Racism (4): Competition v Racial Bias

Gary Becker looked at the well-documented fact that African-Americans in the U.S. earn less than whites, partly because on average they are less well educated. But even if corrected for this, there remains an unexplainable difference in wages. Unexplainable apart from racial bias. There have been many studies that have proven the existence of bias. For example, firms are 1.5 times as likely to interview someone for a job if they think the person is white, even if all other characteristics such as education and experience are equal.

The interesting thing about Becker is that he goes beyond education, positive discrimination or labor legislation in his search for solutions. He mentions increased competition between firms. A racially biased firm will only hire a white who is more expensive and perhaps even less qualified than a black, if this firm is not under pressure from competitors. If its market is opened to competition, then other firms can and will produce the same goods at cheaper prices by hiring the black guy/gal. The biased firm would then be forced to do the same. It may remain biased – opinions on such matters are notoriously hard to change – but it no longer has the luxury of acting on its bias.

So this sounds promising, and market freedom is beneficial for other reasons as well, so it’s worth to pursue it. But don’t expect too much of the free market. There’s no invisible hand, leading those motivated by selfish motives to destroy racism without really wanting to. Much more needs to be done.

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2 thoughts on “Racism (4): Competition v Racial Bias”

  1. […] There a resemblance between the libertarian views on private discrimination and the more widely accepted view in the U.S. that free speech rights and the First Amendment can only be invoked against the government, as if private actors can’t violate people’s right to free speech. The dominant U.S. free speech doctrine reflects an antiquated view of human rights as exclusively vertical. Of course, the government probably does most of the violations, particularly of a right such as free speech, but probably not in the case of the right not to be discriminated against. That’s more of a private monopoly, and markets, protest marches, boycotts, activism etc. won’t solve that problem by themselves. Just look at the market: it didn’t solve segregation, and neither would it have had it been more free. In fact, it’s likely that bigoted white customers who detest eating in the presence of blacks, will not find themselves in white only and hence more expensive restaurants, but will band together and boycott non-segregated restaurants which then lose far more business among whites than they gain from allowing blacks. Such boycotts are absolutely in line with property rights and the free market, which shows that the market can make discrimination worse instead of destroying it. (For a more sympathetic view of the power of the market, go here). […]

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