6.4.09

IT'S BEEN GOING ON FOR THIRTY YEARS. Automobile manufacturing used to be a knowledge-intensive, high-technology business, but that was a century ago. Perhaps that's another way of contemplating the nostalgia for traditional crafts. Some time ago, though, I noted that the nostalgia might be a formula for perpetuating poverty.
Consider an economy with a monopoly productive sector and a competitive productive sector, and one input supplied by a monopoly and another supplied competitively. Identify the allocative inefficiencies. Now turn the monopolies competitive. Evaluate.
I continued with an observation about who would be more likely to seek improved opportunities.
Michigan continues to lead the U.S. in outmigration. That's been going on since the late 1970s. (I count as a wash: Madison to Wayne State in 1979, Wayne to Northern Illinois in 1986.)
I also observed,
Question: if not for Michigan, State, Tech, and Wayne, would the exodus from Michigan have been worse? Different question: How much Illinois human capital is being developed in Madison and Ann Arbor and East Lansing and Kalamazoo?
Now comes the Detroit News (motto: you can read about it on Wednesday) with Outflow of skilled, educated workers crimps Michigan's recovery.
People are leaving Michigan at a staggering rate. About 109,000 more people left Michigan last year than moved in. It is one of the worst rates in the nation, quadruple the loss of just eight years ago. The state loses a family every 12 minutes, and the families who are leaving -- young, well-educated high-income earners -- are the people the state desperately needs to rebuild.
There's a passage from Norman Macrae, possibly in this article, about the reaction of creative people to oppressive taxation and intrusive government, that includes the possibility of people telecommuting from Tahiti. There doesn't appear to be much thinking in Michigan about creating Tahitian conditions.

That recovery will be harder because of the people who have left, said University of Michigan economist Don Grimes. "You can't grow your economy if you're shrinking. You basically have an infrastructure built around a certain size of economy, and if you shrink below that scale, you have fewer people to support the infrastructure."

That can mean higher taxes, poorer services or both.

Some of those costs won't be felt for decades.

"When you lose people in their 20s, in five years, you won't have their kids entering school; in 20 years, you won't have their kids entering the work force," Grimes said. "It puts you in a downward spiral."

Indeed, demographers have said the sharp population losses from 1979 to 1983, when the state lost nearly a half-million people in four years, created an "echo dip" in the state's population nearly two decades later. The current migration, which has seen similar total losses, has lasted twice as long.

Those total losses are out of a smaller population base.

George Leef adds a comment on the article.
There is a line in the piece that annoys me, though — that college graduates "drive the economy." No, they don't. Russia has a much-higher percentage of college graduates than the U.S. and yet its economy is listless. What drives the economy is production and innovation. College grads can contribute to that, of course, but the degree is neither necessary nor sufficient. And if the right economic conditions are missing (freedom, low taxation, secure property rights and contracts), even the most brilliant and highly educated people will produce little.
There's a P. J. O'Rourke wisecrack in Eat the Rich about the mystery of Russia, where chess is a spectator sport, being a place where people boil stones for soup. Nobody would confuse Michigan with Russia, although there are a few strong chess players.

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