So what? This is not a new condition, so one would have expected it to have some significant impact by now if this was really a factor to anyone outside of the "I got mine so screw you" set. Yet California's economy is still overwhelmingly larger than that of any other state in the nation. If the costs of operating in California were not outweighed by the benefits you would have expected businesses to flee the state and not be replaced; this hasn't happened yet and the odds favor California coming out of the recession at the same pace as the rest of the country.

Exactly. California is, hands down, the innovation capital of the world, and has been for decades. Whatever lunacy the political winds are blowing these last few years doesn't undo the accomplishments of the last 100 years: the movie industry, microchips, software (both desktop and internet) to name a few. Entire sectors of the world economy were born there. More than a few cultural movements started there too if the argument can be extended beyond business and tech innovation.

What is really sad in California is the cost of higher education. In the mid 80s, U.C.S.D cost me about $400 per quarter (which covered health insurance), plus I had to come up with another $300/month on rent. My summer job as a Domino's Pizza guy (at $10/hr after tips) and my part time job throughout the year as a high school teacher's assistant ($7/hr) covered most of my expenses for the year. Folks worrying about California should be looking at the cost of education, and the impact that that might have on innovation.