Bravo!

Tim Harford has a superb article in Forbes on what factors may be holding back African-Americans in the United States.

Some of the work he describes is familar- for example, Sendhil Mullainathan's work demonstrating the existence of discrimination in the job market.

Economists Marianne Bertrand and Sendhil Mullainathan recently conducted a large study along these lines in the U.S., mailing out nearly 5,000 résumés after randomly assigning them black-sounding names like Jamal or Ebony or white-sounding names like Kristen or Brendan.

Not only did the "black" résumés get fewer callbacks, but employers didn't even seem to notice whether the résumés were any good or not. They just stopped reading at "Jamal."

Similar studies

have uncovered British discrimination against immigrants from Asia, the West Indies and Africa--but far less evidence of discrimination against white immigrants from France and Australia.

He also discusses the distinction between taste-based discrimination and statistical discrimination.

Economists distinguish between "taste-based" discrimination, where racist employers refuse to give minorities a job because they don't like minorities, and "statistical" discrimination. When an employer considers an applicant's race as a marker for his or her ability, that's statistical discrimination

In an environment where a particular minority is discriminated against in the job market, even though they are just as capable as others in the marketplace, their wages would be below the wages of others in the same line of work but their output would be just as good. Businesses can gain an advantage by hiring these minorities. Hence taste-based discrimination should be purged from the marketplace as bigoted businesses are outcompeted by relatively open minded businesses. I once discussed this.

On the other hand, if certain minorities are truly less capable on average than the rest of the population, businesses can gain an advantage by taking this fact into consideration- just as insurance companies charge young men more for a drivers' license- even though some young men are probably very safe drivers. (Personally, I would expect this to apply only for people just entering the job market. As people gain experience, employees will be able to judge their true abilities.)

Harford's point, though, is more subtle- he describes research which shows that statistical discrimination could easily become a self-fulfilling prophesy.

Fryer and two colleagues, Jacob Goeree and Charles Holt, showed how statistical discrimination could easily lead to a vicious circle. They used computer-based classroom games that assigned students the role of employers, "purple" workers and "green" workers. Students in the role of employers quickly jumped to the mistaken conclusion that purple workers were uneducated, and that view became self-fulfilling, as purple workers abandoned hope of getting hired and stopped paying for education. Once the downward spiral set in, a color-blind employer would actually lose money.

"I was amazed," recalls Fryer. "The kids were really angry. The purple workers would say, 'I'm not investing [in an education] because you won't hire me', and the employers would respond 'I didn't hire you because you weren't investing.' The initial asymmetries came about because of chance, but people would hang onto them and wouldn't let them go."

So, members of minorities which are discriminated against tend to stop investing in skills which could help them in the marketplace. Fryer also conducted research which indicates that that they also tend to become increasingly insular.

Harvard's Roland Fryer, is attracting attention for his study of "acting white," where black kids who work hard at school are said to be ostracized by their peers. Despite a lot of talk about the problem--Barack Obama raised it in his famous speech to the Democratic National Convention--some academic researchers weren't convinced that it existed. Their surveys showed that kids who were doing well at school, whether black or white, had lots of friends.

Fryer argued that asking a teenager how many friends he had wasn't any more likely to produce the truth than asking him whether he was a virgin. Instead, he sifted through a database of the social connections of 90,000 teens, judging a teen's popularity based not on their own claims but on whether other teens named them as a friend. His conclusion was that hardworking black and Hispanic children, unlike non-Hispanic white kids, lost friends if they studied hard.

Fryer has an economic explanation of why white nerds get an easier ride from their peers. Members of minority groups often face a choice between learning something that the minority group values (say, street slang) or learning something that is more widely valued (say, accountancy). Someone who chooses the minority activity is making a commitment to the group--hence it's natural for him to enjoy more trust. And Fryer points to similar behavior by Italian immigrants in 1950s Boston; by the Burakumin in Japan, who are descendants of what was traditionally a low caste; and even in some traditional Amish communities.

Previous posts on discrimination here, here, here, here, and here.

HT: Marginal Revolution