gary becker, discrimination, and rap music
I was thinking this weekend about an argument made famous by Gary Becker. It goes something like this:
Racial discrimination is a preference reflected in the person’s willingness to pay for the privilege of employing/trading with people of a certain group. If blacks and whites produce equivalent goods, a racist would be willing to pay more for goods & labor produced by whites. If markets are competitive, firms that pay for the privilege of working with only one ethnic group will suffer because competitors can produce cheaper goods because they will refuse to pay the price of discrimination. Therefore, competition will make taste based discrimination (i.e., distinctions made on skin color or ethnicity, not output) unsustainable in the long run.
Fair enough – we can all think of examples of where professed hate for other groups breaks down in the face of competition. Think of all the anti-immigrant folks who eat at cheap restaurants made possible by Mexican migrants.
There is one big issue in Becker’s theory that has always bugged me and I don’t remember seeing it addressed in The Economics of Discrimination. What if the consumer’s utility depends on the racial group of the producer? The theory assumes that the market price of goods is independent of who made it. The theory addresses things like cars. The price doesn’t change depending on whether the buyer knows that Mexicans assembled the car.
If consumers are willing to include the producer’s identity in their utility function, there’s no reason to suspect that there would be any competitive pressure to eliminate taste based discrimination in certain kinds of labor markets. I can easily imagine different kinds of markets where Becker’s argument might not apply. For example, cultural markets might work this way. In certain art or music markets, people seem to value the fact that people from a certain group made a product. Think about blacks in classical music, or white in jazz and hip hop. Or more benignly,many people like buying crafts from poor people in central America, not the local basket weaver. People might like to be served by people from certain groups. Think of people who go only to white doctors or lawyers.
What in Becker’s argument would make me think that taste based discrimination is unsustainable in these situations? In other words, why should I not expect consistent wage gaps among grooving white rappers?
orgtheory.net 
Theoretically, in such a case, there is no reason that the discrimination disappears. I remember having read (I don’t recall the precise reference, though) a paper showing that convergence of wages was slower in industries where there is a face-to-face interaction (restaurants, bank clerks, things like that), which is consistent with Becker’s theory.
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Markss
November 5, 2007 at 9:08 am
In such a case, I don’t see any warrant (other than semantics wrangling) to call the outcome “discrimination.” The reason for this is that for the word “discrimination” to keep its semantic integrity given the obvious circularity of Becker’s “theory” it can only apply to employer’s preferences (it is not symmetric). It cannot possibly apply to consumer preferences. Consumer preferences are preferences not acts of discrimination and we can’t argue for or against them; remember the non est disputadum part (in White America for instance Eminem “does the math” and “estimates” that about 50% of his revenue as a performer is attributable to his skin color), nor is there any reason that any producer advantages based on consumer preferences should “disappear” because (the non-question-begging part of) the Beckerian argument ultimate relies–as Fabio is careful to point out–on a selectionist logic whereby bigoted employers are eliminated by the discipline of the market. No such mechanisms exists to eliminate consumers who include the identity of the producer of a cultural good in their utility function (unless such consumers have to pay more money for the product). So a market could certainly be at its Pareto optimum without eliminating advantages for cultural producers based on their categorical membership in certain groups as long as it is the consumers who are voting with their dollars.
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Omar
November 5, 2007 at 1:09 pm
“competition will make taste based discrimination (i.e., distinctions made on skin color or ethnicity, not output) unsustainable in the long run.”
I haven’t read Becker on this, but it would seem to me that the relative size of the groups would make a difference. The smaller the minority, the less the cost of discriminating against them. Becker also seems to be assuming that the society is non-discriminatory enough to allow the minority roughly equivalent access to the means of production. I would also guess that inequality and discrimination push the minority into areas where entry costs for producers and unit costs for consumers are both low.
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Jay Livingston
November 5, 2007 at 1:12 pm
Seems like Becker’s argument assumes that different groups produce the same goods (and in the same quantities). However, in reality as we know it, because of educational differences, hiring practices, and perhaps self-selection into particular occupations, and even (shoot me) cultural preferences, people of particular ethnicities end up producing different goods. How many black econ professors who write NYT columns do we know? I’d guess that as certain groups become to be associated with certain products, consumers may tend to use that as a quality signal or recognition heuristic. And so the pattern becomes self-perpetuating even if the consumer’s utility does not depend directly on the ethnicity of producer. I am doubtful that markets and competition could change this.
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GK
November 5, 2007 at 1:16 pm
GK,
I vaguely remember that Becker (or a Beckerite) has addressed this issue and argues that the theory does not require that members of ascriptive groups be equally dispersed in all industries, only that they get equal returns to human capital. Basically, at this more complex level, the argument is not about integration but what second-wave feminists called “comparable worth.”
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gabrielrossman
November 5, 2007 at 3:54 pm
Omar, I think you’re wrong, there can be consumer discrimination. I mean, if people refuse to go to a restaurant where the waiters are black, you can call it “consumer preference”, but it is still discrimination. And in this case, it is rational for employers to discriminate themselves, whether or not they are racist.
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Markss
November 6, 2007 at 12:10 am