Living costs and real poverty and wealth

In his book The Nine Nations of North America, Joel Garreau thirty-two years ago said that the poorest state in the United States, if one adjusts for cost of living, was Maine and not Mississippi (though he said that the poorest places in all of North America were Canada’s Maritime Provinces of New Brunswick, Nova Scotia and Prince Edward Island).

My mother and brother tend to deny that in fact the New England states are poorer than the South, arguing that their large welfare states mean poverty is not nearly so bad for those who lack money.

Below is a table from a 2008 survey of all states and the District of Columbia compared in terms of wealth adjusted for cost of living, along with the percentage of residents receiving welfare payments.

	Median Household Income	ACCRA Cost of Living Index	Adjusted Median Household Income	Percentage of residents on welfare
Hawaii	$67,214	163	$41,236	3.1%
District of Columbia	$57,936	137.9	$42,013	4.3%
Alaska	$68,460	133.93	$51,116	6.1%
California	$61,021	131.46	$46,418	3.2%
Connecticut	$68,595	128.8	$53,257	2.8%
New York	$56,033	128.02	$43,769	3.0%
New Jersey	$70,378	127.23	$55,316	2.1%
Maryland	$70,545	125.4	$56,256	1.6%
Rhode Island	$55,701	121.7	$45,769	2.8%
Vermont	$52,104	119.9	$43,456	2.9%
Maine	$46,581	119.2	$39,078	4.8%
New Hampshire	$63,731	117.1	$54,424	2.4%
Massachusetts	$65,401	117.1	$55,851	2.7%
Oregon	$50,169	105.03	$47,766	2.4%
Arizona	$50,958	104.27	$48,871	2.1%
Washington	$58,078	103.59	$56,065	3.4%
Nevada	$56,361	102.5	$54,986	2.2%
Minnesota	$57,288	101.58	$56,397	3.1%
Montana	$43,654	101.3	$43,094	2.2%
Pennsylvania	$50,713	100.87	$50,276	3.2%
Colorado	$56,993	100.83	$56,524	1.8%
Delaware	$57,989	100.45	$57,729	2.1%
New Mexico	$43,508	99.9	$43,552	2.4%
South Carolina	$44,625	98.62	$45,249	1.7%
Wyoming	$53,207	98.3	$54,127	1.3%
Virginia	$61,233	98	$62,483	1.6%
Florida	$47,778	97.99	$48,758	1.4%
Michigan	$48,591	97.6	$49,786	3.4%
Illinois	$56,235	97.5	$57,677	1.8%
Louisiana	$43,733	96.91	$45,127	1.4%
Wisconsin	$52,094	96.81	$53,811	1.7%
North Carolina	$46,549	96.43	$48,272	1.5%
Utah	$56,633	95.25	$59,457	1.5%
Indiana	$47,966	95.02	$50,480	2.6%
Iowa	$48,980	94.77	$51,683	2.2%
North Dakota	$45,685	94.7	$48,242	1.9%
West Virginia	$37,989	94.68	$40,124	2.3%
Ohio	$47,988	93.64	$51,247	2.6%
South Dakota	$46,032	92.8	$49,603	2.1%
Missouri	$46,867	92.7	$50,558	2.3%
Georgia	$50,861	92.41	$55,038	1.3%
Idaho	$47,576	92.07	$51,674	2.5%
Alabama	$42,666	91.86	$46,447	1.3%
Nebraska	$49,693	91.67	$54,209	2.3%
Kansas	$50,177	91.48	$54,850	2.3%
Mississippi	$37,790	91.43	$41,332	1.8%
Texas	$50,043	91.26	$54,836	1.6%
Arkansas	$38,815	90.18	$43,042	2.0%
Oklahoma	$42,822	89.48	$47,857	3.3%
Kentucky	$41,53	89.18	$46,578	2.4%
Tennessee	$43,614	89.05	$48,977	2.4%

A more recent look has suggest that Hawaii, though still the fifth richest state by raw income, is in fact the outright poorest when adjusted for its exceedingly high living costs, deposing Maine from that status for the first time in forty years if what data I have are accurate.

One telling result from these tables is that the Pearson correlation coefficient between cost of living index (by which this table is sorted) and percentage of population on welfare is +0.26, whereas that between income and percentage of population on welfare is near zero. This really does completely contradict the claims of my mother and brother that the large welfare states of the Northeast ease poverty, and may show that in fact their high tax rates (“Taxachusetts”) actually mean that they are even poorer than the figures suggest. Efforts to correct for tax burdens have never been made; although when calculating Gini coefficients of income inequality this correction is routine.

A telling feature of the list is how, with the conspicuous exception of Alaska, every state with ACCRA index above 106 is solidly Democrat and mostly atheist, whilst the thirteen states with lowest ACCRA indices are all Republican. This really suggests that living costs are, as I have argued for the past seven years or so, the primary determinant of a region’s politics. It also suggests that:

1. there is a strong relationship between poverty and politics
2. that this is driven by the difference is the wants of various populations rather than nominal wealth
3. that conservatives are conservative because of their limited wants
4. conservatives’ willingness to tolerate lower quality of life as are found in the Republican states or in Australia means they gravitate to areas with poor services but more space
5. the greater purchasing power of conservatives may increase their happiness
6. over the long term, the effect of a decline in the purchasing power of money since the 1970s may be much greater than actual real incomes suggest
• an idea put forward by Austrian economists who argue that counting the public sector exaggerates wealth and prefer “Private Product Remaining” to measure wealth.
• Austrians even believe that workers in the public sector should not be counted in wages and that this may further lower today’s real wages

Young, glaciated regions with no endemic species because their flora and fauna are a mere 10,000 years old have the dilemma of lowering their living costs and size of government to a competitive level. In ecological terms, regions like New England and Scandinavia should have the lowest living costs in the world rather than the highest, and it is an interesting question whether a gold standard or even an international silver standard would be capable of doing this in the absence of farm subsidies and other controls.

Indeed, proving that an international commodity money could do this is a big task for free market economists because it is only by reversing the present gradient in living costs that an international commodity money could encourage conservation in the regions - Australia and subequatorial Africa - that need the highest standard of conservation for their unique low-productivity ecosystems. If and only if their abundant mineral resources could price other “replaceable” exports from Australia and subequatorial Africa out of the world market under an international commodity money, there would be hope for two pressing problems under our present fiat money system.