The Moral Burden on Economists

In his 2017 presidential address to the National Economic Association, Professor Darrick Hamilton warned that treating economics as a morally neutral ‘science’, and the discipline’s limited attention to structural barriers and overemphasis individual agency, has resulted in bad economics, and bad policy particularly as it relates to racial disparity.

The Rev. Dr. William Barber describes economic justice as a moral imperative.  This sentiment is in contrast with our emergent economic priorities around austerity and economic growth — which, ironically, are often at odds with one another — while economic equity, fairness and human capabilities take a distant backseat. 

Our economic profession and its so-called “positivist” approach and “free-market” dogma are culpable for advancing this paradigm. 

The term political economist has become an albatross, as if the field is somehow scientifically weaker or less “objective” than plain ‘ole’ economics.  One need not sacrifice rigor to study how institutions and behaviors intertwine with an objective of building economic inclusion. Likewise, we need to recognize that all scholarship is rooted in “norms,” especially scholarship that claims to study production, transactions and distribution.

The dogma of our profession is based on the faith that markets are somehow natural, transparent, “efficient,” and inevitable.  This belief does not give enough attention to the political actions that form and codify markets in the first place.  Instead, the presumption that markets are simply “natural” leads to a false notion of “fairness” — that somehow, if each individual is “free” to pursue their own profit and happiness, that will ultimately lead to the greater good for society. 

Markets, whether they’re product markets, labor markets, or financial markets, are presumed to be “self-regulating” — the most astute, the most valued and the hardest workers are believed to prosper and endure, while the least astute, least valued and laziest are presumed to receive their just rewards and simply fade away or have to find something else to do.

These presumptions pay little attention to the roles of power and initial endowment (e.g. capital), and how that power and initial capital can adjust to alter the rules and structure of transactions (and markets) to privilege power and capital in the first place.   It is silly to presume or assume that those with power and capital are simply price-takers.

Economist should do a better job of understanding political economy, including power and initial endowments, and should be more keenly focused on understanding and advocating for structures that truly lead to more equitable and fairer distributions.

Without such an analysis, our profession is more than complicit in the continued trajectory towards stratification both within and across nation-states.  As the Haitian film maker Raoul Peck points out, we live in a world where Bill Gates’ net worth exceeds 30 years’ worth of Haiti’s GDP.  This is antithetical to what the Reverend William Barber has in mind regarding economic justice. 

The age-old struggle between capital and labor is not new; perhaps what is new, is the widespread societal acceptance of the inevitability of market-based solutions to address all our problems.  This neoliberal ideology, fueled by orthodox economics, is powerful in maintaining and reinforcing social and economic hierarchy.  

Nonetheless, this long trend towards inequality is not without tension.  This past election seems to represents at least a rebellion, albeit far from a full overthrow.

The presidential election victory of Donald Trump caught most pundits and political scientists off guard. 

The fact that former Secretary of State Hillary Clinton got about 95 percent of the black women vote — a stronghold of the Democratic Party — while about two-thirds of white men — a longtime stronghold of the Republican Party — went for President-elect Donald Trump, was not a surprise, especially given Trump’s overtly nostalgic campaign slogan “Make America Great Again” (i.e. a symbolic reference to a period when the white male relative economic advantage was at its peak). 

What was surprising, was that close to 30 percent of the Latino vote revealed by exit polls went to Trump despite his racist rhetoric, exemplified at his campaign kickoff in which he likened Mexicans to rapist, murders and drug traffickers.  

Also, surprising, was the majority support that Trump received from white women despite repeated examples of his gender-based hostility including a not so subtle reference to rage and menstruation directed at Meghan Kelly in response to her challenging questions; his denigration of political rival, Carly Fiorina, on the basis of her physical appearance; and the unauthorized release of an “Access Hollywood” tape in which he asserts that his celebrity allows him liberties with women including his egregious statement of “grab(bing) them by the (sexual explicative)” at will.

However, if this election is viewed from the perspective of stratification economics, the result may be less surprising.  President-elect Trump’s campaign slogans of “Making America Great Again,” and his signal that “I am your last chance” with overture to the pending demographic shift in which whites will no longer be a numerical majority was all about codifying the “property rights in whiteness.” 

But, how did Trump’s doubling down on an appeal to a white American identity still enable him to secure about 30 percent of the Latino vote?  Latinos are a heterogeneous group with varied national origins and patterns of immigration, yet still nearly two-thirds of the Latino-American population descends from Mexico — a group that was clearly vilified by Trump. 

Stratification economics notes that there may be intermediate economic and psychological benefits associated with distancing from an “out-group” identity towards an “in-group” identity, in this case, a white American identity.  The theory recognizes that identities are multifaceted and no so dichotomous, as such; there are incentives for members of the out-group to identify with the in-group. 

However, cognitive dissonance — the psychological discomfort from holding two or more conflicting identities — offers some constraints on an individual from an out-group disassociating with one’s own group, even in a social context that offers large material rewards for doing so (for more elaboration, see Goldsmith, Hamilton and Darity, 2007 for a discussion of “preference for whiteness” in the context wage stratification based on skin shade).  

Nonetheless, it may be the case that the appeal towards “whiteness,” attracted nearly one-third of the Latino electorate to ignore Trump’s outrageous statements and condemnation largely directed at Mexicans. 

Political pundits have also attributed Trump’s stunning victory to economic populism. However, exit polls are not consistent with an economic populist mandate. 

A majority of household earning less than $50,000 voted for Clinton, while no candidate attained a clear majority of votes for any other income group.  Granted that the less-than-$50,000 income category is the most racially diverse income bracket, this election was more about racial identity than class. 

This leads to a key question with regards to the tenuous relationship between racial divisions amongst the working class and racial coalition-building to address their collective worsening economic conditions: 

Are the white-privilege benefits and protections that accrue to white workers as a result of exclusionary and discriminatory practices that codify the “property rights in whiteness” greater than the reduced labor-bargaining-power cost that result from a smaller and more fragmented labor movement, and from having to compete with a reserve army of black and other subaltern, unemployed workers?

Two things that are unambiguous from racial stratification: (1) black workers are made worse off, and, (2) the capitalist class, which is overwhelmingly white, is made better-off.  What is ambiguous, is the economic positioning of the white working class.  “White privilege” offers both psychological and material benefits. 

This frame fits with Herbert Blumer’s (1958) thesis “that race prejudice exists basically in a sense of group position rather than in a set of feelings which members of one racial group have toward the members of another racial group (my emphasis added).”  Basically, group relative position transcends individual feelings. 

Some more tangible examples of the “property rights in whiteness” include the fact that blacks who live in families where the head graduated from college typically have less wealth than whites where the household head dropped out of high school.  Other examples include Devah Pager’s study that demonstrates that white males that signal prior incarceration have greater rates of employment callbacks than black males who signal no prior incarceration, and the fact that black expectant mothers who graduated from college have a greater likelihood of an infant mortality than white expectant mothers who dropped out of high school.

Midway through his 2013 commencement address at Morehouse College, President Barack Obama invoked the black American legacy of triumphant leaders who, without excuses, were able to overcome tremendous structural barriers and achieve great things: 

“You now hail from a lineage and legacy of immeasurably strong men — men who bore tremendous burdens and still laid the stones for the path on which we now walk.  You wear the mantle of Frederick Douglass and Booker T. Washington, and Ralph Bunche and Langston Hughes, and George Washington Carver and Ralph Abernathy and Thurgood Marshall, and, yes, Dr. Martin Luther King, Jr.  These men were many things to many people.  And they knew full well the role that racism played in their lives.  But when it came to their own accomplishments and sense of purpose, they had no time for excuses.”

The president continues his inspirational speech to this graduating class of this elite historically black college and university (HBCU) by stating that,

“(e)very one of you have a grandma or an uncle or a parent who’s told you that at some point in life, as an African American, you have to work twice as hard as anyone else if you want to get by.”

But, at what cost?  Are there economic and health consequences associated with above normal effort for these highly educated racially stigmatized black graduates in the context of a racially stratified America?

I will discuss the paradox of why high achieving black Americans still exhibit large economic and health disparities, and how the “post-racial politics of personal responsibility” and “neoliberal paternalism” tropes discourage a public responsibility for the conditions of the poor and black Americans, and, instead, encourage punitive measures to “manage surplus populations” of the poor and black Americans. 

An alternative to the orthodoxy, stratification economics allows us to better understand the paradox above — we understand that the added efforts and stigma imposed on high-achieving blacks that threaten the relative position of the dominant white group may translate into deleterious health and economic conditions for these high-achieving blacks. 

There are physical and psychological costs of stigma, and, ironically, exerting individual agency in the context of racist or stigmatized environment may explain the limited role of education and income as protective factors for blacks relative to whites. 

The prevalence of neoliberal and post-racial thought — both framed in the politics of personal responsibility which emphasize individual agency, particularly self-investments in education as a pathway towards upward mobility and efficient social distribution — might literally be bad for black people’s health.

For now, I will focus on wealth.  Wealthier families are better positioned to finance elite educations; access capital to start a business; finance expensive medical procedures; reside in higher-amenity neighborhoods; exert political influence; purchase better counsel if confronted with an expensive legal system; leave a bequest; and withstand financial hardship resulting from any number of emergencies.  And even win a presidency!

Wealth provides financial agency over one’s life. Wealth gives you choice. It provides the economic security to take risks and shield against financial loss.  It provides what the Nobel Laureate Economist Amartya Sen has referred to as a Human Capability approach to development.

Data from the Federal Reserve’s Survey of Consumer Finance indicates that the top 10 percent households hold about three-quarters of the nation’s private wealth.   Moreover, the bottom half of all households owns only about 1 percent — this provides a novel way of thinking about the one percent!

What is frequently overlooked, is that these disparities are even more pronounced when race is considered.  In fact, race is a stronger predictor of wealth than class itself.

Despite enormous racial disparities, much of the public sentiment seems to be that the Civil Rights period, which outlawed the most blatant forms of de jure discrimination, has largely addressed major racial structural barriers.  This sentiment is often combined with the notions that blacks need to “stop making excuses,” and, ultimately, “take personal responsibility” for their low socioeconomic position. 

This trope emphasizes a group-based underappreciating and underinvestment in personal and human capital development on the part of blacks as the explanation for continued disparity. 

If blacks (and other subaltern communities of color) simply would reverse their self-sabotaging attitudes and behaviors, and adopt the “right” attitudes and behaviors, full equality could be reached.

Ultimately, the focus of policy becomes the rehabilitation of the black family — not the deep-seated structures that perpetuate racism and inequality, but rather, deficiencies internal to blacks themselves,

It is as if, after the passage of Civil Rights legislation, conventional explanations for racial disparity evolved from biological to cultural determinism.  The implication is a shift in public sentiment away from a public responsibility for the condition of black America.   

Take affirmative action for example.  Although it is designed as a positive anti-discrimination policy aimed at desegregating elite institutions, including university admission, a common perspective amongst whites and growing perspective amongst blacks is that it amounts to “reverse discrimination” where “unqualified blacks” take the admissions slots from “qualified whites.” 

Not only does this argument underscore a white-entitlement to preferred positions, but it also assumes that whites generally are “qualified,” and by default, blacks generally are not.  It ignores the historical advantage and protected access whites continue to hold via admissions preferences for university legacies, children of donors, and other channels, which serve as examples of hidden affirmative action for the privileged group.  

In terms of racial wealth disparity, much of the framing, including the use of alternative financial service products, focuses on the poor financial choices and decision-making on the part of, largely, black, Latino and poor borrowers.  This framing is often tied to or derived from “a culture of poverty thesis”, in which blacks are presumed to have an undervalue for and low acquisition of education.

This framing is wrong – the directional emphasis is wrong. Meager economic circumstance – not poor decision making or deficient knowledge – constrains choice itself, and leaves poor borrowers with little to no financial options but to attain and use predatory and abusive financial services.

Financial behavior and financial literacy are practically useless for households with little to no finances to manage in the first place

Yet, political discourse upheld by Democrats, Republicans, blacks, and whites alike, still emphasizes education, motivation, and personal responsibility on the part of blacks as the explanation for the racial divide.

This personal responsibility and post-racial discourse that minimizes the role of structure accentuates three things:

  1. the Civil Rights movement largely transcended racial divide
  2. remaining racial disparities result from the actions or inaction on part of blacks
  3. there’s nothing particular about the oppression experienced by blacks

This follows from a neoliberal perspective, where the free market, as long as individual agents are properly incentivized, is supposed to be the solution to all our problems, economic or otherwise

Joe Soss, Richard Fording, and Sanford Schram, in their seminal book, Disciplining the Poor (2011) describe an emergent “neoliberal paternalism” where the state serves a paradoxical role of structuring most aspects of society to adhere to laissez-faire market tenants, while at the same time serving the role of “poverty governance.” 

Here the state uses incentives and sanctions to coerce or discipline the underclass.  Not working to eliminate poverty, but rather to manage seemingly “bad behavior” with increasingly punitive tactics. 

This is related to the work of William Darity Jr. (1983), as well Sam Myers, Jr., on the “managerial class” and “surplus population.”  Framed in classical political economy, the “surplus population” is defined in terms of its inability to contribute immediate profit or production to the industrialized economy.  However, the “surplus population” is deemed useful in a capitalist system, since at least a portion of the people in this category can be drawn upon in periods of accelerated economic expansion, and their presence keep labor costs relatively low and worker discipline relatively high. 

Similar to the concept of “poverty governance,” there is an “inactive” portion of the working class for which a need emerges to “manage”.  This group is often characterized as persistently unemployed and unemployable, a source of urban crime and malice, and whose subsistence need is a drain on fiscal budgets. 

Stigmatization based on race provides political fodder to implement harsh and punitive control of the underclass.  Because of their marginalized social status and over-representation in poverty, blacks become the symbolism by which to define the surplus population; likewise, blacks suffer the disproportionate brunt of poverty governance, because of their over-representation in poverty and their marginalized social status. 

The neoliberal-paternalistic frame provides the rationale for austerity policies; if behavioral modification, particularly with regards to personal and human capital investment, is the central issue, why fund government agencies and programs, which, at best, misallocate resources to irresponsible individuals and, at worst, create dependencies that further fuel irresponsible behavior? 

The Obama administration’s “My Brother’s Keeper” initiative — which attempts to leverage private and charitable resources in order to incentivize so-called “defective” black males to be more “employable” serves as, perhaps, a more benign example of “neoliberal paternalism.”  The focus on black male youths’ motivations and behaviors, rather than more directly addressing the labor market conditions that they face is consistent with the economic orthodoxy of market primacy in allocations and distribution.

However, a report by Janelle Jones and John Schmit (2014) entitled “A College Degree is No Guarantee” indicates that the unemployment rate for black recent college graduates exceeds 12 percent, and is as high as 10 percent for black recent grads with science, technology, engineering, or math related (STEM) degrees.

Over the past 40 years, regardless of education level, the black unemployment rate has remained roughly twice as high as the white rate.  There has been only one year, 1999, in which the black unemployment rate has been below 8.0 percent — black Americans are in a perpetual state of employment crisis.

In spite of these enormous disparities, the presumption remains that if blacks were more responsible, made better financial decisions and were more focused on education, they could get a good job and pursue a pathway of economic security. 

Yet, black families whose head graduated from college have only about two thirds of the wealth of white families whose head dropped out of high school!  

A college degree is positively associated with wealth within race, but it does little to address the massive wealth gap across race. 

In essence, education is not the antidote for the enormous racial gaps in wealth and employment.  None of this is intended to diminish the value of education.  There is a clear intrinsic value to education, along with a public responsibility to equip everyone with a high-quality education that teaches them to synthesize and fuse information into big ideas with encouraging teachers trained to deliver curriculum from grade school through college.

It has been a myth that black families do not value education, but also problematic is the societal overemphasis on the economic returns from education as the panacea to address socially established structural barriers to racial economic inclusion.

Nonetheless, the ascendency of blacks to the most elite positions of society is often put forth to make the case for a grand racial progress.  The transcendence of Barack Obama becomes an ideal symbolism and spokesperson of this political perspective.  His ascendency becomes an allegory of hard work, merit, efficiency, social mobility, freedom and fairness, individual agency, and personal responsibility. 

These cases of black exceptionalism are meant to serve as prima facie examples of what individual or familial acts of perseverance and hard work can achieve. 

The problem with these convenient anecdotes, is that they are self-fulfilling and lack the systematic use of proper counterfactuals to empirically validate or invalidate their conjecture. 

There is no accounting of the voluminous cases of black Americans who also exemplify perseverance, “grit,” and “hard work,” but do not attain successful economic outcomes. 

Perhaps the greatest rhetorical victory of the neoliberal paradigm, is convincing the masses that implicit in unfettered markets is the “American Dream.”   The hope that, even if your lot in life is subpar, with patience and individual hard work you can turn your proverbial “rags into riches.”

The emergent subfield of Stratification Economics offers a different interpretation.  It expands the boundaries of how economists analyze intergroup differences.  It is an approach that goes beyond individual optimizations, and fuses insights from multiple social sciences to examine collective group actions and processes. 

Stratification economics differs from orthodox economics in the presumption of an irrationality of discrimination stemming largely from the view that group-based identity is a pre-determined exogenous trait.

Ironically, it is this presumption of rationality that better enables stratification economics to explain persistent group inequality, and to understand how markets themselves may be exploited to actually reinforce inequality.  With stratification economics, race prejudice constitutes a defensive reaction; it is a protective mechanism, and it serves the function of preserving social hierarchy or enhancing the relative position of the dominant group.

Nobel Laureate Sir Arthur Lewis, in his book “Racial Conflict and Economic Development,” described how dominant groups maintain their social hierarchy positioning by rendering subaltern groups noncompeting

The theory explains that in the premarket stage, when individuals acquire skills and credentials to compete in the market, the dominant group tends to use their power to limit subaltern group members’ access to skills and credentials, so as to ultimately render them noncompeting at the market stage. 

Lewis describes two strategies used by the dominant group when members from the subaltern groups are able to overcome premarket barriers and become competitive:  The first is to change the credentialing criteria at the market stage so as to favor their own attributes (i.e changing the rules in the middle of the game);  the second is to simply discriminate against competing members of the subaltern group. 

Stratification economics recognizes that the positive and negative returns to collective group identity are not just material, but cognitive as well.  Psychological benefits (and distress) accrue to individuals based both on their relative and absolute group position.

Likewise, to the extent that individuals have agency in determining or codifying their group-based identity, they are incentivized to invest in that identity similar to how a firm is incentivized to invest in a particular input in their production process.  Hence, as the social value (or market price) of a group-based identity, like “whiteness” rises, so will an individual’s incentive to invest in that identity. 

Thus, the orthodox conception of race as a simple exogenous variable is theoretically naive.  Such a conception often leads to interpretations that view the individual trait of race as being causally related to some outcome without explanation.  Stratification economics views these models as deterministic, and lacking the rigor to examine alternative hypotheses.

Ultimately, the myopic over-emphasis on individual optimization and the under-emphasis on group formation and collective action leads orthodox economists to accentuate differences in individual attributes like human capital endowment, motivation and attitudes as explanations for intergroup differences. 

Stratification economists look beyond individual factors and investigate structural and contextual factors that preserve the relative status of dominant groups via intergenerational resource transfers and exclusionary practices to explain intergroup disparity. 

Compare and contrast the neoliberal paternalistic policy approach to address poverty and subaltern status with the stratification economics approach.

Neoliberal policies and control mechanisms to manage surplus populations include examples like (Darity, 1983): (1) the British “Poor Laws” of the 19###sup/sup### century (2) income maintenance programs (3) social isolation (4) military conscription   (5) incarceration (6) policies aimed at controlling reproduction, fertility and family formation, and (7) “social experimentation,” to which “surplus populations” are particularly vulnerable — including the infamous Tuskegee syphilis experiment as an extreme example. 

In contrast, a stratification economics approach would include policies like:

(1) Reparations for slavery, Jim Crow and exclusion from New Deal and Post War polices (2) Baby Bonds — the program is analogous to a social security program for young adults to provide capital finance that begin a lifetime of building assets and economic security independent of the financial positioning and decision making of the families in which they are born (3) A Federal Job Guarantee that offers the economic security of a living wage to all citizens, investment in public physical and human infrastructure, provides implicit floor on wages and other worker amenities, provides jobs for socially stigmatized workers, and increases bargaining power for all workers by removing the threat of unemployment (4) Federalize Credit Scores — a metric so determinant on individual life changes should not be left to the private sector; it should be transparent and should have accountability that goes with being an elected official (5) Postal Banking to provide banking services and short and long-term loans particularly for unprivileged individuals who financially have to rely on predatory check cashing institutions and payday lenders, basically put a floor on financial products (6) EEOC should conduct employment audits to detect racial discrimination and prosecute discriminating firms (7) federal subsidy to HBCUs to the tune of the present value of support reached for other colleges and universities from post-World War II G.I. Bill — it is evident that black students still need stereotype safe environments that mitigate hostility and provide curriculum more relevant to their experiences (8) eliminate tracking in grade school and offer universal talented-and-gifted type educational programs (9) single payer health insurance — Medicare for all (10) stop mass incarceration of non-violent offenders, hold police criminally and civilly responsible for abusive police practice, and legalize marijuana. 

Despite the social and political emphasis on education as a means for social mobility, the evidence is clear that when family background is controlled, blacks acquire greater educational credentials, yet, reap less economic and health returns. 

We explored how the irony of post-racial and “neoliberal paternalism” tropes, which emphasize “no excuses,” “personal responsibility,” and “hard work,” may exacerbate economic and health disparity, particularly those that pose a competitive threat to the preferred positions of the socially dominant group. 

Once and for all, let’s eliminate social structures where individuals from socially stigmatized groups have to, in President Obama’s words, “work twice as hard to get by.”

Instead, we need to change the paradigm. Our profession needs to heed Rev. Dr. William Barber’s words and make economic justice as a moral imperative, and seize the mantra as rigorous political economists engaged in fulfilling Rev Dr. Martin Luther King and President Franklin Delano Roosevelt’s vision of an economic bill of rights that offers all Americans economic security, dignity, and agency in achieving their self-determined goals.    

That is how we should determine economic success!

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