You would think the states might notice the different results over time

Maine Versus New Hampshire:  The American states provide a number of natural policy experiments that let us judge — if we are open-minded — what works and what doesn't work.

One such natural experiment can be found in two neighboring New England states that pursued different paths after World War II.  Amity Shlaes, relying on a study by J. Scott Moody, describes the result.

At the end of World War II, Maine boasted a bigger economy and a bigger population than New Hampshire.  In some other respects the two states were similar.  They were both in New England, and both were struggling with the death of old industries such as textiles.  In 1946, per capita income was $9,610 and $9,768 for Maine and New Hampshire, respectively.
. . .
Overall today, Maine residents shoulder a heavier tax burden than do those of New Hampshire.   State and local taxes take 12.6 percent of personal income in Maine, the sixth-highest share among states.  In New Hampshire state and local taxes take 8.7 percent, putting New Hampshire at 49th for tax burden.

The result?  Decade in, decade out, New Hampshire's economy grew faster than Maine's, so that the Granite State surpassed the Pine Tree State in 1984 and today boasts an output that is 20 percent bigger.  Maine's recessions and double dips were worse than New Hampshire's.  Eventually New Hampshire also won the population contest, passing Maine, in part thanks to migration.  Last month, joblessness was 8.1 percent in Maine, better than Ohio but still bad, and 5.8 percent in New Hampshire.

What about that family pocketbook that the White House highlights?  Bureau of Economic Analysis data show average per capita income for Maine in 2009 was $36,745, a bit more than Ohio.  In New Hampshire that number was $42,831, eighth highest in the nation.

If you want lower unemployment and higher incomes in your state, you should imitate New Hampshire — and learn from Maine's mistakes.

(In the late 1970s, I read a comparison of New Hampshire with neighboring Vermont.  The Green Mountain State had had higher taxes than New Hampshire for many decades.  But they didn't seem to have gotten better services in return.  SAT scores were a little higher in New Hampshire, the state's roads were about as good, welfare payments were a little higher (though a little harder to get), and so on, and so on.  Vermont taxpayers were paying more (and still are, last I looked) but weren't getting more in return.)

- 9:40 AM, 24 August 2010   [link]