Sunday, March 23, 2008

Gaps In the Logic

A lot of dirt is being thrown at financial institutions lately and lot of it's nonsense. Near the top of that nonsense list are the accusations of racism. True, blacks have a harder time getting a loan; no one is denying that. But gaps in outcome does not imply discrimination. As Thomas Sowell points out in his new book,
[In two studies in the early nineties] whites were denied conventional home mortgages loans more often than Asian Americans. The same reasoning that led to the conclusion that blacks were being discriminated against in favor of whites would lead to the very questionable conclusion that whites were being discriminated against in favor of Asian Americans. But however questionable that conclusion, we cannot simply accept empirical evidence when it supports our preconceptions and reject that same evidence when it goes against those preconceptions...A later study showed that Asian Americans took out expensive subprime loans less frequently than whites did--but again the media focus was on black-white differences in the use of costly subprime loans and again the conclusion was that racial discrimination in access to conventional loans explained the difference.
Reality is always a bit more complicated than we'd like it to be or even expect. In the social sciences controlled experiments dwell past the edge of ethics so we have to rely on the observed data with all its chaos and imperfections. With that in mind, we must then look at as much of it as possible so we can parcel out the truth from the nonsense derived from our preconceptions.

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