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Los Angeles Business Journal

Thanks to Flourishing Market Forces, Angelenos Can Enjoy More for Less

Life in LA is better than it was in the past

Ted Balaker
August 7, 2006

If given the choice of living in today's LA or the Los Angeles of a generation ago, which would you choose? I'll stick with today's Southern California.

For the glass is half-empty crowd, let's start with the common complaints — many of which aren't as bad as they seem at first glance.

Take gas prices. As much as they hurt, UCLA researchers note that we pump a smaller portion of our incomes into our cars than we did in the 1980s.

What about LA's smoggy reputation and awful air quality? The California Air Resources Board finds the number of days that LA has exceeded the 1-hour ozone standard has dropped from 192 in 1975 to 75 last year—an impressive 61 percent drop.

And then there's the crime. Outsiders often regard LA as one giant playground for gangs, but the serious crime rate has been cut in half since 1980.

Sure, Los Angeles' economic performance hasn't been as robust as we might have liked, but the local economy is more resilient than many realize. Recall that LA has shaken off defense cuts, the '92 riots, the Northridge earthquake, and more. And despite all that, since 1979, median household income is up more than 140 percent. Business services jobs grew by 58 percent and the Milken Institute notes that in 2004, with telecommuting and technology helping entrepreneurs, LA reached a new peak in residential employment.

Some worry about income inequality, but even if the gap between rich and poor widens, that tells us little about the actual state of economic opportunity because the faces that comprise income groups keep changing. Such comparisons over time are particularly misleading in LA, where immigration constantly swells the ranks of the poor. We're fortunate that ours is a rather fluid society, in which the dynamics of a relatively free market help those at the bottom make their way up the economic ladder.

From faltering public schools to the housing crunch, plenty of problems remain in Southern California and some have gotten much worse. Traffic congestion, for instance, has gotten 150 percent worse since the early 80s. It's gone from just an irritant to a force that squeezes much of the economic vitality from the local economy, costing Angelenos $11 billion each year just in wasted gas and time.

And, of course there are the heavy hands of state and local government. Many a business has recently escaped the squeeze of high state taxes and onerous regulations by heading to Nevada, Arizona, and Texas. Bureaucracy is booming in LA, as local government now accounts for the county's largest employment sector. No wonder Forbes recently named LA the nation's most expensive place to do business.

And yet, the good still edges out the bad. One often-overlooked aspect of progress is the degree to which falling prices have improved living standards.

When measured as the amount of time someone must work to make enough money to buy something, the price of nearly everything has fallen dramatically. Buying a dozen eggs requires only about a quarter of the time an American from 1920 had to invest. What to buy a car? You'll only have to work about a third as long as your early-century counterpart.

The nationwide homeownership rate stands at nearly 70 percent, a historic high. Yet restrictions on building permits, a sluggish approval process, inclusionary zoning and other local policies have constricted housing supply in LA, catapulting home prices to new heights. Thankfully, cheaper cars make it easier for people to live in more affordable areas outside of LA and still travel into LA's economic orbit.

The bottom-line is clear: when market forces flourish, Americans enjoy more for less.

A 1970s IBM mainframe cost over $3 million, but today's consumer need only pay about $500 to buy a computer that's a thousand times faster — and better. Deregulation has lowered air fares, allowing average folks more opportunities to visit loved ones or explore faraway lands. Medical science continues to give new hope to those with age-old ailments. Laser eye surgery gives the blind sight and cochlear implants let the deaf hear. Many advances we take for granted haven't been around that long and, thanks to research in fields like genetics and nanotechnology, many more are on the way. Indeed such progress is a global phenomenon, with LA playing its part.

Los Angeles offers unlimited opportunities for entrepreneurs and consumers. We may pay more than folks in North Dakota do for a lot of things, but instead of yearning for days gone by, give me today's digital LA—with its explosion of films and state-of-the-art movie theaters, funky shops, fantastic restaurants, inviting beaches, and updated maps to the stars' homes.

Ted Balaker is a policy analyst at Reason Foundation and author of a forthcoming book on traffic congestion. An archive of his work is here and Reason's California research and commentary is here.


Ted Balaker is Producer


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