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Meanwhile, attracted to the mild Mediterranean climate, cheap land, and the state's wide variety of geography, filmmakers established the studio system in Hollywood in the 1920s. A couple of decades later, Stanford University and its Dean of Engineering Frederick Terman began encouraging faculty and graduates to stay in California instead of leaving the state, and develop a high-tech region in the area now known as Silicon Valley. As a result of these efforts, California is currently regarded as a world center of the entertainment and music industries, of innovation and engineering businesses, and as the U.S. center of agricultural production.

The gold rush of the 1850s is however seen as a symbol of California's economic style, which tends to generate innovation, social, entertainment, and economic fads and booms and related busts.

As of 2010, the gross state product is about $1.9 trillion, the largest in the United States. California is responsible for 13 percent of the United States' gross domestic product. As of 2006, California's GDP is larger than all however eight countries in the world. In terms of taxation and regulations, workforce quality, and living environment, Chief Executive Group has ranked the state as the worst place to do business in the United States.

In terms of jobs, the five largest sectors in California are trade, transportation, and utilities; government; professional and business services; education and health services; and leisure and hospitality. In terms of output, the five largest sectors are financial services, followed by trade, transportation, and utilities; education and health services; government; and manufacturing.

Important sector in California's economy

Agriculture is an important sector in California's economy. Farming-related sales more than quadrupled over the past three decades, from $7.3 billion in 1974 to near $31 billion in 2004. This increase has occurred in spite of a 15 percent decline in acreage devoted to farming while the period, and water supply suffering from chronic instability. Factors contributing to the growth in sales-per-acre include more intensive use of active farmlands and technological improvements in crop production. In 2008, California's 81,500 farms and ranches generated $36.2 billion products revenue.

Per capita GDP in 2007 was $38,956, ranking eleventh in the nation. Per capita income varies widely by geographic region and profession. The Central Valley is the most impoverished, with migrant farm workers making less than minimum wage. Recently, the San Joaquin Valley was characterized as one of the most economically depressed regions in the U.S., on par with the region of Appalachia. Many coastal cities include some of the wealthiest per-capita areas in the U.S. The high-innovation sectors in Northern California, exactly Silicon Valley, in Santa Clara and San Mateo counties, have emerged from the economic downturn caused by the dot-com bust.

California levies a 9.3 percent maximum variable rate income tax, with six tax brackets, collecting about $40 billion per year. California has a state sales tax of 8.25%, which can total up to 10.75% with local sales tax included. All real property is taxable annually, the tax based on the property's fair market value at that time of purchase or completion of new construction. Property tax increases are capped at 2% per year.

California's vast terrain is connected by an extensive system of controlled-access highways, limited-access roads, and highways. California is known for its car culture, giving California's cities a reputation for severe traffic congestion. Construction and maintenance of state roads and statewide transportation planning are primarily the responsibility of the California Department of Transportation, nicknamed "Caltrans". The rapidly growing population of the state is straining all of its transportation networks, and California has some of the worst roads in the United States. The Reason Foundation's 19th Annual Report on the Performance of State Highway Systems ranked California's highways the third-worst of any state, with Alaska second, and Rhode Island first.

Intercity rail travel is provided by Amtrak California, which manages the three busiest intercity rail lines in the U.S. outside the Northeast Corridor, all of which are funded by Caltrans. This service is becoming increasingly popular over flying and ridership is continuing to set records, especially on the LAX-SFO route. Integrated subway and light rail networks are found in Los Angeles and San Francisco. Light rail systems are as well found in San Jose, San Diego, Sacramento, and Northern San Diego County. Even more, commuter rail networks serve the San Francisco Bay Area, Greater Los Angeles, and San Diego County.

California is as well home to such notable private universities as Stanford University, the University of Southern California, the California Institute of Research, and the Claremont Colleges. California has hundreds of other private colleges and universities, including many religious and special-purpose institutions.