What’s up for Minnesota’s economy?

The Center of the American Experiment published a report last week, ““Minnesota’s Economy: Mediocre Performance Threatens the State’s Future.” I wrote a critique, “That Center of the American Experiment report on the Minnesota economy? It’s politics, not economics.”  Read the report, read my piece, and make up your own mind.

Here are a couple of critiques I’ve responded to via email, in case they cross your mind: (I don’t read or respond to comments on the MinnPost page; that’s the readers’ space and they should have a place to discuss the work without any distractions from me.)

  • “The cost of living in Minnesota and South Dakota are very different and you didn’t take that into account.”  Yes, I did.  All of the data are for real GDP in 2009 dollars; these figures use state-level price indices that take account of cost-of-living differences across states. There remains the problem of rural versus urban price differences, but we could go to the relevant price indexes (available here) and I don’t think it would make much difference unless you’re comparing a move from Minneapolis/St. Paul to rural South Dakota or vice versa.
  • “You’re ignoring CAE’s point that Minnesota’s performance is mediocre.”  No, I’m not ignoring it, I’m questioning it. Is an average growth rate a mediocre growth rate?  The answer is no, it is not necessarily.  The literature on economic growth is quite clear that average growth (or worse) is what one should expect from a relatively high income state such as Minnesota, controlling for other factors. That is, average performance is not mediocre but is quite good given that Minnesota is a high income state.

I hope that their report is widely read and discussed critically (in the sense of critical thinking, not criticizing.)