The Economics of Bigotry

Conventionally, profit-seeking and bigotry are contradictions in terms. A company that constrains who can be an employee interferes with the ability to get the best employee and thus interferes with profits. A company which limits its customer base affects its bottom line. The same logic can be applied to personal relationships: if you refuse to make friends with people of different ethnicity, genders, religions, sexual orientations, etc, then you limit the pool of potential friends. Since people are so diverse in their interests, bigotry can make you very lonely. Incentives discourage bigotry.

If it was that simple, the Supreme Court ruling on the Voting Rights Act would be inconsequential and we could safely say anti-discrimination laws have no place in a libertarian government. Economic incentives (which we know are very powerful) would discourage bigotry so much, such laws would serve no purpose. But it is not so simple.

The person who hires is not always the same as the person who profits from that hiring. In fact, it is very common that the manager is not the owner of the store she manages. While a manager's salary and job security are tied to the division he manages, it's an indirect tie. The likelihood he'll get full credit for good performance diminishes the farther the manager is removed from the owner(s). Knowing this, a manager (particularly a low-level manager) faces a very low cost to be a bigot. She gives up little (a small, small chance to get credit for good sales) compared to the owner so she indulges in bigotry more than the owner would. The demand curve slopes down.

This is a real concern for owners who naturally want the very best performers, but it is virtually impossible to get around. Refusing to hire the best person due to bigotry is hard to detect; there is no obvious error the owner can point to (unlike hiring a stupid or lazy person, where there is a record of complaints and poor performance).

What makes matters worse is that sometimes the best performers (or customers) are bigots themselves. Even if a manager isn't a bigot, he may be encouraged to avoid certain traits others  unjustly find offensive. This concern, real or imagined, might be more prominent than we may be willing to admit: the desire to be around people who look like you is a strong one, one probably hard-wired into our DNA.

This instinct increases the benefits of bigotry. In the FX series Justified, the main character is a deputy U.S. Marshal in eastern Kentucky. While not a racist himself, he's found it advantageous to his job to feign some racist attitudes. More people are willing to talk to him if they feel like he's "one of them." It's an extreme example, but it highlights an important point. We not only like to be around people who look like us, we like being around people who think like us. The more people who have foolish views of those who are not like them, the greater incentive to engage in those views (or least, not challenge your primitive instincts). Bigotry becomes self-sustaining.

This is what makes the ruling on the VRA so disturbing. Even though the South had issues with racism "a long ago" (half a century ago), that certainly doesn't mean many of those attitudes are gone. As the recent decision by students to resegregate a South African school demonstrates, old habits die hard.