Race and Economics ñ Does Affirmative Action Really
Help?
Transcription of interview with Walter Williams July 25th 2011.
Douglas Goldstein, CFPÆ, Financial Planner & Investment Advisor
Douglas Goldstein: Weíre talking to Professor Walter Williams who is in the Department of
Economics at George Mason University and has recently come out with a new book called Race
And Economics: How Much Can Be Blamed On Discrimination.
Professor Williams, itís an honor to have you with us today.
Walter Williams: Thanks for inviting me.
Douglas Goldstein: Iíd like to start by talking about one of the topics, which is very important
in your writing.
Itís about central economic planning by government and the main question, which is if that has
resulted in greater freedom or prosperity for any people?
Walter Williams: Some people benefit from government favors and some people lose, so
itís a zero-sum game, but thereís a lot of regulation in the United States, as well
as in your country.
What I try to do with the book Race and Economics, is to say that discrimination does not explain
as much as people think it explains., Iím not saying that racial discrimination does
not exist in the United States, but I ask people to look at some other areas that harm
people.
For example, what does it take for a person to be able to get into business to own and
operate a taxi?
Well, you donít need to have a college degree.
All you need to do is buy a car or a used car and to get some insurance.
Lo and behold, you can be in the taxi cab business and make maybe $40,000 or $50,000
a year.
But what stop so many people from getting into?
In New York City, for example, the license, they call it a medallion, to own and operate
one taxi in May 2010 sold for $603,000.
Itís $75,000, in Chicago $55,000, and in Boston, I think it is $80,000.
So you say, ìWhat is the effect of a licensing law like that?
It tends to discriminate against anybody getting a new cab business who doesnít have $603,000
lying around or a bank credit to be able to get a loan.î More important than racial discrimination
are these laws.
Like in New York City, you donít find many blacks owning taxis, but in Washington DC,
most of the taxis are owned by blacks.
How do you explain that?
Do you say, ìOh, well thereís no discrimination in Washington DC?î Thatís just plain nonsense.
The license to own and operate a taxi in Washington DC is $200 and that explains the difference.
It doesnít have anything to do with discrimination.
Douglas Goldstein: Isnít the concept of requiring a medallion or licensing in any field ultimately
to protect people who otherwise couldnít protect themselves?
Walter Williams: No.
Most of the time, a license or some restriction is to protect the income in the field that
people are already practicing against competition.
That is those people who have licenses, this applies in any area of licensing, they are
very happy because the effect of licensing, regardless of any stated objectives behind
it, is to make the supply of practitioners fewer than it would otherwise be without the
licensing.
Douglas Goldstein: So letís take the extreme case of a doctor.
Wouldnít you want to make sure your doctor is licensed?
And that cost hundreds of thousands of dollars to get ñ
Walter Williams: No.
I think that what you need is that the consumers should benefit immensely for information about
the quality of the doctor, but itís not clear that licensing is the best way to generate
that information about quality.
As a matter of fact, if you look at doctors, they protect one another and for a long time,
it was considered unethical for doctor to testify against another doctor.
The AMA, a number of years ago, they said that roughly 12% of doctors shouldnít be
practicing because they are either alcoholics or dope addicts or just plain incompetent.
Now if you call the AMA and say, ìWould you give me the names of these doctors?î They
would not be forthcoming at all.
So the licensing in almost any field, regardless of the stated intention, discriminates against
those who would enter.
For example, if you look at medical boards, virtually all of the members are doctors and
so the doctors will explain this by saying: ìWho is better to able regulate doctors than
other doctors?î With that kind of reasoning, would you want to make Al Capone be the attorney
general because who is better able to regulate thieves than a thief?
Douglas Goldstein: Who would you want to have regulating the medical industry if not people
who understand it?
Walter Williams: Thereís a practice called certification.
That is you have doctors take a test and theyíre certified as a class A, class B or class C
doctors, but the certification does not restrict entry whereby licensing does.
Then thereís something else thatís probably prevalent in your own country that has a devastating
effect on discrimination.
As a matter of fact, it encourages racial discrimination and that is the minimum wage
law.
If you ask, ìWhat are the effects of the minimum wage law?î put yourself in the place
of an employer.
Today in the United States, the minimum wage law is $7.25 an hour.
Douglas Goldstein: Thatís for the whole countryís federal minimum wage?
Walter Williams: Yes, the federal minimum wage.
Thereís some state and local minimum wages that are higher than that but the federal
minimum wage is $7.25.
You say, what is the effect?
Not the intention, but what is the effect behind the minimum wage law?
You see the effect if you put yourself in the place of an employer, and you must pay
$7.25 an hour to no matter whom you hire.
Will you hire that worker who is so unfortunate so as to have skills that would only enable
him to produce $3, $4 or $5 worth of value per hour?
Most employers would look at that as a losing economic proposition, paying somebody $7.25
when they can only have $4 or $5 worth of value per hour.
So the minimum wage law is to discriminate against the employment of low-skilled people.
Who are low-skilled people?
These are teenagers for the most part.
As a matter of fact, I did a book in 1989 called South Africa's War Against Capitalism.
I went to South Africa a number of times and I studied the labor market in South Africa.
I found out and I gave quotations and reference after reference in my book that white racist
unions in South Africa who would never had a black as a member were the major supporters
of minimum wages for blacks, and their stated reason was to protect white workers from having
to compete with low-skilled low-wage black workers.
As a matter of fact, the minimum wage law is one of the most effective tools in the
arsenals of racists everywhere in the world and down through history.
So we donít ask what the effects of the law is.
We ought to ask what are the intentions.
Now in the United States, we have different intentions from those in South Africa, but
the effect is the same.
Douglas Goldstein: Weíre talking with Professor Walter Williams who actually is originally
from Philadelphia.
He has got his degrees in Economics from UCLA, his Ph.D. He has written over 150 different
publications as well as many books.
He recently came out with the book Race and Economics.
Professor, youíve been distinguishing between someone who is underpaid and someone who is
under-skilled.
In fact in your book, you talked about that as a real issue.
What would be the solution?
Goodhearted people want to make sure that poor people were able to actually get a fair
wage to be able to support their family, but theyíre under-skilled, so how do you deal
with that?
Walter Williams: The way that you do that is you try to improve peopleís skills.
That is, you donít make many better off.
Poor people are better off by pricing them out of the markets, which forces people to
pay them a wage higher than otherwise would be and the minimum wage law is not.
As an anti-poverty device, it does need to pass the smell test.
For example, what would you think of me if I suggest when you say, ìWalter, how can
we eliminate poverty in Somalia?î and I say, ìOh, well just raise the minimum wage?î
Douglas Goldstein: Right.
That would be absurd.
Walter Williams: Thatís absurd and so the way that you get people to earn higher wages
is to somehow improve their productive capacity and then also eliminate barriers to entry.
If you enable some low-skilled person to work for $5 an hour, whatís his worth in terms
of his productive output?
At least he would have a job, and having a job means that he could acquire skills on
the job.
But what the minimum wage law says, well $7.25 and you only produced $4 or $5 worth of value,
you donít get a job in the first place, you donít get the chance to upgrade your skills.
Itís very much like in the medical profession.
When you graduate from medical school, you donít come out there earning what a full-fledged
doctor would earn.
You earn dirt pay.
Thatís what interns get.
They work their butts off and what theyíre doing is getting on-the-job training so they
have greater skills.
Douglas Goldstein: Let me ask you a question: do the same principles apply to affirmative
action?
Walter Williams: Yes.
I think that affirmative action is one of the forms of racial discrimination and it
leads to a lot of social conflict, not only in the United States.
But if you look at a lot of their rights, letís just say in India, are they really
affirmative action rights?
Or the fighting between the Sinhalese and the Tamils in Sri Lanka - They are the result
of affirmative action.
They call it ìbackward peopleís policyî in Sri Lanka.
That is when the government cannot create special privileges for one American, for one
person or for one citizen that does not simultaneously create a non-miracle for somebody else.
Look at a couple of examples in the United States.
At one time, black Americans were discriminated against and they were not allowed in professional
basketball.
Today, blacks are 80% of the players in professional basketball.
How did they do that?
Was that affirmative action policy?
No, they were just highly productive.
They could do a 360 slam dunk in your face and you cannot do anything about it.
Blacks at one time were not allowed in professional football.
Today, blacks are 66%, and itís the same with baseball with lower number of e 18%.
So it was not affirmative action.
What it was, was high skills.
Douglas Goldstein: So people who have the skills should be free to pursue.
In other words, your argument is that perhaps the reasons that blacks were kept out of professional
sports was simply because they were discriminated against where if they had the freedom then
they wouldíve been able to participate, but they didnít need to be pushed in through
some government policy?
Walter Williams: Look at discrimination around the world.
Look in the Post-Ottoman Empire - the Armenians were discriminated against, but yet they had
the highest income in the Post-Ottoman Empire.
You take Jews in Europe.
They were heavily discriminated against during the 20s and 30s, but they had the highest
income and highest professional status.
Even in Germany.
Jews, when they came to United States, they didnít find the end of discrimination in
Untied States, but nonetheless, they were the higher income people.
Or the Japanese or the Chinese in United States.
They were grossly discriminated against, but by any measures of socioeconomic success,
Japanese and Chinese are at the top.
They didnít sit around waiting for somebody to have an affirmative action program and
they didnít sit around waiting for racial discrimination to come to an end.
Douglas Goldstein: Weíve been talking to Professor Walter Williams, whose new book
Race and Economics: How Much Can Be Blamed on Discrimination teaches many of the lessons
that heís been discussing with us today.
Professor, Iím very sorry but weíre just about of time, but could you just tell us
for one minute where people could follow your writings and the work that youíre doing.
Walter Williams: They can go to my website.
It is www.walterewilliams.com and there are references to my publication and the reference
to my two new books.
One of them is Up from the Project, which is an autobiography, and the other is what
weíve been discussing - Race and Economics.
Douglas Goldstein: Fabulous.
Professor Walter Williams, thank you very much for your time.
Walter Williams: Thank you.
Douglas Goldstein, CFPÆ, is the director of Profile Investment Services and the host
of the Goldstein on Gelt radio show (Monday nights at 7:00 PM on www.israelnationalradio.com.
He is a licensed financial professional both in the U.S. and Israel.
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SIFMA.
Accounts carried by National Financial Services LLC.
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His book Building Wealth in Israel is available in bookstores, on the web, or can be ordered
at: www.profile-financial.com (02) 624-2788 or (03) 524-0942.
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