I Can Read Mississippi With My Eyes Shut Tight

{As is my tradition, names of states and cities have been changed, even when the reference is pretty obvious. Colosse is a large city in the South. Zaulem is a city or collection of cities in the Pacific Northwest. Cities refer more to the metro area than the municipality. Arapaho and Deseret are states or regions in the Mountain West, with the latter having a significant Mormon population.}

The Spectator’s Fraser Nelson made the following, surprising, observation:

[I]f Britain were to somehow leave the EU and join the US we’d be the 2nd-poorest state in the union. Poorer than Missouri. Poorer than the much-maligned Kansas and Alabama. Poorer than any state other than Mississippi, and if you take out the south east we’d be poorer than that too.

I’ve been asked (on Twitter) to link to my source, but I’m afraid there’s no study to point to. It’s original research. But it’s also a fairly straightforward calculation. You take the US figures for GDP per state (here), divide it by population (here) to come up with a GDP per capita figure. Then get the equivalent figure for Britain: I used the latest Treasury figures (here) which also chime with the OECD’s (here). A version of this has been done on Wikipedia, but with one flaw: when comparing the wealth of nations, you need to look at how far money goes. This means using a measure called Purchasing Power Parity (PPP). When this is done, the league table looks like the below. I’ve put some other countries in for comparison.

Washington Post’s Hunter Schwartz says that the numbers are legit, the only exception being that Nelson only compared PPP’s on the basis of national rather than state data for the states. Tim Worstall was already on top of it, discovering that making that adjustment would make Britain even poorer than Mississippi:

Fraser has used the average PPP for the US. But as we can see there’s different PPP adjustments for different States. If $100 will buy you $115 worth of goods in Mississippi this is the same statement as the correct PPP adjustment for Mississippi incomes, or in this case GDP, is 100:115. Or, if you prefer, Mississippi’s properly PPP adjusted GDP per capita is $40,400 or so: well above the UK’s $36,200. {…}

Britain really is poorer than even the poorest of the US States, yes, including even Mississippi.

Now, there are a few caveats here. Nelson is looking at means rather than medians. This may not be as revealing as one might think, however, because Mississippi doesn’t have many Bill Gateses to skew his average and he does look at nationwide income percentiles. Also, the PPP is not without its problems, though raw measurements that do not account for purchasing power are themselves hopelessly skewed. Further, and importantly, this is only one metric of comparison between places. The overwhelming response over at OTB was, basically, “So? I’d rather live in London than Hattiesburg” with a bunch of reasons why.

Where one would prefer to live is beside the point, though. Where it’s better to be poor and reliant on government services is similarly beside the point. Unless the point is “America rules, Britain drools.” Which shouldn’t be the point, because that’s not an empirical question and definitely not one that can be measured on any particular metric.

Excluding Colosse, the most favorite place I have lived was Zaulem in the Pacific Northwest. It’s not even close. The least favorite place is a close contest between rural Arapaho and small city Deseret, with enough differences that it’s hard to compare. But Zaulem is the place away from home I felt at home. I was a decent match culturally, I liked the people there, got along well with them. There were only two things that I didn’t like about it. First was the food. Second was the cost of living being so great that I had a lot of difficulty imagining it as a landing spot, even if Clancy could work there.

Meanwhile, my least favorite places were also the most affordable. Coincidence? Not at all! As the OTB commenters astutely point out, put most succinctly by Rafer Janders:

Here’s the crux of the fundamental misunderstanding of economics in the sentence above: living in London is itself the luxury.

If life in Hattiesburg was actually more luxurious, it would cost more — but instead it costs less. A lot less. All you’re saying is that with the same amount of money, a teacher can buy lots of a cheap and not very valuable thing (space in Hattiesburg) or a smaller amount of an expensive and very rare thing (space in London).

Not only could I not agree more, it’s similar to a comment I myself made recently, which is that living in a place like San Francisco or New York is a luxury good. For the most part. As James Joyner points out in the threat, careers do sometimes demand it. Not as often as you might think, though. If you’re in banking, for example, South Dakota and Charlotte have a lot of opportunities for you. Lawyer? South Dakota will pay you to go there. There are acting jobs in Louisiana. There is a music scene in Nashville even if you aren’t a country musician. For the most part, if it’s not a career expense, the product of family obligations, or somewhere you’re just stuck, living somewhere expensive is something that you choose to spend your money on.

As much as I like Zaulem, I simply cannot justify spending money on living there unless I have money to burn. Others choose to live there, or have specialties where the cost of living is outstripped by the higher wages, but that’s less often the case than people think. People say “Yeah, it’s cheaper to live in X but the jobs don’t pay as much,” as though there is some sort of linear relationship. There isn’t. Some places are genuinely more affordable to live than others. Make your decisions accordingly. There’s nothing wrong with spending money on location.

On paper, at least, I feel like my wife and myself have the best of all worlds at the moment. We’re within two hours of three International airports and two major metropolitan areas. We’re within a day’s drive of New York. But when we were hunting for a house, we were also able to put a cap at $400,000 for a 2,000+ square foot house and have an amazing number of options. The house we bought had a price closer to half of that, with almost 3,000 square feet. But the costs are there. It would be a lot easier for me socially to be somewhere else, either in one of those metropolitan areas or one of the smaller (but significantly sized) cities nearby.

The reasons that the US is so much more affordable may be related to taxes and policy somewhat, though is also related to a great many other things. We’re sitting on a nation where land is plentiful, which matters a lot. It would be interesting to see how the provinces of Canada, or the states of Australia, stack up along the same metrics to compare and contrast. Britain is pretty naturally confined by the fact that it’s an island. On the other hand, Britain’s land-use policy seems to lend itself to higher costs of living. There doesn’t seem to be a whole lot of interest in tackling that issue as something beyond trying to spread the money around to help people afford it. The same is true, to an extent, in some cities that view the solution to the housing shortage as something that calls for more subsidy rather than more units. There is something goofy about people spending $2,000 on a closet apartment rolling their eyes at the excesses of someone spending $1,000 on a “McMansion.”

On the other hand, the expensive places are taking hands from a stacked deck. At the end of the day, just as Britain is an island, the Bay Area is a bay area, hemmed in by mountains and water. So it’ll always be expensive. Some will choose to and be able to live there. Others will not be able to or will choose not to, spending their money on other things instead.

So along those lines, the charts and statistics provided by Nelson and Worstall do not ultimately tell us that much, except that some places are more expensive to live than others and salary does not always compensate. The people who don’t know that, ultimately choose not to.