Commentary
While California’s economy continues to produce some impressive headline numbers, its trajectory is becoming increasingly dependent on the tech sector. And now that tech has gone all in on artificial intelligence, the state’s finances are vulnerable to either a bursting of the “AI Bubble” or an exit of AI innovators to other states.
Gov. Gavin Newsom has focused the public’s attention on California’s Gross Domestic Product (GDP) relative to that of major countries. Most recently, California passed Japan to become the world’s fourth-largest economy in 2024.
The importance of this ranking should not be exaggerated. Because different states and countries have different costs and different populations, nominal GDP tells us little about relative living standards. If we adjust GDP to equalize purchasing power, California falls to number 11 in the world, but still near or above countries with many times our population….