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The Economics of Discrimination

In a previous post I laid out my own moral case for opposing all discrimination, including that found in certain affirmative action policies. In this article, I describe evidence that such policies do not help solve the problems they purport to address.

Liberals get a lot of strange ideas. Many of them are self-contradicting, or are contrary to the available evidence -- even that gathered half a century ago -- but that doesn't seem to get in the way.

Here's a fun one: "Conservatives oppose quota-based affirmative action because they benefit from discrimination." (And thus can not possibly hold such a stance for moral reasons.)

But let's look under the hood of this, shall we? There are three sneaky little things going on here: (1) Conservatives are all non-minorities. (2) Non-minorites benefit from racial oppression and discrimination, and (3) Race-based affirmative action is the opposite of discrimination.

Regarding the first change, there's some truth there. the African-American community, for example, holds a lot of "conservative" beliefs, but are loathe to self-label as conservative. But what about the other two? Wrong, dead wrong on both counts.

Obviously affirmative action policies change standards based on race are a form of "discrimination", one's skin tone and ethnicity is used to (duh) "discriminate" by which standards an applicant will be judged. Whether this is right or not, or helpful or not, are entirely separate questions, but it remains a form of discrimination nontheless.

Becker: Who benefits from discrimination?

Nobody does! When racial discrimination, of any kind occurs, everybody loses. This isn't my idea, it's an accepted economic fact...

Wouldn't it be great if we could be sure that every single company which discriminated against qualified applications because of their race got fined for it? Lost profit? Got penalized? Wouldn't it be great if there was some kind of law -- almost like a law of nature, which ensured the bigots never got away with it?

Liberals, pay attention here (conservatives, stop yawning because you know this already): Suprise! It already does! Economist Gary Becker proved this way back in 1957:

Among other things, Becker successfully challenged the Marxist view that discrimination helps the person who discriminates. Becker pointed out that if an employer refuses to hire a productive worker simply because of his skin color, that employer loses out on a valuable opportunity. In short, discrimination is costly to the person who discriminates... The idea that discrimination is costly to the discriminator is common sense among economists today, and that is due to Becker.

Cool, eh? I was thrilled when I first discovered this. Of course, there probably are some who are bigots because they don't realize that this sort of discrimination hurts them. But it's clearly not the guy who's pointing it out here, right now.

Of course, this works the other way around. Just as everyone is hurt when a qualified black or hispanic is denied a job, so also we are all hurt when a qualified asian or white is denied a job. I'm not trying to look out for "my" group here -- my point is simply that when good people -- of any race -- are denied the ability to do what they do best, everybody loses. Market forces don't care one bit which color their skin was, and neither do I.

Another interesting point: This sort of notion originates, like so many failed economic notions, in Marxism. And sadly, many liberals still seem to cling to this notion as strongly as most other discredited Marxist assumptions.

Speaking of failed liberal economic ideas, another theory is that government regulation is the best answer to racial discrimination. If you mean enforcing laws against actual, documented cases of racial discrimination, I'm with you. But if you mean that having more general governmental control over each company reduces discrimination, it turns out Becker discovered just the opposite was true:

Becker showed that discrimination would be less pervasive in more competitive industries because companies that discriminated would lose market share to companies that did not. He also presented evidence that discrimination was more pervasive in more regulated and, therefore, less competitive industries.

Unhappy about unjust racial discrimination? Suprise -- economic competition is the answer, not increased governmental control. The local power company, tightly controlled by the government, is more likely to be discriminatory than a private company like Xerox. Again, you may not like this answer, but it might be a hint that you're wrong about something. Or several somethings. (As if!)

And while we're on the topic of education, again, the view that the "upper class" (as if I was a member of it -- I currently make a fraction of a public school teacher's salary!) benefits from keeping people uneducated. Once again, collectively, this turns out to be false, again shown by Becker:

Becker pointed out what again seems like common sense but was new at the time: education is an investment. Education adds to our human capital just as other investments add to physical capital.

All those greedy capitalists want to keep people poor and stupid? Not really. Turns out that education itself is a kind of "capital" -- of wealth. When we have less of it as a society, we're all poorer. Including those who need it to keep their businesses going (and do R&D to develop products, to sell to our neighbors, to pay our own wages with). When everyone is educated, we all win.

Again, one could try to argue (probably correctly) that there are some who don't understand this and thus don't understand that investing in education -- everyone's education -- black, white, brown, etc. is a good move. But you can't paint the guy who's pointing this out to you with that brush.

Sowell: Does affirmative action work?

First, I want to be clear: I'm not opposed to all forms of "affirmative action". I have no opposition for finding disadvantaged citizens (though I personally would not limit to just one or two racial groups) and helping them improve though additional education, support, and funding. In other words, I have no issues whatsoever with increased education or attention where it's needed and helpful.

But when it comes down to actually discriminating against one party, with the idea of helping another, I have to draw the line. And so did Thomas Sowell.

In his groundbreaking "Preferential Policies: An International Perspective" Thomas Sowell documents preferential policies similar to affirmative action quota systems all over the world, finding:

[T]hese preferential policies produce results that are the same whether they exist for a majority or for a minority and regardless of what group or groups hold political power.

Again, discrimination for/against blacks, discrimination for/against whites... doesn't matter. Some people just haven't realized, or have forgotten, that discriminating against people -- any people -- on the basis of their skin color is stupid, prejudicial and wrong. And, oh by the way, not only is it morally wrong, it doesn't work nor improve society as a whole.

It's what I thought as a child long ago. Some things children think turn out to be right...

Preferential programs not only persist but expand in scope; the benefits of these programs have disproportionately favored those group members who are already more fortunate; ethnic polarization has increased.

In other words, as I and others have reported and maintained: Wealthy blacks and other minorites are disproportionately advantaged by race-based affirmative action policies; while the "poor" -- minority or otherwise, continue to remain downtrodden and unhelped.

Not being rich myself, I feel no particular need to help the "upper crust" of society -- not of any color. They're doing fine, thank you. If you want to target the "downtrodden" -- then do just that -- target the poor. If one particular group is disproportionately poor, then they'll also be disproportionately helped by such measures.

Further, Sowell points out that since preferential-treatment programs don't actually work -- even though they are "sold" as temporary measures until the "problem is solved" -- they remain forever -- precisely because they do not solve the problem!

Imagine I prescribed a placebo for you to take five times a day until it fixed your baldness or removed your wrinkles. You'd be taking it forever, since it does nothing to the actual problem. Better yet, when it failed to work for you, I could claim you weren't taking enough -- and would try to sell you even more. And this is precise what happens with failed preferntial policies.

And thus you understand why I think they're harmful, rather than helpful -- they do not achieve the purported goal of helping the most vulnerable, poor folks -- and distract us from the long-term investments which will achieve these effects.

In the end, Sowell seems to conclude that the best solutions are not quick or glamorous, but rather include investing in a genuine, quality education for all, and using market forces and examples to correct human stupidity.

But there's more to come, still...

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