Opinion: The herd heads for Texas; is economic freedom why?

I just checked the U-Haul website to see how much it would cost to rent a small truck one way from Dallas to San Francisco: $1,462 was the price. Not bad. Next, I wondered what the price would be if I was going from San Francisco to Dallas. U-Haul will rent me a truck one way from San Francisco to Dallas for a whopping $2,599 — that's 77% more expensive than in the other direction. This can’t be because of wear and tear on the truck, the distance, 1,732 miles, is the same. Other city pairs I checked show the same pattern. For instance, the rental price from Dallas to New York City is $1,130, but from New York City to Dallas is 89% higher, $2,138.

Texas Sen. Ted Cruz has more than once taken to Twitter to claim these truck rental price differentials show that, “The nation could stand to learn a thing or two from the way we do things in Texas!” Sen. Cruz no doubt believes California is pushing people out due to its higher taxes with more costly regulations compared to states like Texas, and these price differentials are all the evidence he needs to prove his point. Now, I have nothing against Sen. Cruz, but I’ve noticed politicians have a way of cherry-picking data to fit their political points. As an academic economist, I’m trained to get large samples of data to see if the patterns we see in the “big data” conform with our anecdotal evidence.

With that in mind, Alex Cardazzi, an economics professor at Old Dominion University, and I set out to check Sen. Cruz’s claim. We gathered the U-Haul one-way rental prices from 378 different American cities to every one of the other 377 cities. This comes to 142,506 different one-way rental prices between all the city pairs. We just published our findings in a paper in the American Journal of Economics and Sociology.

In the paper, we used the metropolitan-area economic freedom index produced by my SMU colleague, Dean Stansel, to test Cruz’s hypothesis. To get a high score on Professor Stansel’s index, cities must keep their taxes and spending levels low and keep regulatory burdens (e.g., minimum wages) on labor markets light. Among the 52 largest metro areas, Dallas-Fort Worth ranked 5^thfreest while San Francisco was 38^th and New York City 44^th. These rankings certainly seem supportive of Sen. Cruz’s position.

Perhaps people are moving just because Texas is growing faster than California and New York and they don’t really care about economic freedom as such (though of course Cruz would argue that Texas is growing faster precisely because of economic freedom.) Our statistical analysis showed that even after controlling for other factors like income and population growth, there was higher demand to move from less free locales to more free locales, and this was an explanatory factor in driving up U-Haul prices from places like San Francisco and New York to Dallas-Fort Worth.

These results are not surprising. Several academic papers have been published in recent years demonstrating that domestic and international migration patterns are heavily influenced by differential levels of economic freedom. For example, one study by UTEP economics professor Nathan Ashby showed that Mexican immigrants to the United States tend to flee from relatively low economic freedom Mexican states to relatively high economic freedom American states.

The good news is that Cruz wasn’t cherry-picking after all. Locations with more economic freedom like Texas really are attracting people away from less free locations like California and New York, and you really can see the evidence of that in truck rental prices.

Lawson holds the Jerome M. Fullinwider Chair in Economic Freedom and directs the Bridwell Institute for Economic Freedom in the Cox School of Business at SMU.

BOB EHLERT

SMU COMMENTARY EDITORDevelopment and External Affairs

214.768.7685/916.792.4260

BEHLERT@SMU.EDU|

This article originally appeared on Austin American-Statesman: Opinion: The herd heads for Texas; is economic freedom why?