How to End (Price) Discrimination

John List and Uri Gneezy have appeared on our blog many times. This guest post is part a series adapted from their new book The Why Axis: Hidden Motives and the Undiscovered Economics of Everyday Life. List appeared in our recent podcast "How to Raise Money Without Killing a Kitten."

The passage of the Americans with Disabilities Act was a landmark civil rights bill. It afforded the disabled protections against discrimination that were similar to earlier landmark civil rights bills. In particular, the bill targeted two types of discrimination. One type was the discrimination against the disabled motivated by hatred or disgust. For example, one provision targeted employers that denied employment opportunities to those that truly qualified. Other parts of the bill focused on ensuring a level playing field for the disabled, like one requirement for businesses to make readily achievable retrofits to their businesses to afford the disabled access.

When economists think about the causes of discrimination, they tend to lump them into these two categories. The first is called animus discrimination, which is the type of discrimination we tend to associate with the treatment of African-Americans in the early 20th century. The second is called statistical discrimination, which is discrimination motivated by statistical trends associated with groups. For example, women tend to pay less for auto insurance because they are safer drivers. 

Help Wanted. No Smokers Need Apply: A New Marketplace Podcast

Our latest podcast is called "Help Wanted. No Smokers Need Apply."  (You can download/subscribe at iTunes, get the RSS feed, listen via the media player above, or read the transcript.)

In many states (21, to be precise), it is perfectly legal for an employer to not hire someone who smokes. This might seem understandable, given that health insurance is often coupled to employment, and since healthcare risks and costs are increasingly pooled. And so: if employers can exclude smokers, should they also be able to weed out junk-food lovers or motorcyclists -- or perhaps anyone who wants to have a baby?

Adventures in Ideas: Sex Workers of the World, Unite! An Interview With Maxine Doogan

Freak Readers, It is my distinct pleasure to introduce Maxine Doogan, from the Erotic Service Providers Union. I won’t offer a lengthy introduction —I’d embarrass Maxine! — because her words below say it all. Maxine has taught me a lot about prostitution and the sex trade in general. She has been instrumental in helping me craft my own research. Together, we hope to launch the first multi-city comprehensive research study of the sex economy. In a subsequent post, I’ll ask you for some feedback on that project. For now, I want to share her insights about the sex economy today. 

Q. Our readers might be interested in understanding exactly what you are seeking that might improve the economic conditions of sex workers? By the way, how you do you define "sex worker"?  

A. To improve one’s economics is to improve their lives and the larger communities. 

Is It Unethical to Not Hire Smokers?

That is the question asked in a New England Journal of Medicine column by Harald Schmidt, Kristin Voigt, and Ezekiel J. Emanuel:

Finding employment is becoming increasingly difficult for smokers. Twenty-nine U.S. states have passed legislation prohibiting employers from refusing to hire job candidates because they smoke, but 21 states have no such restrictions. Many health care organizations, such as the Cleveland Clinic and Baylor Health Care System, and some large non–health care employers, including Scotts Miracle-Gro, Union Pacific Railroad, and Alaska Airlines, now have a policy of not hiring smokers — a practice opposed by 65% of Americans, according to a 2012 poll by Harris International.

An Economic Analysis of "Stop and Frisk"

A new working paper (gated) from Decio Coviello and Nicola Persico:

We analyze data on NYPD's "stop and frisk program" in an effort to identify racial bias on the part of the police officers making the stops.    We find that the officers are not biased against African Americans relative to whites, because the latter are being stopped despite being a "less productive stop" for a police officer.

Excerpts:

New York City’s stop-and-frisk program disproportionally impacts minorities. The New York Civil Liberties Union makes this point forcefully by documenting that, in 2011, 52.9 percent of stops were of blacks, 33.7 percent were of Latinos, while whites accounted for only 9.3 percent of the stops. This disparate impact is unfortunate, but should not be surprising if we believe that crime and therefore policing are disproportionally concentrated in minority-rich neighborhoods.

However, mere disparate impact is not the same as impermissible behavior. Discrimination law in the United States generally does not prohibit disparate impact, as long as it does not reflect an intent to discriminate. Therefore, if one is interested in impermissible behavior, it is helpful to have an empirical strategy which goes beyond merely documenting disparate impact, and can detect racial animus on the part of the police.

Remembering Chinatown

Learning that Los Angeles's Chinatown is fighting a Walmart store, including with a lawsuit against the city, reminded me of what I learned in that Chinatown years ago.

One midnight, fed up from revising our dissertations all day, a friend and I drove the 10 minutes from Caltech into Chinatown to dine at Full House Seafood, open until 2 AM. (My Ph.D. adviser once asked why graduate students all seem to live on Guam time.) The restaurant was lively and crowded but not packed, and we quickly got a table. While waiting to give our order, I noticed an African-American man sitting on the chairs near the front counter. Even though several tables were free, the waiters did not offer him a table. Other customers came in, and were seated. As our dumplings arrived and got eaten, and then the spicy tofu, the man still sat on the small chairs.

Affirmative Action: Changing Stereotypes

In a new article for Vox, Karla Hoff, a senior research economist at the World Bank, presents an argument for affirmative action.  Hoff argues that stereotypes can be self-fulfilling, and affirmative action represents an important tool for changing stereotypes and correcting inequality in the long-term:

For economists to ignore the factors that affect how we process information as part of the interpretation of economic change would be as wrong as to ignore the evolution of technology itself. Ideology shapes what we see and how well we perform. Ideology can give rise to “equilibrium fictions.” In our framework, changes in power, technology, and contacts with the outside world matter not just directly but because they can lead to changes in ideology. 

Hoff highlights a natural experiment in India that changed perceptions of female leadership over the course of ten years:

What Teachers Think About Girls' Math Skills

A disheartening new study by Catherine Riegle-Crumb and Melissa Humphries finds that teachers discount the math skills of white females, even when girls' grades and test scores indicate a comparable level of skill.  Here's the abstract:

This study explores whether gender stereotypes about math ability shape high school teachers’ assessments of the students with whom they interact daily, resulting in the presence of conditional bias. It builds on theories of intersectionality by exploring teachers’ perceptions of students in different gender and racial/ethnic subgroups and advances the literature on the salience of gender across contexts by considering variation across levels of math course-taking in the academic hierarchy. Analyses of nationally representative data from the Education Longitudinal Study of 2002 (ELS) reveal that disparities in teachers’ perceptions of ability that favored white males over minority students of both genders are explained away by student achievement in the form of test scores and grades.

Are Older Jurors More Likely to Convict?

A fair trial is harder to come by than you might think. A few years ago, we wrote about a paper (ungated version here) by Shamena AnwarPatrick Bayer, and Randi Hjalmarsson which found that "all-white juries acquit whites more often and are less favorable to black versus white defendants when compared to juries with at least one black member.” 

Now, a new working paper by the same trio has more bad news.

Should the Government Be Targeting a Different Kind of Discrimination?

A new working paper from Uri Gneezy, John List, and Michael K. Price looks at discrimination via a variety of field experiments and more than 3,000 individual transactions:

In certain markets, the observed discrimination is not bigotry or animus-based, but consistent with the notion of profit-maximization, or Pigou’s (1920) “third-degree price discrimination”: in their pursuit of the most profitable transactions, marketers use observable characteristics to make statistical inference about reservation values of market agents. In others, the discrimination is more in line with Becker’s (1957) taste based theory of discrimination, or animus.

Interestingly, the nature of discrimination is less driven by particulars of the market or institutions, rather the nature of the disparate behavior is driven by whether the object of discrimination is a choice of the individual or is uncontrollable.