Discrimination and Disparities Page 12

  What is most striking about statistics on American teenage unemployment rates in the late 1940s is that (1) these unemployment rates were only a fraction of the levels of unemployment to which we have become accustomed to seeing in later decades, and (2) there was little or no difference between the unemployment rates of black and white teenagers then.

  Internationally, unemployment rates have been markedly lower in times and places where neither governments nor labor unions set most wage rates. Most modern nations have had minimum wage laws, but the few that have not have tended to have strikingly lower unemployment rates. These would include Switzerland and Singapore today and Hong Kong under British rule, prior to the 1997 return of Hong Kong to China. There was also no federal minimum wage law in the United States before the Davis-Bacon Act of 1931, which impacted wage rates in the construction industry.

  As for hard data on unemployment rates in these places and times, The Economist magazine reported in 2003: “Switzerland’s unemployment neared a five-year high of 3.9% in February.”45 But this “high” (for Switzerland) unemployment rate returned to a more normal (for Switzerland) 3.1 percent in later years.46

  In 2013, Singapore’s unemployment rate was 2.1 percent.47 In 1991, when Hong Kong was still a British colony, it too had no minimum wage law, and its unemployment rate was under 2 percent.48 In the United States, the last administration with no federal minimum wage law at any time was the Coolidge administration in the 1920s. During President Coolidge’s last four years in office, the annual unemployment rate ranged from a high of 4.2 percent to a low of 1.8 percent.49

  Yet discussions of minimum wage laws, even by academic scholars, are often based on the intentions and presumed effects of these laws, rather than being based on empirical evidence as to their actual consequences.

  IMPLICATIONS

  On the larger question of statistical errors in general, whether errors of omission or commission, these errors often seem to support a particular social vision. This suggests the possibility that pursuit of a social cause can affect how causation is perceived or presented to others.

  Even in the absence of any such concerns, however, the emphasis on complex statistical analysis in economics and other fields—however valuable, or even vital, such statistical analysis may be in many cases—can lead to overlooking simple but fundamental questions as to whether the numbers on which these complex analyses are based are in fact measuring what they seem to be measuring, or claim to be measuring.

  “Income” statistics which lump together annual salaries and multi-year capital gains are just one of many sets of statistics which could stand much closer scrutiny at this fundamental level—especially if laws and policies affecting millions of human beings are to be based on statistical conclusions.

  More broadly, the validity of numbers in general often depends on the reliability of the words describing what those numbers are measuring. Statistics on tax rates, for example, can be grossly misleading when changes in tax rates are described in such terms as “a $300 billion increase in taxes” or “a $300 billion decrease in taxes.”

  All that the government can do in reality is change the tax rate. How much tax revenue that will produce depends on how people react. There have been some times when higher tax rates have produced lower tax revenues, and some other times when lower tax rates have produced higher tax revenues.

  In the 1920s, for example, the tax rate on the highest incomes was reduced from 73 percent to 24 percent—and the income tax revenue rose substantially—especially tax revenues received from people in the highest income brackets. Under the older and higher tax rate, vast sums of money from wealthy investors were sheltered in tax-exempt securities, such as municipal bonds—an amount estimated to be three times the size of the annual federal budget and more than half as large as the national debt.50

  Tax-exempt securities tend not to receive as high a rate of return on investments as other securities, whose earnings are taxed. What this meant was that sufficiently lower tax rates made it profitable for wealthy investors to take their money out of tax shelters and invest it in the market economy, where there was a higher rate of earnings, leaving them better off on net balance, even after paying income taxes that they had avoided before.

  In terms of words on paper, the official tax rate was cut from 73 percent to 24 percent in the 1920s. But, in terms of events in the real world, the tax rate actually paid—on staggering sums of money previously hidden in tax shelters—rose from zero percent to 24 percent. This produced huge increases in tax revenues received from high-income people, both absolutely and as a percentage of all income taxes collected.51 That is because 24 percent of something is larger than 73 percent of nothing.

  Tax rate cuts in some later administrations also led to increases in tax revenues.52 For example, a front-page news story in the New York Times of July 9, 2006 said: “An unexpectedly steep rise in tax revenues from corporations and the wealthy is driving down the projected budget deficit this year.”53

  However unexpected this increase in tax revenues, after tax rates had been cut, may have been to the New York Times, others who had been following economic history would know that this had happened before under administrations of both political parties. But none of these facts has made the slightest difference to those who continue to call tax rate reductions “tax cuts for the rich,” even when high-income people end up paying more tax revenue than before. The very possibility that tax rates and tax revenues can move in opposite directions has seldom been mentioned in the media—a crucial error of omission.

  Similarly, people who discuss raising the government-mandated minimum wage rate talk as if this would automatically mean having the lowest-paid workers’ income rise, from $10 an hour to $15 per hour, for example. In reality, for millions of inexperienced and unskilled young workers, it can mean that the wages they receive in fact fall from $10 an hour to zero, when they are unable to find jobs. Even those who have and keep their jobs can nevertheless end up with lower incomes, as a result of having fewer hours of work available in the wake of a minimum wage increase, as a National Bureau of Economic Research study showed happened in Seattle in 2016, for example.54

  Statistics matter greatly. But so do the words used to describe those statistics. Unless we are prepared to stop and think beyond the words to the realities, we are all too likely to be manipulated and stampeded by a heady mixture of numbers and rhetoric.

  * Professor George J. Stigler, in a critique of Professor Lester’s survey research, not long after World War II, pointed out that “by parallel logic it can be shown by a current inquiry of health of veterans in 1940 and 1946 that no soldier was fatally wounded.” George J. Stigler, “Professor Lester and the Marginalists,” American Economic Review, Vol. 37, No. 1 (March, 1947), p. 157.

  Chapter 5

  SOCIAL VISIONS and HUMAN CONSEQUENCES

  Many people may expect discussions of economic and social disparities to end with “solutions”—usually something that the government can create, institutionalize, staff and pay for with the taxpayers’ money.

  The goal here is entirely different. There has never been a shortage of people eager to draw up blueprints for running other people’s lives. But any “solution,” however valid as of a given moment under given conditions, is subject to obsolescence at some later time under changed conditions.

  The hope here is that clarification is less perishable, and can be applied to both existing issues related to economic and social disparities and to new issues, involving the same subject, that are sure to arise with the passage of time. Given the limitations of prophecy, the point here is to seek to provide enough clarification to enable others to make up their own minds about the inevitable claims and counter-claims sure to arise from those who are promoting their own notions or their own interests.

  THE INVINCIBLE FALLACY

  At the heart of many discussions of disparities among individuals, groups and nations is the seemingly invincible falla
cy that outcomes in human endeavors would be equal, or at least comparable or random, if there were no biased interventions, on the one hand, nor genetic deficiencies, on the other. This preconception, which spans the ideological spectrum, is in utter defiance of both logic and empirical evidence from around the world, and over millennia of recorded history.

  As noted in Chapter 1, individual prerequisites for success in various endeavors may be more or less normally distributed, as in a bell curve, but that does not mean that the presence of all the prerequisites simultaneously will also be normally distributed. Whether among human beings or in nature, highly skewed distributions of outcomes with multiple prerequisites have been common around the world. Nevertheless, the fallacy persists that skewed distributions of income, employment and other social outcomes show either discrimination or genetic deficiencies.

  The human species can be divided and subdivided in many ways—by race, sex, age, birth order or by the different geographic settings in which peoples have lived (coastal peoples compared to inland peoples; mountain peoples compared to peoples living in river valleys), and so on. Among all these subdivisions, and others, large disparities in outcomes have been the rule, not the exception.

  The real per capita income that Britain reached in 1880 was not reached by Spain until 1960, and by Portugal until 1970—and, at these latter dates, the real per capita income in both Spain and Portugal was not quite half that in contemporary Britain.1 Homicide rates in Eastern Europe have, for centuries, been some multiple of homicide rates in Western Europe, and homicide rates in different regions of the United States have likewise differed by some multiple.2

  Yet Britain had no power to suppress the economic development of Spain or Portugal, just as Western Europe had no power to make the homicide rate higher in Eastern Europe. Disparities do not imply discrimination. Nor is discrimination automatically excluded. It is one of many possibilities, each of which has to establish its claims with evidence, rather than being an automatic presumption.

  As already noted, even such natural phenomena as earthquakes, lightning and tornadoes likewise show highly skewed distributions around the world, as well as within the same country. Thunderstorms are 20 times as frequent in southern Florida as in coastal California, for example.3 More than half the geysers in the entire world are in Yellowstone National Park.4 Asia has more than 70 mountain peaks higher than 20,000 feet, and Africa has none.5

  The litany of highly skewed outcomes, both among humans and in nature, is almost limitless.6 Nevertheless, an implicit assumption persists that equal, or at least comparable, outcomes would exist among different groups of people, except for adverse interventions against some, or genetic deficiencies among others.

  These are not just theoretical issues. The ramifications impact laws and policies. The Supreme Court of the United States has enshrined the prevailing fallacy in the form of its “disparate impact” standard for presuming discrimination. Yet median age differences among groups, varying by a decade or decades, are alone enough to preclude proportional representation in occupations requiring either long years of experience or the physical vitality of youth—even if all groups were absolutely identical in every other aspect besides age.

  Age disparities exist among nations, as among individuals. There are more than twenty nations with median ages in their forties, and more than twenty other nations with median ages under twenty.7 How rational is it to expect nations with such large and consequential differences in adult experience to have equal, or even comparable, economic productivity? And among nations, as among individuals, age differences are just one difference among many.

  Seekers of “social justice,” in the sense of equal or comparable outcomes, proceed as if eliminating racial, sex or other group discriminations would produce some approximation of that ideal. But what of the implications of the fact that a majority of the people in American prisons were raised with either one parent or no parent?8 This does not even get into the qualitative dimension of parenting, though we know that educational differences among parents have been correlated with differences in educational and career outcomes among their children, even when those offspring were men who were all in the top one percent in IQs.9

  Sometimes just a single inconspicuous difference in circumstances can make a huge, historic difference in human outcomes. One of the monumental natural catastrophes of the nineteenth century was the famine in Ireland that was due to the failure of the potato crop, at a time when potatoes were the principal food of the Irish. Deaths by starvation and by diseases related to malnutrition are estimated to have claimed a million lives in Ireland, a country of only 8.5 million people at the time.10

  Nearly two million people are estimated to have fled that famine-stricken country between the mid-1840s and the mid-1850s11—altogether a massive loss of population in a small country. Yet the very same kind of potato was grown in the United States—where Ireland’s potatoes originated—with no crop failure.

  The source of that crop failure has been traced to a fertilizer used in planting potatoes on both sides of the Atlantic. That fertilizer contained a fungus which flourished in the mild and moist climate of Ireland, but not in the hot and dry summers of Idaho and other potato-growing areas of the United States.12 That one difference meant millions of human tragedies and a massive loss of population from which Ireland did not recover, until generations later.

  Morally neutral factors such as crop failures, birth order, geographic settings, technological advances, or demographic and cultural differences are among the many reasons why economic and social outcomes so often fail to fit the preconception of equal or comparable results.

  Yet morally neutral factors seem to attract far less attention than other causal factors which stir moral outrage, such as discrimination or exploitation. But our emotional responses tell us nothing about the causal weight of different factors, however much those emotional responses may shape political crusades and government policies. But which causal factors predominate at a given place or time is ultimately an empirical question, independent of our emotions or inclinations.

  Those who seem to be promising an end to existing disparities as a result of whatever policies they advocate, may be promising what cannot be delivered, regardless of the particular policies being advocated. Moreover, the clash between numerical goals, fervently pursued, and the repeatedly frustrated attempts to reach those goals is not without social consequences, including dire consequences for society as a whole—and perhaps especially dire for the less fortunate, who suffer most when social order breaks down amid heady crusades.

  This is not to say that all attempts to help lagging individuals or groups are futile. On the contrary, many dramatic rises from poverty to prosperity, and even rises to the forefront of human achievements, have occurred at various times in countries around the world. But seldom, if ever, has this been a result of policies based on the fallacy of assuming equal outcomes in the absence of group discrimination or on the basis of an assumption of a fictitious sameness among peoples.

  The actual consequences of the prevailing social vision of our times cannot be assessed on the basis of its good intentions or even its plausibility. The real test is what has happened when it has been applied, and what the implications are of the social consequences.

  Educational Implications

  Among the institutions where the prevailing fallacy takes a painfully sweeping toll are those low-income and minority schools in America (and low-income white schools in England) where young thugs are allowed to destroy the education—and the futures—of other students there, by making those other students and their teachers targets of daily disruptions, harassments, threats and violence.13

  In the United States, federal agencies have pressured and threatened schools where statistics show a disciplining of black male students at rates that are disproportionate to the disciplining of other students. The invincible fallacy in the background trumps the most blatant and disastrous realities ri
ght in front of our eyes.

  Even aside from any questions about differences in capabilities or potentialities, there are inescapable differences in what people want to do. Does anyone seriously believe that Asian American youngsters have as much interest in playing basketball as black youngsters have? Or does anyone doubt that the Asian youngsters’ lesser interest in basketball may have something to do with the dearth of Asian Americans among professional basketball players?

  Differences in what individuals and groups want to do, and are prepared to prioritize, are too often ignored in many well-intentioned policies. The “no child left behind” educational policies, for example, introduced during the administration of President George W. Bush, ignored the painful possibility that there was no such universal desire for education as implicitly assumed, and that some uninterested children’s behavior prevented other children from learning. Given these ignored realities, the disruptive or violent children must be separated from others, if those others are to have a decent chance for a decent education.

  Moreover, the need to separate the disruptive and violent children is independent of whether or not there is any “solution” currently available, or on the horizon, for changing the behavior of disruptive and/or violent children. The alternative is to sacrifice the education of unending generations of poor and minority children until such indefinite time as a “solution” for misbehaving or violent classmates can be found.

  The extraordinary educational successes of some chains of charter schools in low-income, minority neighborhoods14 may well be due, at least in part, to the self-sorting of families in those neighborhoods who care enough about better education for their own children to enter the lotteries by which applicants are chosen for admission to charter schools.