The tech industry is fed up and leaving San Francisco in particular, the valley and California in general. Covid, like a war, speeds things up. If you're a young economist you could do worse than study this latest chapter in the (likely) decline of great cities (SF, NY, LA? Chicago?) and the movement of people ...
John H. Cochrane considers the following as important: Commentary, Housing, Inequality, Real Estate, Taxes
This could be interesting, too:
John H. Cochrane writes Low Interest Rates and Government Debt
John H. Cochrane writes FDA vs. Astra-Zeneca; bureaucracy vs. evolution and exponential growth
Menzie Chinn writes Some Asset Market Reactions
John H. Cochrane writes Nothing matters but reproduction rate R
The tech industry is fed up and leaving San Francisco in particular, the valley and California in general. Covid, like a war, speeds things up. If you're a young economist you could do worse than study this latest chapter in the (likely) decline of great cities (SF, NY, LA? Chicago?) and the movement of people and industries to friendlier, safer, and more welcoming climates. If you're a young political economist, whether they bring with them the politics that destroyed the places they left behind -- slash and burn progressivism -- will be equally interesting to watch.
I ran across a great essay on this saga by Mike Solana.
The latest fashion is to claim it's immoral for tech founders and companies to leave, after they have "extracted" so much wealth here. Mike skewers this new fashion, pointing out that tech companies and their founders created wealth here. Microcode is not mined like gold.
I take extreme issue with the notion that industry leaders have taken something from the “community,” ...This is precisely the opposite of reality. ... They are the network. Technology workers do not “extract” value from the region, they are what makes the region valuable.
...the Bay Area’s nativist, anti-immigration political climate has certainly not created the tech community, which is populated largely by immigrants, be they from out of the state or out of the country
But he really digs in on the culture and politics that is going to send this golden goose packing to Austin:
the technology industry has brought tremendous tax revenue to the Bay Area. The budget of San Francisco literally doubled this decade, from around six billion to over twelve billion dollars. With our government’s incredible, historic abundance of wealth, the Board of Supervisors has presided over: a dramatic increase in homelessness, drug abuse, crime — now including home invasion — and a crippling cost of living that can be directly ascribed to the local landed gentry’s obsession with blocking new construction. ...
"Landed gentry." That's really good.
The San Francisco ruling class did secure a few wins this decade. They managed to ban vapes, scooters (effectively), electric bikes (kind of), and those little plastic swords that free men in free countries are still allowed to stick in cocktail fruit. They failed to ban busses and cafeterias, though somehow succeeded in turning both into symbols of billionaire greed. They also instituted the “San Francisco Office of Emerging Technology,” which in theory prohibits almost every future company and technology from existing in the city without prior approval from the local government. Laws aren’t enforced in San Francisco, so the OET hasn’t really come up. But a company in this city can now be attacked by the Board at any moment, for almost any reason. This is the nature of ambiguous laws in one-party states. In a country where nothing is technically legal, punishment can be meted out for almost any whim or unjust personal reason that can be imagined by small-minded people with political power.
Mike describes the higher tax - lower services - people leave spiral vividly
let’s take a closer look at this issue of money. On one hand we have insane, nativist property tax codes, which punish new homeowners at the expense of longtime landlords, and on the other our income taxes have skyrocketed. Since income taxes are structured progressively, the state has backed itself into a position of extreme uncertainty, as the top one percent of earners pay half the state’s taxes — while politicians argue the state’s wealthiest men and women, who already pay more in taxes than the wealthiest men and women of any other state and most free countries in the world, are not paying their “fair share.” As if rudimentary economic threats were not enough, politicians have made cultural platforms of their anti-technology, anti-industry attitudes, and have done everything in their power to drive our top one percent of earners out of the state. In this, our politicians are succeeding. [ Link to Elon Musk's departure]
Such success in driving top earners from the state only further exacerbates the state’s political disasters, with our government of bloated, corrupt services now starving for income. This has in turn increased the political appetite for all manner of draconian, anti-business practices ...everything is structured to further deteriorate.
A donation to the food bank? Not gonna fix this.
Fortunately, tech industry “extraction” is something other regions of the country are welcoming with open arms.
Local activists bemoaning gentrification, you are about to get what you have always wanted, good and hard. If you haven't been following, the latest gems out of Sacramento are a 16% top state income tax and a 0.4% wealth tax. And perhaps a sign saying "don't slam the door on your way out."
Mike's second point is more novel. Why did an industry worth billions not take over the local government? We are used to stories of capture, not destruction, of host-disease coevolution in which the virus stays alive by learning to infect without killing. His political analysis:
had tech workers actually assumed a significant measure of political influence, and led in local politics, San Francisco would today be one of the greatest cities in the world. But not only was such political influence not achieved, it was never attempted....
... the Bay Area’s landed gentry class, which is in complete political control of the region and has been for decades, did almost everything in its power to block construction as demand to live in the region skyrocketed. This artificially ballooned real estate values — along with the cost of rent — to historic, national highs. While the technology industry generates tremendous sums of money for the region in tax revenue, the number of actual technology workers has always been relatively small. In San Francisco, we were never anything close to a voting majority, and of the minority of workers who lived in the city most were not politically active. From here, it was a tale as old as time: politicians in San Francisco scapegoated tech workers for the housing crisis the government created. The scapegoating, amplified by a thoughtless press, catalyzed anti-tech sentiment that increasingly influenced ballot propositions and local political races. Tech workers, ensconced in the world of their work, remained more or less oblivious of these developments.
On the national scene, Big Tech has woken up fast to the fact that they are now regulated oligopolies and need swaths of lobbyists. Perhaps that's easier than keeping local politics under control.
I do think the technology industry can and should be blamed for one thing: taking this bullshit for as long as it has. While the industry has caused none of the problems it’s accused of causing, absence of tech workers from local politics has been problematic, if understandable. The technology industry is ripe with opportunity, and attracts people excited by the prospect of building technologies and companies that have never before existed, unencumbered by bureaucracy, and limited only by the bounds of their imagination. No one moved to San Francisco because they wanted to run for the local Board of Supervisors. I get it. But if 2020 proved anything, it’s local politics is almost the only thing that matters in terms of our day-to-day existence, and if the deterioration of San Francisco can’t be stopped, I at least hope it will be remembered. We can ignore local politics, but local politics will nonetheless shape our lives, and a sufficiently unhinged City Hall can destroy almost anything.
He has a good number of ideas, but they boil down to this:
In any case, regardless of the city we land in, we have to get involved. There’s no ignoring the rest of the world anymore. Grab your shovels, folks, we’ve got work to do.
Perhaps. But I think he's a little too kind. To the extent tech is political it is cloyingly progressive. If you have a gazillion dollars, you really don't care about building codes that double the cost of a house, or zoning codes that means all the little people have to drive 50 miles each way, you just outbid everyone else. When tech does go in to politics it tends to do what every other industry does: support those in power and demand exemptions for yourself. Even the massively funded effort to overturn the idiotic AB5 (Uber drivers) just got an exemption for Uber and Lyft, it did not try to cure the root problem.