The Economics and Ethics of Discrimination

0:00Murray is irreplaceable, but I'd say from my heart that if anybody can replace him, it would be Walter Block, because Walter Block understood everything that Murray was doing, shared a lot of Murray's work, and is equally capable of explaining all of what he wishes to say, as you will witness in just a moment. His topic today is discrimination, fact or fantasy. Please welcome Walter Block.

0:45Chuck, thank you very much for that very kind and generous introduction. I hope I'll be half as good as you made me out to be. I don't think I will, it was so good, but I'll do my best. Before I begin, let me say that if you can't see this screen, you should move your seat, because I will be putting up some statistical and logical arguments to buttress my points, and it's important that you be able to see it. So please take a minute now, you won't be disturbing me or anyone else, and move your seat if you can't see it, given that I'm standing where I'm going to be standing. Okay, my topic is discrimination, fact, or fantasy. My short answer to that question is that it's mainly fantasy. There is a little bit of fact, but very little.

1:30On this card which announces the talk, we have Jesse Jackson who is sort of on the affirmative action side and Clarence Thomas who is not. And the implication is that I'm going to sort of take one or the other position. I suppose if I had a pick between the two, it wouldn't be too difficult. It would obviously be Clarence Thomas. But the way I see my view, it's a little bit more complicated than agreeing with one or the other. I guess I see myself taking a third option. I see private affirmative action as foolish, immoral, counterproductive, but I think it should be legal. Just because something is foolish and immoral doesn't mean it should be prohibited, in my view. In my view, we ought to reserve prohibitions of things for very important issues, like initiation of violence against innocent people.

2:20On the other hand, I will take the position that government affirmative action, or government discrimination, or government prejudice should be prohibited. The outline of what I'll be saying is first I'll try an economic analysis of discrimination. I'll go over the discrimination hypothesis, and then what I'll call the main competitor of that, namely the productivity hypothesis. And I will try to support the alternative or productivity hypothesis by logic and facts. The second part of my talk will be a critique of equal pay for equal work legislation, equal pay for work of equal value and affirmative action. I'll try to show that the cure is worse than the disease, indeed that it's a cure for a non-existent disease, the disease of discrimination or lower pay.

3:09And I'll conclude this section by asking what should good-minded people do instead of having affirmative action or all these equal-pay laws. The third section of my talk will be a legal and philosophical analysis of discrimination. There I will not be concerned with the effects or the economic analysis of discrimination, but rather with our rights to discriminate or non-rights to discriminate. This is a very controversial topic. There's been much heat and little light shed on it. It's a very emotional topic. This is a topic about which people disagree. I'm going to try to reduce tensions and I'll try to do it in three ways. First, I'll try to have a calm, clear and rational discourse.

3:54Secondly, I'd like to read something to you from John Stuart Mill on this subject. John Stuart Mill says as follows in his book on liberty, He who knows only his own side of the case knows little of that. His reasons may be good and no one may have been able to refute them, but if he is equally unable to refute the reasons on the opposite side, if he does not so much as know what they are, he has no ground for preferring either opinion. Nor is it enough that he should hear the arguments of adversaries from his own teachers, as they state them and accompanied by what they offer as refutations. That is not the way to do justice to the arguments or bring them into real contact with his own mind. He must be able to hear them from persons who actually believe them, who defend them in earnest and who do their very utmost for them.

4:44He must know them in their most plausible and persuasive form. So essential is this discipline to a real understanding of moral and human subjects He writes that if opponents to all important truths do not exist, it is indispensable to imagine them and supply them with the strongest arguments which the most skillful devil's advocate can conjure up. Luckily today you have no need for devil's advocate. You've got me. I really believe this stuff that I'll be putting forth for you. My third point here is that it's really important to discuss controversial issues and I would say you couldn't get much more of a controversial issue than this. What's the alternative to discussing controversial issues? I guess fighting about them, and it's more fun to talk about them, I guess, and it's more of a learning experience to talk about them and study them and to fight about them.

5:35So I'm glad that I have an audience here that is willing to listen to me. At some time I thought I wouldn't even have that, but I'm glad to see at least so far that that's the case. I want to give some advice, and I don't mean to patronize, people who disagree with my argument. My advice to you is don't get angry with me, don't tune out, but rather get down my arguments clearly, because if you want to refute me, the very least you have to understand what I'm saying. I myself had this problem with Keynes. I sort of had this visceral hatred for Keynes when I first read him, and it was hard for me to understand what he was saying, so it was always hard for me to refute him. And it took me years to understand it, so I would hope that some of you might save yourselves these extra years, and cool down internally, psychologically, and if you disagree with me, at least listen, the better to refute me.

6:24Okay. What we have to explain, what we have to try to account for is why is it that females earn less than males or why is it that blacks earn less than whites? And that they do, there can be no doubt. I think it's non-controversial that females earn about 75% as much as males and blacks earn about three quarters as much as whites do. Well, why is this? Well, we have two hypotheses. The first hypothesis is I call the discrimination hypothesis. And here, the view is that it's due to greed, it's due to capitalism, it's due to employer discrimination. The idea is that most employers are male or white or white and male and whites and males or white males have this visceral hatred for females and blacks and Blacks, and since they're in charge, they're going to just shaft the downtrodden people.

7:19Some quotes from this side would say, women are victims of a wage gap or attributed to racism. Here's a quote from a Canadian feminist who says, jobs held by women are valued less than those held by men, which accounts for the wage gap. And they say that a picture can tell a story worth a thousand words, so I'd like to put a picture up here that sort of encapsulates, at least for me, what this discrimination hypothesis is all about. And I don't know if you can see it in the back, but it's a little baby boy and a little baby girl, and they're looking under their diapers, and the caption says, oh, that explains the difference in our salaries, namely the plumbing.

8:04The fact that one persuasion, the other is the other persuasion, that's it. And if it was white and black, you'd have a black and white baby and sort of looking at their skin color and saying, that's the explanation.

8:22The argument here is that with a wage ratio of 0.75, this is an obvious inequity, it cries out to the heavens for redress, and seemingly the statistics speak for themselves. The message is we have rampant discrimination and the solution is affirmative action or equal pay legislation or any other of many government initiatives. The problem is I don't think we can allow the statistics to speak for themselves. They lie. You know, there's that expression, what is it? Lies, damn lies and statistics. Statistics. Well, strictly speaking, the statistics don't lie, but they are subject to misinterpretation, and I'm going to try to push an alternative explanation of them. Okay, I've now explained what the discrimination hypothesis is. Now let me try to explain the alternative, the competing hypothesis, the competing theory, which is the productivity theory, which says that the reason that blacks and females earn less than whites and males or white males is because they have lower productivity.

9:22That's it in a nutshell. But behind that lies a story, and I don't think that we should get in an uproar about this. We're not saying that anyone is inferior particularly, just that on average women, for example, have different interests, different training, different specializations. They concern themselves more on average with household activities, and it's no mystery to people knowledgeable about specialization and division of labor to see that if you specialize in one thing, you're not going to be that great in the other thing. I mean, if you play the violin all day long, you're not going to be a great chemist. And if you play, if you study in a chemistry lab, you're probably not going to be a good concert pianist. Well, if you're with little children and doing diapers and this and that and the other, it should be perhaps no mystery that your productivity in other things would be less than otherwise.

10:13Let me put some statistics on the table to show you what the facts are. The facts are, and again, these facts are pretty non-controversial. The facts are that if you take median weekly earnings for full-time workers, and in the top row I have female to male, that's F divided by M, and in the bottom row it's B divided by W, or black over white, in 1992 they seem to be converging around 0.75. The female have been increasing. If we go back a little further, back into the 70s, it was around 0.6, 0.59. It's been creeping up steadily. With blacks, it's been going up and down a little bit, but it seems to be converging toward 0.75.

11:01Just to give you a pause for thought, the identical relationship also exists between never married men or non-married men and married men. The Theory that I'll be urging upon your consideration is called the Marital Asymmetry Hypothesis. What is the marital asymmetry hypothesis? The marital asymmetry hypothesis says that marriage has an asymmetrical effect, a different effect on female and male earnings in the market.

11:49Namely, it increases male earnings and reduces female earnings. That's the theory. Why could this be? Try to give you a sort of an insight as to why it could be. Well, because there is unequal distribution of child care or other family activities. for example, child rearing, cleaning, housework, errands, shopping, gardening. There's a different, not only labor force participation rate, but also attachment to the labor force, namely females are less attached to it, and I'll be giving you some evidence for that. It's as if we're having a race. Chuck and I are having a race, and he's carrying a 50-pound sack on his back, and I'm just sort of racing, and otherwise we're both, you know, middle-aged, bald males, both slow in fact, But he's got 50 pounds on him and I don't. Who's going to win the race? Well, obviously, I'll win if we're roughly equal before.

12:41Well, the idea here is that females are roughly equal to males. It's just they've got a 50-pound sack on their back and they're racing. And they're coming in. When the male finishes 100 yards, the female finishes 75 yards, to make an analogy between the .75. A typical story told by feminists is you'll have a husband and a wife. They'll both go to work. They'll work from nine to five. They'll have the same preparation. They'll say both have a master's in chemistry and they'll work in some chemical lab. And the husband and the wife both come home at 5.30. And you know what the husband turns to the wife and you know what he says to her? He says, well, what's for dinner? Well, you know, well, if she's going to be making the dinner and she's going to be doing the shopping and she's going to be doing that, that's her 50-pound bag or sack.

13:29And this, forget about having children, which is a whole other thing that women and men are very differentially attached to children, namely men much less than women. That's the fact, or at least those are the facts according to this hypothesis. Nor is this temporary. Let me read you another quote from a bunch of sociologists who try to see if there are changing mores. Now we're in the 90s and maybe things are different. To their surprise, the sociologists discover that the social and economic gains won by so many American women during the past decade have had remarkably little effect on the traditional gender roles assumed by the more than 3,600 married couples in their study. Although 60% of the wives had jobs, only about 30% of the husbands believed that both spouses should work, and only about 39% of the wives thought so.

14:18No matter how large their paycheck, the working wives were still almost entirely responsible for the couple's housework. Husbands so hated housework, the researcher found, that wives who asked them to help out can sometimes sour the marriage. I don't see why you have to be a sociologist to know this. I mean, it's sort of common knowledge among all the people I know that there's this differential attachment between wives and husbands. Now let me give you some more evidence on the differential attachment, not labor force participation. Labor force participation is the rate at which people find themselves in the labor force. Attachment is something different. It has to do with motivation and willingness to move to save your job. There was a survey by a bunch of sociologists, again, of the XYZ Corporation, which they didn't name, but it was a large corporation in the South, and they found the following.

15:11Mainly they discussed promotion seeking behavior in the XYZ Corporation and they found that all males had a 53% high motivation and females only 33% but that's only the tip of the iceberg, the bottom of the iceberg is look at what marriage does. It increases the male motivation to get a promotion from 47 to 60% and it decreases the female motivation from 36 to 30%. This is compatible with the hypothesis that marriage has asymmetrical effects on income, boosting the male and reducing the female because of the differential attachments to the home environment. The next one has to do with occupational primacy. This is the idea, suppose this husband and wife chemist that I was talking about before, suppose one of them gets an offer to move to Boston and the other one has to take what he or she can grab.

16:07Grab, whereas the one that was offered the job in Boston knows what they're going to get and has a good job. Well, the question was asked of males and females, would you give up your job if your spouse's job required a move? And only 4% of the males said they would, but 53% of the females said that they would. Next question, would your spouse give up his or her job if respondents' job required a move? 92% of the husbands said yes, their wives would give up their jobs, only 55% of the females said they would. Next question. Respondent's job is more important to the family than spouses. 90% of the men said yes, only 34% of the women did. And spouse's job more important, only 4% of the men said yes, their spouse's job is more important, whereas 50% said the other way.

16:53So this is further evidence of the differential attachment to the labor force, the connection to the labor force, if you will. Now, the case of blacks, obviously you can't utilize a marital asymmetry hypothesis because that has nothing to do with it. Why is it then that blacks earn roughly 75% as much as whites? Well, according to the productivity theory, it is because blacks have roughly three quarters of the productivity of whites. And I don't think that's controversial. I think everyone agrees to that. There is controversy as to why it's so. Now Charles Murray and Shockley and Jensen have a view as to why it's so. It's got to do with IQ and inheritance and this and that and the other.

17:39Other people have the very opposite view, namely they say it's due to the fruit of slavery, discrimination, joblessness, low education, Jim Crow, whatever it is. I don't propose to get involved in that issue. That's way beyond my competence. I'm not concerned with that issue. I'm only concerned to indicate to you that there is no controversy among both sides of this debate that for whatever reason blacks have three quarters or have less productivity than whites. And according to the productivity theory, that's why they have lower wages. Okay, I now move on to the second part of this discussion, namely the logic of it. And in order to give you the logic of it, I have to acquaint you with a basic premise of economics.

18:25Everyone who got his PhD or her PhD in a school as opposed to with a box top and a Cheerios box, believes in the marginal revenue product theory of wage determination. Now that's a big mouthful. All it means is that wages are determined by productivity, roughly. For example, suppose someone has a productivity of $3 an hour. Now, that means that if you have 100 people on your factory and now you hire this person, your receipts rise by $3 an hour extra. Now, what kind of wage offer are you going to make to this person? Well, if you're a good capitalist pig and you want to exploit, which is great, the first wage offer you would offer is a penny. You know, you don't want to get the workers uppity, you don't want them to be too rich or something. You have a penny. That's good enough for them.

19:11The problem with that is that if you offer him a penny, and he can produce $3 an hour, you can make $2.99 pure profit, which is great for you. But some other capitalist pig is going to say, well, you know, I'm all for exploiting workers. Yes, yes. Don't get me wrong. I love exploiting workers. However, I'd rather exploit them than let this guy exploit them. So if this guy's exploiting them for $2.99, I'll exploit them for $2.98. I don't like giving workers wage increases to two cents an hour, but better that I exploit them than the other guy exploits them. So the wage goes up to two cents. But now another capitalist is going to say, well, yes, yes, but I want to exploit them. I'll pay three, four, five. Where does it end? It ends up around near $3 an hour or as close to it as is determined by the cost of finding these workers.

19:57And this is a very powerful thing, which explains why capitalists want to go down to the Mexican wetbacks and exploit those workers because they're paid less than their productivity levels and so they'll bring them up to California to pick whatever it is and pay them triple what they're getting down in Mexico and still make a profit. This is a very, very powerful insight in economics that wages tend to reflect productivity. On the other hand, if anyone is foolish enough to pay such a work of $4 an hour, what happens to him or her? Well, they lose a buck an hour, so they'll tend to go broke. So if I've proven to you that it's unlikely that wages will stay below productivity levels and it's unlikely that wages will go above productivity levels, I hope you'll agree in concluding with me that there indeed is something to the economic argument that wages tend to equal productivity levels.

20:47Further, another introduction to economics 101 business is that profits tend to equalize in all industries. If industry 1 is making 50% profit and industry 2 is making 1% profit, people will get out of industry 2 where the profits are only 1% and into industry 1 where profits are 50%, which will tend to lower the profits in the high profit area and raise them in the low until they tend to equalize except for risk, which is just a complication. I'm assuming equilibrium, I'm assuming no monopoly, which would take me too far afield. Okay, with this introduction to basic economics in, you know, three minutes, we now return to our productivity theory of the wage gap.

21:35Now, notice what the discrimination hypothesis is asking us to believe. What they're asking us to believe, M stands for male, F for female, and we have wage and productivity. I hope my handwriting is not as bad as it seems to me sometimes. that you can make out what I'm saying is, you see, if we want to take seriously the discrimination hypothesis, we have to assume that the productivity between males and females is equal. Because if the productivity between males and females is very different, then of course females will get less if they have lower productivity or more if they have higher productivity. So I'm assuming for the sake of argument, namely that the productivity is 10 in 10 for males and females, and I'm going to try to be true to the facts. and the facts are, as I indicated, that females earn 75% as much as males, so I'm assuming that the man earns $10 and the female earns $7.50.

22:29And this is roughly what we are asked to believe by the people who hold the discrimination hypothesis. But the problem with this, and this is why I say it's a logical difficulty, the problem is that you're gonna earn a lot of profit by hiring females and you'll earn zero profit if you hire a male. Profit consists of productivity minus wages, and for a male you're paying him 10 and he's producing 10, you make zip. Whereas a female, she's producing 10 for you and you're only paying her 750. It's as if she's got on her lapel a little sign that says, hire me and make it extra 250 an hour. Now, suppose you're a male chauvinist pig. Your view is, yes, yes, women are fine, but they should be barefoot, You get pregnant in the kitchen and they shouldn't be working and I'm not going to hire a woman no matter what.

23:18I'm a male chauvinist pig. Got to do it, otherwise they'll kick me out of the club. So you say, I'm going to hire a man. I'm not going to hire those women. Women are no good. You get somebody else who is a profit maximizer who doesn't win. Men, women, transvestites, some third sex, I don't care. I'm just looking to maximize profits. That person will make an extra $2.50 an hour. Now who's going to undersell who? Who's going to drive who to the wall? Who's going to go broke? Obviously the person who is paying an extra $250 an hour for what somebody else is paying only $750. You're paying $10 for it. I'm only paying $750. I'm no longer the chauvinist pig you are. I'll drive you out of business. So this scenario is untenable. It's nonsensical. It's illogical. It can't last. And if ever it did, it would disappear.

24:11So that's why I come back to the view of discrimination, fact or fantasy. It's not fully fantasy. There is some fact, there are some male chauvinist pigs, but they go the way of the dodo bird, because they keep getting ground down by losing profits. The point, the lesson from economics is, you want to discriminate? Fine. Go discriminate. You're going to pay for it. And if you're going to pay for it and there's a competitive market, you're going to lose out and the other guys are going to win. See, this would imply also that there's more profit in industries that hire females. For example, banking and insurance. And industries that hire mainly men, like logging, mining, trucking, steel manufacturing, are going to make low profits. But that's nonsensical, because profits tend to equalize.

24:58And if ever there was this vast divergence in profits, there would be some move. It's simply not tenable. See, the point is, according to their theory, you're exploiting women. Well, if you're exploiting women, you ought to have the profits to show for it. I mean, what's the point of exploiting people if you don't make profits, right? But we can see that you can't do that. It can't last, because profits tend to equalize. Okay, the next point I want to make, and this is harking toward or anticipating what I'll be saying about equal pay for equal work, is suppose now the opposite scenario, namely my scenario, namely the productivity scenario, namely that the productivity of men and women are different. Again, not because men are better than women, but because women on average are concentrating on different things.

25:47And suppose that the productivity of men is $10 and of females it's only $7.50. But suppose the law now is that you have to pay both $10 because otherwise you're evil, you're a monster, you're an abomination, you're a discriminator. Well, under this scenario, the profit that you'll make on a female is minus $2.50. The profit you'll make on a male is zero. In equilibrium there should be zero profits and I don't want to get into that, but the point is you'll be making $2.50 less on a female than on a male. Do you know what's going to happen? Females aren't going to be able to get jobs, which is roughly what happened to black male teenagers for reasons I'll get into later. That's why their unemployment rate is like quadruple, Let's take another case, the case of the haircut discrimination.

26:32Suppose the following. Suppose, let's say, you're doing women a favor, but you're not, you're just going to unemployed them. Better that they be exploited if they have to be exploited, and I don't think they will be exploited, but better to be exploited and working, at least you'll learn something on the job, then being unemployed you learn nothing, and you have no money. Okay, let's take another case, the case of the haircut discrimination. Suppose the following. Suppose that there is this plot on the part of hair cutters to exploit women. And the truth of the matter is that it costs $10 to cut a male's hair and $10 to cut a female's hair. I mean, you can see, looking at Chuck and me, you know, there's no way that that's going to be true.

27:17You know, not much to cut here. But suppose it's true. That a female and a male, it costs the same amount to cut. Because we just love to exploit women, we're going to charge them 30 bucks and we're only going to charge 10 bucks to a male. Now, I ask you, is this tenable? Is this reasonable? Can this last if ever it was true? No! Because you're going to make 20 bucks extra profit over and above what the profits will make on males by cutting females' hair. Under such a scenario, all the barbers who are barbering male hair would quit and start barbering females, which would mean that the prices of females would come down as the supply into beauty shops increases and males will rise as people leave. So it's totally untenable. You'll make out like a bandit if you exploit women.

28:02Well, if you'll make out like a bandit if you exploit women, everyone is going to want to be exploiting women. I'm assuming everyone's a fat capitalist pig type. You know, no one ever went broke underestimating the selfishness of the capitalists. Fine. Let's take the next scenario, the one that I find more reasonable. Namely that the price charge for males and females is $10. But the real cost, this is, I think it's true, that it costs more for females' hair than males' hair. Women's hair, men aren't as fussy for this reason or that reason. My view is that it costs more to cut females' hair, which is why they have to pay more for it. Well, under these situations, females aren't going to have any beauty parlor operators, because they'll see a woman, they'll see that they're not going to be able to make any money.

28:56So they'll all shut down. Now, how is that going to help females? Okay, again, I'm not so concerned with hair cutting. I'm concerned with the, although I am, but deeper underlying it, I'm concerned to show you the economic theory of discrimination, which is that it can't exist, that there are pushes in the market that, whenever it sees it, it'll eviscerate it, it'll wipe it out, whether it's haircuts or wages, doesn't matter. Okay, there were accusations that banks in Boston, as it happens, were lending in a racist way. They were lending more to whites than the blacks. And the banking authorities have to get in to shape them up because they're a bunch of racist pigs. There were a lot of problems with these theories.

29:42First of all, it's true they were lending more to whites than the blacks, but they were lending more to Asians than to whites. So it was Asians first, whites second, blacks third. So if they're such white racists, why are they helping out the Asians? So that's one problem with the theory. The second problem with their technology, excuse me, is that they didn't count people as white or black based on the color of their skin, but rather where they live. For example, they counted the rich areas as white and the poor areas as black. So if you were a rich black, you got counted as white. If you were a poor white, you got counted as black. sort of a little wonky kind of a theory. The third one is that the default rates were about the same.

30:28If there was truly racism, white default would have been much higher because he would have been going way down in the barrel to get whites because you're anti-black. But the truth is that the default rates were roughly equal, which shows that the market is working. So whether it's haircuts, wages, loans, it's the same thing, the market tends to work. Any racism or sexism tends to be, eradicated by the market because of the profit and loss considerations. So my conclusion of this section is that there is no discrimination. Or better yet, if there is any, it's very vestigial, very peripheral. It's continually ground down. To get back to my title, discrimination, fact or fancy, very little fact, mostly fancy.

31:14As long as we're talking about private enterprise, a little clinker here. Because remember, I keep talking about people going broke if they engage in discrimination. Who can go broke? Only a private enterprise can go broke. The government can't go broke. If they do something stupid, they just raise taxes. So this theory only works in private enterprise. So if we needed any more reasons to prefer private enterprise to government sector, we now have one. This process only works in the market. It doesn't work in the government sector. Okay, I now concluded that section of my comments and now I'm on to the third part where I'm going to give you some statistical evidence. And here is the statistical evidence.

32:02See, the point is here, my theory says that it's really marital status that determines it. If it's really marital status, then we ought to be able to put this to a test, or at least illustrate this. So the way I do it is I divide the population. I have two, you see it's all female to male earnings in percentage terms. And I have different ways, like the first one is Canada in 1971 for people age 30 or more. Notice the distinction between ever and never married. Ever married means you were ever married. You were touched by the institution of marriage, which remember I claim has asymmetrical effects on male and female income, raising male income and lowering female income.

32:51So, if you were widowed or divorced or separated or you're presently married, you're ever married. And what's your ratio? 0.33 or 33%. ." Whereas if you were never married, the ratio is 99, which shows, I mean, look, now try these facts on the other hypothesis, the discrimination hypothesis. Now you're being asked to believe that these male chauvinist pig types, these refusers of humanity, discriminates against ever married people, but not against never married people. Why? If you're going to discriminate, have the decency to discriminate. No, discriminate against everyone. What marital If you hate females, if you have this male chauvinist pig that believes that females should be barefoot pregnant in the kitchen, what are you doing paying never married females 99% as much as you pay males?

33:41Why are you doing that? Well, it's completely unaccountable on that theory. The next one is Canada 1971 university degree and near the total all people at 61% ever married 56%, never married 109.8, namely females are paid 9.8% more than males. The point is we're converging very close to unity, that there is no difference between males and females, they have equal productivity except for marriage. for Marriage. If they've been touched by the institution of marriage, it warps, it creates the wage gap. If they've not been touched by it, there ain't no wage gap. The third one is Canada, 1982, high school degree, and we can see that the never-marrieds are 93, which is pretty close to unity. I try to get stuff for the U.S., but the point is, see, in order to get this Canadian stuff, they don't publish it. They don't even publish this stuff. They collect it, but they didn't publish it. And the group that I was working Well, what I did for the U.S. since I couldn't get it, beggars can't be choosers, what I did is I took the female-male wage ratio for people 25 and above, who I assume have been touched by the institution of marriage, and then people 16 to 24 who I assume roughly have never been touched by the institution of marriage.

35:08It's not exactly true, but by and large, it's sort of what economists call a proxy variable. Now look, you have a 94% ratio. Now why is it that females who are 16 to 24 are earning 94% or 95% as much as males? It cannot be accounted for on the discrimination hypothesis. It certainly can be accounted for on the productivity hypothesis, Which is why I say this is evidence for the Productivity Hypothesis. Let me run another one at you very quickly, the effect of children. Here we have females to males, hourly earnings, 1987, white people aged 20 to 44 in the U.S.

35:54In the first case, we standardized for age and region, but not for a marital status. And we noticed that if you have children, you earn 62% as much as a man. If you don't have children, you're in 86%. Again, very compatible with the marital asymmetry hypothesis, not at all compatible with the discrimination hypothesis. And in the second one, we now standardize or control for more things, age, region, education, skill level, labor force turnover, but not marital status. And again, if you have children, you earn 72% if you're a female as much as a man, but if you don't have children, you earn 90%. They're crying out to say, yes, the productivity hypothesis is what it's all about, the other is ridiculous.

36:49Now, there are very sophisticated studies, econometric regression analysis, they use the residual method. What this is, is that they measure the wage gap and then they try to attribute it to all sorts of things like age, education, experience, degrees. They never use marital status. I can't find any studies that use marital status. Or if they do, they do it single versus married. But single versus married doesn't cut it. Because if you're single, you can be widowed or divorced. Namely, you've been touched by the institution of marriage. If you want to do it cleanly, you have to do never versus ever marriage, not single versus non-single. Other problems with this is that it ignores customer discrimination or fellow worker discrimination.

37:35After all, we're trying to figure out what's going on with an employer discrimination. Another problem is that the independent variables are very sloppy. For education, they take years of schooling. But years of schooling in Harvard are different than years of schooling in Podunk University, and they don't control for that. Then there's a bias toward the quantifiable, which all econometric regression equations have. It's very hard to measure perseverance, initiative. And yet from our sociological studies, you see that married men have this ambition for their kids that women don't have on average because they're more concerned with the children. Children. Now, some of you might say, well, what about the past? Maybe this is true now. How about in the past? The point is, this theory is true for as far back as we can go. Now, I go back to 1941 here. I couldn't get any good stuff for 1931 and the previous censuses just didn't have what I wanted. They didn't distinguish between never and ever married. The top one is the never married. They're the ones that are up around the 80s, 90s,

38:4250% ratio, female to male, the bottom ones are ever married or the total. So this thing that I'm talking about, it's not that all of a sudden now in the 90s, since we're so cool and groovy and we don't discriminate now, we've never discriminated for at least the last 50 years or as far back as I can get statistics for. And I have no doubt that this was true, you know, back to the beginning of time, This economics grinds down continually, this profit consideration that I was talking about. Okay, I now arrive at my second major point. I am now going to criticize equal pay for equal work, equal pay for work of equal value and affirmative action.

39:30I claim that they are a cure for a non-existent disease, namely the harm of discrimination. I claim that discrimination is impotent thanks to the magic of the marketplace, which Ronald Reagan gave us that wonderful term. First, equal pay for equal work. Let me introduce this in the following way. In South Africa, in the bad old days of South Africa when apartheid was running rampant, they had a thing called job reservation laws. What were job reservation laws? Job reservation laws were roughly that blacks got the dirty end of the stick and whites got the good end of the stick. If you wanted to be a chief dynamiter in the diamond mine, you had to be white. If you wanted to be the assistant, you could be a black. This was the rule promulgated by white racist unions.

40:20But it was continually undermined by the capitalists. The capitalists who don't care white, black, they just care about green Because otherwise they go broke, as we've seen in the examples I've given. They kept undermining it. What they would do is they'd say, yes, yes, you're black. You can't have the title of Chief Dynamite. But we're going to get you to do it if you can do it, and they could do it. So the union, the white racist union, was feeling the pinch. These job reservation laws were passed, but they were being subtly undermined continually. So guess what they came up with? In a brilliant stroke, they came up with equal pay for Equal Work. You see that whites had much higher productivity than blacks in South Africa for various reasons having to do with you-know-what.

41:07So what they did is they got a law saying you have to pay whites the same as blacks and all of a sudden the union owners, the mine owners were not giving the blacks any of these jobs because if they did they would lose money. Let me make this point in a different way. In nature there are certain animals that are very, very weak and what they have is a compensating differential. For example, the deer is very fast. If it weren't fast, it would be gobbled up by the wolves. The skunk, we all know the compensating differential of the skunk. If it didn't have it, it would not survive. Similarly with the porcupine. Take away the quills, The porcupine is not going to survive.

41:53The analogy is that weak economic actors have a compensating differential too. In the old days, when people read good literature, there were the Horatio Alger stories. Horatio Alger was this young boy who was very poor and who wanted to claw his way into employment. And you know what he would do when he wanted to get a job and the owner wouldn't give him the job? The point is that the compensating differential of weak economic actors, people who are despised, people who are downtrodden, people who are weak for whatever reason in the economic sphere, have this thing equivalent to the smell of the skunk, or the porcupine quill, or the sweetness of the deer, and that's the ability to work for low wages.

42:43You take that away from them and they are helpless, just as helpless as a deer without speed or a skunk without the smell. The equal pay for equal work is taking away this compensating differential from these helpless people. The minimum wage law is a vicious law. Before the minimum wage law came in 1937, I think it was, or maybe 1936. 1936, 38, sorry, we have an expert here. I'm just a dilettante in labor economics. Chuck knows where it's at. It was 1938. Before the minimum wage law came in, the unemployment rates of whites and blacks was close. The unemployment rate of old people and young people was close. A little higher for blacks, a little higher for young people, but not much.

43:29After the minimum wage law, the unemployment rate for white males in their fifties, such as myself, is pretty low, four, five percent. For blacks of that age, eight, ten percent. For white teenagers, oh, twenty percent. For black teenagers, forty percent, fifty percent. And if you count the fact that, you see, they only count you as unemployed if you're seeking work. And if you stop seeking work because you never get it, they don't count you as unemployed due to the magic of statistics. So the unemployment rate for these people is even higher. This is a vicious, depraved thing that that guy Reich keeps saying, you know, we've got to have higher minimum wages. Why are they doing this? Well, because the unions are competing with unskilled workers and the last thing they want is good competition.

44:18They'll price them out of the market. But this is what equal pay for equal work is. If you do this for females, females will then have the same result as black male teenagers. We shouldn't do it for females, we should undo it for black male teenagers so they get jobs. This is just vicious, cruel and depraved. Why is it that blacks can't get cabs in the inner cities? There's a very controversial issue and I hope that you'll take my benevolence for granted. The reason blacks can't get cabs is because blacks live in higher crime areas and the cab drivers, whether they're white or black or green or blue, it doesn't matter, they'd rather go to a white area where it's safe than to a black area where it's more dangerous.

45:07It's human nature. The point is that the law is such that they have to pay the same fare. So that's why they have trouble going into the black areas. Why is it then that blacks can get food in the black areas? That's because the prices can be higher. The prices in the black areas are usually higher for a can of coffee in the white area or the black area. It's much higher in the black area because the costs of doing business are higher there, because the crime is higher there for various reasons which I won't get into. There now are people like Jesse Jackson who say, well, it's unfair. You can't allow prices to be higher in the black areas. This is racism. Let's have the prices the same. Well, if the prices were the same, I don't have to ask you if you want to pass my economics course what's going to happen.

45:52There ain't going to be no food in the inner city. You know, the black people will then have to go miles and miles away to the white areas to buy food. That's just economics. It's not racism or anything like that. There will be people very happy to go into the black areas if they can make the same profit given the risk as anywhere else. The Market Tends to Equalize Okay, next one is equal pay for work of equal value. This, if anything, is perhaps even worse than equal pay for equal work. What equal pay for work of equal value... You see, equal pay for equal work is, you know, sort of all plumbers have to get the same amount and forget about the fact that there are different qualities of plumbers. Equal pay for work of equal value is to say, They say, well, since men are plumbers and women are nurses and plumbers are getting more than nurses, we have to make them equal because, you know, they're really worth the same amount.

46:47And what they do is they say they'll assign points to things like skill, effort, responsibility and working conditions. And on that basis, they'll determine which professions or which work gets which wages. Suppose I shoot an arrow up into the air, a quarter of a mile up, and as it comes down, I catch it with my teeth. A little weird, but you know, humanly. Now I ask you, is there a job that requires more skill than that? It's pretty skillful. I mean, you know, if I miss, it goes right through my ear and I'm in trouble. Does it take great effort? Yes, I get nervous every time I see the arrow coming down. Is there great responsibility? Yeah, I can get dead. What about the working condition? So, according to that, this industry of catching arrows with your teeth as they come down from a quarter of a mile should get high wages.

47:39But I just invented this. Actually, I stole it from someone. I footnote him in my work. But the point is that there is no such industry, there is no such job. It's just a completely made-up thing. Let me give you another one. The job of horse trainer in 1885. Was that a job that took great skill? Yes. Was that a job that took great effort? Yes. Responsibility? Sure. Working conditions? Pretty bad. A horse kicks you, bites you. What happened? All of a sudden this rascal, Henry Ford, came up with the horseless carriage and the job of horse breaker, which has the same skill, effort, responsibility, working conditions in 1885 as in 1925, all of a sudden the bottom drops out of that market.

48:28The point that I'm trying to make to you is that skill, effort, working conditions and responsibility have got very little to do with anything. They're forgetting about something important, namely the demand for the product. Let me give you one more example. Dentists. Do dentists make a lot of money? Yes, dentists make a lot of money. They have high skill. There is effort. You have to look down people's tonsils. The working conditions are, I don't know, I'm not really, it doesn't seem aesthetic to me. I don't want to be a dentist when I grow up. And they make a lot of money seemingly because of the skill, effort, responsibility and working condition. Now suppose I invent a cure for tooth decay. What happens to the salary of dentists? It goes way down, and yet the skill, effort and responsibility of working missions are the same before and after my invention of the tooth decay pill.

49:19Again, more evidence that these things are pretty irrelevant. What this really is, is a recipe for Sovietizing the whole labor force. You're going to get Hillary or Billery, as I like to call them, and they're going to decide how much wages are worth for each occupation. They've done this a little bit on the state level. You know, the Republicans ought to be happy about that because we've done it on the state level. Big deal. I mean, if it's wrong, it's wrong on the federal level, it's wrong on the state level. Let me read you a report on how this works. What they've done is they've tried to rank the various professions in various states based on awarding them arbitrary points based on these four considerations, skill, effort, working conditions and responsibility.

50:05Vast discrepancies occur in the job scores for the three states. In Minnesota, for example, a registered nurse, a chemist and a social worker all have equal values and would be paid the same. be paid the same. However, Iowa's study finds that the nurse is worth 29% more than the social worker who is in turn worth more than 11% more than the chemist. While the chemist also receives the lowest point total score in the three positions of the Vermont study, the social worker and nurse reverse rankings. And this goes on and on with all sorts of anomalies and the bottom line is that it's just arbitrary and capricious. Okay, affirmative action. The third thing to cure this non-existent disease. First of all, affirmative action suggests that women are inferior, and I don't think women are inferior. They're just specializing in different things.

50:52Secondly, it's unjust. It supposedly helps young women who were never the victims of discrimination in the first place. I mean, if you can have a law, it's supposed to help people who were the victims. What's the point in helping people who weren't victims because they look like other people who were victims? That's not justice. Third point, what this does is it helps the people who least need it and hurts the people who most need it. You see, under affirmative action, you're an employer. The last thing you want to do is fire a woman or fire a black. I mean, you fire a woman, you fire a black, you pull the rest of your hair out. That's why I have so little hair. I've been pulling it out, thinking that I might have to one day fire a woman or fire a black. So, if I'm afraid of this, what kind of black or woman am I going to look for to hire?

51:39Obviously, one who comes from Harvard or Princeton or Yale or Cal State Hayward. Plug for Cal State Hayward. Namely, the ones that need it the least are the ones that are going to benefit. Every employer is going to think like I am. The demand curve for these kind of workers is going to shift to the right. The salary of these people is going to go up. Now, what about the marginal blacker woman, the one who I might have given a chance to if I thought I could fire them if it didn't work out, I'm going to stay away from them like with a ten-foot pole, because God forbid I have to fire them if it doesn't work out? And every other employer is going to think the same way, so the demand curve for this kind of worker will shift to the left. So the people that need it the least, the ones at the top of the pile will get the help, the ones at the bottom of the pile will get pushed further down.

52:27Third, fourth point, it harms blacks and women who have made it on their own. Now what they did many years ago in Harvard Medical School is they took in a whole bunch of blacks who didn't pass the same entrance requirements that the whites did. They were just freshmen in the medical school and you know what happened to people, blacks in the Boston community who had got their medical degrees years before under equal, even, Steven rules, people stopped going to them. People said, well, look, if they're letting them in, you know, I'm not going to trust them with my little Johnny's stomach or whatever it is. So this is unfair to people who made it on their own.

53:12Fifth point, it harms an unqualified minority by placing people beyond their competence. I think at Berkeley, the difference in SAT scores between the whites and the blacks is 200 points. Now 200 points on the SAT scores is like, you know, it's a different universe. I'm a teacher at Holy Cross and Chuck's a teacher. What do you do if you have one group that's up here and one group that's down there? Where do you pitch it to? To this group and this group doesn't understand what you're talking about. To this group and this group is bored. To the middle? Well, maybe that's the best, but then what do you do when you give out marks? Do you fail all these people? Do you pass them all? You know, what you have is great inflation, what you have is great resentment. And the people that are at Berkeley aren't learning what they could have been, had they been, say, at a middle level school.

54:03And the people at the middle level school aren't learning what they could have at the lower school. In other words, you have a mismatch of people. You have people at Holy Cross, you have people at Harvard who should have been going to Holy Cross, but they're at Harvard. You have people at Holy Cross that should have been maybe at a community college who can't keep up with the work, and it's unfair to them. They're not learning. They feel miserable. You know, everyone else in the class learns, they don't learn. This is not doing them a favor. I mean, it's sort of like putting me in the ring with Mike Tyson. I mean, I'm not going to learn anything, I'm just going to get knocked out and I'll establish a new world's record, quickness of knockout, one second, that'll be it. I mean, what's the point of putting me in the boxing match with Mike Tyson, it's ridiculous. You want to put me in the boxing, give me a chuck, I'll have a chance.

54:55If he has a 50 pound sack on his back, I could maybe mush him a little. Six-pointed harms those excluded by, they get frustrated, you know, other people are accepted, I'm not. It exacerbates tension. There's more tension on college communities now between blacks and whites than ever under the previous non-affirmative action. And then it promotes invidious racism. There was this wonderful case of two blonde, blue-eyed people, about as blonde and blue-eyed as this guy over here, and they applied to the fire department of Boston as whites, and they didn't make it because of the race norming, But they would have made it had they been black. So they failed the first two times. The third time they took it again, and this time they declared themselves black.

55:44They found a grandmother or something, who knows, they declared themselves black. And now they passed as blacks. Well, what do you do? What do you do? Open their mouths, look under their nostrils to determine if they are or not? There is one country that has some claimed expertise in matters like this. So you know which country that is, South Africa. Do we want to go the way that South Africa happily is coming out from under? Well, that's the way we're headed, because now you have to say, no, no, no, you're not black. Well, who am I to say he's not black? I don't know. Now, what's the criteria? It's crazy. There was this wonderful case, well, not so wonderful, very unfortunate case of the Detroit Symphony Orchestra. Now, the Detroit Symphony Orchestra, up until 1960, had open curtain auditioning.

56:31This means, I'm trying out for the Detroit Symphony Orchestra, I play the violin and you guys are the members of the orchestra and I'm auditioning and you're going to determine how good I am and you see me, I'm playing. And there were no blacks in the Detroit Symphony Orchestra. So in 1960, roughly, I forget the exact year, the NAACP came to the Detroit Symphony Orchestra and said, look, They're not going to say you're a bunch of racists, but look, how about a closed curtain audition? Close the bloody curtain, let me play, you not hear me, you just hear me squeak, and you like my squeaks, you take me, you don't like them, you don't take me. And the Detroit Symphony Orchestra said, okay, we'll do it, it's fair, you know, we don't want to get invidious distinctions, you know, you're black, you're white, you're female, you're this, you're a Martian, doesn't matter, you can play the violin, you're in our orchestra.

57:20So from 1960 to 1980, they had closed curtain auditions. No blacks. I don't know why. No blacks. Guess what? 1980, they came back and they said, we want open curtain auditions. And we want you to hire some blacks. You see, the point is, you can't have affirmative action if they can't see who it is, right? I mean, it just sort of shows what's going on here. This system is not cool, not a good system. So in conclusion, I say that you have a right to discriminate as a private individual, not as a government. I say also that education, public schools, first of all, I'm against all public universities.

58:05I hate to bite the hand that feeds me. This is a public university. My view is that all universities should be private. Not only shouldn't they be able to discriminate on race or sex, they shouldn't even be able to discriminate on the basis of intelligence. Stupid people pay taxes. If you're going to have a public education system, why shouldn't stupid people come in there? Why should Berkeley, you know, pick these and not those? I realize this would ruin the public university, but I'm quite happy to ruin all public universities, because I don't think there should be any in the first place. My point in summary is that discrimination is impotent, the market grinds it down, private discrimination, therefore we should enhance the scope of the private market and decrease the scope of the government sector, So the only legitimate function is the government, which is to protect persons and property for which you need armies, courts and police.

58:59And I thank you for your attention.