RALEIGH – During the just-completed 2010 session of the North Carolina General Assembly, virtually every piece of proposed legislation had an advocate claiming it would create jobs.

In a state with a double-digit unemployment rate, the attractiveness of turning every idea into an economic-development issue should be unsurprising. But the fact is that extravagant job-creation claims are nothing new. They aren’t confined to periods of economic recession.

Conservatives argue that lowering the cost of doing business and increasing the cost-effectiveness of North Carolina government would boost employment and income growth. Liberals argue that raising the cost of doing business and increasing the cost of North Carolina government would boost employment and income growth.

Yeah, I don’t get the latter’s logic, either.

But let’s set aside the logic of the respective arguments and look at empirical evidence. As summarized in this 2003 JLF paper, there is plenty of data suggesting that states grow faster to the extent that they minimize taxes, regulations, and rent-seeking by special interests. More recently, economists Tate Watkins and Bruce Yandle of George Mason University’s Mercatus Center published a paper in the latest edition of Regulation magazine on the related subject of how public policy affects the patterns of migration among young people.

Americans and foreigners alike move to particular states for all sorts of reasons. North Carolina has certainly attracted many immigrants of all ages to our state in recent years. Retirees have chosen North Carolina over alternative destinations with higher land prices, for example. Families have left colder climes in the Northeast and Midwest for the moderate climes of the Sunbelt. Low-skilled immigrants from Central and South America have come to our state to fill jobs in agriculture, manufacturing, and service industries at lower wages than native Carolinians were willing to accept.

Watkins and Yandle decided to look more closely at a subset of incomers – persons aged 25-39 who are the most likely to be moving to a state to start a family, start a business, or both. Surveying the various alternative explanations offered for state economic success, they further decided to test four measures: 1) a Knowledge Economy Index heavy on measures of educational attainment, R&D spending, and entrepreneurship; 2) a Freedom Index measuring government intrusiveness in fiscal policy, regulations, and personal liberty; 3) an updated version of Richard Florida’s Creativity Index, based on measures of industry concentration, inventiveness, and diversity; and 4) a Cost-of-Living Index, reflecting the relative cost of basics such as housing, food, and transportation.

After running the numbers for all 50 states, the economists found an interesting dichotomy. The factors showing a significant relationship to migration within the United States weren’t the same as those showing a significant relationship to immigration from abroad.

“Somewhat surprisingly,” they wrote, “a robust knowledge economy does not appear to attract domestic migrants, but it is the main attractor for international movers.” Americans moving from state to state seemed to respond strongly to the indexes of freedom, creativity, and cost-of-living, while foreigners responded strongly to the knowledge-economy index.

In the best of all possible worlds, of course, states should aspire to excel in all categories. North Carolina policymakers ought to maximize freedom in our state while also improving educational attainment. But when policymakers are faced with inevitable tradeoffs, they shouldn’t pretend – as they do all too frequently in my experience – that there will be no adverse affects of increasing taxes or regulations in order to promote some other goal they assume will be attractive to corporate leaders and entrepreneurs.

Policymakers should stop fixating on downtown revitalization programs that end up building expensive playgrounds for the few people who will ever end up living there. And policymakers should stop trying to fix broken state programs by throwing more money at them.

To make their states more economically attractive and vibrant, should they improve education or reduce the cost of government? The answer is yes.

Hood is president of the John Locke Foundation.