The Visible Hand

Let’s say you were in the market for an iPod and wanted to find a bargain, so you searched in a local online market like Craigslist to find one.? Would it matter to you whether, in the photograph of the unopened iPod, the person holding the iPod (all you can see is their hand and wrist) was black or white?? What if the hand holding the iPod had a visible tattoo?

I suspect that most people would say that the skin color of the iPod holder wouldn’t matter to them.? More people likely would say the tattoo might keep them from responding to the ad.

Economists have never liked to rely on what people say, however.? We believe that actions speak louder than words.? And actions certainly do speak loudly in some new research carried out by economists Jennifer Doleac and Luke Stein.? Over the course of a year, they placed hundreds of ads in local online markets, randomly altering whether the hand holding an iPod for sale was black, white, or white with a big tattoo.? Here is what they found:

Black sellers do worse than white sellers on a variety of market outcome measures: they receive 13% fewer responses and 17% fewer offers. These effects are strongest in the Northeast, and are similar in magnitude to those associated with the display of a wrist tattoo. Conditional on receiving at least one offer, black sellers also receive 2-4% lower offers, despite the selfselected-and presumably less biased-pool of buyers. In addition, buyers corresponding with black sellers exhibit lower trust: they are 17% less likely to include their name in e-mails, 44% less likely to accept delivery by mail, and 56% more likely to express concern about making a long-distance payment. We find evidence that black sellers suffer particularly poor outcomes in thin markets; it appears that discrimination may not “survive” in the presence of significant competition among buyers. Furthermore, black sellers do worst in the most racially isolated markets and markets with high property crime rates, suggesting a role for statistical discrimination in explaining the disparity.

So what can you conclude from this study?? The clearest result is that if you want to sell something online, whether you are black or white, find someone white to put in the picture.? I suppose you could say that advertisers figured this out long ago, and actually go one step further, making sure the white person is also a good looking blond woman.

It is much harder, in this sort of setting, to figure out why buyers treat black and white sellers differently. As the authors note, there are two leading theories of discrimination: animus and statistical discrimination.? By animus, economists mean that buyers don’t want to buy from a black seller, even if the outcome of the transaction will be identical.? Buyers wouldn’t like black sellers, even if black sellers provided exactly the same quality as white sellers.? With statistical discrimination, on the other hand, the black hand is serving as a proxy for some sort of negative: a higher likelihood of being ripped off, a good more likely to have been stolen, or maybe a seller who lives very far away so that it will be too much trouble to meet in person to do the deal.

The most impressive part of this paper by Doleac and Stein is their attempt to distinguish between these two competing explanations: animus versus statistical discrimination.? How do they do it?? One thing they do is to vary the quality of the advertisement.? If the ad is really high quality, the authors conjecture, maybe that provides a signal that could trump the statistical discrimination motive for not buying from the black seller.? It turns out that ad quality does not matter much for the racial outcomes, but possibly this is because the quality difference across the ads isn’t great enough to matter. The authors also explore the impact of living in an area with more or less concentrated markets, and also across places with high and low property crime.? Black sellers do especially bad in high crime cities, which the authors interpret as evidence that it is statistical discrimination at work.

I really like this research a lot.? It is an example of what economists call a “natural field experiment,” which has the best of what lab experiments have to offer (true randomization) but with the realism that comes from observing people in actual markets, and with the research subjects unaware they are being analyzed.


Heavy D

It is really racism??? Or is this a case of rational humans making inferences based on a long history of data they've acquired during their lifetime (or did I just define racism?)

I honestly don't consider myself racist and in some cases I go the other directly (I'm white and finding myself sometimes over-tipping in an effort to say, "see? I'm not racist!"

But knowing that an item comes from from a very high crime area increases the odds that I'm asking about stolen goods or getting set up to be robbed. Same goes for tattoos....all the kids have them these days but to me, it's like smoking...a sort of instant field intelligence test.

Chuck

Advertisers have figured out that white people are more effective as models in commercial than people of color, specifically black people. This is in part because white people are still regarded in some way as a typical representation of "American." As such, there's a level of racial anonymity: you don't notice if the model is white. But you do notice if the model is black.

Of course you can see black models in commercials, but generally speaking they're portrayed as part of a group, or part of a series on people being shown, in which most of the others are white. That way the advertisers can engage in racial diversity without risking being associated with black models.

But what if the product indexes high on usage by black people? Meaning, a higher percentage of users are black than the population as a whole? I'm not talking about products specifically made for black people (e.g., Afro-Sheen), but products with mostly general appeal, but brands within skewing heavily black? I'm talking, perhaps, 25% of users who are black, double the US population of ~13%.

In such a case, as a marketer, you'd prefer not to ignore the fact entirely by featuring only white people. But you also don't want to risk alienate many of your white users by featuring primarily black models (a consideration that's awful to contemplate in the 21st Century but that is, nevertheless, a very real multimillion dollar problem to consider). There's some veracity to a variation of the old marketing saw: black people will buy products featuring white models, but white people won't buy products featuring black models. This is a broad conclusion that is accurate only on the fringes, but again, such fringes might be worth millions of dollars.

So what do marketers do? I have noticed that many are side-stepping the issue entirely and using cartoon animals as models. Three I've noticed in the past couple of years were for a bathroom tissue, an air freshener for the home, and a pre-packaged children's snack food. All three use animal families as the models, typically showing a happy mother presiding over happy children's consumption of candy and use of toilet paper in their sweet smelling home.

This serves a couple of targeting purposes. For one, it signals to a more downscale (e.g., less income, less educated) audience that this commercial is for a product targeted to them, as they are more likely to respond favorably to cartoons of cute animals. But secondly and I think more importantly, it also avoids the whole issue of having to decide what races to represent in the commercial, and to what degree. A family of (incontinent) bears could represent a white or black or Latino family equally, without arousing any negative reactions to the models in any other races.

I don't know whether this has been explored in a scholarly fashion, but I for one would certainly like to see some research on it.

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Stephen

A third explanation for racial discrimination is "implicit" attitudes, in which even people who consciously intend to be non-racist are prone to form more negative associations with certain groups (blacks, the elderly, etc). These attitudes are most likely to actually influence behavior when people are making snap judgments without a lot to go on.

This stuff is studied through the "Implicit Association Test" (IAT). You can do a demo at
https://implicit.harvard.edu/implicit/demo/

The results may scare you.

(I teach this stuff, but I have no connection to the research.)

By the way, the described study is in the tradition of Bertrand and Mullainathan's famous study of call-back rates. They sent hundreds of resumes to different low-level job openings (no more than a handful to any one opening) with randomized "white-sounding" and "black-sounding" names, in Boston and Chicago. (They did a lot of work to pick the names.) Black-sounding names got many fewer call-backs.

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D

Do blacks or tattooed white people commit crimes at higher rates? Is that a relavent question? Are people just being probablistic and making smarter bets? Would we expect them to do otherwise if the answer to the 1st question is "yes"?

BSK

@ HeavyD

The problem is, there IS no historical backing to these attitudes. Is there REALLY any evidence that tattoos are possessed by people of lower intelligence and/or higher propensity for crime? I doubt it. Yet, that is the PERCEPTION. Is there any REAL data that suggests blacks are more prone to crime than whines? NOPE!* Again, perception. And by submitting to these false perceptions, we perpetuate them.

(There are stats that demonstrates certain crimes are committed at a statistically disproportionate rate by PoCs, but these stats ignore context and don't control for other variables; furthermore, there are crimes committed at a statistically disproportionate rate by whites, yet these are oft-ignored AND none of these actually offer evidence as to the likelihood of an INDIVIDUAL committing a given act. Just to flip the script, you are far more likely to be the victim of a white serial killer than a black serial killer. And isn't offering an iPod on Craig'sList for cheap via an in-person swap exactly the type of behavior a serial killer looking for victims might engage in? Perhaps. But we don't play scare tactics with white serial killers... or white anythings ... just brown people.)

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Christopher Strom

I suppose that in order to intelligently discuss "animus versus statistical discrimination" one would have to understand the difference between the two ideas.

Of course, if one did not understand the difference, he or she might lump them under the larger banner of "racism", declare them barbaric and wrong, and dismiss any exploration of the nuances of the subject as acceptance and legitimization.

Of far more interest, I think, are the differences between offer amounts (negligible at 2-4%), willingness to respond / make an offer / provide name (significant at 13-17%), and accept mail delivery / long distance payment (profound at 44 and 56%). These groupings (my own) correspond with increasing levels of trust in the other party.

To respond to a CL ad requires one level of trust. To accept a remote transaction (mail delivery or long distance payment as opposed to a COD-type transaction) requires a much higher level of trust. To settle on a price means that the initial hurdle of being willing to make a deal has been cleared, and thus requires no additional trust.

To cast a finer net to differentiate between animus and statistical discrimination, I would suggest that CL ads run with hands visible in the photos be randomized not just by high/low crime cities, but that the ads themselves reference black / white and high-crime / low-crime neighborhoods within those cities.

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sreekant

What was tried out in the experiment is something Indian advertising has been practising for a long time. Models are almost always fair. Indians are as skin colour conscious as any other country. Lots of prejudice is possible because Indians have so many skin tones from the very fair to jet black. So you can always discriminate against somebody else :).

Cliff

BSK,

You are making very strident claims without anything to back them up. Are blacks equally likely as whites to scam someone on Craigslist or not? If you have any evidence on the matter, please link to it now, otherwise your claims can be ignored because you have no basis for them.

Btw, in what way are crime rate statistics "fundamentally flawed"? Do you really believe, statistically speaking, that a randomly chosen white person and randomly chosen black person are equally likely to be criminals? Because obviously that is not the case.

James

I just want to point out that many (all?) of the effects could be caused by symmetric behavior on the part of white and black prospective buyers and the asymmetric demographics between white and black people. For example, black people might be X times more likely to respond to black ads, and white people also X times more likely to respond to white ads (same X in both cases), but because white people on average have more money than black people, they would generally come with higher offering prices, and hence the offers generated by the white ads would be higher than those generated by the black ads.

I think this is important to point out because people might be tempted to draw judgmental conclusions when they're not supported by the data (even if they're likely).

164

Craigslist is free but chaotic. There are a lot of "riff raff" with no manners that use the service, but a few gems if you are careful. The potential to get scammed is great.

Therefore, I would be put off by all the negative stereotypes, tattoos, trailer parks, poor writing skills, and yes dark skin. Doesn't make me a racist, biggot or any other name.

GLK

The concept that humans like light skin better than dark is patently absurd to me. You can debunk that simply by looking at very young children playing. They could care less what color their playmates skin is. This thing we call prejudice is a product of social conditioning based on a mixture of fact and fiction. Unraveling the two to get to the truth is an unlikely yet noble pursuit.

Ian

FYI - I am a white male age 36. I can't explain this and I cannot defend this.

I have been ripped off by both black people and by white people. I was far more angry to be ripped off by white people than by black people.

Thoughts?

Bobby G

BSK,

You're clearly a smart individual, and you argue on topics about which you are passionate much like I do, but you can leave out the "Fail"s from your responses. Seriously, you don't need to touch the rest, but you don't need to put the "fail". You make some good points but your insulting attitude, deserving or not, turns off other readers and muddys up the validity of your points by inspiring hostile attitudes in those you are trying to convey your ideas to. Just a little friendly advice.

I'm afraid that I can't provide much personal opinion on the actual topic because I'm so risk-adverse to online scam that I prefer paying the premium to buy from reputated vendors, which may include people I know. Honestly I feel like if someone wants to scam you there are a number of gimmicks they could use including having a pretty white girl to pose with the product (can use the same picture for multiple scams, if you're clever). Making the post higher quality also would not encourage me too much since that is also a potential gimmick.

Again, I'm painfully risk-averse on this subject so I'm not much help. I just worry about losing more than a hundred dollars dealing with randoms looking to take other people's money.

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BSK

Bobbyg-

Duly noted. My delivery has a lot to work on and I appreciate the constructive criticism. I will say, in my defense, when I see people peddling thinly or not-so-thinly veiled racism, I see little reason to be diplomatic, but, you're right, if I want to take the higher road, I should walk it.

What I will say, to risk-averseness, is this:

Craig's list is inherently risky. And, even if there is a legitimate difference in risk between different racial groups, it's essentially inconsequential. Are you really okay paying significantly more for a reduction of risk of less than 1% when you're already dealing in a risky medium? If so, that's ultimately extremely risky behavior. Clearly, animus, particularly racial animus, is the problem here. Few people do a rational assessment of the situation and, instead, submit to emotions which are useless when actually trying to quantify race.

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NLT

A black person regardless of sex selling a product is less likely to have a sell from a white person. Black entrepreneurs in the past have tried to find white sales people to sell their products. I have no randomized control studies to support my statement. I have only a life time living as a black person in the USA.

Ruth Austboe

Let Tom Cruise and James Bond play bad guys for another 5 years, and all black guys start to play good guy for another 5 years in all movies, maybe the ad. result will change. I don't know how bad black guys are, but the movie shows tell me so, that is what I got it from. I blame it on Hollywood.

oksothen

Are black women avoiding those black male hands at the highest rate among all groups?

If so, that is interesting.