Donald Sterling and the Economics of Discrimination
By David Henderson
What I find interesting about the case of Los Angeles Clippers owner Donald Sterling is how well it illustrates Gary Becker’s insights on the economics of discrimination. Becker pointed out that the market makes people “pay” for discriminating on racial grounds. The white person who refuses to hire a black person who is more productive than a white employee (assuming the same wage for each) will find himself doing less well economically than if he hired the black person. Linda Gorman, in her article on Discrimination in The Concise Encyclopedia of Economics, lays out this insight nicely.
How does that apply here? Well, it seems fairly obvious that Donald Sterling is a racist. But you couldn’t tell that by looking at the race of the players whom he has paid big bucks to hire. So, however foolish he might have been–tip for budding racists: don’t make racist comments to a young lover whom it’s clear you don’t trust, and, even better, DON’T GO CHEATING ON YOUR WIFE–he was not so foolish as to try to win basketball games with an all-white roster. Indeed, take a look at the Clippers’ payroll. The top 3 players alone made in salary this season a total of over $46 million while the payroll for the whole 18-person roster was $73 million. And guess what race these top 3 are.
In other words, the market disciplined Donald Sterling. In hiring players, he didn’t discriminate against black men. Doing so would have been too costly.