Race and Economics
Race and Economics
RACIAL HIERARCHIES IN POSTCLASSICAL ECONOMICS
Commentaries by political economists about the concepts of race and ethnicity and the implications of those categories for economic behavior and outcomes date back to the eighteenth century. Classical political economists generally maintained that all groups have comparable abilities to make rational economic decisions. Variations in observed outcomes among groups were explained in terms of history, luck, and incentives. Incentives and markets were seen as especially powerful forces capable of generating convergence in observed outcomes. In contrast, most postclassical economists believed that permanent and semipermanent group differences in desirable wealth-generating characteristics are primarily responsible for differences in levels of development.
Although the Irish were often a principal subject of discussion, the colonization of the Americas and the massive expansion of African enslavement ensured that attention would shift to Native Americans and blacks. Much of that discourse consisted of thinly veiled rationalizations for policies of discrimination, exploitation, and oppression through assertions that the victims were less than fully human. The expropriation of Native American land was justified by a “natural law” argument by which so-called civilized communities were divinely mandated to master and transform that environment.
EARLY THEORIES
Philosophers’ theories of Caucasian, Aryan, and Anglo-Saxon racial superiority provided a rubric for distinguishing between the civilized and the uncivilized. The philosopher David Hume (1711–1776) insisted, for example, on the universality of human nature in 1748, but by 1753 he had become a staunch proponent of racial hierarchies. Hume wrote, “I am apt to suspect the negroes and in general all the other species of men … to be naturally inferior to the whites. There never was a civilized nation of any other complexion than white, nor even any individual eminent either in action or speculation.” (Morton 2002, p. 3).
Such contrived claims about black inferiority served to justify enslavement. As was noted by Eric Williams, “Slavery in no way implied, in any scientific sense, the inferiority of the Negro” (Williams 1994, p. 29). Supporters of slavery predicted disastrous consequences if blacks were emancipated. The inaccuracy of those predictions did not deter mid-nineteenth-century postclassical economists who were influenced by the writings of anthropologists from fully endorsing notions of differences among racial groups in the capacity to exercise economic rationality. Nonwhites and the Irish were characterized as “lower races,” and the category “Africanoid Celt” and an “Index of Nigrescence” were introduced in 1870 to measure how close the Irish were to blacks (Levy and Peart 2002).
DARWIN AND MARX
Charles Darwin’s 1859 book On the Origin of Species by Means of Natural Selection, or, The Preservation of Favoured Races in the Struggle for Life provided additional fuel for speculations about racial hierarchies, although Darwin and some of his supporters were dubious about the extent to which the dictum “survival of the fittest” could be applied appropriately to human beings. Alfred Russel Wallace, for example, insisted in 1864 that natural selection does not apply to humans because of ethical issues deriving from the phenomenon of human sympathy. However, prominent social Darwinists, including Herbert Spencer (1820–1903) and William Graham Sumner (1840–1910), argued that human progress depends on unbridled competition in all areas of economic life. As individuals sought to improve their circumstances, continuous movement toward the perfection of the human race inevitably would occur.
Karl Marx (1818–1883) was fascinated by Darwin’s work, although his views about race were more nuanced than those of most of his contemporaries. Although Marx and Friedrich Engels (1820–1895) envisioned the eventual disappearance of national and ethnic identities through the expansion of global capitalism, Marx recognized that in the interim a variety of social formations were sustainable and that economic progress “does not prevent the same economic basis … from displaying endless variations and gradations in its appearance, as the result of innumerable different empirical circumstances, natural conditions, racial relations, historical influences acting from outside, etc.” (Marx 1991 Capital, vol. 3, p. 927).
Marx’s sensitivity to issues of race and culture is evident in his discussion of Native American societies, in which he expressed special admiration for the Iroquois, highlighting their “sense of independence” and “personal dignity.” In addition, his writings are generally devoid of many of the prevailing stereotypes about non-Western traditional societies, including India and pre-Columbian Mexico (Anderson 2002). Nevertheless, the influence of Darwin is suggested by Marx’s comments about the dependency of barbaric and semibarbaric countries on civilized ones, indicating that he, like most thinkers of that period, failed to recognize white supremacy as an overarching global phenomenon (Robinson 1983). However, unlike most postclassical economists, Marx believed that differences in levels of social development among groups could be mediated through social interventions rather than reflecting a permanent pattern enshrined by innate genetically or culturally based variations in development potential. He argued that “all this crippling under existing social relations has arisen historically, and in the same way can be abolished again in the course of historical development” (Marx and Engels 1976, p. 425). That view resonated with those of classical political economists who insisted on the efficacy of incentives and markets to produce convergence in economic behavior and outcomes.
RACIAL HIERARCHIES IN POSTCLASSICAL ECONOMICS
Pseudoscientific notions of racial hierarchies can be found in the writings of several prominent postclassical economists, including William Stanley Jevons, Alfred Marshall, Arthur Pigou (1907), John R. Commons, and Irving Fisher (1930). In 1871 Jevons stated: “A man of lower race, a negro, for instance, enjoys possession less, and loathes labour more; his exertions, therefore, soon stop. A poor savage would be content to gather the almost gratuitous fruits of nature, if they were sufficient to give sustenance; it is only physical work which drives him to exertion” (Jevons 1871, p. 183). Those postclassical economists explored a variety of areas in which racial variations in economic rationality were hypothesized to exist, including labor supply, family size, consumption, and savings decisions. Marshall wrote about savage life ruled by custom and impulse in which there was no conception of future planning and rational economic decision-making and people were incapable of steady work. Individuals belonging to the “lower races” were deemed to be especially prone to the consumption of luxury goods and alcoholic beverages (Marshall 1891).
Large-scale migration from southern and eastern Europe to the United States beginning in the last decade of the nineteenth century led to the extension of notions of racial inferiority to those population groups. In 1907 Commons warned, for example, that the new immigrants were genetically inferior and would reduce the genetic quality of the nation. Various postclassical economists characterized those immigrants as “untaxed imports” and advocated eugenics policies to improve the genetic pool of the nation, including measures to encourage fertility among the “superior” genetic stock and reduce fertility among those with “inferior” natural abilities, including permanent segregation, sterilization, and selective restrictions on immigration (Levy and Peart 2002).
As described by William Darity, several researchers who were actively involved with the American Economic Association during its formative years subscribed to the view that African Americans eventually would face extinction as a result of a combination of genetic deficiencies and social maladjustment. Proponents of that view refused to discard the underlying assumptions of black inferiority even after demographic trends contradicted the predictions associated with the “Black Disappearance Hypothesis” (Darity 1994).
REVIVAL OF THE CLASSICAL VIEW
Beginning in the 1930s, the Chicago School played a pivotal role in reviving the classical tradition of treating individuals as possessing equal competence to engage in rational economic decision-making and reestablishing the critical role of incentives and markets in conditioning human behavior. Frank Knight’s 1931 critique of the presumed correlation between time preference and race in a 1931 review of Irving Fisher’s Theory of Interest was a major turning point.
George Stigler and Gary Becker also helped undermine postclassical views about racially distinct time preferences. Becker’s well-known “taste” or preference theory of discrimination has determined the contours of discussions about race for most contemporary neoclassical economists (Becker 1957). His analysis was conceived as a response to the failure of economists to examine the phenomenon of racial economic discrimination systematically. Two exceptions to the pattern of neglect of this topic noted by Becker include a 1952 study of black workers in southern industry by Donald Dewey and a 1955 analysis of occupational racial wage differentials by Morton Zeman. In Becker’s model social identities are treated as economically nonproductive individual characteristics that may, however, have significant economic consequences. A racial group thus can be treated simply as the aggregation of those individuals identified by a particular classifying parameter, allowing neoclassical economists to ignore the economic implications of individuals’ decisions for the intensity of group identification. The key theoretical conclusion flowing from Becker’s model is that the competitive forces of the market inevitably undermine the economic impact of racial prejudices, which are presumably irrational. However, the persistence of inequality in outcomes across groups has been documented, and this finding poses a formidable challenge to the efficacy of Becker’s model. Among others, Patrick Mason (1999) has suggested that racial discrimination may be consistent with the competitive process.
LATER RECONCEPTUALIZATIONS
Efforts to explain persistent racial differentials have generated two markedly different approaches to reconceptualizing the relationship between race and economic outcomes. One approach reintroduces the postclassical notion of racial hierarchies. Monographs by George Gilder and Charles Murray in the early 1980s assert that differentials in economic outcomes between blacks and whites stem primarily from dysfunctional behaviors endemic to black culture, including willful refusal to adhere to the traditional American values of hard work, self-reliance, future orientation, thriftiness, a strong emphasis on education, and individualism. Economists such as Thomas Sowell and Walter Williams readily integrated aspects of this discourse into their writings in the 1980s, and subsequently the number of subscribers to those views increased significantly (Akerlof and Kranton 2000; Loury 2002). Although claims about black genetic inferiority that were prominent during the postclassical period have been resurrected, few economists have been willing to endorse those claims openly (Herrnstein and Murray 1994).
The second approach to reconceptualizing the ways in which race affects economic behavior and outcomes revives the classical tradition of focusing on the role of incentives and institutions in reducing disparities and is associated with the emergent subdiscipline of stratification economics. Stratification economists conceptualize race as a produced form of personal identity that is responsive to changes in incentives for altruistic versus antagonistic behavior in social interactions. Collective identity is deemed to have economic value even as there are also costs to identity formation. As a consequence, reductions in intergroup wealth differentials are a necessary but not sufficient condition for eroding traditional patterns of collective identification. This conclusion is consistent with Marx’s views on the value of culture and institutions. Stratification economists believe that racial disparities and racial discrimination are endemic features of the U.S. economy and social systems that are reproduced by a myriad of institutional practices that require transformation to produce outcomes characterized by sustainable reductions in racial differentials. Like Marx, stratification economists recognize that historical inertia is a powerful barrier to change, leading to caution in making predictions about short-term reductions in racial differentials.
SEE ALSO Akerlof, George A.; American Economic Association; Culture; Darwin, Charles; Discrimination; Economics; Economics, Classical; Economics, Neoclassical; Economics, Stratification; Fisher, Irving; Hume, David; Immigration; Inequality, Racial; Marshall, Alfred; Marx, Karl; Race; Race and Religion; Racism; Stratification; Williams, Eric
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James B. Stewart