Discrimination and Disparities

by Thomas Sowell

politicians and local activists have every incentive to claim that the higher prices are due to discrimination, in the sense of Discrimination II,

The difference between understanding the source of the higher prices and mistakenly blaming those who charged those prices is the difference between doing things to lessen the problem and doing things likely to make the problem worse by driving more much-needed businesses out of the neighborhood.

the imposition of stronger law enforcement may be seen as just another imposition of injustice on the affected communities.

An employer who judges each job applicant individually, without regard to the applicant’s group membership, can nevertheless end up with employees whose demographic makeup is very different from the demographic makeup of the local population.

Even if every individual of the same age had the same income, regardless of which group that individual was part of, nevertheless there would still be serious disparities in income between Japanese Americans and Mexican Americans—as well as between many other groups.

conditions prior to job applicants reaching an employer can have a “disparate impact” on the chances of someone from a particular group being hired or promoted, even if the employer judges each applicant on that applicant’s own individual qualifications, without regard to the group from which the applicant came.

“Society,” however, is seldom a decision-making unit, except perhaps at election time or during a mass uprising.

a case could be made that Adam Smith’s view of capitalists as individuals was even more negative than that of Karl Marx.14

Businesses in general, making decisions in a labor market or a product market, are not like professors voting at a faculty meeting, because those votes seldom have any costs for the professors themselves, despite whatever good or bad results such votes may have for students or for the academic institution. The difference is the difference between decisions made subject to consequential feedback in a competitive market and decisions made with insulation from such feedback in academia and in other insulated venues.

many non-whites in fact lived in these whites-only areas. These included black American economist Walter E. Williams during a three month stay in South Africa, doing research.21

While racists, by definition, prefer their own race to other races, individual racists—like other people—tend to prefer themselves most of all.

the costs of Discrimination II to the discriminator—in the context of a competitive market—are far lower, or even nonexistent, in situations where free market competition does not exist, such as in (1) public utility monopolies whose prices and profit rates are directly controlled by government, (2) non-profit organizations, and (3) government employment. In all these particular situations, Discrimination II has tended to be far more common than in competitive markets, not only in South Africa under apartheid, but also in other countries around the world.23

Railroads were also affected economically by racial segregation laws.

Discrimination II might require the regulated public utility company to pay additional labor costs from having to offer higher salaries, in order to attract a larger pool of qualified applicants, from which only applicants from groups that the decision-makers preferred would be hired. But, as a government-regulated monopoly, such costs could be passed on to customers who had little choice but to pay those costs.

unintended consequences can affect outcomes as readily as intended consequences, and sometimes even more so. Minimum wage laws and building restrictions are two examples among others.

the resulting chronic surplus of job applicants beyond the number of jobs available reduces the cost of refusing to hire qualified job applicants from particular groups, so long as the number of qualified job applicants refused employment is not greater than the number of surplus qualified applicants.

there was no significant difference between the unemployment rates of black and white teenagers in 1948.

After the effectiveness of the minimum wage law was restored by recurring minimum wage increases in later years, not only did teenage unemployment rates as a whole rise to multiples of what they had been in 1948, black teenage male unemployment rates became much higher than the unemployment rates for white teenage males—

Coastal California, including the entire peninsula from San Francisco to San Jose, was one of the largest regions where severe building-restriction laws and policies prevailed.

The racial impact of these housing restrictions was more pronounced than many racially explicit restrictions.

Much empirical evidence suggests that human beings do not interact randomly—nor as frequently or as intensely—with all other human beings as with selected sub-sets of people like themselves.

However striking these patterns may be statistically, they are not patterns that most people are made aware of by seeing them with the naked eye, as is the case with differences between black neighborhoods and white neighborhoods in the United States.

But that does not, by itself, mean that all residential sorting and social sorting are externally imposed, or need to be externally eradicated. Sorting has been as common within black neighborhoods as within other neighborhoods around the world.

A timeless explanation of discrimination against blacks, such as racism, cannot account for either the progress or the retrogressions that took place on a large scale at differing times. This is not to deny that there has been racism, but the evidence suggests that the discrimination that took place was not simply Discrimination II,

those communities began to consist increasingly of people steeped in a culture that originated in the South, and was unwelcome in the North by both black and white Northern communities.

To the extent that the cause was misdiagnosed, proposed cures for Discrimination II, such as re-educating the white population to their misperceptions, offered only limited prospects of success.

The correlation between the IQs of husbands and wives is at least as high as the correlation between the IQs of brothers and sisters46—

what is far harder to find is the even or random distribution of different kinds of people—in places or endeavors—that is widely treated as a norm, deviations from which are regarded as evidence of discrimination, in the sense of Discrimination II.

Professor Wilson’s sarcasm and anger were directed at people whose reactions reflected a greater concern for their own personal safety than for his sensitivities. His account suggests that they were not racists, for merely by wearing a tie he avoided tensions on both sides, even though wearing a tie did not change his race.

Professor Walter E. Williams, an economist at George Mason University: Information is not costless… People therefore seek to economize on information cost. In doing so, they tend to substitute less expensive forms of information for more expensive forms. Physical attributes are “cheap” to observe. If a particular physical attribute is perceived as correlated with a more costly-to-observe one, the observer might use that attribute as an estimator or proxy for the costly-to-observe attribute.49

Jews were permitted to live were called “the Pale of Settlement”—a phrase surviving in the English language today in statements about certain things being “beyond the Pale.”

The question is not whether such residential restrictions can exist, or have existed, but whether the presence of such restrictions can be automatically inferred from statistics showing non-random clusterings of particular people living in particular places or concentrated in particular kinds or levels of particular occupations. Such issues involve not only causal questions but also moral questions—the latter being harder to answer.

This is the big question !

Neighbor is chili when selling house

In early colonial America, more than half the white population in colonies south of New England arrived as indentured servants.52

These were not just coincidental mood swings among whites across the North. The behavior of blacks themselves had changed.

As Jacob Riis put it in 1890, “There is no more clean and orderly community in New York than the new settlement of colored people that is growing up on the East Side from Yorkville to Harlem.”60 By the late nineteenth century, most blacks in New York state had been born in New York state, and grew up with values and behavior patterns similar to those of the vastly larger white population around them.

whatever it was based on, the view became axiomatic among many Americans in the second half of the twentieth century that unsorting people was a high priority, especially in schools, but also in residential neighborhoods.

Nevertheless, only about a mile from where those pronouncements were made in the Supreme Court, there was an all-black public high school whose history, going all the way back into the nineteenth century, belied the Chief Justice’s key assertions about empirical facts.

Clearly, racially segregated schools were not inherently inferior.

Yet, toward the end of the twentieth century, some new and highly successful schools brought educational excellence to many ghetto communities, not only in Washington but also in New York and other communities across the country.

They differ from a random sample of low-income black and Hispanic youngsters only in that they are the children of parents who cared enough about their education to enter them in the lottery.

The educational track record of such self-sorting has been far more successful than third-party sorting, whether the third parties sorted by race or by residential location, or by a belief that racial diversity would lead to higher educational achievements.

The usual explanations or excuses for grossly inferior educational results in minority neighborhood public schools do not stand up under scrutiny.

these black children who succeeded in Success Academy charter schools were no more exempt from these and other negative social influences than other black children from the same communities who have failed abysmally in the regular public schools.

Contrary to those who attribute social pathologies in the ghettos to external causes in general, and white racism in particular, some of the strongest opposition to government programs that insert people from ghettos into middle-class neighborhoods came from black residents in those middle-class neighborhoods.

Black homeowners have “protested, loudly” at public meetings that they “didn’t want ‘those people’ moving back into their rejuvenated neighborhood.”

They called them ‘project people,’ ‘lowlifers’ and ‘freeloaders.’”81

But these expected benefits to the newcomers from housing projects and high-crime neighborhoods have repeatedly failed to show up in extensive empirical studies

Here, yet again, we see the implicit assumption that there would be no disparate outcomes unless there were disparate treatment.

negative consequences to the pre-existing residents of the communities into which they have been placed are seldom, if ever, mentioned—much less measured—in these studies.