For chapter 7 of The Why Axis, Gneezy and List address the “hidden motives behind discrimination.” This idea looks at discrimination, whether with economic intentions or simply bad ones.
You may ask, what is economic discrimination like? In some cases, it could make sense economically for the firm to discriminate, but it Gneezy and List note that it could come off as pure hostility towards the group of people that are being targeted.
An example that they use looks at how an airline might address the cost of seat(s) based on a consumers weight. Southwest Airlines, for example, will charge an obese person the cost of two tickets if they meet the threshold of the weight (since they would be taking up two seats). This may make economic sense to Southwest, but the obese person may feel like they are being targeted simply for their weight. Gneezy and List investigate if the discrimination in the world is economic based or purely hate, or perhaps a little bit of both.
One of the experiments that Gneezy and List ran was “Would You Sell a Car to Those Guys?” Gneezy and List explain:
In this experiment, we worked with our colleague Michael Price in assigning pairs of men to pose as our secret agents: straight men acting as friends, straight men playing love partners, gay men acting as friends, and gay men portraying partners. Each of these pairs visited various car dealerships to negotiate the purchase of a new car. Every “couple” bargained at different randomly determined dealerships, and every dealership was approached twice. We observed not only what kinds of offers the various “couples” received, but also how often they were offered niceties like a test drive and a cup of coffee.
The results were disappointing, as gay partners were treated worse than straight ones. However, it wasn’t completely consistent. From the book:
Many dealerships rejected offers from buyers they perceived as gay, while accepting identical offers from our straight buyers. More than 75 percent of the time, dealers quoted the gay couples higher initial prices, when the gay couples extended counter offers, they were much more likely to be rejected and the salespeople ended the negotiations.
What was interesting that Gneezy and List found was the type of race for the salesman varied in the discrimination of the couples. They found that minority salesman made offers that were $1,233 higher than of the majority salesman. The next part is the most shocking:
In fact, minority salespeople seemed to want to limit their contact with the gay customers, not offering test drives or the opportunity to purchase a less expensive car–implying they were so put off by the couples that they were willing to forgo a nice commission in exchange for not having to deal with them. (This does not mean that all salespeople acted in this way; just that a majority did.)
That’s a whole different kind of economic discrimination. The fact that they would be willing to pay more since they were discriminating in the first place is amazing/disheartening.
The conclusion that Gneezy and List come to is that minorities tend to be more religious and through that tend to be against homosexuality so therefore may have felt more uncomfortable. Additionally, they say that minorities believe that homosexuality is a choice rather than something your born with and think that you should be able to control it. This in turn is why they would have more prejudice. Their next experiment that they underwent was something that people know cannot be a choice: discrimination towards race.
In the experiment that had half African-American men and half white men when shopping for a high-end car, they found that the dealerships gave an offer $800 higher to African-American men than white men. When looking at lower-end cars, the price was exactly the same for the race of the buyer.
That is, the dealers discriminate when they think that the prospective buyer’s race indicates that he may be less likely to buy the expensive car. They don’t discriminate when they think the buyers, regardless of the race, are just as likely to buy the less expensive car…In other words, if you are a bigot, you will consistently act like a bigot. But if you discriminate only when you think it boosts your profits, you are engaging in economic discrimination. Such discrimination may very well be unethical and unfair, and in the case of the BMW car dealers, you are treating some people poorly based on their race. But it’s still not animus.
One of the main conclusions that Gneezy and List are coming to in this chapter is that the results are similar to something that psychologists call attribution theory: the idea that inferences are made by us to help explain the causes or events to ourselves. From Gneezy and List:
We attribute causes of obesity, homosexuality, criminality, and so on based on these inferences, when in fact we know nothing at all about the individual in question. And the better we know someone else, the less likely we are to attribute stereotypes to them.
The next part of their research is public policy and how Affirmative Action (AA) can lead to discrimination. The point that Gneezy and List make is the idea that women and minorities have already made strong advances over the past 50 years from when Affirmative Action was first implemented. So when a minority is actually very qualified for a job, it could be attributed to Affirmative Action, not her actual talent. The issue now is simply economic discrimination–and it’s growing.
To deal with this problem when shopping for example, they say to simply be more prepared.
The moral of this story is simple: If you want to reduce economic discrimination when shopping, make sure that you are armed with enough information about going rates and product information to counter it. When you do, and you signal this to the other side, you dramatically change the salesperson’s incentives to discriminate.
The final conclusion of this chapter is from University of Chicago professor Richard Thaler. Firms have been gathering an immense amount of data about us, the consumers, and have been using it to gain a bigger profit off us. Thaler says that to work against this discrimination, congress needs a pass a law to have them release the data to us. With the citizens knowing the data the firms have on us, it becomes a lot less valuable. The key for us is to understand how they are using it against us, not that we just know what data it is.