Discrimination is harder to end for police departments than business

The deaths of George Floyd in Minneapolis, Ahmaud Arbery in Brunswick, Philando Castile in Saint Paul, Eric Garner in New York City, Freddie Gray in Philadelphia, Michael Brown in Ferguson, and others have disturbed and angered many Americans. The country seems headed toward a renewed sensitivity to racial injustice and recommitting itself to reform.

You might not think economists have much to add to this discussion, but we have been systematically researching discrimination since Nobel Prize winner Gary Becker wrote his book “The Economics of Discrimination” in the 1950s. Since then, economists have studied how markets mediate the hostility some people have toward others, how we can carefully estimate the effects of discrimination and racism on outcomes such as income, life expectancy, and treatment by police, and what unintended consequences we should be aware of in the fight against discrimination.

Knowing the answers to these questions would reduce the inequities of discrimination more effectively. Economists will start by identifying the different types of discrimination. One is that employers do not hire black workers or pay them less because they do not like them. Another type is that employers do not hire black workers or pay them less because other workers do not like them. Yet another is that employers do not hire black workers because customers may not like them. In a small town with such prejudices and few options, black people might have little recourse. But what about a large town or city with more employers?

If equally productive black workers are hired for less than white workers, an employer can make more profit by hiring such workers, as costs would be lower and revenues would be the same. Employers could also establish firms with only black workers to prevent the loss of their prejudiced white labor force. Such firms would earn higher rates of return on their capital. It is possible there are many firms that practice discrimination with little effect on the incomes of black workers, since those workers can simply avoid the firms that do not pay them according to their ability.

This approach identifies the market forces that make discrimination less profitable. Research along these lines investigates how the relative sizes of firms without prejudice and the affected populations, as well as other factors, affect the path to reduced pay discrimination. When there is less competition with fewer firms, there is less pressure to remove disparities in treatment. More competition benefits workers and consumers.

A part of our lives that is relatively immune to competition is who polices us. If one lives in a city, one can avoid bad employers or jobs. However, it is harder to choose to live under a different police force. One would have to leave friends and family and actually move to a new jurisdiction. Police departments and other agencies for a city operate like a monopoly since they do not have to compete for customers. They are difficult to replace even when many of the “customers” are disappointed in the service they receive. It is difficult for citizens to take their police business elsewhere. They can only change the service through political pressure.

This approach to modeling discrimination within the market suggests that even when the willingness of society to tolerate racism and discrimination is falling, there would be slower progress in reducing the damage suffered by minority groups from police organizations. This implies that pressure to limit discrimination from state organizations needs to be done much more deliberately than fighting discrimination in competitive markets.

Another challenge is that the existence of police unions provides a sort of immunity to reform. Conservatives do not challenge law enforcement, and liberals often defer to unions. In this case, police unions carve out special benefits for their members, such as 24 hours to review information before giving statements when officers are investigated, and qualified immunity that shields officers from personal liability for certain violations.

Economists have greater faith that prejudice and discrimination will harm its practitioners the more competitive the market is. Such employers bear those costs and reduced profits by not hiring equally productive workers. The environments with less competition, like police departments in cities, face fewer pressures because they have a captive market. This is why we need to bring pressure for reform through political activism.

Erik Craft is an associate professor of economics and philosophy with the Robins School of Business at the University of Richmond based in Virginia.