You have some money. You want to invest in a place that is safe and will give you a return on your investment. You have a couple choices. Option A – There is a location where demand is high, and there is little competition. Option B – Demand is good, but there is a lot of competition.
Option A seems like the obvious choice. However, there is a reason that there is little competition. The risk is high at Location A. Perhaps it is on the beach and a hurricane can easily wipe out the investment. We don’t know when the hurricane will come, but we need to factor in the increased risk of losing the investment. Can we make enough profit before the investment is lost to a storm to make it worth investing at the higher risk location?
Are you justified in charging a higher rate at Location A? There is less competition but greater risk. You can charge more and get it at Location A than you can charge and get at Location B. Should you invest in Option A?
The answer to this basic question is what underlies systemic discrimination.
In a Free Market, we allow each person to produce what they want and to purchase what they want. The individual can set the price at whatever they want. The buyer can opt to pay or not. This is the basis of the Free Market. Each person is allowed to choose.
People at the beach are willing to pay more rather than leave the beach to go inland to get the same product at a lower price.
The alternative is to say that the Free Market isn’t fair. We need to set the price so that the person at Location A doesn’t pay more than the person at Location B. We, as a society, decide what is fair and reasonable. We don’t let the Free Market do this. If we choose this path, then many rational people will decide that they simply won’t provide services at Location A because the risks outweigh the reward. We, as a society, then decide it isn’t fair that the investor doesn’t provide the same services for the same prices at all locations; so, we mandate that if they are going to operate at Location B, they must also operate at Location A and charge the same price for the same service. The rational investor will have no choice but to raise the prices for the low-risk area in order to compensate for the high-risk area. We, as a society, think that decision isn’t fair, so we decide to regulate prices as well. We have now strayed far from the idea that the individual can make the best decisions on what to produce and what to buy. In every society where it is decided that the Free Market isn’t fair and we must make choices for the provider of goods or services, everyone suffers.
Systemic discrimination based on higher risk is a rational thing. Systemic discrimination is a necessary thing, unless we want to cause distortions and discrimination in other ways. In this example, if we choose to force the provision of services at the same price in a high-risk area, we are forcing those in the lo- risk area to subsidize the high-risk area. We, as a society, have the right to force this behavior. But, there are repercussions when we choose this path.
Now, go through the example and replace the beach and hurricane with an area where riots, looted stores, and thefts are more common. As a rational investor, you will consider an investment in the high-crime community the same way you consider an investment in a high-risk beach location. Assuming you are not a racist, you can remove the color of skin from this discussion. Is it not rational and reasonable for an investor in a Free Market to weigh the risks associated with providing goods or services to a particular location? If you answer “no,” then you don’t believe in the Free Market, and you favor managed discrimination. In your attempt to protect the customer at the beach, you are willing to discriminate against the provider of goods or services and discriminate against those to whom the risk is shifted.
However, if you decide that it is rational to consider the risk associated with a location when deciding whether to provide goods or services or how to price those things, then you do believe in the Free Market and that each person knows what is best for themselves.
What causes some communities to present a higher risk? It isn’t skin color. The amount of melatonin in our epidermal layer has nothing to do with our propensity to be an honest citizen or a thief. To suggest that it does is what makes a racist. A racist might choose to ignore the risk factor in deciding where or who to do business with, but there are plenty of people who are not racists and who will be happy to invest in a community regardless of the predominate skin color in the area. The vast majority of the nation is not racist. Focusing on those who are and giving them more power and influence than they really have is unproductive and takes our attention away from what are more fundamental problems.
Yes, racism exists. But, race is not what is causing some communities to be higher-risk locations in which to invest than others.
Some might argue that all communities have the same risk. That simply isn’t true. We operate in a Free Market where money and prices adapt to risk. This adaptation to risk is a fundamental component of how our system works. Insurance rates are based on risk. Young drivers pay a higher rate because they present a higher risk. Homes on a flood plain cost more to insure than those that don’t. Life insurance rates are adjusted for age. Virtually everything in our system adjusts for risk. It isn’t just insurance. We account for risk when we choose a home based on the school, the driving time, the access to the internet, the condition of the neighborhood, and the financial stability of the community. We choose our work based on another set of complex intertwining factors. And, those become even more complex and important as we choose a mate. Our genetics, our income, our relationship, and our lust all play a factor in whether to have children.
We attempt to take into consideration all of the unpredictables and unknowns, weighing the risk they pose to our choices. In a Free Market, each of us is allowed to make those choices for ourselves.
Today, there is much discussion about systemic racism. Some argue that we mush abandon the Free Market to compensate for the racism that exists. But, that is a false choice. Even if we modified everyone’s skin color to be the same, just as Dr. Seuss modified all of the Snitches to have or not have a star belly, the problem would remain. That is because it isn’t the color of skin that causes the problem.
The Free Market discriminates against risk. In a community where risk is low, interest rates are lower, insurance costs are lower, and money moves more easily. Money doesn’t care what color a person’s skin is.
Apart from natural disaster threats, what makes a community more or less risky? If money wants to invest in senior living, it will tend to look for a community with more seniors. It is riskier to invest in senior living in a community with few seniors.
Does skin color affect risk? No. However, there is a correlation between skin color and other risk factors. If one wants to address systemic racism, then we first need to recognize that it isn’t color that is being discriminated for or against. Rather, it is the risk that is associated with various skin colors. However, it isn’t the amount of melatonin that causes the various behaviors. What society describes as good behavior or bad behavior exists in all skin tones. Fortunately, there is general agreement by the various skin tones as to what is good or bad behavior. People of all shades tend to think honesty, fairness, respect, and justice are all good things. People of all shades tend to think that violence, discrimination, unfairness, and dishonesty are bad things.
We would like to think that the ratio of good to bad behavior is the same in all shades of skin. Perhaps it is. We can hope it is. We can encourage it.
Rioting, looting, theft, violence, and the destruction of property increases the risk of investing in a community. Such behavior is no different than a natural disaster striking an area, except that this is self-imposed rather than an act of nature. It is devastating to the community.
Some suggest we provide more job training and education to the demonstrator. This suggests that it is a lack of knowledge or education that causes the bad behavior. Intelligence isn’t associated with skin color, and plenty of intelligent people have exhibited bad behavior . All shades run the good/bad spectrum in equal proportions. We need better schools, some say. But, what makes a good school?
Does the color of the students make a school good or bad? No. Where do the teachers want to work? Do they take into consideration the risk associated with working in a particular school or community? It isn’t the color of the student that usually makes a teacher want to teach or not teach at a location. It is how safe do they feel. What is the pay and benefits? Do they like the neighborhood? If they prefer one school over another, it is usually because of those things.
Do we need to provide the demonstrator with better housing? Sure; we all need better housing. My grandparents were raised in a sod house here in America. They shared it with the livestock during a blizzard. The nation has spent a large amount of money building homes for people of all colors. Those homes have increased in size each year. There are fewer people living in those homes each year. Before, we had multiple generations living in the same home. Now, this is uncommon.
We can go through and compare all of the demographic differences between the different skin colors. We can look at the different incarceration rates. The different marriage rates. The different domestic violence rates. We can observe the large differences in gun violence between the difference races.
But, before you automatically decide that each of these differences is caused by one skin color discriminating against another, you need to fairly and honestly decide if some of the reasons for the differences have nothing to do with melatonin but, instead, by the consequences of choices we as individuals and groups make. Automatically declaring any differences are due to racism is simply not accurate.
Another analogy. Let’s say that I choose not to have children. There are consequences to that choice. I am likely to have more job flexibility. I am likely to have more disposable income. I am likely to travel more. I won’t have a child to be proud of or to live vicariously through. I won’t have grandchildren. My choice has consequences.
Another analogy. Let’s say that I decide to smoke. I am more likely to have cancer. I am likely to have less money, as I am spending more on tobacco and health care. I am likely to cause health problems for those around me. There are certain people who will not associate with me, if I smoke. My choices have consequences.
Should a person who decides to have six kids have the same disposable income as the person who chooses to have none? If the answer to that is “yes,” then we have to take time and money away from the person with no children and give it to the one with many kids. Should the person who chooses to smoke have the same health care and health issues as the person who choose not to smoke? Think about the outcome for each of the possible answers you have given to these questions.
Our society does not force me to have children. It doesn’t force me to smoke or prohibit me from smoking. Society permits me to make the choices I want and to enjoy or suffer some of the consequences of those choices.
A person who chooses to have children out of wedlock is more likely to be a single-parent family. That choice is likely to have far-reaching consequences for both the parents and child. It will affect the income of the family. It will affect the jobs that can be held. It will affect education and learning opportunities for the child. It may affect the discipline of the child. The challenges are not insurmountable, but they are significant.
We tend to group together, by choice, with people of similar skin color or ethnicity. We do the same thing by religion, by work, by social club, by age, by school, by political party, and by other choices. Each of these groups forms its own culture…its own tribe. These cultures tend to prioritize different things. These tribes may decide to place a different emphasis on work, on cooperation with law enforcement, on the priority of the family, on what it thinks about drugs, on marriage, on religion, and on host of other different issues.
These choices made by us and those who surround us form our culture. Those cultural choices have consequences. Religious people and non-religious people have many differences in how they want society to function. People who live in large urban areas have very different ideas about fundamental choices than those who live in smaller communities. Each of these cultural choices has consequences. Skin color is one element of a much larger profile that we want to consider, if we are honestly looking for the cause of inequalities. To suggest race is the only or even the primary cause of the inequalities is racist. It ignores the many other factors that play a role in why one culture has a different outcome than another.
Systemic Discrimination is real. It exists for a reason. It is something that we can change by the choices we make as individuals and as a part of the cultures of which we are members. As a society that values the individual right to choose, we must also acknowledge the consequences of those choices. If one skin color culture or one political party culture or any other cultural tribe wants to improve their situation then it is their choice to make that happen, hopefully in a legal manner that is not harmful to others.
Choose to make a better world. Choose to build, not destroy. Choose to respect and work with those of different tribes. The solution is not to be envious of and plunder the tribe who has made choices that resulting in better outcomes but, rather, emulate the choices of those who have demonstrated a more successful way of doing things.
History is full of people who have lost everything. Some never recover. Others find a way to work together and rebuild, becoming an inspiration for others who want to work toward such success. Nearly every group, tribe, and culture has been devastated at one time or another. Consider the ones that have overcome that. What did they do? What choices did they make that reduced risk, rewarded innovation, and gave the greatest opportunity?