Race and Economics

Race and Economics, by Thomas Sowell, New York: David McKay, 1975, 276 pp., $9.95.

Enemies of what Karl Popper aptly terms "The Open Society" have found the differential economic performance of groups of people to be a dandy flail with which to thrash their foe. Internationally, this has taken the form of angling for political controls to erase the manifest differences in economic performance between nations. Internally, these strategists have effortlessly refocused this same tactic upon class "exploitation," and in the special case of culturally pluralistic societies they have taken convenient advantage of relative economic differences between ethnic collectivities as well. Concerning the latter, they commonly require us to believe that such differences result from one of only two possible alternatives—from discrimination or from "innate" inequalities in capability. And since most humane people recoil instantly from the second as morally unacceptable, it is usually easy to get them to assent to the only other alternative proffered, namely, that these disparities result from discrimination in a society that is base enough to allow it to prosper. This then leads logically to calls for greater "social control" (Chomsky's term) over the dominant institutions of society for the purpose of dispatching this malevolent influence.

At a time when this ideational plod is exerting an unprecedented and so far only fecklessly challenged allure for official policymakers, this fine new book—Race and Economics by Thomas Sowell, a professor of economics at UCLA—forcefully injects some sanity into these complacent ruminations. For instance, it neatly polls the pointy horns of the aforementioned, contrived dilemma by identifying a host of other factors—neither innate nor discriminatory—that can give rise to dissimilarities in group estimations.

Some of these are of a purely technical nature that produce statistical artifacts, such as the failure to weight data for age in making intergroup comparisons. This is serious. For the fact is, the proportion of young people varies widely within different groups (as measured by median age, which ranges from 18 for Puerto Ricans to 23 for blacks to 36 for Irish to 47 for Russians). So parameters such as income, unemployment, and crime rates that are themselves independent functions of age must be related to the respective age distributions of the groups being compared. This is seldom done. Another factor that can cause spurious inequalities in certain group statistics is uneven regional concentrations (blacks in the South, Chicanos in the Southwest, Indians on reservations, etc.). And yet another such factor is variations in the reliability of the figures being compared (income figures for Chicanos, for example, can easily be biased by illegal immigration and covert employment).

But a more fundamental change of perspective, argues Sowell, is to view group progress as an historical, dynamic process by which all groups are steadily progressing even though they may have commenced the journey at different times and from different starting points. A cross-sectional slice of society at any single point in time—say the present—would, to be sure, image such varied historical influences as current differences, but they would be temporary and self-correcting in the long run. An important historical factor of this type would be, for instance, when the bulk of a given group immigrated to this country and started the gradual process—which Sowell calls an "intergenerational relay"—of acculturation. Clearly, there would be little reason to expect a mainly post-World War II immigrant group such as Puerto Ricans to have achieved the same degree of social integration by 1976 as have the descendants of a mainly 19th-century immigrant group such as the Irish, who, when they were new, manifested many of the same symptoms of social pathology as Puerto Ricans do now.

Similarly, whether or not a group enters the United States already in command of English (or at least already literate in some language) can affect its rate of integration, as can differences in such other "capital assets" as the degree to which the originating culture values learning, self-discipline, future rewards relative to immediate gratification, and, importantly, the extent to which it is already accustomed to an urban environment.

Any of these factors can cause real differences in "merit"—that is, value to, say, a prospective employer—so that even with scrupulously fair assessment of each individual's abilities, one would still observe overall group differences in employment, income, educational attainment, etc.—although of an ever-lessening character. These considerations therefore invalidate the now-proliferating use of group statistics as proxies that are supposed to represent truthfully the extent to which the component persons have or have not been fairly treated. Clearly, the use of "goals and guidelines" and the like in place of strictly merit criteria, especially for relatively recent immigrants to these shores and to urban life, cannot be defended in the name of fairness to individuals.

This leads us naturally into Sowell's fascinating discussion of the interaction between discrimination and economics. In exact contradiction to the assertions of those calling for greater "social control" over the economy as the way to narrow group differences, Sowell shows that discrimination flourishes far more luxuriantly in a controlled economy than under laissez faire. This is because the market is by nature so very much more responsive to purely economic considerations and penalizes noneconomic decisions such as discrimination through the awesome force of competition. In the job market, for instance, if "there were substantial misjudgments of current group productivity, this would mean an opportunity for some employers to reap unusually high profits by concentrating on hiring members of such low-wage groups." In this way a group that has been discriminated against becomes preferentially attractive to any other employer who is merely impartial and fair. Moreover, because of higher profits, such nondiscriminatory employers will tend to expand at the expense of their discriminating competitors. There is then, in general, a considerable cost to the person who is discriminating for indulging such tastes, a cost that will act to discourage discrimination as long as the employer is not indifferent to his rate of return. Similar considerations hold in the sale and rental of housing, the capital markets, consumer sales and services, etc.

There are, of course, many situations in which employers are relatively indifferent to profits, as in industries whose profits are regulated, or which are nonprofit (foundations, university administrations, churches, etc.), or where the employer is the government himself. Here, "there is no real opportunity to earn more profit by hiring misjudged minorities…[so] the employer can hire according to his own prejudices without paying a price in terms of foregone profits." In these sectors of the economy, then, one would anticipate that discrimination would be much more severe than in competitive industries.

Yet, these very situations, having been created by governmental actions, would be highly sensitive to political pressures and so should tend to "reverse themselves more rapidly than unregulated industries when discrimination becomes a political issue." This pattern, predicted from theory, accords rather well with what is actually found: there is in fact a long history of a dearth of blacks in the army, railroads, telephone companies, foundations, and university administrations. (And how many clergywomen do you know? or black Mormon priests?) And this has been followed by a rapid shift once political pressures were brought to bear. (Churches are the exception that proves the rule; they are, of course, constitutionally immune to political pressure and hence remain as segregated as ever.) Such "reversals" do not, of course, mean that discrimination (choosing persons for reasons other than job productivity) has been stopped. Indeed, this is unlikely as long as economic considerations still remain peripheral rather than central—but merely that its direction has changed so as to minimize its resistance to the dominant political wind.

This is only a single instance of Sowell's profound and much broader point that the actual effects of government actions can be detrimental to minorities even when this is not at all their purpose. For instance, a "public utility regulation has an effect on racial policies…even though [its] purpose…is wholly nonracial." Other instances of this same phenomenon are government-mandated minimum wages, rent controls, and limits on interest. In each case the price is set at a nonmarket level that causes an excess of workers hunting jobs, tenants looking for apartments, and persons seeking loans. This chronic surplus makes possible (in fact, requires) discrimination on noneconomic grounds even in otherwise profit-seeking businesses; yet none of these governmental actions has this as its intention.

Other parts of Sowell's insightful discussion of this subject focus on the police, the schools, taxation, subsidies, urban renewal, and welfare. And he concludes it with the observation that "social reformers" as a group, when they act with the power of government behind them, are prone to the same bureaucratic symptoms as other government functionaries, such as the tendency to act to enhance their personal power rather than to respond to what minority members perceive as their real needs and to conceal through dissembling their mistakes—whose full costs they in any case do not bear.

The overall quality of the arguments in this book makes the few isolated flaws all the more irritating. One of these concerns Sowell's discussion of the significant fact that West Indian blacks who have immigrated here have an impressive record of professional and economic achievement in spite of suffering, presumable as much as American blacks, from racial discrimination. He attributes this to cultural factors—self-discipline, self-reliance, persistence in the face of adversity, orientation toward future rewards and the like. Here he may well be right.

What is difficult to accept is his locating the source of these cultural traits in peculiarities in the institution of slavery as practiced in the Caribbean that, in contrast to American slavery, permitted these cultural features to blossom. For if this were so, it should be typically true of West Indian blacks as a whole—yet those in Britain have social difficulties that seem not very different from those of American blacks and which are in striking contrast to the relative success of West Indians here.

A more plausible explanation of these facts, then, would begin by noting that West Indians could (until recently) enter Britain without restriction, whereas their immigration to the U.S. has always been selective and slow; only small numbers of the most motivated would persist in the effort to come here. So one could easily imagine that these laws have acted as a sort of sieve and that the apparent cultural differences between West Indian immigrants and American blacks are wholly a product of this relatively recent selection rather than of ancient historical differences in the practice of slavery. This supposition does not necessarily dispose of the interpretation Sowell favors, but it is an obvious alternative that should have been evaluated.

Even more annoying is his perfectly awful treatment of the question of "innate" differences in intellectual configurations between groups. To be sure, Sowell does not believe that this topic has much importance, since it "was not clear that any very major differences among ethnic groups was [sic] left to be explained by innate biological differences" after all the other factors already mentioned were taken into account. But in that case it would have been preferable to stop right there rather than to go on to write an uninformed statement such as: "the more general controversy over heredity vs. environment…has raged for centuries with no signs of being settled" (emphasis added). For the evidence is very clear, at least for English-speaking whites, that IQ differences among this large and ethnically diverse group are at best only slightly attributable to existing environmental variations.

Other remarks are equally regrettable. And too, he left entirely unsaid what really are the two key points here. First, "innate" differences between groups, even if proved to exist, still could not logically justify collectivist rather than individualist policies. (Indeed, the opposite view—that no such differences exist—already has rationalized collectivist policies like "affirmative action.") Second, such differences would imply only that even in "historical equilibrium" (by which I mean the happy day when all artifactual factors are satisfactual, all transitory historical influences have transited, and laissez faire rules the realm), it would still be wrong to attribute without other evidence any residual differences in group parameters to persisting collusionary discrimination against individuals. This is, of course, only a small logical extension of the many other excellent arguments that Sowell has already advanced here against making inferences of this kind.

These defects aside, it would be hard to overstate the value of this book. It would not be a serious exaggeration to call it, after Comte, an "opuscule fondamentale"—a small work of seminal importance in its field. For it is one of the very rare analyses of this turbulent social question that argues for less rather than more government intervention. And it supplies a hearty slug of ammunition, not merely against the lumpish and thoughtless persons who advocate "affirmative action," but also against the aridities of that larger tribe of adepts who, in seeking to persuade us that group diversity is a particularly pernicious and ineluctable byproduct of freedom, have in ultimate view the plugging of "The Open Society." Sowell clobbers them all, well and truly!

William Havender received his B.S. in horticulture from Cornell University and his Ph.D. in genetics from the University of California at Berkeley. His article on group discrimination, "Meting Out Injustice," appeared in the September 1976 issue of REASON.