From: jk@panix.com (Jim Kalb)
Newsgroups: alt.politics.libertarian,talk.politics.theory
Subject: Re: Economic Discrimination in Libertaria:  banks
Date: 13 Oct 92 19:29:45 GMT
Organization: Institute for the Human Sciences

In <ISBELL.92Oct10085022@panther.ai.mit.edu> isbell@ai.mit.edu (Charles L Isbell) writes:

>Question:  do studies like the following affect the (original) debate
>on the likelihood of economic discrimination in Libertaria absent
>anti-discrimination laws?

[deletions]

>The study from the Federal Reserve Bank of Bostn concluded that
>minorities are roughly 60% more likely to be denied a mortage than
>whites even when they are equally creditworthy [ . . . ]

>The new report, the first of its kind in the nation considers 39
>criteria that go into mortage decisions, such as credit and employment
>history, total debt and net worth.  Bankers said that the absence of
>those factors from earlier reports made conclusions suspect [ . . . ]

A couple of comments:

1.  More info is always more useful than less.  Does anyone know of
any statistics on relative default rates for black mortgage borrowers
and others?  Any evidence on whether the differences demonstrated by
the study mean that blacks have to apply to more places, or choose the
places where they apply more carefully, or whether they mean that many
blacks find that money to buy a house is simply not available?

2.  I seem to recall a statistical principle in accordance with which
if there are two populations, the first of which has more of a
normally-distributed characteristic than the second, then if
subpopulations are chosen using the same criterion the subpopulation
chosen from the first population will tend to have more of the
characteristic than the other.  This result holds even if the
criterion is something related to the characteristic, like having at
least amount X of the characteristic.  If "likelihood of repaying a
mortgage" could reasonably be thought to be normally distributed, and
if it's true that blacks as a population have less of that
characteristic than others (which seems likely, if only because as a
population they have less money), and if my recollection is correct,
then it seems that it would be rational to find each of the 39
characteristics somewhat less convincing in the case of a black than
in the case of a non-black.  Are there any statisticians who can
comment on whether my principle makes any sense?

3.  Moving on from the first comment (which amounts to an argument
that racial discrimination can be rational), I think a libertarian or
a frequent lib-symp like myself would be inclined to say that if it's
true that non-blacks are irrationally distrustful of blacks, blacks
need not be that way and in Libertaria they would be free to grasp the
opportunity for profit handed them by irrational non-blacks by setting
up their own lending institutions.  For that matter, rational
non-blacks would be free to grasp the same opportunity by setting up
lending institutions that specialize in loans to blacks.  Current
non-libertarian laws that make it harder to set up lending
institutions and that make it less likely that black-oriented
businesses will succeed (for example, by in effect requiring other
businesses to try to "cream off" talented blacks) make it more
difficult for this solution to evolve.

>Researchers found that *80%* of all applicants, regardless of race,
>have some flaw that could disqualify them.  That means it is in the
>hands of individual bankers to decide whether the bulk of would-be
>homebuyers receive loans.

Most business decisions have a very important element of subjective
judgment.  That's why antidiscrimination laws won't do much unless
they are coupled with vigorously enforced a.a. requirements.  To me,
that's a reason for being opposed to such laws.

-- 
    Jim Kalb (jk@panix.com)
Newsgroups: alt.politics.libertarian