One final word on this 46 year old topic:
Monday I insisted that all reasonable people should be at least mildly disturbed by the diminution of property rights implicit in a ban on whites-only lunch counters.
Tuesday I cited an excellent comment from Jonathan Pryor suggesting that a whites-only lunch counter is itself an indirect assault on property rights insofar as the owners expect taxpayers to foot the bill for enforcement of the whites-only policy (say, by calling the police when unwanted visitors show up).
There are circumstances in which I think Pryor’s argument clearly applies. I cited the case of the man who keeps a barrel of Hershey bars on his front lawn and expects the police to stop children from filching them. Surely this man is imposing a burden on the community over and above the assertion of his own property rights. But I also gave several other examples that gave me pause about the applicability to lunch counters.
This in turn brought forth an insightful comment from Ken B, who points out that the Civil Rights Act itself called for a lot of taxpayer-financed enforcement. The act was passed, blacks sat down at lunch counters, owners attempt to evict them, the police were called.
So if you base your case on Pryor’s argument, you’ve got an empirical question to face. In which regime do the police get called more often—the regime where owners can legally ban black customers, who nevertheless sometimes show up uninvited? Or the regime where blacks can legally eat at any lunch counter, but are nevertheless sometimes evicted? And depending on what the numbers show, you’ve got to be prepared to switch sides. (You might also conclude that the answer differs from community to community, so that it makes little sense to decide this issue on a federal level.)
And most importantly: Regardless of what the numbers actually show, you’ve got to concede that you would have switched sides if the numbers had been different. Which in turn should make you extremely hesitant about demonizing those who read the numbers differently than you do.
The key is “So if you base your case on Pryor’s argument”. This can only be a part of the cost / benefit analysis, so whilst it should be included, you would be foolish to base your case on it.
My feeling is that it is quite a small part of the overall cost / benefit.
The cost of enforcing murder laws are quite high. If we were to base our case only on the cost of investigation, we would allow murder. In fact, I don’t think anything would be illegal.
It’s a good point that you raise, and at least worth recognizing as a forfeiting of property rights. Rather than trying to figure out which regime costs more in police enforcement, my argument — and, I would imagine, most people’s argument — would be that the enforcement of the Civil Rights Act and the 14th Amendment was a net loss of property rights, but the increased freedom from discrimination for blacks (and others affected by the bill) was worth the trade-off.
This leads to the question of “how much do you value property rights versus the ability to live without being the target of discrimination?” That’s another good question to ask, as I would image that a bill which required the demolition of any building at the request of any anonymous complainer would be too far in the other direction. The battle is (as with anything like this) at the margin, such as “how much do we force each private business to spend on ramps and elevators for the disabled?” I would imagine that most people would say “somewhere between $1 and $1,000,000,000,000;” the tricky part is narrowing that down.
“This leads to the question of “how much do you value property rights versus the ability to live without being the target of discrimination?”
Being the target of discrimination has to hurt more when the police are enforcing it. Having police enforcement of anonymous discrimination (I won’t sell to you if you are black, Jewish, etc.) has to magnify the disutility of those in the affected groups. And those targeted for how they were born, with unchangeable characteristics surely would and should feel more burned than the naked people who kept coming up yesterday but who do have the option of putting on clothes. I might putting a separation between public and private institutions in the CRA would have created some ironic outcomes. A white-only business could call the police to enforce trespassing and have a black police officer dispatched to enforce who then himself would have been banned from getting a drink at that business’s drinking fountain. All academically interesting, but we did the right thing by crafting the law the way it was. [That is has taken 50 years for the government to extend similar rights to gay people is a disgrace, though. Obama will surely drop Don’t Ask, Don’t Tell, and even if he is a one termer, his integration of military will be looked back on as a serious achievement.]
I think that I just set a record for number of typos in a Big Questions comment!
This post is a complete nonsense.In the post called Blind Justice I presented a simply partial equilibrium model that shows that landlord Mary’s behaviour is not welfare neutral. Her behaviour leads to a “maryweight’s loss”, which is clearly a market imperfection. In this cases, the economic theory teaches us that a regulation is welcome.
Maybe it’s a side issue but in this whole discussion I think people give too little attention to the value of clear and simple rules. The simple rule that would allow private discrimination has the benefit of preventing other encroachments — eminent domain abuse for example. Paul’s critics rarely concede this. The no race based discrimination rule has obvious advantages. I think you will find even Rand Paul admits this.
Ken– This is a slippery slope argument. Slippery slope arguments, by their very nature, are weak to the point of constituting a logical fallacy. This is so because they ask us to consider a decision, not based on it’s merits or logic, or anything in evidence, but on the basis of how someone will consider it at a later time.
Slippery slope arguments are used often and are rarely validated by actual outcomes. Like raising the highway speed-limit cap from 55mph did not result in blood running in the gutters.
But you are very right about one thing. Despite market anarchists trying to paint this as a moral issue, this matter is clearly about property rights and the cost/benefit of varying degrees of them.
We did away with “Cuius est solum, eius est usque ad caelum et ad inferos” (Latin for for whoever owns the soil, it is theirs up to Heaven and down to Hell) rather definitively in the 1940s. In USA v. Causby (1956) the supreme court was asked to decide whether a property owner’s rights to full and absolute control of their parcel of land trumped the public’s benefit of having some government control over how that property was used (in this case that the air above the land be occupied by landing military planes).
The supreme court shot down such a notion and describing a situation where the traditional property rights of the land owner would allow it to slow the progress and growth of the nation, SCJ Douglas says “Common sense revolts at the idea”.
I can think of no better way to describe the notion that a nations political-legal system should sanction the deprivation of any able body from the free flow of commerce and industry therein.
Even if you do not base your argument on Pryor’s point, it does form part of the cost / benefit analysis, so it might be worth a bit of pondering, to see which side of the fence it lies on.
In a completely non-racist society, the law is unnecesary, but equally the police will not be called with or without a law. We can consider this the same as the non-existant law on anti blue-eyed people discrimination. Were such a law to be introduced, the net effect would be a small cost in drafting and passing the law, and a small cost in the reduction in property rights. There would be no gain as there is no blue-eyed discrimination anyway. I do not think most property owners would consider it to be a serious imposition. The fact that is has a small net cost and no benefit is probably why we do not have legislation against hypothetical, but non-existant discrimination. In this society, Pryor’s point is moot. In the absence of blue-eyedism, the police are never required to act on it, and the cost is zero with or without the law.
In a hypothetical society that is very racist, the actual existence of the law has the same cost as the anti blue-eyed discrimination law above. A small cost, which bothers people only a little and costs very little. People feel more strongly about it not because the law exists, but because they are racist (that is how I defined this society), and it seeks to prevent then acting on this. The main cost of the law is not the loss of property rights (which is the same as in the blue-eyed example), but preventing people from acting the way they want to. In this society, the police are probably going to be called out quite a bit with or without the law. I do not know under which there would be greatest call-outs. However, we do know that racist discrimination is not economically efficient (I am trying to stick the terminology), so in this society the benefits of such a law are likely to be the greatest.
From the above, we can see that the enforcement cost is not necessarily an argument for one side or the other, but acts as an indication of the benefit of the law. If the enforcement costs are high, the benefits are also high. If the enforcement costs are low, the benefits are likely to be low also. This applies if you have or do not have the law.
So where are we at the moment? We have no enforcement costs for blue-eyedism, this suggest that the utility of an anti blue-eyedism law would be very low. Do we have any enforcement costs for racist discrimination? Are the police ever called to such incidents? I think the answer is “yes”, which suggests the utility of the law is high. Remember, this applies with or without the law.
Apparently, it is illegal to eat an orange in the bathtub in California, or beat a rug on your lawn in San Francisco. These laws have similar costs to the existence of the hypothetical anti-blue-eyedism. Although we would prefer they did not exist, there is very little interest in repealing them, because their mere existence has such little cost. When the existence of the Civil Rights Act attracts such little attention as orange eating in the tub, that is the time to remove it.
No, my observation here is not about a slippery slope. It is about transactions costs. There are very real costs in unclarity.
Ken–I’m sorry then. This statement, “The simple rule that would allow private discrimination has the benefit of preventing other encroachments — eminent domain abuse for example” seemed very much like a slippery slope argument.
“If we specify this particular act as legal then disputes arising later about a different element of property law will be more likely to be decided favorably”.
I don’t see how this logic would play out though. Laws that diminished property rights on the basis of imminent domain have not resulted in the expansion of anti-discrimination protections. As in most cases the issues presented have been decided on their own merits.
Lets see if I understand (GOOD meaning legal):
Racist businessman doesn’t want to trade with certain people: EVIL
Racist customer doens’t want to trade with certain businesses: GOOD
Thief wants to force non-voluntary transaction: EVIL
Non-racist wants to force non-voluntry transaction: GOOD
Bigot wants to stop gays entering his bar: EVIL
Bigot wants to stop gays entering his house: GOOD
Zealot doesn’t want to hire heathen: EVIL
Zealot doens’t want to date heathen: GOOD
I don’t want to shop at racist stores: GOOD
Racist doesn’t wan to shop at black stores: GOOD
I want to stop racist businesses: GOOD
Racist wants to stop black businesses: EVIL
What? Wait What?
Seriously, you lot are like the very people you despise, how ironic.
Patrick–While some people have, not much of this discussion is really about good v. evil.
At least for me it is about to what extent the state should promote practices that grow the economy and discourage those that arrest it. In particular arresting behavior that has a negative influence outside of the group that benefits from that influence (i.e. arbitrary discrimination in commerce). To use a few of your examples:
Racist businessman doesn’t want to trade with certain people: EVIL — Well not evil, just a burden on the economy that should not be supported.
Racist customer doens’t want to trade with certain businesses: GOOD — Not good, just a non-issue since that racist customer still has the option to do business wherever he likes. He gets all of the benefits of his choice and assumes all of the costs.
Non-racist wants to force non-voluntry transaction: GOOD — Again, not good, but a matter of equity. Few people would support anti-discrimination enforcement on private transactions (Bob sells a hog to Jim).
But when you open a place of business you are entering a social contract with the community. They approve of your facilities, grant permits, establish what you may sell, and (in the case of controlled substances and more recently anti-discrimination laws) to whom you may sell. Your statement is much like “Non-selling-smokes-to-kids-ist wants to prevent voluntary transactions involving cigarettes to children: GOOD”. To which the response is, well it is good for the kids I suppose, but it is better for the community at large that has decided that the proscription on selling smokes to kids has value.
Conforming to these values is part of your cost of doing business. It is not part of your costs when you go shopping or decide to reside in a home somewhere.
In any case, I haven’t seen much in the way of despiction until now. And there are classes taught on the meaning of the word “irony”, it may prove a valuable asset that you should consider.
As I already explained, my definitino of ‘good’ was legal.
And really? “Community”? Where is it? YOU have not given any proof that I agreed to be a part of this “community”, nor do I even know where it is. And this also is contradictory to your previuos statement that “the state should promote practices that grow the economy and discourage those that arrest it”.
I don’t want exactly want shops selling drugs to kids, but the most I might be willing to do is shop next door (unless it has lower prices). See, the miracle of the free market means that GDP is higher, that people’s wants are satisfied and there is no enforcement cost, how wonderful. A state control meanwhile, well, there are tonnes of flaws with the premise, but fundamentally:
Racist shops will be removed to the extent that people do not like racist shops.
regardless of legislation, so logically, all legislation can do is be harmful.
Also, defining the purpose of the state is even more fuzzy:
a) to increase nominal GDP
b) to increase real GDP
c) to increase the happiness of the poorest
d) to decrease the suffering of the poorest
e) to protect rights of life and property
f) to protect liberty
g) to promote general welfare
h) account for ‘market failures’
and the list goes on
Bekyou: Well if you want to call it a slippery slope you can but lablelling it so does not prove anything about it. There are lots of cases of precedents in one murky area being used or abused in another murky area. Cutting that sort of thing off at the knees is largely the basis for prohibiting vague laws. It prevents the creeping abuse and reduces the cost of vigilance fighting the abuse. An example is statutory rape law. Only an idiot thinks all 16 year olds (or 14 or whatever the age of consent is) are the same. So the rule is arbitrary. In some cases it will be unfair. It will always be “too simplistic” for les biens pensants. But the clear cut rule prevents abuse (of the vagueness) by cops AND perptrators and reduces greatly the costs of enforcement / over enforcement.
“Racist shops will be removed to the extent that people do not like racist shops. regardless of legislation, so logically, all legislation can do is be harmful.”
This is a very simplistic analysis. Racist discrimination imposes an economic cost on everyone. It continues only because people are prepared to bear that cost for the benefit of not serving some group. There must be thousands or millions of people today who participated in racist discrimination in the 1950’s. Many of them would have been enthusiastic, and fought the introductoion of anti-discrimination laws because they wished to continue to discriminate. Possibly these same people today mostly reject racism and regret the costs they imposed on themselves and others by their irrational narrowing of their trading and interactions. Hopefully, they now think that it is better without so much racist discrimination, and everyone is better off as a consequence. It is possible (but not certain) that the legislation was part cause of this shift. Therefore, logically, legislation of this type can be beneficial, not harmful. The harmful effects are short lived, the beneficial effects enduring. Sometimes you have to run things for a time before the full effects can be seen.
Patrick–“YOU have not given any proof that I agreed to be a part of this “community”, nor do I even know where it is”. What I said was that by opening a business you are necessarily entering into a social contract. This can’t be denied. In order to have a store you must agree to certain things. That you will keep the occupancy of your building under a prescribed limit. That you will maintain the building in a safe manner. That you will not sell certain things to certain people. And similarly, that you must sell equally to all people. All of these things (and more. much much more)are what you must agree to in order to open a store or restaurant. And in exchange you get all the benefits of an economy supported by the people at large.
The free market does not ensure that GDP is higher. There are many closed economies with higher GDPs than similar open ones. You’re confusing your econometrics I think. A free market does ensure the most efficient placement on the PPF, but this is a simplistic approach that does not take into account market failures caused by irrational actors (racist shop owners). An irrational shop owner moves the dot away from the PPF and a touch of state intervention will mitigate some of that inefficiency.
Ken– I’m not getting your point. Having a clear cut definition of age of consent prevents misinterpretation of who may sleep with whom. I’ll give you that. How does this secure the rule of law in other matters? Are you suggesting that having a clear cut age of consent (establishing when it is and isn’t statutory rape) will prevent someone from accidentally committing prison rape? Or keep them from shop-lifting? If this were true then I could accept that establishing firm rules on when a store owner may discriminate might also keep the state from bulldozing my house to put in a highway. It seems your complaint is against vague laws, so make the anti-discrimination laws very explicit and plain … like they are. Problem solved.
But you say there are lots of precedents where a precedent from one case is applied to another unrelated case. Could you cite some of them? I don’t need lots, just a dozen or two from the last 30 or 40 years (to keep it relevant. and final verdicts please, lower courts are often overturned). I would like to remind you, though, that there is a difference between a precedent and a statute. Can you give me an example of a statute on one matter being inappropriately applied to another?
You did bring it up.
Harold
So, legislation is SUPPOSED to be democratic, so if the majority support racism, there would be segregation, while if the majority don’t, we wouldn’t. So the only way where society could be improved by legislation is if a dictator says “stop being racist”, to a population who believe in his legitimacy more than the people believe in racism.
You don’t combat racism, you outgrow it, as both legislation and racism are expensive, and would be made obsolete in the loong term (althgouh legislation rarely is removed, whihc is where the problems is).
Benkyou Burito
So just because I set up a shop on a plot of land owned by “The American Government”, I accept their rules implicitly. This opens the rules to all sorts of totalitarianism, especially since Hitler WANTED the ‘inferiors’ to leave, but no country would take them, so does that mean it is the ‘inferiors’ fault for staying there?
OK, ‘market failures’, lets think about this logically. People want something. They are willing to pay both the cost of the operation, as well as the tax to enforce it, as well as campaign for it (else the state is undemocratic). So it will happen on a free market. You could come up with something like, say, legislating bad breath and saying “it would be evil to give one company all that power!”, but that equally applies to the state, and if people don’t want to give that power to a private institution, why give it to the state? And before you bring up “you can vote out senators”, I’ve found that companies are far mroe responsive than governments (unless they have state priviliges, but that just shows how bad the state is).
And no-one has addressed the base contradiciton that, were I racist, I can refuse to shop at certain businesses, but cannot refuse to serve certain customers
“And no-one has addressed the base contradiciton that, were I racist, I can refuse to shop at certain businesses, but cannot refuse to serve certain customers”
The situation is entirely asymmetric. On the one side, the claim is that if you have some items to sell then you should sell them to everyone who wants to buy them at the price you set. Nobody, I think, would claim that if you want to buy an item, you should it buy from everyone who wants to sell it.
In stark form, on the one hand we are comparing buying from shop A with buying from shop B. On the other we are comparing selling to customer C and customer D with just selling to customer C.
And even if you do consider both equally bad. How on earth could you possibly enforce it? Nobody shops at all businesses – indeed they shop at a tiny proportion of all of them. And nobody displays any behaviour which explicitly states why they are shopping at shop A rather than shop B.
Or to put it another way, not buying something which someone else wants to sell is something which happens in shops billions of times every day, for countless different reasons. What are you going to do about it?!
Patrick: I think you are describing “tyranny of the masses”. See Benkyou Burito’s post earlier, to quote: ” And yet, we would not tolerate a pure democracy as our form of government. It has never succeeded. It has a far worse track record even than socialism.” The USA has a representational democracy, not a referendum on every issue.
My argument is that racism is expensive, the legislation is inexpensive. The legislation carries a small cost, so “all reasonable people should be at least mildly disturbed” by it. The emphasis should be on “mildly”, so don’t have the law if it is not necessary. If enforcement is expensive, that proves that the legislation is having an effect, as there are no enforcement costs for a law everyone was going to obey anyway. In the case of anti-discrimination laws, the effect is likely to be a reduction in racist discrimination, which makes the market more efficient. In the absence of the law, costs would also be high to enforce the discrimination.
David: thanks for the clarification of the trespass law in the other post. I still think it is different from robbery, but I may be wrong. Is there a criminal penalty for trespass? Could the police come and find and prosecute a trespasser if they had already left a premises?
Eric:
My POINT was that look at how ridiculous it would be to enforce something like that, but also that doing so would be moronic (even if it oculd be enforced). Shops should be allowed to discriminate, for the same reasons customers are allowed to.
Harold:
But you still miss the fundamental flaw, that if we should ban a discriminatory businessman, we should also ban discriminatory customers, employees and spouses.
Also, even under a representative democracy, I assume that it will still be democratic.
And as for trespass, in the UK at least, it is a civil offence (so you will be sued).
Patreich–Much like my point about accepting certain societal norms as a condition of opening a business (and exploiting the commerce of that society) there is an internet equivalent usually referred to as “Godwin’ Law”
I think we can put another notch on Godwin’s belt.
Beyond that, your post is almost unintelligible. I really don’t know what you are trying to say. But on your point –::
“And no-one has addressed the base contradiciton that, were I racist, I can refuse to shop at certain businesses, but cannot refuse to serve certain customers”
I addressed this directly in my earlier post.
“But you still miss the fundamental flaw, that if we should ban a discriminatory businessman, we should also ban discriminatory customers, employees and spouses.”
In another post I postulated a possible basic justification for forcing the shopkeeper but not the shopper. It was basically you may consider compulsion if it was possible for the discriminator(s) to monopolise. It is possible for the shop to be a monopoly, but it is not possible for the shopper. It is possible for landlords of a particular group to be a monopoly, it is not possible for the tennents. Monopoly may not be the correct term, but I think you can follow the argument. It is a way of attempting to express the “assymetry” of the relationships in a absolute way. It is not possible for a private club to monopolise all clubs, so they can be exempt. An individual cannot monopolise all relationships, so individuals are exempt. I floated the idea, and the more I thought about it the better it seemed to work.
The context of my earlier posts was anti-gay discrimination
http://www.thebigquestions.com/2010/03/10/out-of-the-closet-and-into-the-news/
There is one part of this discussion that has been puzzling me for 2 days now.
Prof. Landsburg says “In fact there is one difference between you and the restaurant owner: He’s making it easier for his banned customers to get served elsewhere (by supplying restaurant meals and thereby bidding prices down at competing establishments). ”
I’ve been trying since I read that to make it make sense and I cannot.
How will reducing the number of places selling to Mr. Brown result in Mr. Brown having greater access to the things he needs and at better prices? Borrowing from SCJ. Douglas, Common sense revolts at the idea.
The good Prof. seems to be saying that by supplying the goods at all, even if just to white shoppers, that the non-racist competition will have to match his prices or else lose the business of all the white shoppers. There by driving the price of goods that Mr. Brown wishes to buy down.
Even on the face of it this is dubious. Because in areas plagued by racism, the racist shop-keep is likely in the majority and already has enough sales volume to make money at a low profit margin. Him bidding down the prices of his minority-tolerant competition is likely to bid them right out of town.
But even if that were not the case, we are talking about removing anti-discrimination laws in favor of laizze faire (sp).
Prof. Landsburg’s suggestion requires an Alice-in-Wonderland world where businesses are free to refuse any customer they wish yet if they do sell to them they must do so at the same price they sell to white people.
Steven, if The bigot can tell Mr. Brown to go somewhere else, than why wouldn’t the dis-interested party tell Mr. Brown that he can come in and shop but will pay 50% higher prices? How has the bigot helped Mr. Brown as you claim he has?
Benkyou: By selling meals to whites (as opposed to not selling meals at all) the restaurant owner reduces the demand for meals at all the other restaurants. Lower demand leads to a lower price via mechanisms that you can read about in any good economics textbook.
Steve, that only works if the market is otherwise completely, or mostly, integrated. If all the other restaurants will refuse to sell to blacks, or impose price discrimination against blacks to account for the lower demand by whites due to the white-only restaurant (note that they do not have to be racist to do so, it would be rational at that point), we are back to square one.
Steve, I may be completely wrong here, but wouldn’t those textbooks assume rational actors? By discriminating against Mr. Brown, the owner is behaving irrationally, at least in a strictly economic sense. We can “make” it rational by putting a value on preserving the “purity” of his premesis at higher than the lost revenue. This then introduces a complication into the mechanisms, which I am not sure is dealt with in at least the simpler textbooks, even if they are good.
If we take an example, there are 1000 white racists and 100 Mr Browns. There is one shop only selling to whites, and another shop selling to anyone, but no whites actually use it. The white shop only sells 90% of its maximum amount, but still has a turnover 10 times as big as its rival. Through economies of scale it will be able to carry a wider stock, and sell more cheaply. Simple theory would predict that the other shop would need to reduce its prices in order to increase its sales, but it can’t increase its sales because the white people value their freedom from blacks higher than the lower prices. In order to keep open, the only alternative is to raise prices.
I am guessing the textbooks have curves describing this. In the above case, the amount sold by the black shop to 90% of the market is zero, and completely independant of price.
Putting it another way, the demand / price mechanisms only work if there is fair competition and the buyers move from higher to lower price. If they will not move , the mechanisms break down, and you effectively have two independant markets.
Steven–“the restaurant owner reduces the demand for meals at all the other restaurants”
This is incomplete and as such inaccurate. The restaurateur is only reducing the demand for meals sold to white people. But is increasing the demand for meals sold to brown people. And because the brown people are operating as rational self interested shoppers they will pay whatever price for their meal that is less than the cost of going somewhere else. So, again, how does this help the brown people like you claim it does?
I re-read my econ books, they all say that reducing the competition leads to higher costs. Or are you operating with an assumption of perfect competition? Or that there are zero barriers to entry preventing other restaurateurs from getting in on the action?
Otherwise how can you justify a statement like “limiting a market segment to a much smaller pool of sellers will result in them having more variety and better prices”.
Lucas: If all the other restaurants will refuse to sell to blacks, or impose price discrimination against blacks to account for the lower demand by whites due to the white-only restaurant (note that they do not have to be racist to do so, it would be rational at that point)
They don’t have to be racist, but they do have to be monopolists. (See the standard textbooks, including mine, for why price discrimination can’t survive in the presence of competition.) Not many lunch counters have much monopoly power.
Benkyou: The restaurateur is only reducing the demand for meals sold to white people. But is increasing the demand for meals sold to brown people. Correct on the first count and incorrect on the second, but also incorrect in thinking this is relevant. At the non-racist shops there is only one price (see my reply to Lukas) and that price is determined by the intersection of supply with *total* demand. Adding one more restaurant lowers the total demand for meals at the other restaurants, and therefore lowers price.
Harold: I imagine you could put together a coherent story involving economies of scale to get the conlcusion you want, but I don’t imagine you could do it plausibly, given what we know about scale economies in the lunch counter business. Your assumptions come close to “proving” that most towns will have just one enormous lunch counter instead of several competitors. Does that sound accurate to you?
Steve, Lunch counters have been chosen as the model which most fits “perfect competion”, as they have a strict area to take their trade, tend to be full during their main periods, and economies of scale are not so applicable. If we take grocery shops instead, the trend towards there being one large supermarket which takes most of the trade. Another way of viewing it is to look at a small town – it does have just one lunch counter.
The economies of scale was not the main point. The main point is that in a strictly racist market, reducing prices in the black shop will not increase trade from the white sector. Raising prices in the white shop will not increase trade in the black shop. You do not have 1 market, but 2. Therefore opening a whites only counter does not affect the black counter at all.
You will arrive at a price in each market independant of the other. I think that the price in each will be higher than the price in a single market, hence the already discussed inefficiency of discrimination.
The black market (unfortunate term) is smaller than the white. If there are any benefits of acting an a larger market (what do the standard texts say here?) they will not accrue to the black shop. Therefore (assuming some benefit of a large market), the price in the black shop will be higher than in the white shop. Taken to its extreme, the size of the market will not sustain any shops (or lunch counters). If Mr Brown is the only black person in town, and no-one will serve him at the lunch counter, does the textbook say he should open one up just for himself?
Economists are keen on the marginal case. In a town, new lunch counters will open until the benefits of opening are less than doing something else, say running the shoe shop. In this way we get the optimum number of lunch counters. If we need to open one for each ethnicity, we are significantly coarsening the “resolution”. If the optimum were 1 in a non-segragated town, then we must have 2 in a segregated one, so twice the optimum. If the optimum were 1000, and the two ethicities equal in number, we need 1001, so only very slightly more than the optimum. The arguments provided above are applicable mostly in small markets.
As I understand the argument, price discrimination can survive in a competitive market, if the good in question is non-transferable (see: airline tickets, insurance policies.) Would you buy a second-hand lunch?
Besides, we can’t just assume competition in a segregated caste society as existed in the Deep South. Sure, it would be nice to enforce perfect competition and let everything unfold from there, but politics is the art of the possible.
“At the non-racist shops there is only one price (see my reply to Lukas) and that price is determined by the intersection of supply with *total* demand”. We could be talking two different situations here. Are you modelling with a large group of non-discriminators, smaller groups of discriminators discriminated against? (we may call them non-racists, racists and blacks for simplicity). I am assuming only 2 groups, racists and blacks. If the two group answer is different from the 3 group, then we must discuss which is closer to reality, but it shows that more than 1 model may be applicable.
Why would total demand affect the price a restaurant charges a black customer If he’s allowed to discriminate on price.
Are you suggesting that a white customer would buy the goods from the bigot’s store then sell them to the brown customers?
Why do you assume that a bigot willing to discriminate against black shoppers would feel obligated to continue selling to white shoppers who then sell the goods to black customers?
I think that your model is too simple to be of any use here. It calls for assumptions that are not validated by reality.
Benkyou: Why would total demand affect the price a restaurant charges a black customer If he’s allowed to discriminate on price.
You might as well ask why total demand would affect the price anyone charges for anything. You can find the answer in any good Principles textbook.
Are you suggesting that a white customer would buy the goods from the bigot’s store then sell them to the brown customers?
What a bizarre assumption. Are you suggesting that the laws of supply and demand don’t work unless this kind of reselling goes on?
Benkyou: In my last comment, I pointed you toward the Principles Textbooks. Let me save you the trouble:
Suppose there are 20 integrated lunch counters. In equilibrium, each lunch counter serves its desired number of customers.
Now a whites-only lunch counter appears. Some of the customers from the existing 20 decide to eat at the new place instead. The laws of arithmetic now guarantee that at least one of the 20 is serving fewer customers than it prefers. In an attempt to draw more customers, that lunch counter will lower its price. This puts downward pressure on prices generally.
Sorry not to have explained this earlier; your invocation of esoteric topics like New Trade Theory had misled me into assuming that you understood the basics.
Benkyou:
On Godwin: If I had a conclusion which could use the same logic to show that “the total state is good”, you would be right in looking at the atrocities of the total state, and reasoning that my conclusion was probably false, on those grounds.
You argued that:
a) It increases GDP
b) The social contract is valid
c) Democracy is not perfect
These can be used to argue for the total state, where a leader states: “You people might almost all disagree, but I think we should [insert totalitarian policy], as it will be good for GDP, if you disagree, you can leave to our neighbour, who has [insert other totalitarian policy], but hey, it’s you choice!”
And this do not address the problem of hypocrisy that:
“And no-one has addressed the base contradiciton that, were I racist, I can refuse to shop at certain businesses, but cannot refuse to serve certain customers”
Because, surely by living in an area, you should be forced to pay the same price as a business, ie. giving up any racist commercial preferences, as that would also increase GDP, and follows the exact sam logic as that of forcing businesses to serve anyone.
Steven–I see where your flaw is now, thank you.
“Suppose there are 20 integrated lunch counters…Now a whites-only lunch counter appears.”
You were assuming a market capable of supporting many many restaurants and apparently has very few barriers to entry. There are many places just like this in suburbia or traditionally diverse metropolitan cities like NYC. But there are also many many places where this is not (or historically was not) the case at all. Isolated rural cities and metropolitan regions with a cultural hegemon. Such as the cities of the 1960s south.
In these places the market can not support an unlimited number of restaurants and the limited number of customers and cultural norms create significant barriers to entry. As well as the established, discriminatory, firms have significant political influence to further limit entry into these markets.
Your praise of Krugman’s work on NTT and your blithe acceptance of my reference to it led me to believe that you understood its implications on this topic.
Just to make it more plain.
How would you arithmetic look if the max number of resteraunts for this market were two and we begin with two restaurants already in operation and operating at equilibrium? This condition would describe the jumbo-jet market in this country (boeing and McDonnel-Douglas)
How would it look if the max number of restaurants the market could support were one?
And how can you accept NTT without considering these questions? Aren’t they “The Big Questions”-y enough?
The qualifiers here are important – “in the presence of competition”, “they would have to be monopolists”. There is in fact no disagreement of these principles, just whether they actually apply. As far as I can make out, Benkyou and I are arguing that a case similar to monoply can arise, and there will be an absence of competition. This can occur in small towns, and with non-lunch counter businesses such as grocery shops. If this pertains, then it is possible to maintain price discrimination, and it is possible for the segregated counter to not reduce the price in a “blacks only” one. The big question then becomes “which situation applies?”, or perhaps more importantly, what is the effect of a mixed system, perhaps 5 segregated and 5 non-segregated counters, minority population of 20% and say 40% the white population refusing to use the non-segregated?
Harold. You’re pretty well on. Though there are nuances specific to New Trade Theory that set it apart. In particular NTT shows that first-mover advantages can critically alter the degree of competition in a market. In particular in small markets that can only support a small number of firms (another distinction made by NTT.
In these cases the first movers get advantages resulting from market dynamics as well as political influence that is used to further erode at competition.
It was expanding the mathematical proofs to support these conclusions that Krugman won his 2008 Nobel. An award that Prof. Landsburg calls “Well deserved” (http://www.thebigquestions.com/2009/11/13/krugman-to-the-rescue/ ). Far from being esoteric, NTT is one of the rising influences on IPE and is yielding some of the most predictable results.
A matter which seems to be ignored here is that even if discrimination can persist privately with real costs on the discriminated groups, is that sufficient for anti-discrimination laws to be good policy?
Anti-discrimination laws can be seen as price controls: a racist firm is forced to sell to blacks at a lower price than it wants (the original price possibly being infinite, although it is probable that it was instead too high to bother advertising). If you believe that you can efficiently help blacks with specific price controls, shouldn’t you advocate numerous other price controls?
Or suppose you think the “psychic externalities” from discrimination makes intervention justifiable. People really don’t like the idea of the mere knowledge of businesses discriminating, even when they’re not involved in any transactions with them. Thus, it could be economically efficient to ban discrimination. If so, you should have no (consequentialist) objections to anti-sodomy laws, especially in the past were attitudes were more antagonistic. Also, if you’re in the “discrimination laws helped make discrimination more unpalatable” school, you should also think the same thing of anti-sodomy laws, which would presumably also be a good thing from the “psychic externality” point of view.
Henry–What are your views on Cigarette age restrictions? Does this infringe upon the rights of the shop-owner to sell what he wants to who he wants? Is it justified? Is a background check to ensure that your customer is not a known crazy, or criminal an infringement on the rights of gun store owners?
We accepts laws that tell us who we may NOT sell to. But consider very differently laws which tell us who we must sell to.
As far as the anti-sodomy law issue you bring up. My argument is not based upon the value of the public getting what it wants, but in the actual value to the public. A law, such as anti-discrimination laws, that clearly removes a barrier to commerce and economic growth is anathema. Anti-Sodomy laws do not do this. Also the regulated in A-S laws are not engaging in an activity in public or with public costs as a shop-keeper is doing.
Correction: Sorry, “A law, such as anti-discrimination laws, that clearly removes a barrier to commerce and economic growth is anathema”
This was the product of a bathroom break, coming back to finish the post and forgetting what I had just typed. Basically Strike this sentence and reverse it (as willy wonka says)
“Henry–What are your views on Cigarette age restrictions? Does this infringe upon the rights of the shop-owner to sell what he wants to who he wants? Is it justified? Is a background check to ensure that your customer is not a known crazy, or criminal an infringement on the rights of gun store owners?”
Those are based on paternalistic and externality grounds. I’m not arguing from a deontological “property rights” respective, but a consequentialist one. Can we construct plausible paternalistic or externality arguments for anti-discrimination laws?
“As far as the anti-sodomy law issue you bring up. My argument is not based upon the value of the public getting what it wants, but in the actual value to the public. A law, such as anti-discrimination laws, that clearly removes a barrier to commerce and economic growth is anathema. Anti-Sodomy laws do not do this. Also the regulated in A-S laws are not engaging in an activity in public or with public costs as a shop-keeper is doing.”
I’m sceptical of your “barrier to commerce” argument, for it also applies to discrimination on seemingly “valid” grounds.
For instance, I would imagine that you probably would not object to businesses prohibiting especially odorous people from entering. I think you would agree that giving everybody the right to enter whatever public establishment they wanted would not be efficiency-enhancing. People are forced to put up with particularly unpleasant company.
Now, consider that to racist owners or customers, the presence of a black person may be functionally similar to an odorous person. They get displeasure either way. While it’s easy to come up with a deontological reason for prohibiting discrimination in this case, a consequentialist one is much harder. What distinguishes the former from the latter? The main one I can see is that the mere idea of discrimination is repugnant to people, causing “psychic disutility”, an externality. However, my point was that accepting the “psychic disutility” argument for prohibiting discrimination should also cause you to accept it for the prohibition of many activities, include sodomy.
Henry, my argument is based purely on the economic consequences. And like I said before, this is not a matter of what the public values but hat is the true value to the public.
The smelly person did make me think though. But I don’t believe it applies. Discriminating against a smelly person is in actuality internalizing the externalize caused by that persons odor. The other patrons are affected by the actions of the smelly patron (or lack there-of in not bathing). The smelly person is doing something unrelated to commerce (smelling badly) and it is that activity that is being discriminated against. We can assume that once the smellster takes a bath he will be welcomed.
The black patron is simply trying to do the same thing that the customers who may be offended are doing (shopping, eating, working). The bigoted customers, offended by a black diner, are offended BY the very act of commerce. Or they are offended by something for which the customer has no control, cannot change, and has no external affect beyond his own skin. Presumably it does not make food taste bad to look at a black person.
I see absolutely nothing repugnant about discrimination (as a concept and rational practice). I would be horrified at the waste if every child were screened for sickle-cel anemia. And just as horrified if Black children were denied the test. But when discrimination is enacted arbitrarily, to the detriment of free and open commerce between all Americans, and subsidized (structurally) by the taxpayer at large, I see that as a market failure.
“The black patron is simply trying to do the same thing that the customers who may be offended are doing (shopping, eating, working). The bigoted customers, offended by a black diner, are offended BY the very act of commerce. Or they are offended by something for which the customer has no control, cannot change, and has no external affect beyond his own skin”
From the perspective of economic efficiency, it does not matter why the other customers find something offensive. They would be willing to pay money to avoid the smell, and they would be willing to pay money to avoid seeing black people. The fact that customer cannot change their skin colour might be relevant from a deontological perspective, but I cannot see why it matters here.
Because, a law requiring the smelly person to bathe before going shopping CAN be complied with in a way that allows commerce to continue unabated. A law requiring a customer to stop being black cannot.
In the first case the barriers to commerce are much smaller than the loss of that economic activity. In the second the barriers to commerce are much higher.