Williams: Self-Enforcing Discrimination

Black politicians, civil rights organizations and others who say they are concerned with the welfare of poor black people often support harmful measures. One of the most effective tools for disadvantaged people is to be able to charge a lower price for what they sell and pay a higher price for what they buy. Let's look at this principle first using a couple of nonracial examples.

How does chuck steak compete with a more preferred cut such as filet mignon? Everyone knows the answer. It sells for a lower price, say $7 a pound compared to filet mignon's $20. Suppose one wanted to rig the market against chuck steak. He need only lobby the legislature to set a minimum price for steak, say $15 a pound.

Many customers would voluntarily discriminate against chuck steak in favor of the more preferred filet mignon. The reason is simple. Before the law, it cost 13 additional dollars per pound to discriminate in favor of filet mignon. With a minimum steak price of $15 a pound, it only costs five additional dollars to do so.

A fundamental law of economics posits that the lower the cost to do something the more people will do of it. That applies to doing anything, including discrimination.

What about the opposite of setting not minimum prices but maximum prices like a price ceiling? Again, let's begin by using a nonracial example.

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