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How the Free Market Ends Discrimination

Politics / Economic Theory May 17, 2014 - 07:53 PM GMT

By: Thomas_J_DiLorenzo

Politics

When Branch Rickey integrated major league baseball in 1947 by hiring the great Jackie Robinson to play first base for the Brooklyn Dodgers, he did not do so because he was forced into it by any “civil rights” law. The federal civil rights laws at that point were almost twenty years into the future. Nor was he motivated by a sudden enlightenment on the issue of race. As the president and general manager of the Brooklyn Dodgers, Rickey was paid to make the Dodgers as profitable as possible. In order to do that, he had to recruit and develop the best baseball players he could find, regardless of skin color or anything else. He succeeded immediately with the hiring of Robinson, as the Dodgers went to the World Series in that year, in no small part due to the efforts of Jackie Robinson.


The Branch Rickey/Jackie Robinson story illustrates the economics of discrimination, which modern economists associate with Nobel laureates Gary Becker and Kenneth Arrow, both of whom wrote books on the subject in 1957 and 1971 respectively. The theory is straightforward: If an employer exploits any worker or workers (because of race or anything else, including plain greed), this means that the worker is being paid significantly less than her marginal productivity (i.e., her additional contribution to his revenues). If she contributes say, $1000/week in revenues through her work efforts but is only paid $100/week, this fact creates a profit opportunity for competing businesses. A competitor can hire her away for say, $200/week, which she would gladly accept, leaving the new employer with an $800/week increase in revenues. Then another employer would be motivated to offer her say, $300/week, $400/week, etc. until she is paid close to her marginal product.

As Ludwig von Mises put it in Human Action (Scholar’s Edition, page 592), the only way employers in a capitalist economy could get away with wage exploitation would be if there were “a universal monopoly of all kinds of production activities which can be created only by an institutional [i.e., governmental] restriction of access to entrepreneurship.” The only place in the world where any such universal employer monopoly has ever existed is the socialist countries of the twentieth century, such as the Soviet Union, where everyone was a government employee and paid whatever crumbs their political masters deemed necessary to keep them alive and working. The worst example in world history of the exploitation of labor took place under the Marxian-inspired regimes.

Which brings us to the recent Donald Sterling/Los Angeles Clippers saga whereby Mr. Sterling, the billionaire owner of the professional basketball team, was drummed out of the NBA (and of polite society) for making racist comments (telling a “girlfriend” some fifty years his junior to not bring “black people” to his basketball games).

From all news accounts, Donald Sterling is a creepy character who may well have racial hatred in his heart. But even so, in order to survive in one of the few remaining industries that relies almost exclusively on meritocracy, he was forced by competition to make multi-millionaires out of dozens of black athletes over the past thirty years as owner of the Los Angeles Clippers basketball team. Just this past season alone he paid the following African-American athletes the following sums (according to the Web site “HoopsHype”): Chris Paul ($18.7 million); Blake Griffin ($16.4 million); DeAndre Jordan ($11 million); Jamal Crawford ($5.2 million); Jared Dudley ($4.25 million); Matt Barnes ($3.25 million); Darren Collison ($1.9 million); Willie Green ($1.4 million); Ryan Hollins ($1.2 million); Reggie Bullock ($1.15 million). Donald Sterling did not pay these huge salaries because he loves black people; he paid them because he loves making money (or at least trying to).

One of the leading tenets of political correctness in the university world today is that, because America is such a racist country, and because capitalism is supposedly such a useful tool for the exploitation of labor, black people can never make it on their own. They supposedly need to be coddled, protected, employed, advanced, and babied by the state and its paid minions in the university world and elsewhere. Nothing disproves this flaky superstition more convincingly than the meritocracy of professional sports.

The economics of discrimination is a well-guarded secret at most universities because it so easily disproves the politically-correct “black-people-can-never-make-it-on-their-own” theory. When an academic does make the economically-informed argument about how competition deals with wage discrimination, he is typically libeled, smeared, and denounced as a racist (or worse) by the cultural Marxists on the faculty, if not the university administration as well. This was the case with Professor Walter Block several years ago after presenting a state-of-the-art lecture on the economics of discrimination at Loyola University Maryland, based on the pioneering work of his old dissertation advisor at Columbia University, the recently deceased Gary Becker (R.I.P.).

Thomas J. DiLorenzo [send him mail] is professor of economics at Loyola College in Maryland and the author of The Real Lincoln; Lincoln Unmasked: What You’re Not Supposed To Know about Dishonest Abe and How Capitalism Saved America. His latest book is Hamilton’s Curse: How Jefferson’s Archenemy Betrayed the American Revolution – And What It Means for America Today. His latest book is Organized Crime: The Unvarnished Truth About Government.

http://www.lewrockwell.com

© 2014 Copyright Thomas J. DiLorenzo / LewRockwell.com - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


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