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Abstract
Much discrimination works through exclusion. Poor access to public goods disadvantages minority individuals before they reach the job market. Market impediments to competition cannot explain exclusionary discrimination, and the question is, what can? This paper draws on two different nonmarket theories of discrimination, ‘discriminatory equilibrium’ and ‘stratification economics’, to address the question. In one, group cognitive biases are (re)generated by the tenor of inter-group interaction, while in the other the majority finds exclusionary discrimination remunerative given its asymmetric power. This paper models these views as different types of bad equilibria. In a couple, Pareto-improving policy interventions are possible as the problem arises from bad intra-group coordination within, respectively, the minority and the majority. Yet, in a third, the majority is in a payoff-dominant strategy game when discrimination pays off irrespective of coordination dynamics. The mitigation of discrimination in this case is more political than a policy problem.
Acknowledgements
We are grateful to William Darity Jr. for his help and encouragement and two anonymous referees for their comments. We are alone responsible for any mistakes that remain.
Disclosure statement
No potential conflict of interest was reported by the author(s).
Notes
1 See, Fang & Moro (Citation2011) for a survey.
2 That is, from ‘club’ rather than ‘public’ goods as Davis (Citation2019) points out.
3 Stratification Economics is developed by William A. Darity, Jr., and his associates. See Darity, Citation2005, Citation2022; Darity et al., Citation2015, Citation2017, Stewart, Citation2008. On discriminatory equilibrium, see Adida et al., (Citation2014, Citation2017) and Bracic’s (2020).
4 The authors in neither view describe their work in these terms and might not agree with our interpretation.
5 Improvements in market competition emphasized in market theories cannot fix a market failure. A helpful analogy offered by an anonymous referee is a ‘bank run’. Improved competition for deposit holders by banks (or among deposit holders for bank services) cannot mitigate the run, whatever its effect might be to lower the probability of a run occurring in the future.
6 Assimilation can mean very different things. On one extreme, it might mean the minority individual becomes completely indistinguishable (culturally, linguistically, in terms of lifestyle, etc.) from the majority population, while on the other end of the spectrum it would simply mean that the individual’s context-specific life choices (and practices) ‘fits-in’ smoothly without disrupting mainstream norms and values. Our use of the term here is closer to the latter end of the spectrum.
7 In other literature, group identities emerge out of infinitely repeated games members play with each other while also interacting outside the group. In these more complete specifications, individuals make identity investments in relatively closed networks at any point in time based on initial endowments, preferences, and beliefs, which they update based on changes in costs and marginal utility gains (Bernard et al., Citation2016; Bénabou and Tirole, Citation2011; Shayo, Citation2009; Akerlof & Kranton, Citation2010). Darity et al. (Citation2006) and Mason et al. (Citation2022) explore how group identities emerge in the context of inter-group conflict over resources. Using an evolutionary game specification, they show mixed equilibria that correspond to different group of identities, where equilibrium selection determines which ones from this set individuals adopt.
8 We assume away the possibility that the majority rejection payoff remains above that of acceptance for all possible values of n, which would be the case when a strongly prejudiced majority is indifferent to minority assimilation.
9 We postulate that these values corresponding to the equilibria in Figure are: m = 0 when the majority’s rejection payoff exceeds that of acceptance; m = m1 when n = n* and m = M when the acceptance payoff is higher.
10 Note that the inequality would also hold for higher values of m since the ghettoizing payoff is inversely related to the level of majority acceptance and thus: n(m = 0)>n(m1)>n(M).
11 For instance, some historians remark that WWII was an important milestone in the mainstream social acceptance of Italian Americans (Cannato, Citation2009). In the context of our discussion, the desegregation brought about by the Italian Americans’ participation in the war effort and the mass induction of young men into the US military might have moved them to a ‘mixed’ Nash equilibrium that in turn impacted the majority attitudes favorably.
12 According to market-based theories, the assimilation payoff would rise with assimilation also because it revives market competition, raising the cost of discrimination for its perpetrators, since minority self-isolation intensifies information problems.
13 As Arthur Lewis (Citation1985a) puts it, ‘ … the yield from various form of exploitation might just be higher than that of investment, such as when immigrants kill the aborigines and seize their lands; purchase slaves and force them to work; levy taxes on villagers payable only in cash; thus forcing them to work in the mines; or prevent villagers from growing export crops (or levy heavy taxes on export crops) to force them to work for employers; and so on’ (p. 30).
14 Economists (Thurow, Citation1969; Swinton, Citation1977, Citation1978) and legal scholars (Roithmayr, Citation2010; McAdams, Citation1995; Cooter, Citation1994, Citation2000) who have written on discriminatory groups liken them to cartels that are neither unstable nor short lived, unlike what economists – perhaps, mistakenly, assume about cartels. We are thankful to an anonymous referee for bringing the latter group of writers to our attention.
15 Also, important, but ignored in our discussion are class differences especially within the majority group (see Greenberg, Citation1980), which raises the broader question, how agents with conflicting interests within dominant groups can act in their collective interest (Erturk, Citation2021).
16 Our simple specification ignores the likely positive feedback effects from higher majority acceptance level on the political capacity to impose sanctions on negative externalities. Related is also the likely transformation in the utility map of majority individuals who become accepting, such that the minority individuals’ wellbeing might begin to matter. It is often remarked that teenagers discount their future wellbeing heavily, having a hard time imagining a future world in which they are someone else – an adult. The rejecting majority individuals can be similar: heavily discounting an alternative, hard to imagine world where they are someone else – accepting.
17 Note that the difference between payoffs z and x at this equilibrium (m = 0) gives the horizontal distance between the acceptance and rejection payoffs in Figure .
18 Earlier we assumed that taxes internalizing negative externalities cause the rejection payoff to rise more slowly than acceptance payoff in minority assimilation. Here, we make the additional assumption that they lower the expected rejection payoff for all levels of majority acceptance.
19 The same political processes that depress the rejection payoff, treated as exogenous shifts in our simple specification, could also dampen the non-conformity costs. For instance, in his analysis of the racially segregated US labor markets, Swinton (Citation1977, Citation1978) emphasizes the important role of ‘whites only’ labor unions in enforcing majority non-conformity costs, weakened one would think by legal sanctions against overt racial exclusion in unions.
20 For ease of exposition, we assume that an ‘inside’ Nash equilibrium exists for all three possible schedules for the expected acceptance payoff.
21 Becker appears to have recognized the problem. In his introduction to the second (Citation1971) edition of his The Economics of Discrimination he writes, “The first edition paid only limited attention to the economic effects on minorities of collective action, and [what this edition offers] is only a small step towards a full analysis”. He then goes onto remark that, “[o]ur ignorance of the scope and incidence of collective action against minorities is perhaps the most important remaining gap in the analysis of the economic position of minorities” (pp. 7–8).
22 On the minority’s deficit of ‘equal protection by the law’ as it relates to discrimination against African Americans in contemporary US, see, among others, Alexander, Citation2010 and Hayes, Citation2018.
Additional information
Notes on contributors
Korkut A. Ertürk
Korkut A. Ertürk received his BA in Economics at New York University and PhD at The New School for Social Research. He is currently Professor of Economics at the Utah University where he has been teaching since 1993.
Sanchit Shrivastava
Sanchit Shrivastava received his BA in Economics and Statistics at University of Mumbai, MA in Economics at Gokhale Institute of Politics and Economics, and PhD at the University of Utah. He is currently teaching as Assistant Professor of Economics at Skidmore College. Sachit Shrivastava received his BA in Economics and Statistics at University of Mumbai, MA in Economics at Gokhale Institute of Politics and Economics, and PhD at the University of Utah. He is currently teaching as Assistant Professor of Economics at Skidmore College.