We recognize that we have only begun to understand racism and its impact on our profession and our discipline.
This is an astounding statement from the “officers and governance committees of the American Economic Association,” published June 5. Here’s the whole statement.
Like them, I don’t know much about racism’s impact on the economics profession or on the discipline. But unlike them, I have gone far beyond beginning to understand racism.
One of the earliest contributions to the understanding of racial discrimination was Gary Becker’s book The Economics of Discrimination, written in 1957 and based on his Ph.D. dissertation at the University of Chicago. One of Becker’s main contributions in that book was the idea that when an employer discriminates on a basis other than productivity, he misses out. Becker’s point was not that therefore employers would not discriminate but rather that the free market makes them pay a cost for discriminating.
In 1962, Armen Alchian and Reuben Kessel found, consistent with Becker’s model, that when governments regulate firms’ profits, as they do with utilities, the utilities have a diminished penalty for discriminating and, therefore, discriminate more.
Are these high-level people in the American Economic Association unfamiliar with this literature?
UPDATE
My friend Phil Magness just posted the following abstract of an article he wrote for Public Choice:
This paper investigates the historical relationship between the emergence of public choice theory in the 1960s and the problem of racial discrimination. Drawing upon archival research, I argue that foundational public choice scholars brought together four distinct strains of anti-discriminatory theory to grapple with the challenges posed by segregationist public policy instruments during the Civil Rights era. They include (1) the treatment of racial discrimination as regulatory capture, which is typified in the work of Frank Knight and W. H. Hutt; (2) the treatment of discrimination as an efficiency problem, building upon the closely related Chicago school insights of Gary Becker and Milton Friedman; (3) the treatment of discrimination as a constitutional problem, as seen in extensions of the framework of James M. Buchanan and Gordon Tullock; and (4) historical analysis of discriminatory institutions, also as seen in the work of Tullock. Together, the four components provided the basis of a comprehensive economic critique of discrimination that has since been neglected in the literature on the history of economic thought, and that offers far-reaching insights into the academic literature on race and the continued problem of discriminatory institutions.
It’s from his “The anti-discriminatory tradition in Virginia school public choice theory,” Public Choice (2020).
READER COMMENTS
Alan Goldhammer
Jun 11 2020 at 7:16pm
While Becker’s position may be correct for some types of employment, I see no impact of it at all on racial covenants in housing or red lining by banks. It took legislation to remedy those. they were not amenable to the type of economic solution that you mention.
BTW, my home had a restrictive covenant in the original title.
Mark Z
Jun 12 2020 at 3:08am
The Federal Housing Administration refused to underwrite mortgages for black home-buyers in white neighborhoods and, at the development-level, would only underwrite segregated (white) developments, so housing regulation was itself one of the driving forces behind redlining.
David Seltzer
Jun 12 2020 at 7:16pm
Mark Z. Levittown openly engaged in racial discrimination. The first residents of Levittown, could not rent or sell their homes to Black people. The FHA , which guaranteed bank loans to William Levitt, only offered mortgages that discouraged developers from selling to non- Whites. Black veterans, returning from WWII, wishing to purchase a home in Levittown, were summarily denied by government edict. William Levitt is equally contemptible as he, in practice, suborned this reprehensible policy. BTW. Levitt wasn’t eager to sell to Jewish families either. The irony is astonishing.
Mark Z
Jun 13 2020 at 5:27pm
Yep, Levittown is a big example of this. I thought of Richard Rothstein and his book The Color of Law when you mentioned Levittown, since he’s written about Levittown and similar segregated housing developments.
dede
Jun 14 2020 at 9:06am
Is it too far fetched to imagine that, at least in some cases, legislation (to forbid discriminating covenants) was pushed by homeowners who were keen to sell their house at a market price with more potential buyers (either the discriminated ones or the ones who believed the covenant was despicable)?
The idea that there is a cost to discrimination and that this cost is borne by the discriminating party in a free market is rather compelling: I understand why some believe that fighting against discrimination yields better outcomes than fighting for free markets but that does not necessarily make it the right thing to do.
Jon Murphy
Jun 11 2020 at 10:39pm
Becker, Friedman, Buchanan, Tullock, Knight, Hutt, Alchian, Kessel…these are not obscure names. Three Nobel Prizes (should be 5). Several AEA fellows.
Mark Z
Jun 12 2020 at 2:43am
I assume their statement is more in reference to *racism in economics* (as an academic discipline) rather than *the economics of racism.* Saying they understand little with respect to the former may not be inconsistent with understanding much with respect to the latter.
William Laffer
Jun 12 2020 at 4:52am
Logically and superficially, that distinction makes sense. But the literature should apply to economics departments and economics as a profession, to a considerable degree. Most universities do not sell a product or try to maximize profits, but academic departments compete with each other for prestige and influence. So I don’t think your point obviates David’s (very much).
(The AEA’s statement spoke of racism’s “impact on our profession AND our discipline” (emphasis added), and you, likewise, spoke of economics “as an academic discipline”. While the literature on the economics of racism almost certainly applies to economics DEPARTMENTS and economics as a PROFESSION, it applies less or not at all to economics as a science, a body of knowledge, a subject, an intellectual discipline.
On the other hand, it likewise is hard to see how racism could have had an impact on economics as an intellectual or academic discipline, any more than it could have an impact on physics, chemistry, mathematics, linguistics, computer science or electrical engineering AS DISCIPLINES. As professions, sure, but not as disciplines.)
Jon Murphy
Jun 12 2020 at 7:06am
The conjunction “and” in their sentence confounds your interpretation. If it wasn’t for that “and,” I’d agree with you.
Vivian Darkbloom
Jun 12 2020 at 8:01am
Not at all. The use of the conjunction “and” does not change the meaning. And, importantly, the entire context supports Mark’s interpretation and his comment:
“We recognize that we have only begun to understand racism and its impact on our profession and our discipline. We have learned that our professional climate is a hostile one for Black economists. As documented in our 2019 survey, only 3% of the profession identifies as Black (compared with 13% of the U.S. population) and almost half (47%) of Black respondents reported experiences of discrimination in economics. Only 45% of all survey respondents (regardless of race) believed that economists who are not White are respected in the field.
We commit to improving the representation and experience of Black Americans in our profession….”
And, David Henderson seems to agree. Otherwise, why would he write: “Like them, I don’t know much about racism’s impact on the economics profession or on the discipline”? His substitution of “or” for the original “and” does not make any substantive difference here.
David Henderson
Jun 12 2020 at 8:59am
No, I don’t agree.
The “and” is crucial.
Someone says, “I’m beginning to understand A and A’s effect on B.” There are two things to understand. Like them, I don’t know much about A’s effect on B. But I do know about A.
Vivian Darkbloom
Jun 12 2020 at 9:03am
If you don’t agree, why did you write “Like them” rather than “unlike them”?
Jon Murphy
Jun 12 2020 at 9:14am
He doesn’t replace”or” for “and.” Re-read the original sentence, David’s response, and his subsequent response to you again. His response is entirely to the second half of the original sentence. The part after the “and.” David states that we know a lot about the part before the “and.”
Vivian Darkbloom
Jun 12 2020 at 2:13pm
Original quote:
“We recognize that we have only begun to understand racism and its impact on our profession and our discipline.”
David Henderson:
“Like them, I don’t know much about racism’s impact on the economics profession or on the discipline.”
He doesn’t replace “or” for “and”? Read both sentences again. And, again, the entire context of the AEI article is on the effect of racism on the profession and the discipline, not on the economics of racism. If you are arguing that the effect of the first “and” (not the second) is that AEI is saying they don’t understand racism, that’s pedantic in the extreme. The entire context is that they don’t understand fully the effect of racism economics on the profession.
Mark Z
Jun 12 2020 at 2:32pm
My counterexample would be “law and economics.” The term doesn’t mean the two distinct disciplines, but the area of study of the relationship between law and economics. It seems to me “X and how it relates to Y” or similar clauses are often used to describe the relationship between X and Y, not the two distinct concepts of X and the relationship between X and Y. It could be lazy and redundant writing, but especially when one is uncertain what relationship one is asserting between X and Y, this phrasing may have its appeal.
Jon Murphy
Jun 12 2020 at 3:35pm
So it is two separate disciplines. It’s the relationship between law (one discipline) and economics (another). When we are studying that field, we are making the distinction between the two all the time. “Economic analysis of the law” is when we combine the two into one coherent discipline. See Guido Calibrisi’s “The Future of Law and Economics” especially Chapter 1.
Jon Murphy
Jun 12 2020 at 3:42pm
Which is why their original sentence is confusing at best and incorrect at worst. And again, David’s comment is on the second part of the sentence, not the first. He makes that explicit in the sentence immediately after you stopped quoting.
As Mark points out below, the conjunction “and” brings together two distinct things. It is not possessive, the way you want to interpret it. We already have a possessive: ‘s.
There is a difference between saying “we understand racism and its effect on our profession” and “we understand racism’s effect on our profession.” The former, syntactically and colloquially, means two unique things: racism (1) and its effects (2). The latter recognizes the ownership of the first thing on the second.
Is this point pedantic? Obviously not given the confusion arising from their usage.
Vivian Darkbloom
Jun 12 2020 at 4:50pm
I was not at all confused by their “usage”. The context was crystal clear, if not the language. I view the title of this post, and the allegation it poses, a rather cheap shot.
Richard Ebeling
Jun 12 2020 at 6:35am
if you link to the reading list in the AEA statement there is no “inclusion” of Becker’s “Economics of Discrimination,” or W.H. Hunt’s “Economics of the Color Bar,” or any of Thomas Sowell’s writings such his book, “Race and Economics” or those discussing discrimination, or, say, Walter William’s “The State Against Blacks” and “South Africa’s War on Capitalism.”
Notice also in the statement that they assume that failure for there to be as many blacks in the economics profession as are represented in the population as a whole is taken to imply racism in the economics profession. Rather than an interesting observation from which to begin an inquiry, they assume an explanation and propose “policy” conclusions within the profession.
Mark Z
Jun 12 2020 at 2:37pm
I looked through their reading list, and it’s not hard to see why those books were excluded. Anti-capitalism is a common theme among the books and articles they recommend. Inasmuch as they reflect a quasi-endorsement of said writings’ conclusions, I can’t say I find it encouraging.
SaveyourSelf
Jun 12 2020 at 3:03pm
I formed a hypothesis while in college in 1999 that racism is a simple statistical error, primarily sampling error. By that I mean, assumptions based on single digit sample sizes (or even sample sizes of zero) will unsurprisingly generate wildly unrealistic statistical predictions. When such faulty summaries are then accepted as fact, modeled over large populations, and used to justify action and policy, the outcomes are predictably absurd. Garbage in, garbage out, as they say.
Racists are lazy statisticians.
You might add this is a 5th distinct discriminatory theory of racism, if you find it compelling.
David Henderson
Jun 13 2020 at 9:54am
“Racists are lazy statisticians.”
Great line.
My friendly amendment: “Racists are lazy and or incompetent statisticians.”
Mark Z
Jun 13 2020 at 5:30pm
I would add another mechanism to the accumulation of prejudice beyond sweeping or hasty generalization, which is confirmation bias. Not only are many people poor statisticians, they’re also poor data collectors, so once they believe X, they disproportionately pay attention to data that confirms X. That’s why, IMO, it is sometimes difficult to dislodge a prejudice with more data.
SaveyourSelf
Jun 13 2020 at 6:00pm
Great point. I think it is called “selection bias” in statistics and you’re right, it would lead to a similar skewed view of reality.
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