Why California Continues to Lead the Nation in Poverty and Homelessness

Fresh data show that California remains a living example of the Good Intentions Fallacy.

During a speech at Harvard several years ago, Charlie Munger (1924-2023) related a story about a surgeon who removed “bushel baskets full of normal gallbladders” from patients. The doctor was eventually removed, but much later than he should have been.

Munger, the vice chairman of Berkshire Hathaway, wondered what motivated the doctor, so he asked a surgeon who participated in the removal of the physician.

“He thought that the gallbladder was the source of all medical evil, and if you really love your patients, you couldn’t get that organ out rapidly enough,” the physician explained.

The doctor was not motivated by profit or sadism; he very much believed he was doing right.

The Righteousness Fallacy

The anecdote is a perfect illustration of the righteousness fallacy, which is rampant in modern politics. The Righteousness Fallacy (also known as the fallacy of good intentions) is described by author Dr. Bo Bennett as the idea that one is correct because their intentions are pure.

California is a perfect example of this fallacy.

Year after year, California pours billions of taxpayer dollars into anti-poverty initiatives. And year after year, poverty and homelessness in California grow worse.

Consider these three facts about the Golden State:

• Welfare Spending and Poverty Rate: In the 2024–25 fiscal year, California allocated approximately $31 billion from the General Fund for human services programs. Yet it has the highest poverty rate in the country at 18.9% (edging out Mississippi).

• Income Tax Rate and Income Inequality: California's top marginal income tax rate remains at 13.3%, the highest in the nation. Yet it also ranks near the top in inequality. (In 2022, families at the 90th income percentile earned 10 times more than those at the 10th percentile—$305,000 vs. $29,000.)

• Housing Regulations and Homelessness: California has one of the most regulated housing markets in the U.S. and has spent $24 billion on combating homelessness the last five years, yet the state accounts for 24% of the nation's homeless population (and cannot even account for how this money was spent).

None of these trends are new, by the way. I began observing them six years ago.

The Danger of Favoring Intent over Result

That politicians would persist with harmful policies should come as little surprise.

The Nobel Prize-winning economist Milton Friedman once observed the uncanny proclivity of politicians “to judge policies and programs by their intentions rather than their results.” In his book Capitalism and Freedom, Friedman described the danger of such thinking.

[The threat comes] … from men of good intentions and good will who wish to reform us. Impatient with the slowness of persuasion and example to achieve the great social changes they envision, they’re anxious to use the power of the state to achieve their ends and confident in their ability to do so. Yet… Concentrated power is not rendered harmless by the good intentions of those who create it.

I don’t doubt that California lawmakers, like the physician who was removing healthy gall bladders, believe they are doing the right thing. But they are not.

California’s policies have been failing for years. Lawmakers (and voters) need to wake up to reality and realize that, like the gallbladder-removing physician, they aren’t making people better.

This article is based on a previous version.