Tag Archives: nondiscrimination

When Government Mandated Discrimination in the South

When it comes to the question of antidiscrimination, free market economists and libertarians tend to suggest a laissez-faire solution that strikes many people as naive. The story goes something like this for consumers:

Suppose a hypothetical business’s customers are 80% white and 20% black. This business is located in a place where many white people are racist. Further suppose that these racist customers are opposed to the idea of eating in an integrated restaurant. Thus, the self-interested business owner makes a calculation that enough of his customers (and the local population) are racist that he might be able to win more business by excluding black people from his restaurants–because he’ll gain more favor with those racist customers. And whatever small minority might be offended by it (i.e. the more egalitarian-minded white people) and the minorities themselves, will be too small to offset his gains. If his math is right, and it may well be if racism is popular enough, this might make business sense. (Of course, if by contrast, the amount of the population that is virulently racist is relatively small, then discriminating on race would be counterproductive, even in amoral economic terms.) 

It doesn’t really matter whether the owner himself is racist or not. The decision will, or will not be economically sustainable based on the opinions of the public in general, regardless of the owner’s own views. 

So based on the above story, we must concede that it is possible that discrimination could, under certain conditions, make business sense. I’m not sufficiently familiar with how quickly opinions evolved in the South, so I won’t claim to know how long this remained economically feasible. For these purposes, it is enough to acknowledge that is a possibility. So the question becomes, what happens to the minorities? Will there be any businesses to serve their needs? 

And the answer is obviously yes. Indeed, the discrimination of the businesses, means that minorities would be an untapped market that would be easy for the entrepreneur to gain as customers. They might devise a business that caters exclusively to the needs of those minorities, or, more likely, they might make an integrated establishment that could attract a wider range of customers. Assuming the latter, over time this second business would also be sustainable. If we further assume the general trend that younger generations tend to be more tolerant (at least of race, gender, etc.) than their parents continues, then this second business would become more profitable in the long run, and the discriminatory business would eventually have to change its ways as its customer base shrinks. Even if we assume no change in tolerance over time, it’s still the case that the business serving minorities should be able to do so properly. Discrimination might exist in this case, but no one is being denied access / underserved.

Logically, this story should make sense as long as we assume (at least some) people are motivated by self-interest. And while the more pessimistic edition (where discrimination is sustainable) may not be ideal, it still avoids the most important problem of minorities being frozen out of the market.
But there seems to be a problem with this story. Because obviously, discrimination really did exist in a major way in the American South. America has a free market, and yet Rosa Parks was still discriminated against on the Montgomery buses. How do we account for this? Surely we must have gotten something wrong in the story above if the free market produced such an outcome?
This is the cognitive dissonance that people naturally face when they hear the economics case against antidiscrimination laws. It doesn’t seem to conform to the historical reality we learned about.
Fortunately, there’s a quick article by economist Thomas Sowell (who happens to be black, if you find that relevant), that helps us reconcile these conflicting ideas. Sowell’s piece focuses on the famous Montgomery Bus Boycott episode. He explains that, in fact, the state government passed the laws that required the private bus operators to segregate their buses–and business owners actually unsuccessfully lobbied to block the legislation because they didn’t want to lose the business of the minority customers (and most of their white constituents were indifferent). 
In other words, Sowell’s article suggests that, at least in this prominent case, the free market did not produce a discriminatory business model. In fact, the government required discrimination, and self-interested business owners tried to fight it. Sowell also offers an excellent summary of why the market process fights discrimination while the political process encouraged it (emphasis mine):

These [private bus company] owners may have been racists themselves but they were in business to make a profit — and you don’t make a profit by alienating a lot of your customers… 

People who decry the fact that businesses are in business “just to make money” seldom understand the implications of what they are saying. You make money by doing what other people want, not what you want. 

Black people’s money was just as good as white people’s money, even though that was not the case when it came to votes.

Here’s a link to the rest of the piece, which I highly recommend:

Rosa Parks and History

The Unintended Downside of Nondiscrimination

This week, two Oregon bakers (the Kleins) finally paid damages to a lesbian couple (the Bowman-Cryers) after discriminating against them. For the uninitiated, this story actually dates back to 2013 and the facts of the case are pretty straightforward. Basically, the Kleins refused to bake a wedding cake for the Bowman-Cryers, and they specifically cited their Christian beliefs as the reason for denying service. That is, the Klein’s version of Christianity thinks same-sex relationships are morally wrong, and thus they did not want to bake a cake for a same-sex wedding. In response, the Bowman-Cryers filed a nondiscrimination complaint against the business, and ultimately the court sided with the couple and ordered the Kleins to pay $135,000 in damages in 2015. The situation quickly escalated after the initial complaint was filed, but it is important to note that the court’s decision to award damages was based solely on the initial act of denying service. Upon receiving the judgment, the bakers refused to pay the damages, but now this week they paid the balance off in full. This latest development is why this story is back in the news.

Although the payment development is not terribly interesting by itself, the broader issue of nondiscrimination legislation is an important one. In this case, it’s pretty easy to predict that the commentary will break down along ideological lines. Conservatives will cite this case as further proof of the government’s war on Christianity and an attack on religious freedom. Liberals will likely cite it as a victory for gay and lesbian rights. If you agree that discriminating against people based on their sexual orientation is absurd, it may be tempting to join with liberals in celebration on this one. But we must remember that it is always tempting to applaud government coercion when it is used against your opponents. The important question here isn’t whether we prefer the views of gay people or the views of religious conservatives. The real question is whether we want government coercion being used to force any private citizen to provide a service against their will.

That’s the focus of our piece today: Should we support anti-discrimination laws like the one in this case?

To answer this question, it is useful to consider the logical possibilities of these nondiscrimination laws. Specifically, we’re going to concern ourselves only with laws that prevent discrimination by businesses that provide public accommodation (like hotels, restaurants, grocery stores, etc.), and we’ll stick with the bakery example for our thought experiments. Also, note that the analysis and opinions expressed here wouldn’t apply to the Kim Davis marriage license situation in Kentucky because she was acting as an agent of the government, which can’t have religious beliefs, rather than as a private citizen.

So under Oregon law, discrimination is deemed unlawful if it occurs on any of the following protected characteristics, which are known as protected classes. The items in bold are the only ones that are recognized under Federal law:

  • Race / color
  • National origin
  • Sex (includes gender, pregnancy and sexual harassment)
  • Sexual orientation
  • Religion
  • Retaliation for opposing an unlawful employment practice
  • Association with a member of a protected class
  • Age
  • Marital status
  • Physical/Mental disability
  • Injured workers
  • Family relationship
Now in the case that we’re discussing, it’s easy to favor the nondiscrimination law if you are sympathetic to the cause of gay rights. But we must realize that the tables could readily be reversed in ways we might not be as comfortable with. Let’s take a look at some examples.
For the first example, assume that there’s a bakery in Oregon that is owned by an African-American man. The local leader of the Ku Klux Klan comes in and asks for a cake to serve at the coronation of the new wizard-leader-guy. (And yes, the KKK is still a thing.) Given the KKK’s history of violent racism against Black people, our bakery owner understandably might not want to bake them a cake. But there’s a problem there because the KKK has started to brand itself as a religion. Thus, the bakery owner technically could not turn down the KKK’s business because of its religion. If he did, he would be guilty of unlawful discrimination and could be fined. I know what you’re thinking. No one really thinks the KKK is a religion. But we should note that the barrier to establishing a religion, at least for tax purposes, is comically low. Of course, it’s impossible to know whether the KKK would actually succeed in a discrimination complaint in this circumstance, but at least according to the letter of the law, it’s a very real possibility.
Next, let’s assume there’s a bakery in Oregon that is owned by a gay married couple. A fundamentalist Christian comes into the store and requests a cake for their annual “Pray Away the Gay” camp graduation, which is a bit odd, since the camp has never had any graduates. Nevertheless, our Christian friend suffers from incurable optimism and is sure the camp will be a success this year. He wants a well-decorated cake to help celebrate the occasion. The bakery owners in this case, understandably want no part of this deal. They actually both came from religious backgrounds and suffered tremendous personal trauma when they came out to their families. But since religion is a protected class, the bakers’ hands are tied. They have to provide the cake or risk violating the nondiscrimination laws and paying damages.
Finally, let’s assume there’s a bakery in Oregon that is owned by a Hispanic lady. Once a week, like clockwork, there’s an Arab gentleman who comes to the shop and tries to hit on the owner. He’s never successful in this goal, and he’s a bit of a jerk about it. This week, he comes in at the normal time and wants to buy a large order of muffins. Given his history, the owner declines the business for fear of encouraging him. This has nothing to do with the fact that he happens to be an Arab; he’s just been a nuisance and she wants to exercise her right to refuse service accordingly, hoping he’ll get the hint. Unfortunately, the man takes this very badly. And to try to get revenge, he files a discrimination complaint alleging that the owner refused service because he is of Arab descent. Of course, the facts in this case clearly don’t support his claim, but that doesn’t automatically mean he won’t win. After all, even the people that really are guilty of discriminating on race or religion, probably have the good sense to claim there was actually a different, legal basis for their discrimination. So maybe he’ll win, and maybe not. Even in the best case scenario though, the owner will likely have to spend some time and money trying to defeat the discrimination claim, even though it has no legitimacy.
Of course, the above hypotheticals were cherry-picked to be worst case scenarios. But if you support the nondiscrimination law in the actual Oregon bakery case, then you are also supporting the possibility of the first two scenarios being a reality. Any decent person would probably object to them, but you can’t count on the government to only enforce nondiscrimination laws when they hurt the types of people you dislike and benefit the groups you are sympathetic to. It doesn’t work like that. Government coercion is a blunt instrument, and once it is unleashed, there’s no way to know exactly who will get targeted. And if you think I’m just being hyperbolic here, then you should consider these actual examples of nondiscrimination laws being used in unexpected ways:
Interestingly, these last two incidents happen to match my hypotheticals almost exactly (though I promise I didn’t know anything about them beforehand). In the final analysis, it’s not just a possibility that nondiscrimination laws will be used in preposterous ways; indeed, it’s already happened. So before we sign on to nondiscrimination laws as a panacea for creating tolerance, we need to consider all the consequences that follow.
Additionally, we should note that the likely and actual “abuse” of discrimination laws is not the main reason to oppose such laws. The definition of abuse depends entirely on what groups you are sympathetic to, and that’s a big problem. The main reason to oppose these laws is that the government shouldn’t be in the business of coercing private individuals to conduct trade against their will. We don’t have to like it, but people have a right to be bigots as long as they are not violent. So it shouldn’t matter why someone chooses to refuse service–whether it’s because they’re racist or sexist or just don’t like your choice of shoes. Their refusal to provide service is still a peaceful act, and the government should not have the power to force them to perform a service. 
Finally, consider what would happen if the Oregon bakers continued to refuse to pay the couple the damages awarded. It’s not clear that it could have escalated all the way to criminal contempt, but the bakers could have at least had their assets seized to fulfill the debt. Regardless of whether you agree with their position or not, it’s hard to see how it is just that someone could lose their house for refusing to bake a cake. But that’s the world that nondiscrimination laws like this make possible, and it’s a world that also rewards frivolous lawsuits by the KKK.