Gary Becker and the Economics of Discrimination

Graph depicting a persisting gap

Gary Becker argued that the gap in wages between white and black workers constituted discrimination

In response to my last point, it has been pointed out to me that I need to deal with the work of Nobel Prize-winning economist Gary Becker, whose 1957 book The Economics of Discrimination is, I’m told, a huge “counterexample” to my claim. Leaving apart that I carefully qualified my statement regarding libertarian silence on race—thus a single counterexample doesn’t really mean much—I will give you some first thoughts about Becker’s book.

What Did Becker Argue?

When Becker wrote, the study of racism and discrimination was largely the province of sociology, psychology, and anthropology rather than economics. Economists, he wrote, lacked tools by which to properly approach the problem of discrimination:

I have attempted to remedy this neglect by developing a theory of discrimination in the market place that supplements the psychologists’ and sociologists’ analysis of causes with an analysis of economic consequences. (p. 11)

Becker was interested in the effects not the causes of discrimination. Whatever the causes of discrimination were, they were left to the other disciplines; economics would step in to measure the effects. This looks to be a perfectly appropriate division of labor. All these approaches could perhaps be brought into communication with one another and economics would finally have a place at the table by bringing some quantitative precision to the measurement of discrimination by providing an “unambiguous definition of discrimination in the market place” (p. 13).  That measure is money:

Money, commonly used as a measuring rod, will also serve as a measure of discrimination. If an individual has a “taste for discrimination,” he must act as if he were willing to pay something, either directly or in the form of a reduced income, to be associated with some persons instead of others. When actual discrimination occurs, he must, in fact, either pay or forfeit income for this privilege.  (p. 14).

Two very important findings of Becker’s work emerged. First, Becker found that a “wage gap” between white and black workers had persisted over time despite any advancement in conditions in the U.S. Second, that discrimination hurt the discriminator, not just those discriminated against. These were very important and significant findings and social scientists still draw on them, expand on them, and acknowledge they are problems that must be dealt with.

What Did Becker NOT Do?

Placing Becker’s argument in the wider context of the larger struggle against racial discrimination underscores how outside the mainstream his approach really was. The great strength of Becker’s approach was that it gave a quantitative measurement of discrimination, something that had been elusive to scholars before Becker. On the other hand, the very precision that Becker offered was, forgive the metaphor, purchased at a price. The price was that Becker’s approach seemed to support, not overthrow, the “separate but equal” doctrine. I am not claiming that Becker endorsed the doctrine, or that the book was an endorsement of segregation, or, least of all, that Becker was somehow a closet racist. What I am trying to do is show how the tool Becker developed, a precise quantitative measurement of discrimination, was limited in its use for the fight against discrimination. To understand why this is so, we need some background on the separate-but-equal doctrine.

If we go all the way back to the Supreme Court case of Plessy v. Ferguson in 1896 we find the Court claiming that, as long as the facilities provided to each race are equal, the act of segregating the races does not violate any Constitutional provision of equal protection:

A statute which implies merely a legal distinction between the white and colored races — a distinction which is founded in the color of the two races and which must always exist so long as white men are distinguished from the other race by color — has no tendency to destroy the legal equality of the two races, or reestablish a state of involuntary servitude.

Again, let me stress, that Becker does not endorse the Plessy decision or segregation statues. I am calling your attention to the idea underlying the finding. Simply:

  1. The Constitution demands equal protection for all its citizens.
  2. Segregation provides separate, but equal, facilities for white and black citizens.
  3. Therefore separate-but-equal facilities provide equal protection and do not violate the Constitution.

The NAACP was not the only organization to fight racism and discrimination, but let’s use it as an example of how this doctrine could be attacked. In the first few decades of the twentieth century, the NAACP started by pointing out the obvious fact: the facilities provided under segregation were seldom equal. They would go to court with lots of evidence to prove this. And they’d win. And the court would order equalization of the facilities. New coat of paint perhaps. Or nicer cushions in the train station’s waiting room. Or perhaps a new roof for the “colored” school.

This strategy meant the NAACP was running around winning teeny-tiny victories that only applied to the particular facilities under adjudication. And the victories were temporary. Sure, you got a new roof for the school but what about the textbooks? Or the pay for the teachers? Or countless other things that African Americans lived with every day under the “equal” facilities of segregation. There simply weren’t enough lawyers, money, or time to tear down segregation with this strategy.

By the 1930s, the NAACP had a new strategy for attacking segregated education, one of their main targets. Rather than attacking the equal side of the equation, they would attack the separate side. If they could prove that the very act of separation was in-and-of-itself inequality, then they could prove that segregation was always discriminatory regardless of facilities provided. This was the strategy that led to Brown and the dismantling of de jure segregation. An important precursor to Brown was the case of Heman Sweatt. He had applied to the University of Texas Law School, an all-white facility. Since Texas had no law school for African Americans, like Sweatt, they created one for him almost overnight. A room in the Texas capitol building with its law library, a couple volunteer law professors and: ta da! Instant Law School!  And, when the NAACP challenged the state of Texas in court, the state argued things like: the law library at the capitol building is larger than the U of Texas law library! The faculty student ratio is better at the Instant Law School:  3 professors, 1 student! All objective measurements say we meet our Constitutional requirements.

The Supreme Court didn’t buy any of that. In 1950 they found:

the University of Texas Law School possesses to a far greater degree those qualities which are incapable of objective measurement but which make for greatness in a law school. Such qualities, to name but a few, include reputation of the faculty, experience of the administration, position and influence of the alumni, standing in the community, traditions and prestige. It is difficult to believe that one who had a free choice between these law schools would consider the question close. [my emphasis]

It was those very qualities that were not, and could not, be captured by Becker’s objective measurements that were the key to unraveling segregation. In other words, Becker does not really attack the separate side of the equation, only the equal side, which the NAACP found out decades before was a losing strategy if you were interested in undercutting segregation.

Becker explicitly says segregation is not, in and of itself, discrimination. Take residential segregation:

Residential segregation is often confused with residential discrimination, although the latter is clearly a separate phenomenon, occurring when some people pay more than others for a dwelling of given quality. (p. 78)

“As mentioned earlier, segregation and discrimination are often confused, and a good example of this confusion is found in the discussions of Negro housing. Many whites do not want to live near Negroes, and this is a primary cause of residential segregation, not of residential discrimination (as is often believed). (pp. 159-160)

In other words, if an African American goes to an apartment manager only to be told that “we don’t rent to your kind, boy” and is refused a place to rent, that is not discrimination according to Becker if the prospective renter finds a manager that will rent to him at an equivalent price. This is because of how Becker defines “discrimination.” He does not use the word the way we do in ordinary language, he means something that can be measured in money; since there was no difference in rental price, the treatment of our prospective renter is completely missed by Becker’s analysis.

Becker claimed that his objective measurement focusing on money was a “simple way of looking at the matter” that “gets at the essence of prejudice and discrimination” (p.14). I disagree. While Becker’s analysis of the pecuniary costs of discrimination is important and useful it hardly gets at the “essence of prejudice and discrimination.” Rosa Parks paid the same for her ticket as the white passengers, the back of the bus arrived at the destination along with the front of the bus. It was the indignity, it was implied inferiority, that was the key to the bus boycott in Montgomery.

To be sure, the Civil Rights movement was concerned about quality employment and Becker could have been a very powerful weapon in making those claims, but let’s not overextend his analysis to claim it did things that it did not. It did one thing and did it well. But it did not address a lot of concerns about segregation and, in fact, by separating segregation from discrimination as it did, actually was inconsistent with a lot of attacks on institutionalized segregation.

How Influential Was Becker?

In the introduction I argued that Becker’s single book could hardly be taken as strong evidence that libertarians were especially interested in racism and civil rights between 1954-1964. But perhaps I was wrong about that. Perhaps Becker’s single book was so influential and well-received that it, in one swell foop, makes up for the almost complete silence of other libertarians on the topic. It was suggested that I needed to educate myself by reading this excellent article by Jean-Baptiste Fleury. Hey! Look at page 6! It cites my work (this paper to be precise). It really is an excellent article!

Fleury notes that the book:

enjoyed a reasonably good reception in the relatively small community of race relation specialists. The book’s visibility reached beyond the traditional academic boundaries. It was favorably reviewed in the Crisis, the NAACP journal, and was even cited in a 1960 report for the association, The Negro Wage-Earner and Apprenticeship Training Programs (see Hill 1960). (p. 27)

The (see Hill 1960) was a citation to the work of Herbert Hill, the NAACP specialist in labor and employment. So, yes, the book made a small ripple in Civil Rights agencies because they were obviously interested in employment as an important issue. Fleury does not mention any reviews in the libertarian or conservatives periodicals so there is no evidence that it really lit a fire under those audiences.

The real impact of the book really was not felt until much later. “Despite the growing acknowledgment of the economic nature of discrimination, Becker’s approach continued to provoke skepticism until the mid-1960s,” writes Fleury (p. 29). In summation, I see no reason for Becker’s book to change my judgment that the libertarian community was all but silent during the Civil Rights Era.

There is one more possibility, however. “In his 1962 book,” Fleury writes, “Capitalism and Freedom, Friedman publicized Becker’s economic approach to discrimination to a wider audience” (pp. 28-9). Especially because in a comment on this post, I was told that Friedman’s chapter was “basically a non-technical explanation of Becker’s findings for a popular audience” and thus my claim that Friedman was making stuff up is unsupported since what he wrote was supported by Becker. Perhaps I need to return to Friedman’s book in order to fully appreciate the impact of Becker. I’ll do that in my next post. Same Bat-time! Same Bat-Station!

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5 thoughts on “Gary Becker and the Economics of Discrimination

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