Over at City Journal Steve Malanga makes a point that should be obvious:
The ultimate resource, economist Julian Simon once declared, is human innovation. Many states and cities have taken him at his word, increasingly trying to lure those citizens most likely to beget innovation—especially the highly educated, knowledge-based workers dubbed the “creative class†by urbanist Richard Florida. But just how to bring those workers and the economic activity they produce to a state or city has been a subject of dispute. Florida himself suggests that the creative class is largely drawn by a certain urban lifestyle, an “indigenous street-level culture—a teeming blend of cafes, sidewalk musicians, and small galleries and bistros.†Creative-class advocates argue that taxes matter little to this group.
A new study suggests they’re wrong, and that state tax rates do affect the migration of highly paid workers—in this case, coveted “star scientists.†The study, by University of California-Berkeley economist Enrico Moretti and Daniel Wilson of the Federal Reserve Bank of San Francisco, and published by the National Bureau of Economic Research, estimated that a nearly 1 percentage point decline in New York State’s top tax rate produced a 2 percent gain in net migration of scientists—with fewer leaving a place and more willing to come there. State taxes thus have a significant influence on the “location of star scientists and possibly other skilled workers,†the authors contend.
Yes, members of the “creative class” do respond to incentives just like everyone else. However, taxes aren’t the only incentive. There are other things like climate, geography, culture, and cachet.
Why do I point this out? Chicago is not San Francisco. Not only does San Francisco have a benign climate going for it, you can go to the ocean in the morning and be in the mountains in the afternoon. As it turns out that was precisely the advertising pitch during the first California real estate boom more than a century ago.
That kind of a pitch isn’t attractive only to people who take advantage of those natural assets. There are millions of Californians who rarely go either to the beach or the mountains but they still like the idea of it.
Chicago doesn’t have a benign climate or the ocean or the mountains. While it does have some world class cultural assets many cities do, including San Francisco, Los Angeles, and San Diego. It doesn’t have the cachet of New York. The “City of Broad Shoulders” doesn’t have the attraction of the “Big Apple”.
That means that a Chicago where housing prices are as high as in other large cities and that has taxes as high as Los Angeles or New York (or higher) will find itself unable to compete.
