While there are several books on discrimination as well as inequality, this one by Thomas Sowell matters much for two reasons. The first reason is that Sowell has a remarkable academic background that includes a B.A in Economics from Harvard, an M.A. in Economics from Columbia, and a PhD in Economics from University of Chicago. As well, aside from his monographs and articles, he has a respectable peer-reviewed publication record in such high-ranking journals as The Journal of Political Economy and The American Economic Review. The second and perhaps most important reason, given the topic of the book, is Sowell's personal background. He is a black man who spent his early childhood in the segregated south and with limited financial means. Here is part of his biography from goodreads
While Sowell has a free-market perspective, and in my opinion sometimes exaggerates to make his case, Discrimination and Disparities is very well thought-out, and makes some excellent points backed by both economic theory and the data. It is a must-read for anyone who is interested in the topic and is open to having their thoughts provoked. Below are some points on a few of the issues Sowell deals with in the book.*
ON PROFILING:
Information is not costless. People seek to economize on information cost. In doing so, they tend to substitute less expensive forms of information for more expensive forms. Physical attributes are “cheap” to observe.
ON MINIMUM WAGE:
A wage rate set above where it would be set by supply and demand in a competitive labor market will cause chronic surplus of job applicants. There will be a surplus of qualified black job applicants as well as qualified white job applicants. Under such circumstances, the cost of discrimination to the discriminating employer will fall. The discriminating employer may decide not to hire black job applicants. Minimum wage laws cause the overall youth rate of unemployment to rise and will particularly hurt the young minority job seekers: “what is particularly striking is that there was no significant difference between the unemployment rates of black and white teenagers in 1948”. Between 1940 and 1960, before the great expansion of the welfare state, black poverty rate declined significantly.
ON INEQUALITY:
At some point between ages of 25 and 60, over three-quarters of the population will find themselves in the top 20 percent of income distribution. The turnover rate in the highest income bracket is particularly high. Fewer than half the people in the “top one percent” in income in 1996 were still there in 2005. The highest incomes are usually very transient incomes, reinforcing the conclusion that these are transient capital gains rather than enduring salaries. And most of “the poor” are not permanent residents in low-income brackets. It is important to note that “the poor” are not a given set of human beings, but an ever-changing mix of people. Entry -level jobs are, therefore, not necessarily “dead-end jobs”.
Despite equal numbers of households in each 20 percent, there are far more people in the top 20 percent of households. The number of people participating in the labor force and earning income is four times as great in the top quintile as in the bottom quintile.
ON “THE POOR PAYING MORE”:
While prices are higher in inner-city neighborhoods, rates of profits are generally lower. The community is actually paying additional costs generated by some residents in that community. The local residents who created none of those costs are victims of those who did.
*The points were summarized and kindly provided by my colleague, Massoud Fazeli.
Sowell was born in North Carolina, where, he recounted in his autobiography, A Personal Odyssey, his encounters with Caucasians were so limited he didn't believe that "yellow" was a hair color. He moved to Harlem, New York City with his mother's sister (whom he believed was his mother); his father had died before he was born. Sowell went to Stuyvesant High School, but dropped out at 17 because of financial difficulties and a deteriorating home environment. He worked at various jobs to support himself, including in a machine shop and as a delivery man for Western Union. He applied to enter the Civil Service and was eventually accepted, moving to Washington DC. He was drafted in 1951, during the Korean War, and assigned to the US Marine Corps. Due to prior experience in photography, he worked in a photography unit. After his discharge, Sowell passed the GED examination and enrolled at Howard University. He transfered to Harvard University, where he graduated magna cum laude with a Bachelor of Arts degree in Economics. He received a Master of Arts in Economics from Columbia University, and a Doctor of Philosophy in Economics from the University of Chicago.
While Sowell has a free-market perspective, and in my opinion sometimes exaggerates to make his case, Discrimination and Disparities is very well thought-out, and makes some excellent points backed by both economic theory and the data. It is a must-read for anyone who is interested in the topic and is open to having their thoughts provoked. Below are some points on a few of the issues Sowell deals with in the book.*
ON PROFILING:
Information is not costless. People seek to economize on information cost. In doing so, they tend to substitute less expensive forms of information for more expensive forms. Physical attributes are “cheap” to observe.
ON MINIMUM WAGE:
A wage rate set above where it would be set by supply and demand in a competitive labor market will cause chronic surplus of job applicants. There will be a surplus of qualified black job applicants as well as qualified white job applicants. Under such circumstances, the cost of discrimination to the discriminating employer will fall. The discriminating employer may decide not to hire black job applicants. Minimum wage laws cause the overall youth rate of unemployment to rise and will particularly hurt the young minority job seekers: “what is particularly striking is that there was no significant difference between the unemployment rates of black and white teenagers in 1948”. Between 1940 and 1960, before the great expansion of the welfare state, black poverty rate declined significantly.
ON INEQUALITY:
At some point between ages of 25 and 60, over three-quarters of the population will find themselves in the top 20 percent of income distribution. The turnover rate in the highest income bracket is particularly high. Fewer than half the people in the “top one percent” in income in 1996 were still there in 2005. The highest incomes are usually very transient incomes, reinforcing the conclusion that these are transient capital gains rather than enduring salaries. And most of “the poor” are not permanent residents in low-income brackets. It is important to note that “the poor” are not a given set of human beings, but an ever-changing mix of people. Entry -level jobs are, therefore, not necessarily “dead-end jobs”.
Despite equal numbers of households in each 20 percent, there are far more people in the top 20 percent of households. The number of people participating in the labor force and earning income is four times as great in the top quintile as in the bottom quintile.
ON “THE POOR PAYING MORE”:
While prices are higher in inner-city neighborhoods, rates of profits are generally lower. The community is actually paying additional costs generated by some residents in that community. The local residents who created none of those costs are victims of those who did.
*The points were summarized and kindly provided by my colleague, Massoud Fazeli.
Sowell has long been one of my favorites. Here are a couple of my favorite quotes (including one which I do not even endorse – I just think he puts the case nicely):
ReplyDeleteThe first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.
Diversity. If there is any place in the Guinness Book of World Records for words repeated the most often, over the most years, without one speck of evidence, “diversity” should be a prime candidate. Is diversity our strength? Or anybody’s strength, anywhere in the world? Does Japan’s homogeneous population cause the Japanese to suffer? Have the Balkans been blessed by their heterogeneity — or does the very word “Balkanization”
remind us of centuries of strife, bloodshed and unspeakable atrocities, extending into our own times? Has Europe become a safer place after importing vast numbers of people from the Middle East, with cultures hostile to the fundamental values of Western civilization?
Greed. Someone pointed out that blaming economic crises on greed is like blaming plane crashes on gravity. Certainly planes wouldn’t crash if it weren’t for gravity. But when thousands of planes fly millions of miles every day without crashing, explaining why a particular plane crashed because of gravity gets you nowhere. Neither does talking about greed, which is constant like gravity.
Another economist with a compelling personal story, whose work I am even more appreciative of, is Walter Williams. I think it is not coincidental that minority economists who have had to fight all the odds to attain their professional goals become free market advocates.
Lee Nason
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