Caplan Interviews Hanania

Bryan, please become a podcaster.

What a lively, wide-ranging conversation!

At 1:06:22, the conversation touches on markets and discrimination:

BC, “To what extent do you accept the Beckerian view that market forces tend to eliminate taste-based discrimination?”

RH: “Why do they eliminate taste-based discrimination?”

BC: “Because, if you are refusing to hire people who are just as qualified, because you don’t like their group, then you are leaving money on the table; and if you won’t hire them, then the competition will.”

RH: “Yeah, but at the same time, people have, right, preferences. People do care about who they’re around. And it’s just an empirical question, the strength of their preferences on these things.”

It is useful to distinguish employers, workers, and customers. A profit-maximizing employer must reckon with what workers want, and what customers want. In contexts of team production, workers’ preferences about “whom they’re around” — motivated discrimination — might shape productivity, and so constrain the hiring decisions of a profit-maximizing employer. In contexts of close interaction between employees and customers, a customer’s “interaction tastes” might shape her choice of “which business to patronize”, and so indirectly constrain the hiring decisions of a profit-maximizing employer.

It seems plausible that the sign and strength of any ‘team interaction effects’ within the firm, and of any ‘customer interaction effects’ in services, will vary by group identity (e.g., sex, race, religion, age) and by industry.

(To complicate matters, profit-maximizing employer must also reckon with the fact that workers and customers, too, have some propensity for ‘statistical discrimination’.)

See, for example:

Kenneth J. Arrow, “What Has Economics to Say about Racial Discrimination?,” Journal of Economic Perspectives 12:2 (Spring 1998) 91-100.

John Yinger, “Evidence on Discrimination in Consumer Markets,” Journal of Economic Perspectives 12:2 (Spring 1998) 23-40:

“Audit studies find continuing high levels of discrimination against minorities in the marketing of available housing and in car prices. Audit studies also find that discrimination can be caused both by economic agents’ prejudice and by their search for profits.”

If many workers and many customers have entrenched preferences for discrimination, then it takes a Beckerian risk-taking entrepreneur to play the role of “first mover” against discrimination. See Branch Rickey and Jackie Robinson, who had to win the confidence of Dodger teammates and the loyalty of ticket-buyers at ballparks.