Today's musing minute:
Wednesday, October 14, 2020
Friday, June 26, 2020
Finding discrimination in the data
The observation of racial disparities is not, by itself, evidence of racial discrimination in any meaningful sense of that term. I have discussed a number of likely causes of the incidence poverty that disproportionately affects black communities in the US.
More sophisticated investigations try to account for the various causes of any observed racial disparity. Consider, for example, a difference in pay. Clearly, a comparison of average earnings without adjusting for factors like educational qualifications, training, and experience are inappropriate. If one wants to isolate the effect of racial discrimination one needs to compare apples to apples. Some studies have attempted to make such adjustments, using available, though imperfect, measures of labor-relevant characteristics, like education, qualifications and experience. And some have found that the adjustments do not reduce the gap between black and white earnings for equally qualified and able workers to zero. This “residual” is then attributed to discrimination.
As another example, a similar study corrected for buyer characteristics other than race, finds a persistent disparites is housing prices paid by blacks and whites, a premium that blacks had to pay for the same/similar houses under similar conditions – and concludes that this must be because of discrimination.
Yet, another example, involves the observation that, despite having applicant pools of equally qualified people, men vastly outnumber women in certain lucrative, prestigious professions, like engineering and computer science. [Notably these observations do not control for the number of offers made and accepted.]
The details of these studies are not important for this discussion. What is important are the following two questions.
1. Is it legitimate or sensible to attribute the “unexplained” disparities to discrimination (prompting the corollary question: what does that mean)?
2. What follows from that; what do these remaining gaps imply for policy?
With regard to question 1 much depends who we imagine has the burden of proof. When we observe a disparity that cannot be explained by differences in the background data are we justified in concluding that discriminatory behavior must have occurred, or will we require that such a conclusion be proven by further evidence of actual discriminatory behavior? This will turn out to be very important when we consider the way the criminal justice system works in deciding accusations of discrimination.
Question 2. Is the more important one. What should be done about racial disparities that can with greater or lesser confidence be attributed to discrimination? To be more specific the possible scenarios include disparities in pay, hiring, firing, promotion, training and working conditions. To explore this we need to examine the economics of discrimination.
immoral, but should it be illegal?
In a free society people will be free to do some immoral things. Clearly freedom has been an indispensable part of the growth of our society and the achievement of prosperity for many. But, many will argue, if left unchecked it will produce gross inequality and injustice. For example, the argument goes, people with power to hire and fire, to pay more or less, to promote or not to promote, who have racial biases should not be free to exercise those biases with impunity. We need laws and regulations to check that behavior. Such is the justification for the extensive regulatory apparatus designed to counter any suspected bias that might lead to labor market discrimination.
The extent of the anti-discrimination, diversity promoting, bureaucracy and regulatory framework is formidable. In economic terms it constitutes a significant proportion of our GDP. Every company above a minimum size must devote considerable resource to diversity monitoring, ensuring that minorities are not being disadvantaged in any way. Besides the various and varied state agencies tasked with advising and monitoring such matters, there also exist powerful federal agencies for the purpose, notably the EEOC (Equal Employment Opportunity Commission) and the OFCCP (Office of Federal Contract Compliance Programs) – which is the watchdog for the implementation of affirmative action, that is preferential treatment for “equally qualified” minority workers and job applicants). This regulatory bureaucracy, besides its operating cost, imposes significant indirect costs on businesses as they try to ensure that no complaint is filed with the EEOC against them or that no deficiency is noted in their affirmative action plan (required by all federal government “contractors” – those who directly or indirectly do business with the federal government, which may be the majority of businesses in the economy. It is hard to overstate the reach of the anti-discrimination, diversity-promoting, micro-managing bureaucracy.
But, what is it all about? Is it simply a matter of trying to counter the consequences of labor market bias? And if so, does this make any sense? Like all regulation, labor market regulation faces serious knowledge and incentive problems. There are always unintended consequences and costs.
We may examine this by using the example of pay. Presumably the objective of the regulations is to ensure that racial bias does not result in lower pay for equally qualified workers. To construct a regulation to ensure this one has to provide a way of deciding who is “equally qualified”. More specifically, when a complaint of pay discrimination is lodged with the EEOC, the agency must decide whether the complainant is equally qualified in comparison to those who are receiving higher pay. Or, more simply, are doing the “same job”. The agency will have to insert in place of the judgment of the employer its own judgement to decide whether the pay gap is justified. But, clearly the agency cannot know as much about the business as the employer. How can the agency know how much of the gap is due to the legitimate judgment of the employer about differences in the productivity of the worker and how much is due to bias?
To complicate matters, should the issue come to a court of law, the procedure followed will be, as described above, to use “experts” to control for productivity factors as much as possible, and to observe if any pay gap still remains. If, after this exercise, a gap remains, it is common in such proceedings that such finding will be regard as sufficient for the plaintiff to have established a prima facia case of discrimination, and then the burden of proof will shift to the employer to “prove” that he has not discriminated. The presumption of innocence is now removed.
Needless to say, since it is very difficult to prove the negative of no discrimination, many of these cases are resolved with costly settlements. Even more likely, employers will work hard and spend significant resources to avoid such lawsuits by ensuring that minorities are paid sufficiently to deter such complaints even if it means paying them more than they are worth in terms of unbiased business judgments. In other words, this kind of regulation, in trying to prevent pay discrimination causes discrimination against non-minorities The same logic applies to hiring in an affirmative action environment where less qualified minority workers are likely to get hired in order to avoid any presumption of discriminatory bias. Affirmative action is actually affirmative discrimination. If discrimination is immoral, one wonders how it can be justified in this context.
A particularly stark manifestation of this is the preferential treatment given to black student applicants to college. Black applicants are in many institutions admitted with test scores a few hundred points below those of their white and Asian counterparts. The result is that many underprepared black students are admitted to programs in which they are likely to fail and to attract attention for doing so. This program is thus doubly counterproductive in, first, failing to benefit the people it is designed to benefit, and, second, in increasing discrimination and race-consciousness by discriminating against whites and Asian students. In addition, it fails to address the fundamental reasons so few black students are unprepared for the colleges to which they apply. By targeting diversity of admissions (notably not of graduations) the focus is on the symptoms not the causes.
All in all, in similar ways, anti-discrimination regulation is a problematic bag of tricks with unpleasant surprises. Which prompts the question, is it even necessary? A brief look at the economics of discrimination suggests it is not, in fact, suggests that such regulation may actually retard the erosion of discrimination.
In any reasonably competitive labor market, competition works to erode discriminatory behavior (and also discriminatory attitudes as a result, because if people behave in a non-discriminatory way they interact with a greater diversity of individuals and often overcome their initial biases and prejudices). No system has ever been more successful in reducing the effects of bias in race, class and other such designations than competitive capitalism.
To understand this, consider again the example of pay discrimination. Imagine an employer who will hire black workers only if they are paid less than whites (or hired into lower paying jobs for which they are overqualified) In a competitive labor market such an employer pays a price, and it could be a heavy price. If blacks have to discount their wages in order to get employed in equally qualified jobs, non-discriminators will have a cost advantage if they hire blacks and have an incentive to do so in large numbers. Over time such cost advantages will translate into higher market shares. In the long run discriminators will have to adapt or go out of business.
The same applies to hiring, promotion, training, work conditions, etc. Those employers who are color-blind will make better use of the resources to economic advantage and outcompete discriminatory behavior. This applies as much to black employers as anyone.
This story is well known. Some find it unconvincing because they think, incorrectly, that it depends on the employer having “perfect information” about the qualifications and productivity potential of black and white workers. If this were the case, then the story would be just a nice theory, applicable to a world where knowledge was perfect and there was no uncertainty. In fact in such a world there would never by any discrimination at all, as long as there were sufficient non-discriminators, though there might be segregated work forces.
In the real world discrimination is a fact of life. The question is what system minimizes discriminatory behavior or minimizes the existence of racial bias. And the answer is a competitive unregulated labor market. To think that regulation, like the current affirmative action regulation, can improve on it is to ignore the very heavy regulatory costs I have enumerated above, and to assume that somehow the regulation results in a better match between qualifications and employment regardless of race. Establishing that a free market would not bring about a perfect outcome is emphatically not to establish the case for regulation, which far from being able to make things better, is very likely to make things worse.
In this four part essay I have tried to show why the current race-loaded narratives are not helpful but are, rather, destructive of understanding, empathy and progress. My recommendation is to talk about how we individuals of all races and creeds can work to improve lives in general, and the lives of the poor in particular, a significant proportion of whom are black.
My decision to write this extended blog was provoked by the precipitous deterioration of the already abysmally low level of our public discourse, particularly around race, inequality and public policy. Such discourse shows less and less evidence of knowledge about the workings of markets, of American history and of the workings of government. In addition, myths and distortions abound in service of an unprecedented radical public policy agenda, one that, sometimes consciously, targets the very foundation of the American free market system and the freedom and prosperity with which it is associated.
I am particularly sensitive to these matters because race and economics is an area of specialization for me as an economist. I was born and grew up in Johannesburg, South Africa. My father was an extraordinarily liberal and tolerant man and we experienced considerable dissonance living in the apartheid police state. But, though he was a very passive man in general, he was easily angered by any manifestation of racial bias or bigotry. I grew up with an appreciation of tolerance and of individual rights, in sprite of seeing manifestations of the very opposite everywhere around me.
Upon leaving South Africa, I did my doctoral dissertation on the Economics of Apartheid, under the supervision of the famous economist, Nobel laureate, Gary Becker at the University of Chicago. Becker pioneered the field of the economics of discrimination. But he did not consider situations in which the government, supporting a white minority, imposed racially discriminatory laws. This was the case in South Africa under apartheid and in the Jim Crow south in the US.
I realized that in such situations, governments serve to prevent, or retard, the process by which free markets erode discrimination. This leads to the prediction that, when such discriminatory laws are removed, allowing freedom of choice, including biased choice, discrimination and bias will gradually, if not immediately, disappear. This is exactly what has happened in South Africa and in the American south. The current discourse evidences no understanding of this or, indeed, of the negative role that government must play if it enters into the realm of what should be private decision making.
 It should be obvious that, in a perverse way, labor market regulation gets in the way of this erosion process, by focusing on race and encouraging non-optimal use of resources.
 For the sake of brevity I have omitted consideration of the egregious violations of individual liberty that these regulations entail.
 Supporting such regulation, since it is coercive in nature, should carry the burden of proving that it does.
Wednesday, June 24, 2020
Introduction – Racial disparities and what to do about them.
Part 2 dealt mainly with why the “legacy of slavery” cannot be the cause of the significant persistent racial disparities that we observe, namely, because these disparities have dramatically worsened since the 1960’s, suggesting that the policy environment that has developed since that time is the cause. Here I want to examine that in more detail.
First, a general point. The existence of group disparities is inevitable and is not necessarily a reflection of injustice. There are a multitude of reasons why the members of any population group (gender, race, national origin, age, ethnicity) will differ in outcomes from members in any other group. History, genetics (for example athletic ability), prior education, culture (family cohesion), etc. play a huge role. And these, and other, factors interact to produce outcomes in a complex way. Most disparities are simply the result of spontaneous individual “sorting” and should signal no concern or need for remedial efforts.
But, in the case of black Americans, such disparities do signal some palpable pathologies to which we should pay careful attention. Simply attributing these disparities to systemic racism and discrimination, shaming all white people, most of whom had nothing to do with them, and looking to sensitivity training policies and state mandated preferential treatment will not diminish these disparities. By treating the symptoms rather than the causes tihs actually makes the disparities worse and is likely to fuel racist attitudes. I will explain this in Part 4. For now I turn to a brief examination of the real root causes of racial disparities.
Racial disparities as by-product of poverty
Black Americans are disproportionately poor. Many policies affect the poor disproportionately. Rather than focusing on changing racist attitudes, surely it makes sense to first tackle those social and economic policies that have a disparate impact on the poor – on those worst off in our society. Breaking the cycle of poverty should be a top priority.
Poverty is a complex phenomenon. But, basically, people are poor because they lack productive resources. Productive resources include physical property, real estate, but, also, importantly, human capital, that is, valuable individual abilities, attitudes, and knowledge. So, obviously, education plays a pivotal role in this. So does the family in shaping a child’s capacity to recognize and use resources and to dedicate herself to the acquisition and use of them. So, poor schooling and family dysfunction are two prime candidates for explaining the failure of any population group to achieve prosperity.
Education. As mentioned in Part 2, the quality of public education for black children has declined monotonically since the abolition of forced segregation and the adoption of forced integration. More fundamentally, it is the public school monopoly that is holding back black education. Public education is a system in which education is both subsidized and produced by the state (the government). There is no good reason why education should be produced by the government. It could still be subsidized. But parents could be given the power to decide where and how those subsidies are used. Parental choice in education is a bi-partisan issue. Allowing and requiring parental involvement in their children’s education would galvanize the education system overnight and produce a sea change in black education achievement, and this would, in turn, dramatically serve to break the cycle of poverty. An unfortunate culture antagonistic to educational achievement and the discipline and dedication that it requires has developed within many poor black communities, seeing the education system as an oppressive “white” institution – a culture particularly debilitating for boys and young men. Parental choice could go a long way toward combatting this culture.
Crime. Lack of education implies lack of opportunities, lack of vision and hope, and fosters an environment in which violence flourishes. Add to this the availability and profitability of hard drugs. The drug war has adversely affected black Americans disproportionately - addiction, gang violence, drug-related police corruption and brutality, are manifestations of the multiple problems produced.
The so-called “war on drugs” has lasted more than half a century. Instead of eradicating the use of drugs it has provided organized crime with massive profits, corrupted our police forces (who cannot compete by adequately compensating the men and women on the front line for the danger they face in a futile attempt to stem the flow of drugs), violated people’s individual rights as police use the extraordinary powers and resources they have been given to pursue suspected drug offenders (and to abuse those in a corrupt was for their own advancement), commanded massive budgets at all levels of government that show no signs of diminishing and more. It is a failed policy. And one of its most devastating affects has been to perpetuate and extend the cycle of poverty and violence in the lower income black communities of America. Any serious discussion about racial disparities simply cannot ignore this.
Though these two are the most urgent policy reforms, there are many other counterproductive policies that should be abandoned or reformed. Minimum wage laws destroy jobs mostly for those at the bottom of the income scale, throwing them onto welfare. Unemployment is generally higher for the unskilled and untrained, and minimum wages makes it worse.
Incentives matter. Dozens of welfare policies subtly and not so subtly blunt the incentives of young black people to work and achieve, tying welfare payments to unemployment and poverty. Perhaps the most egregious is the subsidization of teenage pregnancy which has mushroomed with these subsidies. All of this should be reformed to provide welfare assistance that does not significantly diminish the incentive to be employed. A variant of such a policy is the negative income tax, proposed by Milton Friedman in the 1950’s (resurrected in a different guise as a universal basic income), though the level of income that could realistically be guaranteed is dependent on replacing all of the dozens of different existing welfare programs for this one simple program. That this is not politically possible is attributable to the dramatic loss of power and earnings that it implies for all those now working at some level in the extensive “poverty industry” who have a perverse vested interest in the continuation of dependence through poverty. Ironically, in this sense a formidable barrier to poverty eradication is current poverty policy, which, doubly ironically, works to exaggerate and perpetuate inequality.
 For starters requiring children to attend the school for which they zoned should be abolished. Let parents decide. The allocation of resources to schools should follow the demand. Charter schools are a first step toward this. But they are hopelessly over-demanded by low income parents. Providing parents with vouchers redeemable at accredited public or private schools would solve this. It would introduce competition leading to educator accountability, innovation, diversity of educational methods, as educational entrepreneurs entered the sector. There is widespread popular demand among low-income parents for greater school choice. The chief and likely only obstacle to its implementation is the teacher-union movement. The unions are desperately afraid that their guarantied jobs will be threatened if teachers and other educators are held accountable subject to the choices of parents who have options.
 Many will balk at the suggestion that hard drugs be decriminalized, as many did at the suggestion that the prohibition of alcohol in the 1920’s be lifted. As in that case, the “cure” is way worse than the “disease”. The drug trade is obnoxious and has horrible results. But the drug war is even worse. At least if trade in drugs were legal it would be visible and a fraction of the money spent on prevention could then be allocated toward education about addiction. Decriminalization would lead to less police corruption, less organized crime and gang violence, and maybe even less addiction.
Tuesday, June 23, 2020
Introduction – Outcomes and Causes.
If we can agree that systemic disparities exist in economically and socially desirable outcomes like income, wealth, schooling, housing, job satisfaction, career advancement, wholesome family structure, low crime, etc,, can we also agree on the causes of these disparities? It would appear not. In fact, it seems that it is about causes that all or most of the disagreement regarding racial disparities is about.
There are large and persistent racial differences in those desirable outcomes. Specifically black considered as a group exhibit the worst outcomes. But, often, the causes of these disparities are not investigated – the question is never asked. It is just assumed that the disparities are the result of racial discrimination (though that too is mostly left undefined and unexplained).
In the current divisive political environment where the issue of race has been dramatically harnessed to cultivated grievance and resentment, the disparities ae simply assumed to reflect bad attitudes, bad behaviors and perverse historical-system effects (there is a strong element of Marxist ideology running through it, coupling racial injustice with the injustice of capitalism itself). Reference is often made to the “legacy of slavery” – something that recently became insidiously present in the 1619 Project published by the New York Times and is quietly entering the popular consciousness and the high school curriculum in places.
No, it is not the “legacy of slavery”.
Before proceeding, let me note some salient historical facts. The troubles commonly associated with black lives in America today did not begin with slavery, with emancipation or with Jim Crow. They began in the 1960’s, during the civil rights era. They are the legacy of the liberal policies enacted at that time and of the war of drugs begun a little earlier. These served to slow the dramatic progress that black Americans had been making from the abolition of slavery until that point in time. We see this in al of the relevant evidence about desirable outcomes like education, wealth, housing, and low crime. This can be easily verified by consulting the relevant statistics. To hear Thomas Sowell talk about it, listen to this excerpt from an interview here. So in an important way, these disparities are not the result of widespread racist intent, or even anticipation.
In 1960 approximately 80 percent of black families were headed by two married parents. Today the number is approximately 20 percent, about 80 percent of black children are brought up in young single parent household. In particular fatherhood is rare. Families are dysfunctional and unstable, with predictable psychological effects on children. In examining black lives and how to make them better it is imperative to exam the causes of this.
The same is true of educational quality and achievement. Dating from the abolition of forced school segregation until now, schooling for black children has continued to deteriorate and is now absolutely abysmal in the poorest districts. The abolition of forced segregation was morally and legally desirable, but its replacement with forced integration has been a total disaster, making black education significantly worse than it was before Brown v. Board of Education.
And the same is true of black crime. Until the escalation of crime from the 1960’s onwards, many the high-crime black neighborhoods of the country were not that different from their lower crime surroundings. Harlem was a place accessed by subway and frequented by many white people without fear – to go ballroom dancing, attend restaurants, etc.
The pattern is clear.,
Despite all this, racial justice warriors cling to the myth that slavery is to blame for a large portion of the racial disparities that exist. They embed it in the narrative of progressive, post-modern, anti-colonialist, Marxist inspired, jargon to suggest that prosperity in America has been achieved in large part on the backs of the slaves, and the quasi slaves that followed under the system of "oppressive capitalism." (see the 1619 Project).
 There is some evidence that in enacting the ‘war of drugs’ the Nixon administration was aware of the effect it would have in marginalizing black Americans and considered that a feature if not the objective of policy. No president since Nixon has used the knowledge of this to even come close to suggesting decriminalizing drugs, probably for fear of widespread opposition, opposition which surely cannot be all about marginalizing and victimizing black Americans. It seems most Americans consider the drug war to have other “noble” objectives.
Saturday, June 20, 2020
Tuesday, May 26, 2020
The TV series Unorthodox has been making waves among Jews (and perhaps ripples among non-Jews) across the nation. Most rave about it. Some, predictably, are critical of it from a defensive point of view, being members of the broader orthodox Jewish community. I watched it and had decidedly mixed feelings. While I found it moving and fascinating, I also found it very contrived and unconvincing (especially the last episode).
Friday, May 22, 2020
2. criminal justice,
3. the economy,
5. health care
6. and immigration.
Sunday, April 12, 2020
Thursday, January 9, 2020
A dead giveaway for detecting this are, for example, in relation to the oppressive treatment of women and gays in other countries and the extent to which these "new liberals" (progressives) will make excuses for this (based on a cultural relativist criterion) carefully avoiding any kind of condemnation. Another of course is the extent to which they advocate trammeling the rights of "rich people".
Wednesday, December 4, 2019
Then there is the monopoly of funerals, weddings, and conversions that the orthodox Israeli Jewish establishment has. This implies for example that marriages between Jews and non-Jews cannot take place in Israel. Again this is anathema to Americans. Gordis’s attempt to explain this in terms of understanding Israel’s origin and ongoing raison d’etre to provide a safe haven for the Jews of the world facing current or future oppression will strike many American readers as simple apologetics.
In this light, the contrast could not be more stark. A principled individual rights approach, sees rights adhering solely to individuals. There is no coherence to the notion of collective rights, as in “the rights of the nation”. The latter is simply a set of weasel words used often to justify violations of individual rights for the “greater good” or some mythical national purpose. Gordis gets this right, but understates the coherence of the individual rights approach. He is, not surprisingly, no libertarian/classical liberal, though he is very appreciatively aware of its teachings, notably through the ideas of America's founders like Thomas Jefferson.