20 May 2010

CRA 64

I was reflecting on this and I think the problem here is that economic rights don't always take into account social and cultural norms that underlie those rights. People are supposed to pay their debts. There isn't any law that requires you to do it (in theory you can get out of paying almost anything, for instance just walk away from a mortgage and if you've little equity in it the only loss is the property and moving expenses), you're just supposed to honor your obligations when you take credit lines from somewhere. There are legal and economic penalties. But really, how bad is a black mark and hit on your credit score compared to potentially tens of thousands of dollars in medical bills that you can't pay, or hundreds of thousands on a mortgage you can no longer afford (and which the bank strangely decided you were good for). We don't use debtors prisons anymore to handle this, so the penalties are pretty mild. And yet most people try to pay their debts. That's an important element in a society based on credit and lending for growth.

So when it comes to private businesses and properties establishing their rules, it's not quite enough to say, well the private business can do what they want on their terms because if he does something stupid, say, discriminate against Africans or Mexicans or Koreans, the market will punish him. Actually it might. If there are enough people willing to buck cultural or social norms or his bigoted behavior is an outlier. But if the cultural and social norms are enforced, even to the point of using violence or the mere threat of it to compel them, alongside legal challenges, harassment, and penalties for noncompliance from law enforcement, both against the potential customer and the owner or operator of a business, then those social and cultural norms will go uncorrected. Now in a relative way, these local rules offer penalties and blow back against the local society and culture that imposes them versus cultures that do not. Money and skills offered by discriminated minorities may flee the area for more tolerant climes, or even form their own segregated clans to compete against the intolerant ones. In a world where such exits are easily made, this is probably fine. We don't (and didn't) have a world like that throughout the Jim Crow South. The problem wasn't necessarily that there were no laws forbidding private discrimination. The problem was that there were essentially norms and laws that enforced private discrimination whether people wanted to do it or not; there was no right of exit. That's why there was a law installed, to alter the social and cultural dynamics because the market can not behave in its usual way to offer such competitive norms in an environment that enforced only that set of rules that forbade competition. For example, not only was it more or less the case that a black man could not do business properly alongside whites as an equal consumer, he could not form his own competitive industries to serve in contrast to those to offer non-discriminatory or his own segregated businesses. White on black racism was institutionalised as acceptable, the reverse was not. This is not a tenable manner to operate a market economy consisting of a diverse set of peoples.

In the abstract theoretical world, the problem that Rand Paul lays out isn't really that the private business owner is now enslaved to the government which will tell him who he may conduct business with and on what terms (with his ridiculous guns in bars example as somehow equated to raw and naked bigotry). The problem is that the society as a whole surrounding that business tells the private business owner who he may conduct business with and on what terms. He already does not have private control over his own business. Under those terms it makes the most sense to offer a level and equal playing field, where any consumer or business owner may contract with any of their opposite, without meaningless superficial discriminatory elements factoring in (leaving business related decisions like credit worthiness, established in a somewhat racially neutral way like credit scores).
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