Wealth and culture

At the Washington Post, Megan McArdle, of whom I am a sincere fan, has a post about the puzzle of race and wealth: why, in 2016, “the net worth of the median white family was almost 10 times higher than that of the median black family.”

“Causal explanations come in two flavors,” she goes on to say, “structural or cultural. What ‘nature or nurture’ is to biology, ‘structure or culture’ is to public policy: Is the problem caused by forces external to the community or by its internal behavior?”

She notes a piece by Coleman Hughes, who argues for the cultural explanation.  He cited a 2015 study by the Federal Reserve bank of St. Louis, who “followed over 40,000 families from 1989 to 2013, tracking their wealth accumulation and financial decisions. They developed a financial health scale, ranging from 0 to 5, that measured the degree to which families made “routine financial health choices that contribute to wealth accumulation”—e.g., saving any amount of money, paying credit card bills on time, having a low debt-to-income ratio, etc. At 3.12, Asian families scored the highest, followed by whites at 3.11, Hispanics at 2.71, and blacks at 2.63.”  Education and wealth made no difference: “the racial gap in financial health-scores didn’t shrink; it widened” between educated, middle-class families of different races.

So far, so good.  But then McArdle then swings to her own parsing of this situation.  What if, she says, structure and behavior are actually “just two sides of the same coin”?  In essence, with neologisms like “frictional racism in everyday life” and unsupported statements like “casual discrimination against black Americans adds up”, she makes an argument that amounts to “discrimination steers culture,” or that how you think about money and spend it depends upon how people treat you.  In effect, that black people are being mistreated so widely that they’re spending all their extra cash on external luxuries to comfort themselves.

With all due respect to Megan McArdle, I must nevertheless say that I consider that to be a weak theory.

First, her logic is based on the part of the situation which is the weakest, because it’s the most subjective, least quantifiable and most incentivized to see it: to what degree black people still suffer lots of racism from day to day.  She assumes that there is still a lot, and that black neighborhoods are places of high discrimination.  (We’ll set aside the question of how often black people contribute to an atmosphere of racism between them and non-black people by being racist themselves.)   I have no doubt that when it does actually and unmistakeably occur, it’s painful and personally significant– but that doesn’t make it common, much less common enough to seriously offset any impulse to save.  How common is it?  There is simply no evidence, because there cannot be; whether an ambiguous incident is racist is often just a subjective judgment; the person reporting it often simply assumes what is in the other person’s head.  If there is a structural effect of racism, it works the other way, here: If we reward the interpretation of an ambiguous situation as racism with deference, compassion, exculpation and assistance to the interpreter/victim, reasons to interpret it that way will be looked for.  (The Fugitive Slave Act of 1850 included a provision by which judging commissioners were paid $10 if they returned accused runaways to slavery, and $5 if they freed them.  Which interpretation of evidence do you think the commissioners looked for?)   This is not to say that racial incidents do not exist, but more to the point (with regard to possible actions about it), in a nation of 325 million, there’s no way to prevent them ever from happening, and a single incident can have disproportionately wide effects.  How people respond to it is very much within their control.

In addition, opportunities for being treated differently must obviously vary with the degree to which black people interact with non-black people.  “If you’re visible and vulnerable to discrimination,” McArdle writes, “it is rational to invest in goods, such as jewelry and luxury vehicles, that send a signal of affluence to strangers. That signal reduces the likelihood that you’ll be hassled when you leave the house.”  If her theory were correct, we would expect to see an effect of more prosperity from segregated (often self-segregated) black communities– because there’s less discrimination there, not more.  Avoiding the difficulty and complexity of interracial interactions are why people of all races self-segregate that way.  Living among only black people, they aren’t going to be reminded of race nearly as often and therefore any need to show off like some sort of conspicuous-consumption analogue to puff adders would not be connected to some posited attempt to be treated better by non-black people.  We don’t see that effect.  This kind of thinking also assumes that black people are so ignorant as to be unaware that in the broader culture, flashy luxury items like Cadillacs and gold chains, fake or otherwise, are viewed more as redolent of Mafia dons or pimps.

In addition, if it were true and a human effect (rather than specific to a culture), we’d have seen similar dynamics among people of other differences and other eras in response to the much more vicious -isms of the past.  Jewish people were hated and feared and discriminated against legally for thousands of years in Europe.  Asian-Americans were discriminated against in late 19th century California in laws preventing them from owning property, and even with laws founded directly on cultural hatred, like the Pigtail Ordinance.  In the 20th century the Japanese were rounded up and put in camps.  Both groups only got stronger, knitting themselves into a tight community that put family and education and work and savings first and foremost.  Some might argue that these examples aren’t comparable to the racial wealth gap today, for this, that or the other reason.  But that sort of logic stinks.  It suggests a double standard: that human beings can be called different only when it’s advantageous to claim it.  To me, it’s legitimate to compare all human beings with all others, and it seems as likely that this cultural erosion results from the “soft bigotry of low expectations”.  Higher expectations and exculpatory explanations are incompatible.

A different and more direct comparison with others is with black people who immigrated here voluntarily from Africa and the Caribbean.  They do vastly better than native-born black people.  Their example is often argued to be not comparable because they self-selected to come here, and that people who do that have a lot more energy and drive than most people.  But it’s difficult to see how that would affect spending patterns, or many other areas of life affecting healthy financial behavior.  For example, black immigrants are also significantly more likely to be married and significantly more likely to be steadily employed, neither of which requires noteworthy amounts of energy and drive.  In addition, with regard to arguments about culture versus structure, racism would affect African-American immigrants even more frequently, since, many being from Africa itself, their skins would be if anything even darker.

The children of those African-American immigrants form an even stronger argument against the structural explanation.  A 2014 piece in Quartz about immigrants from Africa by Allison Schrager talks about their children, and in particular the findings of a paper about them by University of Chicago PhD candidate Alison Rauh. After discussing Rauh’s observation that the rates of joblessness among those children are strangely sky-high, Schrager writes, “Children of black immigrants are an interesting group. It seems [based on Rauh’s paper] their economic outcomes go one of two ways: They either out-perform their parents, continuing a rise through the economic ranks or they flounder and face the same economic challenges of native-born black Americans. The disparate performance of black immigrants’ children is unique. There is a distribution of outcomes, but on average, children of Asian immigrants out-earn everyone—including native-born whites (their idleness rates also converge to Asian natives but this rate is so low to begin with it’s unremarkable). Second generation Hispanic immigrants are nearly identical, in economic outcomes, to native-born Hispanics.”

What did Rauh find to be the main difference between the two kinds of children of African-American immigrants with regard to the working-versus idleness criterion?  Rauh said, “Counties with high levels of racial segregation experience quicker convergence [of likeliness to work among these children with that of native-born black children], highly educated counties experience slower convergence.”  Some might object that the children in segregated areas are less likely to be able to work because of a lack of jobs in those areas.  That argument holds no water with regard to children of the affluent immigrants: the parents have the money and motivation to get their kids to jobs.  Work ethic is culture, not structure.  I see no other potential explanation than that the culture of the ‘hood, of the floundering native-born poor black people, overcame the culture that the black immigrant parents had brought with them.  In less segregated and more educated neighborhoods, far from doing worse due to a greater potential for racist interaction with non-black people, the general culture supported the parents’ culture, and those black children went on to outperform even their parents in education and earnings.  This is not racial, but human.  J. D. Vance described a similar dynamic among poor white people in his recent book Hillbilly Elegy; when he got out of the poor white community in which he grew up, he became a different man.  Francis Quarles described it almost four hundred years ago: “Be very circumspect in the choice of thy company. In the society of thine equals thou shalt enjoy more pleasure; in the society of thy superiors thou shalt find more profit. To be the best in the company is the way to grow worse.” (Enchiridion, 1644, Ch. XXIX)

Politics skews everything.  “Structural” is an exculpatory explanation: it’s not your fault.  It’s the fault of those scheming kulaks in the other party, who have nefariously locked you in place!  But we’ll save you, if you vote for us.  Sometimes there is some structural thing the politicians can fix.  More often, though, what they save you from is the pain of criticism and the discomfort of having to change.  Exculpatory explanations are therefore always politically attractive, and politically skewing– and should therefore be scrutinized more closely.