Just as one picture can be worth a thousand words, there are times in the public policy debate that a single chart sheds needed light on many issues. Such is the case with a chart posted on the American Enterprise Institute's web site. It was created by University of Michigan Economics Professor Mark J. Perry. As Perry explains it, the chart shows that “[d]uring the period from January 2011 to March 2014, there have been slightly more single-family housing starts in Houston (95,037) than in California for the entire state (94,993). In this single chart, we can understand the dynamism of the booming, expanding Texas economy and housing market compared to the stagnation of the California economy and the housing market there for new construction.”

By way of further explanation of the difference between the two jurisdictions, Perry points to recent ruminations by Washington Examiner columnist, economics professor and Hoover Institution Senior Fellow Thomas Sowell on the high costs of liberalism: “As in San Francisco and other parts of the country where housing prices skyrocketed after building homes was prohibited or severely restricted, this began in Palo Alto in the 1970s. ... Housing prices in Palo Alto nearly quadrupled during that decade. This was not due to expensive new houses being built, because no new housing was built in Palo Alto in the 1970s. The same old houses simply shot up in price. ... That is part of the unacknowledged cost of ‘open space,' and just part of the high cost of liberalism.”

That is part of the unacknowledged cost of 'open space,' and just part of the high cost of liberalism.

In other words, basic laws of economics are at work in Perry's comparison. Raising the cost of a product reduces its supply as producers reduce output. The higher costs are also reflected in decreased demand for the materials and labor skills required to produce the product. Further constricting the supply through policy externalities like land-use restrictions pushes prices even higher because more bidders are competing for fewer products. At some point, however, the cost of the product reaches such a high level that some bidders give up and go elsewhere.

As Perry notes, the median sales price of homes sold in California during March 2014 was $376,000, double the median sales price in Houston for the same month. Housing costs are only one factor in determining where people and companies locate, but it's surely not coincidental that major corporations like Toyota and Occidental Petroleum are moving from California to Texas, and a parade of other firms are relocating their California operations to Utah, Michigan and New Mexico. Neither is it coincidental that Texas has added more than 887,000 jobs since December 2007, while California is still struggling along with almost 58,000 fewer jobs than it had back then.

The lesson here is that government policies have consequences for good or ill and that people and jobs go where they are most welcomed. Texas has created a booming economy in recent years by lowering costs for businesses, including homebuilders, while California has dramatically increased them. Other states will act accordingly and so should federal policymakers.