Extremely weird

This piece in The Guardian:

A $95,000 question: why are whites five times richer than blacks in the US?

OK, interesting question. And we get to this report (and this reads like the press release from it rather than an actual report but I can\’t see a fuller version of the report around).

There\’s not really sufficient information in that short paper to tease out exactly what has been happening: we\’re told rather what the researchers assume has been happening.

But it ain\’t just that blacks have lower incomes than whites…..there\’s a significant difference in financial assets between races on roughly the same incomes. We should also note that they\’ve been following the same couple of thousand families over the past couple of decades….so this is panel data, not a random statistical selection at points in time.

What really puzzles me though is that they don\’t seem to discuss, at all, the most obvious cause of this wealth gap.

Start very simply….if you were going to attain some level of wealth, some stock of (non-housing) financial assets, over a period of a couple of decades, what is it that you would have to do?

Yes, well done that man. You would have to save. So, the most obvious explanation for a gap in wealth achieved would be a gap in the original savings rates. But we don\’t get any information upon this at all: we just get the statement that the wealth gap exists.

Which is, umm, puzzling really.

Note also that it\’s households being measured here and I see no indication that (possible, I\’ve no idea whether there is in fact such a difference) possible differences in household size have been accounted for.

As an analogy, think of that old favourite the gender pay gap. Five years ago people would point to the simple existence of it and assert that this proved discrimination. Enough people have been, over that period, pointing out that what matters is not the existence of a gap but the reason for the existence of that gap. If, for example, the gap is a result of discrimination then that may well be something we want to do something about. If the gap is, however, a result of lifestyle choices freely made (which is what almost all of it really does seem to be) then this is probably not something we really want to do anything about.

Please leave aside your views on the gender pay gap, whatever they are, and accept this just as an analogy. To make the point that it\’s not the existence of a gap which proves there is a problem: we need to find out what is causing the gap to a) show that there is a problem and b) only if we know the causes can we possibly craft policies to ameliorate said problem.

So it is with this finding about the race wealth gap. The paper certainly seems to show the existence of a wealth gap. But given that it doesn\’t manage to even discuss, let alone measure the importance of, the most obvious reasons for the existence of said gap there\’s not a lot we can take from it about what we ought to do about the gap….if anything.

6 thoughts on “Extremely weird”

  1. Whichever race lags should perhaps be accused of Not Doing Its Share, and told to pull its socks up.

  2. Would have thought the much maligned efforts of George W Bush, Clinton and Carter et al to improve ownership rates for housing were a step in the direction of asset equality.But no care was taken to stop house price inflation( with for instance LVT) which caused tiny little problems with sub-prime mortgages bringing the world market capitalist system crashing down.But there you go,capitalism’s not perfect ,and other platitudes.

  3. Check out the link above in comment 1 to see how the quip ‘stop acting white’ is used to keep promising non-white people from achieving success by other non-whites.

    Then consider the implications of telling unsuccessful whites to ‘stop acting black’.

    There you have your answer.: It’s coz ‘they’ iz racist against non-blacks.

    Remember: People tend to deal with people they like and that like them. People who have a chip on their shoulder and a touchy attitude towards others and life in general are not popular because they are too difficult to deal with and so, tend to get left out of the loop.

    Simple economics really ;-(

  4. Tim
    You seem to have a very strange notion, that goes against the grain. To generalise, you appear to be saying that we should understand a problem before proffering a solution. A bit like demanding a doctor make diagnosis prior to prescribing a course of treatment.
    To carry the medical analogy a bit further, if politicians do not properly understand a problem (or have strong prior predjudices) then they should first make sure that they do no harm.

    Tim adds: Erm, yes.

    Sorry to be picky and all that but, umm, yes.

  5. Tim
    I have no special knowledge in this area, but could the differences, at least in part, but attributable to the fact that the whites have had greater access for longer to inherited wealth than blacks?

    Tim adds: Hadn’t thought about that. A possible cause, yes. Blacks didn’t move north into the industrial areas in any great numbers until the 1950s I think. so we’d only just now be starting to see the possible impacts of that generation having left housing wealth etc to their children.

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