide."

And your argument is that the urban areas represent the rich? Again, I think you're confusing perception with reality.

Bryan Willman writes:

In any case, the end game is self defeating even in electoral terms.

So there's only one party left. Result - instead of running against a republican in the election, you now face death struggle against another democrat in the primary.

There will always be "competition", it just may all wear the same labels.

Saturos writes:

@Brian, and what exactly is the argument against Fully General Counterarguments?

Combine the Curley Effect with Bryan's theory and you get a Truly Scary Scenario.

Saturos writes:

Irrational voter theory may help defend David Henderson's argument against @david's criticism.

Steve Sailer writes:

There are two giant generators of wealth in California, Silicon Valley and Hollywood, and a few percent higher state income tax won't make much difference to people who want to play in those leagues. As Sean Parker explains to Mark Zuckerberg in The Social Network, Boston is nowheresville for software (which is pretty funny to anybody who remembers Lotus 1-2-3 and the like, but that's increasingly the way it is.)

John Palmer writes:

When are you moving, David?

David R. Henderson writes:

@Daniel Klein,
Thanks. And good point about academia. There, the effect should even be stronger because the academics don’t bear the costs of good people leaving to nearly the same extent: they can have their good people replace the ones who left.
@John Palmer,
I’m unlikely to leave California. Even with all this bad policy, I still love it; and my wife is even more inclined to stay than I am. On the local level about 5 to 10 local activists and I have won approximately 70% of the anti-tax-increase battles we’ve engaged in and so we’ve blunted bad policy a little.

jpa writes:

I am recent California emigrate (tech sector). I calculated the deficits and political situation as future tax liability (being a high income earner). I also considered the impact on real estate prices the taxes would have (causing high earners to leave, depressing prices). I decided it was a really big financial gamble to stay and raise a family in California. Even though it is the far and away best job market for me, I left for another state.

For Barack Obama it's the Julia Effect.. Keeping social mobility down for your constituents lest they desert you as they become more affluent.

However, if people won't cut off their noses to spite their faces it won't work. Or stop doing so, as in post Thatcher England.

Dallas writes:

Does the "Curley" effect require that "Curley" mentally understand the indirect reactions to his decisions? He could just be making decisions based upon his own "self interest" in a system that can create undesirable outcomes.

Businessmen are always being accused of just being greedy and operating in their "self-interest". This is true for businessmen and if the market system is correctly designed with real competition you get decisions that fulfill the desires of the customers. It is in Nordstrom's self-interest to make my wife happy, and they do.

It appears that the political class also operates in their own "self-interest" in a non-market system where power is the currency and the system design is full of perverse incentives that are counter to the interests of the whole society over a long time scale. We need to think about the political system design and how to avoid instabilities and better align the self-interest of the political class with that of the citizens.

We also need to keep in mind that most of the worst outcomes in the history of man have flowed from "good intentions" ranging from god's love and killing infidels to land for the "good" Germans (aka Nazi) or the noble idea of equality of the USSR or China. The people who created these horrible "outcomes", all believed they were doing "good".

Tom of the Missouri writes:

"Detroit has become... the first major Third World city in the United States."

Have you ever been to East St. Louis and North St. Louis? We are always neck and neck with Detroit in the annual race for "Most Dangerous City" and I think we are in the running for 1st in the Curley effect here, too.

Fascinating article by the way.

I think my home state of Illinois is neck and neck with California, too in witnessing the Curley effect, although in Illinois I guess it could also just be Chicago style corruption combined with stupidity. Think Blago and those that elected him - twice.

David R. Henderson writes:

@Tom of the Missouri,
Yes, I have been to East St. Louis. It’s not a major city. In any case, I was quoting them to lead into my point; doing so didn’t require that I agree with them, although, on the Detroit point, I do.
Good point about Illinois.

Josh S writes:

I don't think it really matters whether there's a conscious desire on the part of the politician to drive his opponents out. What is needed for the "Curley effect" are two factors:

1. Policies that harm "Curley's" opponents more than they harm his supporters.

2. Those policies must be extremely popular with his base.

For example, in New York, destroying the financial sector may very well indeed drive quite a few potential Republican voters out of the state, but so many people's jobs depend on it--and they know it--that such a move would be hugely unpopular. In California, the political left is populated by people who don't just want free stuff, but are overtly hostile to private enterprise.

Joel Johnson writes:

Not a rhetorical question: Can anybody point to research that shows how differences in marginal tax rates cause migration? I think the evidence is shaky. There is more heterogeneity across states in many other dimensions: house prices, energy costs, education quality, etc.

David? Anybody?

sourcreamus writes:

The difference between Texas and California is not immigrants but policy as you say. But immigration can eventually change the government which will can then change policy. California has reached that point and Texas has not.

Sleemo G writes:

California is different from Detroit. The weather and topography are too good for all the wealthy people to leave California. Sure, LA is a hellpit, but it will take lifetimes to reduce Orange County to a similar condition.

As for Detroit, does it still exist? I thought they were bankrupt and letting parts of it return to its former prairie terrain?

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