Tag Archives: Economics of Discrimination

Coerced Fairness: Wronging Every Right

14 Thursday Apr 2016

Posted by in Discrimination, Liberty, Tyranny

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A nurse says, “If I can bring myself to treat a patient tattooed with a swastika, then a baker can bake a cake for a gay wedding.” Of course, the statement ignores any differences in the values held by these individuals, their right to hold different values, or at least their right to act peacefully on those values. It makes an arbitrary presumption about what is “fair” and what is “unfair”, which is seldom well-defined when two parties hold sincere but conflicting beliefs. Yes, the baker can bake the cake, but should he be forced to do so under state compulsion? Coerced behavior is the product of aggression, but declining business for personal reasons is not an act of aggression, though the “safe-space” crowd would do its best to convince us otherwise. Sorry, hurt feelings don’t count!

Imposing the machinery of the state on private decisions about how and for whom one’s art must be practiced invites even more coercive action by the state going forward. Jeffrey Tucker addresses this in “Must a Jewish Baker Make a Nazi Cake?“, using the teachings of Ludwig von Mises on the implications of voluntary and coerced behavior.

Discrimination occurs in markets in many forms. Consumers discriminate between sellers and products based on quality, price, convenience and trust. In turn,  producers or sellers discriminate between workers based on skill, effort, wages and trust. They discriminate between local markets or areas of specialization based on profitability. They discriminate between buyers based upon ability and willingness to pay. All of these forms of discrimination are rational because they result in better value for the discriminating consumer or better profitability for the discriminating producer. In other words, these forms of discrimination align with economic self-interest.

Other forms of discrimination do not align strictly with economic self-interest, but they may be preferred by the individual based on other criteria. It’s probably not possible to justify these forms of discrimination from all perspectives. Some may be abhorrent to most observers, including me. Certainly more consensus exists on some than on others. Nevertheless, these non-economically motivated forms of discrimination are always costly to the discriminator. For example, a consumer who refuses to frequent certain establishments owned by members of an out-group will forego opportunities for more varied experiences. Also, she will tend to pay higher prices due to her lack of interest in the competitive effort made by the out-group. An employer who refuses to hire certain minorities faces a more limited labor pool. He is likely to face a higher wage bill and will get a less efficient mix of skills in his workers. A seller who discriminates against certain groups by turning them away foregoes revenue, and the action may have negative reputational consequences. Obviously, other competitors can profit from another seller’s discriminatory behavior. Almost by definition, markets impose penalties on discrimination not borne out of economic self-interest.

Anyone with doubts about the effectiveness of markets and capitalism to overcome this latter type of discrimination should look no further than the broadly integrated activity that occurs within markets every day, and at the extent to which markets have become more diverse over time. Here is a choice quote of Tucker:

“Commerce has a tendency to break down barriers, not create them. In fact, this is why Jim Crow laws came into existence, to interrupt the integrationist tendencies of the marketplace. Here is the hidden history of a range of government interventions, from zoning to labor laws to even the welfare state itself. The ruling class has always resented and resisted the market’s tendency to break down entrenched status and gradually erode tribal bias.

Indeed, commerce is the greatest fighter against bigotry and hate that humankind has ever seen. And it is precisely for this reason that a movement rooted in hate must necessarily turn to politics to get its way.“

The hypertext within the quote links to an excellent piece by Andrew Berstein on “Black Innovators and Entrepreneurs Under Capitalism”, which covers the sad history of efforts to use government to undermine black commercial success.

Social justice activists argue that the state has a compelling interest in ending all discrimination, but the courts have followed a circuitous path in thrashing out whether (and what parts of) the U.S. Constitution might protect individuals or groups against private discrimination. But my interest is in what happens when the state endeavors to end discrimination in markets that are otherwise self-regulating: the state infringes on other rights that are clearly and definitively enshrined in the Constitution, and it arrigates power to itself that far exceeds the limits defined there. It may compromise the freedom of association, the freedom of religion, the right to private property, and the right to privacy. I believe the government has a compelling interest in protecting those rights, which apply to all individuals. It is also worth noting the absence of a limiting principle in defining what counts as fairness or discrimination. The Left finds it easy to denigrate and dismiss these as selfish concerns, proving how little regard they have for individual liberty. Establishing government control over the extent of those rights represents the end of our Constitutional Republic and is a prescription for tyranny.

Consider the ways in which government often attempts or is asked to create accommodations for marginalized groups, through laws on hate speech, compulsory service, hiring quotas, admission quotas, lending fairness, pricing equity, wage laws, work rules, mandatory facilities and the forced transfer of income. Tucker argues that this complex web of resource manipulation and mandatory and proscribed behaviors has several “unintended” consequences. I already mentioned the obvious abridgment of freedoms. Another negative consequence is that this approach does not promote unity; it breeds resentment and is likely to end in greater disunity. Furthermore, self-sufficiency is undermined by policies that hamper economic growth, and all of the general measures just mentioned redound to the detriment of that objective. Finally, many of these “fairness” policies run directly counter to the interests of the marginalized, such as wage floors that eliminate employment opportunities for the least-skilled, and means testing that discourages labor market effort through income “cliff” incentives.

The most menacing aspect of the effort to stamp out all forms of discrimination is a state with power to impose its own rules of legal “fair” treatment. Tucker appeals to Mises’ views on this point:

“[Mises] said that a policy that forces people against their will creates the very conditions that lead to legal discrimination. In his view, even speaking as someone victimized by invidious discrimination, it is better to retain freedom than build a bureaucracy that overrides human choice. …

Sacrificing principle for the sake of marginalized groups is short-sighted. If you accept the infringement of human rights as an acceptable political weapon, that weapon will eventually be turned on the very people you want to help. As Dan Sanchez has written, ‘Authoritarian restriction is a game much better suited for the mighty than for the marginalized.’“

Proponents of legal, compensatory  handicapping by the state in favor of those pressing any and all grievances ask us to compromise basic constitutional rights, including the rights of association, free expression, privacy and private property. A corresponding effect is to grant the state more complete coercive power in almost every aspect of life. The unavoidable focus of such policies is not unity, but group identity, a divisive result that should give us pause. The power granted to the state in this context is as arbitrary as the currently fashionable definition of “fairness”, and it cannot be rolled back easily. Furthermore, economic vitality is not easy to restore once basic institutions and freedoms have been destroyed. This is evident from the sad history of socialism throughout the world. Ultimately, the coercive power granted to the state can be used in ways that should horrify today’s proponents of social and economic redress for every real or imagined inequity.

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Addendum: Just over a year ago, I made a qualified defense of the right of a business to refuse service based on religious principles in my post “Suit Me, Or Face a Lawsuit: Adventures In Litigationland“. There, I made a distinction between “public accommodations” versus work for which a business-person must use her art, which is a form of expression, to provide customized service to a potential customer. I had the baker in mind, or the photographer asked to work a gay wedding. As I have in this post, I maintained that if a business-person finds some aspect of a request objectionable for any reason, she has the right to discriminate by refusing the business as a matter of freedom of expression.

I left a huge loose end in the argument I made in the earlier post. It had to do with the presumed requirement to serve all potential customers through the “public accommodations” of a private business. However, if the baker creates a beautiful “love cake” for sale to the general public, why can’t he refuse to sell it to a gay couple for their wedding as a matter of freedom of expression? After all, it involves the baker’s art. If a stationer has created an artful collection of cards for sale to the public, why can’t she refuse to sell them to a gay couple for their wedding invitations on account of her religious convictions? And what about the nurse? If he is in private practice, can’t he refuse to practice his art of healing on the “swastikaner” as a matter of free expression? I believe that’s a constitutional absolute, though professional oaths may dictate that care be delivered. An emergency room nurse would not have any choice but to deliver care under federal law, but it is not clear whether the law would withstand a constitutional challenge by a private hospital on these grounds. As things stand, the nurse can only refuse employment or resign if the rules are not to his liking.

 

 

Leftist Ad Hominid Species Screams “White Racists!”

03 Wednesday Feb 2016

Posted by in Discrimination, Equality, racism

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Lately I hear that all white people are racists, and I feel compelled to examine the intellectual grounding of such an inflamatory claim. Consciousness of race is not racism, as some would suggest. Indeed, solutions to racial division offered by activists usually require that we bear race in mind as a primary differentiator. Insofar as one must consider the worth of another person in any context, people of good faith simply do not care about a person’s race. Rather, they care about traits that count, such as honesty, skills, work ethic and perhaps affability. Should they somehow care more? What would vindicate them?

Inflammatory Claims

There are probably several motives for the charge of universal white racism. On one level, it represents political agitation. Posts carrying the charge on social media always involve a measure of “virtue signaling” to like-minded friends, or perhaps before the Gods. (I’m sure the posters will be forgiven.) Such posts might represent acts of social contrition to allay deep-seated feelings of guilt. The posters might fancy that they are raising the consciousness of others, proudly imagining the important lesson they are teaching. The bad news for them is that most people of good faith are rightly skeptical of proselytization like this. In fact, the agitation probably does more to breed skepticism than anything else.

Voluntary Sorting Behavior

What some view as racial division is often an innocent consequence of voluntary sorting based upon the shared subcultures most compelling to individuals at a given time. There are many subcultures into which a person might fit: work, school, profession, sports, music, religion, politics, hobbies, geography, ancestry, ethnicity and race. And there are micro-cultures within all of these categories. These cultural segments differ in many respects, and they may overlap in many cases. The extent of sub-cultural overlap may be viewed as a gauge of assimilation.

In any given context, people tend to voluntarily sort themselves into the sub-culture they find most compelling. This voluntary sorting does not yield a fixed social distribution of individuals across groups. Individuals can choose to associate with different sub-cultures to which they belong on a day-to-day basis.

There is a pronounced tendency for sorting to occur within larger “populations”, such as cafeteria-goers in a large office or in a large school. People from particular work groups might sit together: there is some sorting by age, by gender, and by race. African-Americans often sit together. There is mixing of members of these subgroups as well. People are brought together by work or school, but the shared work or school culture is frequently less compelling to individuals in their choice of a lunch table than other sub-cultures to which they belong.

Isolation or Assimilation

Assimilation does not mean that cultural differences must disappear, but it does mean that subcultures must at least be tolerant of others. A key question is whether one subgroup would welcome a member of another subgroup to join them. There might be reasons to refuse in some circumstances, such as a group of accountants who wish to avoid economists. Lol. However, a group of Caucasians who prefer to remain exclusive, making African Americans feel unwelcome, are guilty of racism, and vice-versa. As for the converse, an African American individual who prefers not to join a group of Caucasians, and vice versa, there is usually a good rationale for presuming the individual to be innocent of racism: they are simply choosing a more compelling sub-culture.

Certain sub-cultures may be especially amenable to selection from across sub-groups. For example, team sports often foster racial mixing, as do music and various professions. Religion and economic stratum can be powerful shared sub-cultures, drawing members across racial groups. In other words, mixing of sub-cultures will occur when a compelling sub-culture is shared. That is a form of successful assimilation.

When voluntary sorting takes place, the parties seek commonalities. That’s a form of discrimination that may be quite healthy and not racist in any way. On the other hand, accepting diversity implies respect for other cultures and subcultures. Voluntary sorting allows those cultures to function, but it does not necessarily imply exclusion of others who might be curious and wish to learn and take part in a culture’s traditions, or who might even wish to become a part of a different community.

Counterproductive Compulsion

The insistence that racism is widespread is often an expression of support for compelled remedies or paying reparations of some kind to alleged victims. In a free society, the kind of voluntary sorting discussed above will always be a reality; any attempt to prevent it would require extreme coercion. Reparations for historical injustices, legal or economic, raise ethical questions about the treatment of those who must bear the costs. They also carry high administrative costs and tend to breed resentment and division. There are well-known downsides to quotas in hiring and in school admissions. Not only do quotas lead to reverse discrimination, they also can place the intended beneficiaries into situations of vulnerability to failure.

Markets Are Not Racist

Then there is the allegation that private markets are a source of “systemic racism”, having “disparate impacts” on certain minorities. However, it should be noted that the market mechanism tends to penalize racism. A consumer who chooses to avoid sellers of a different race will tend to pay a higher price for the privilege. An employer with a “taste for discrimination” must choose from a smaller labor pool and may lose the opportunity to hire the best talent. In other words, racists must pay for their preference. They also forego the creative benefits that diverse organizations tend to enjoy.

Certain minorities have struggled to achieve success in the private economy, but there are much better explanations for that difficulty than market forces, which provide the best opportunity for growth and assimilation. There is no question that institutional obstacles have had extremely harsh effects on groups starting from lower rungs of the socioeconomic ladder. A few examples: the failed public education has been especially burdensome for urban and rural minorities; various public policies have effectively excluded minorities from markets, including Jim Crow laws, the minimum wage and the Davis-Bacon Act; the so-called social safety net is rife with features that penalize work and reward fragmentation of families, making it as much a trap as a net; the drug war creates illicit market opportunities which present catastrophic but unappreciated risks for both the participants and their families; rent controls, zoning laws and restrictions on new construction limit the stock of affordable housing; heavy regulation makes starting a business difficult for those without the financial and legal resources to deal with it; and the ugly tradition of cronyism tends to reduce social mobility by entrenching privilege rather than rewarding economic value. The deck is stacked in many ways against economic mobility by public policy, and racial minirities have borne much of the burden.

Immigration Hotspot

Another controversy is whether racism is manifest in the negative views of many Americans toward immigrants. These claims allege ethnic and religious discrimination, including the hatred of Muslims. No doubt there are Americans who harbor racist attitudes toward immigrants. Some of this is grounded in unreasonable economic fears. There are also fears that terrorists may be among new immigrant populations, especially refugees, but that fear is hardly unreasonable given the recent experience of Europe and the difficulty of establishing reliable background information on some of these individuals.

Sharing Freedom

Racism still exists and it will never go away entirely. However, our dedication to freedom compels us to protect speech as long as it is not threatening. Racial discrimination by participants in markets can be difficult to detect, but racists must pay an economic price imposed by the market mechanism, and there are often legal remedies if racial discrimination in markets can be proven. Fortunately, racism today is not as widespread as the agitators would have you believe. The best policy for assimilation and acceptance is to promote a shared culture of freedom and economic opportunity.

Suit Me, Or Face a Lawsuit: Adventures In Litigationland

06 Monday Apr 2015

Posted by in Discrimination, Presumptive rights

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Racism-cartoon

Suppose that Jim and Bob, who are life partners, own and operate a company that produces signage. A church group requests a banner to read “Only one man and one woman make a marriage”. Jim and Bob are likely to be offended by the suggestion that they use their art to express such a sentiment, and I think they are entitled to refuse the business. The freedom of expression granted by the First Amendment to the U.S. Constitution protects individuals against compulsion to express things they find objectionable. Will Jim and Bob engage in discrimination if they refuse the business? You bet, but I do not think the government has a “compelling interest” to intervene on behalf of the religious group, especially if there are other businesses capable of producing the banner or if the group can produce it themselves.

Has the exercise of free expression been tested as a defense against charges of illegal discrimination? The example above dealt with discrimination by a private company against a religious group. A similar case involved New Mexico photographers who refused to shoot photos at a same-sex wedding. The plaintiffs alleged discrimination on the basis of sexual orientation, but the photographers claimed that compulsion to accept that work constituted a violation of their freedom of expression. The New Mexico Supreme Court ruled against the photographers. They appealed to the U.S. Supreme Court (SCotUS), which refused to hear the case without additional comment. While this case established a precedent in New Mexico for the compelling interest of government to enforce anti-discrimination law, the refusal of SCotUS to get involved did not create a wider precedent in favor of anti-discrimation law over free speech. There are a number of reasons why the Court might have refused to hear the case, including the fact that the suit was brought under state law, not federal law; simple prioritization across many competing cases for an always full docket; or the lack of any conflict with other court decisions.

At the link above, which was written just after the New Mexico court’s ruling, Eugene Volokh offered his views on the case:

“Is it permissible for the law to require freelance writers, composers, artists, editors, and the like to create speech that they don’t want to create? Might it even be permissible for the law to require other conduits, such as bookstores and movie theaters, to distribute speech that they don’t want to distribute? (I use ‘speech’ here in the standard First Amendment sense, which includes music, pictures, video, and the like.) … It seems to me that having to create speech, using your own creative abilities and judgments as an artist, musician, writer, or what have you, is an even deeper ‘foster[ing]’ of ‘an idea [you might] find morally objectionable’ — an even deeper intrusion on ‘individual freedom of mind’”

We often couch discussions like this in terms of “rights”, which is easily understood. However, there is a strong distinction between this framing and the actual structure of the Constitution. Rather than granting specific rights to individuals, that document presumes the existence of those rights and instead enumerates powers held by the federal government and restrictions on its exercise of those powers. For example, here is the First Amendment:

“Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.”

And below is a key excerpt from the Fourteenth Amendment, upon which much anti-discrimination law is based. Note that its prohibitions apply only to government action, not private action:

“No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.”

One right that should be presumptive is that of individuals to form a union in marriage. It is not addressed explicitly in the Constitution, and perhaps that would be less important if the government were not so intricately involved in the marriage business. Property rights, estate law, taxes, and legal benefits to employees and significant others can all be dependent on the legal status of a marriage. Still, it is not obvious why the government should be anything but neutral with respect to who can be married. Even if we concede a government interest in certifying marriages (it is a source of license fee revenue), are there other reasons for government authority in this area? Call me a skeptic. In any case, the legal recognition of marriage has been left up to the states.

Laws against private discrimination are thought to derive their authority from an enumerated power in the commerce clause, in Article 1 of the Constitution. This allows Congress to “regulate commerce among the several states“. This power was traditionally held to relate only to interstate commerce, consistent with the preservation of federalist principles and states’ rights. The courts have interpreted the power more broadly at times, but it is certainly not unlimited. In the traditional context of interstate commerce, and in view of the presumptive nature of individual rights under the Constitution, this seems to be a strikingly thin rationale for regulating many kinds of private behavior, or for compelling certain activities that burden the exercise of other rights.

Returning to the example above, defending Jim and Bob for turning away the church group’s business is similar in most respects to defending the photographer in the New Mexico case, or the baker who refuses, on religious grounds, to decorate a cake with a gay wedding theme. The cases all involve a form of private discrimination and a conflict between anti-discrimination law and forms of free expression. Whether presumptive rights to free speech, religious practice, or even freedom of association can trump statutory prohibitions against discrimination, or vice versa, is unlikely to be resolved once and for all, at least not any time soon. The individual circumstances surrounding a dispute of this nature will always be helpful, if not determinative. But what sort of test can be applied in order to achieve a resolution?

When sufficient tension exists, it is up to the courts to consider the specific nature of the discrimination in question, its rationale under any presumptive rights, and whether the claimant has “protected” status under a relevant anti-discrimination law. In terms of anti-discrimination law, a line is often drawn by insisting on the universal, non-discriminatory provision of “public accommodations”. The exact meaning of this term can differ by jurisdiction, but it generally implies a sales channel for which the “doors are open”. The presence of competition and alternative providers would argue against the state’s contravention of the presumptive rights of individual sellers in order to satisfy a statuary requirement. The competitive landscape and presence of viable alternatives should be an important consideration in balancing interests in these kinds of conflicts.

Choosing to discriminate against a specific group is not costless, even when legally sanctioned. It is obvious to most business people that tolerance is more profitable than intolerance. The acceptance of this disparity was clearly articulated as a “taste” for discrimination by Gary Becker in his 1957 book, “The Economics of Discrimination“. Becker’s analysis of discrimination in the labor market noted that employers with such a “taste” are willing to pay higher wages in order to avoid hiring certain minorities. In the examples above, Bob and Jim are willing to turn away otherwise profitable business, as are the baker and the photographer. However, their tastes for discrimination do not imply economic irrationality. In all three cases, the business people hold the maintenance of certain principles to be of greater value than the foregone profits.

These issues are relevant to the recent controversy surrounding Indiana’s new Religious Freedom Restoration Act (RFRA). The context for RFRAs is narrower, as they relate to religious expression as opposed to expression generally. The first RFRA was a federal law supported by liberals in response to a conservative SCotUS decision in a dispute over the use of peyote for religious purposes. Generally, RFRAs require that the government have a compelling interest in burdening religious exercise and then must do so using the least restrictive means available. A number of individual states have passed their own RFRAs in order to carve out religious exemptions to various rules. In a recent post, Eugene Volokh discusses the history that gave rise to RFRAs, and the irony that many liberals now decry their existence, while conservatives tend to support them. The principles underlying these laws were once championed by prominent liberal members of SCotUS.

The version of the Indiana RFRA originally signed by Governor Pence would have allowed religious expression to be used as a defense in a discrimination lawsuit. Subsequently, the Indiana state legislature amended the bill with a provision stating that the law does not authorize a “provider” to refuse business from a range of protected groups, including gays and lesbians (ministers, churches and non-profits are exempted). Does this nullify the impact of the bill on free exercise of religion? Many believe so. However, the absence of positive “authorization” may not mean the courts will decide that the state of Indiana has a compelling interest in preventing a particular case of discrimination.

[An aside: One interesting approach has been suggested for businesses in the wedding industry whose owners believe that accepting work at same-sex weddings would violate their religious principles. These businesses should continue to accept business through their “public accommodations” except for customized wedding goods and services. According to this approach, they should offer the latter exclusively through binding contracts with specific churches or places of worship, thereby operating  exemptions granted to those institutions.]

Critics of the original Indiana RFRA were generally silent regarding RFRAs in 19 other states, as well as a federal RFRA signed by President Clinton. Moreover, it is clear that there has been some contrived activity from partisans on both sides (see here, here and here). At least the contrived activity demonstrates a greater depth of understanding than some of the hateful speech that I have witnessed on social media. Some would claim my example of Jim and Bob is contrived as well, but it is a plausible scenario and it shows that the tension between rights can cut both ways. A call for the legal supremacy of anti-discrimination law over presumptive rights means that the freedoms of protected groups can be abrogated as well when in conflict with another protected group.

Persecution is well known to both gays and people of faith. Both groups are certainly aware that there will always be others who do not share their views, strictures and practices, and some who may well disapprove. Both groups should be sympathetic to the notion of “live and let live”, and they should have the forbearance to avoid insisting on everyone’s direct participation in their celebrations. Some might even call this good manners. Participation (even for profit) cannot be compelled any more than approval. Regardless of what one might think of the values of outsiders who do not wish to participate, the “discriminatory” actions (or failures to act) in question are not prima facie evidence of hatred.

Jim and Bob, as well as the baker and the photographer, have broad presumptive rights under the constitution, whether they involve free speech or religious exercise. No one should be compelled to engage in expression they find objectionable without the ability to challenge it in court. Protections against discrimination are important, but they certainly do not confer the power to force others to participate in your celebrations. And why bother? Live and let live.

Postscript: Why bother, indeed! And here is Jonathan Turley on the key issue of defining an “expressive act”.