The Simple Economics of Discrimination

Diversity is a topic that comes up quite frequently, whether having debates on affirmative action policies or hate crimes against a particular marginalized group in society. I'm surprised when working in higher education when the topic of diversity does not come up. It could just be me, but I get the perception that the voices I usually hear  are the loud voices of those who feel there is too much government interference on hiring minority candidates and those who feel that American Society is still as racist as it was in the Early 1900's. 

Considering the diversity conversations usually get brought up by the confronting fringes of society, I wanted to bring this topic more down to earth and explore the economics behind discrimination. This article will take a micro-economic approach that views the production of a business firm selling a good or service to consumers. The one assumption to this analysis is that discrimination of a producer leads to a direct or indirect action. It then also leads to them not selling to a consumer or indirectly influencing the consumer not to buy that good or service on the basis of feeling discriminated against. 

Pretend you are an owner of a mid-sized grocery store that is located in a mostly Caucasian neighborhood, but also has a noticeable group of African Americans and Latinos in the area. Down the road, there is also a gay bar. being realistic, people do not see "white only" signs anymore or business owners that bluntly kick anyone out due to their backgrounds. However, there are times where people show visible signs of being uncomfortable with a minority cultural group whether intentional or not (microaggressions). In this particular example: If the grocery store owner is prejudice against gay people and has had limited interaction with other racial groups, these minority groups will go elsewhere for their grocery needs and give negative publicity online via social media and review sites about the business. This means less products being purchased in the store and less revenue for the owner. 

Below is a short run supply and demand curve that shows when a business owner engages in discriminatory behavior with marginalized/minority consumers. The demand curve (slanting left to right) shifts to the left because the owner has a change in the consumer base, excluding the marginalized groups. The supply curve (slanting right to left) does not change because the production does not change in the short run. As you can see, Q1 goes to Q2 showing a decrease while there is also a decrease in price from P1 to P2. Although the price drop is good for the loyal consumers in the short run, it stagnates the growth of the owner's business and  decreases its comparative advantage to the business' competitors. (more text below graph).

With this analysis, one could come to an economic and realistic understanding why it is important not to discriminate against marginalized/minority groups. If one looks at it in more of a macro-level perspective, one could argue that the economy can be hindered by discriminatory activity. Especially if a big portion of private or public sector engages in such activity. 

What I learned from the Walker Recall Fiasco

On Tuesday, we saw a historic and rare political event happening with the Recall Election of Gov. Scott Walker. We also noticed that there was a higher voter turning topping a little over 30% (as reported by the Appleton Post Crescent). Although it was an  interesting event that politicos will analyze from now until November, the current political state of Wisconsin is in much need of compromise and repair. Although you hear some political rhetoric about getting along, we are mostly hearing why their economic policy is better and how the other completely destroyed the jobs outlook of the state/city (Milwaukee).

Now what did I learn from this? Quite simply, this election throws a curveball in some politicos' minds about the voter not being rational in the sense of having a short mind-span when it comes to negative political events relating to a political candidate. The original frame of mind comes from how consumers have recently recently reacted to some economic tragedies of well knowing businesses. For example, one could notice consumers forgiving Ford quickly for their tire issue on their expeditions in the 90's and Toyota more recently with their brakes issue. Now, however, one could notice a difference in the Wisconsin voters based on the timeline the recall elections occur. 

One must remember that this all started back in February 2011 (over a year ago) when Gov. Walker introduced the collective bargaining bill to Wisconsin Residents. Once the law went into effect last summer, Wisconsin voters had to wait to petition a recall until the first year of the Governor's term was complete (per election law). Consider that timeline, many voters against the bill had to wait 6 months until they could start the whole process. Also considering all the media slip ups politicians make on almost a daily basis, many politicos did not think the recall election was overwhelmingly possible. Then, the news broke out about how the Democratic Party got over a million signatures, which surprised not only the Walker Campaign Team, but also myself.

We will have to wait and see what happens to Scott Walker in a few months when Barrett faces him in the general recall election, however I am curious what the Obama Campaign Team is thinking right now given this analysis. Considering 2 weeks is usually political eternity for political candidates, angry voters waiting impatiently for 6 months to recall a governor is a new twist in political strategy. Is 6 months for a controversial collective bargaining bill the same as a 2.5 year wait of angry voters wanting to kick Obama out due to his health care bill. Although I still think many voters are going to elect their candidate based on economic indicators, I am considering changing my mind about whether the healthcare bill will pop up as a strong secondary reason why an angry conservative voter will vote for Romney instead of Obama.  

Breaking News: Tom Barrett wins Wisconsin Primary

As mentioned last night in the last blog article, it was to be expected that Barrett would win the election. While Kathleen Falk was there in the beginning, I believe she had too much support from the unions. That made more centered democrats worried what radical policies a Falk Administration begin.

What was more surprising that the fake lt. Governor candidate Isaac Weix got more votes than Ira Robins. Regardless, the round two battle between Walker and Barrett will mostly be on the economy. If Walker can lower the unemployment rates in Wisconsin, he can coast through an election win. If now, expect Barrett to hammer Walker on a poor economic record.

What also still remains is how the state election could be the bell weather election for the national presidential election. If Walker keeps his position as Governor, does that smell trouble for the Obama Administration. The reverse could happen for the Romney Campaign. Final thought: As Carville put it yesterday... "wake up Democrats, You could lose this election." Democrats must not be too confident that they have any election in the bag, considering the Economy has not made up its mind on being a bull or a bear (going up or going down).

Last Minute Guide for the Last Minute Voter: 2012 Wisconsin Governor Democratic Primary

As tomorrow holds the answer to who will run against Scott Walker in the recall election, here is the analysis on each other candidates and prediction on will be the Democratic Recall Nominee. (There's no sugar coating in this analysis)

Milwaukee Mayor Tom Barrett 
Tom Barrett is more well known in the City of Milwaukee then elsewhere in the state. Let's be honest, most people hate Milwaukee mayors because of their inability to look past the usual crime that occurs in a large city (which means they hardly go into the city). However, that's not a big deal in this race because many years of voting shows most Democratic support concentrated in Milwaukee and Dane County.

Those living in or have access to Milwaukee television see Barrett as a candidate who has seen some revitalization in the city making the area around the Marquette Interchange look better. He also was a survivor of a vicious attack and came back to push better crime preventive measures. The downside of his candidacy, he ran for governor in 2010... against Scott Walker. It's unfortunate that the un-electable 2010 candidate has become the electable Democratic Primary Candidate. Although he sometimes put his foot down when getting heat to talk about an issue, he is not consistent which worries some voters of him not being strong enough to go against a strong vocal Walker.

County Supervisor Kathleen Falk
Kathleen Falk comes from Dane County, another state stronghold for Democratic Voters. She has been the county supervisor for a long time. Known as the "Union Candidate," she was there from the beginning of the movement to recall Scott Walker to restore the collective bargaining rights of public workers. Her strong stance is a double edged sword. On one hand, she showed her leadership in standing for what she believes in and did whatever she could to get things done. On the other hand, her stance and doing whatever it takes to restore collective bargaining doesn't scream being the "mom" of Wisconsin to unite the state back together.

Her other downside has to deal with her early entrance into the race. Some political analysts believe that Barrett entered the race because there were core Democratic Supports not fully in love with a Falk Candidacy. This could also be proven with the push for former US Wisconsin Senator Russ Feingold to enter into the race. If she wins the nomination, she needs to strengthen her tone and perception of being a strong leader.

The Other Two Un-electable Candidates
When it comes to Professor LaFollette, he had some good ideas considering hes a reputable college professor. During the debate, his message focused on the "Wisconsin Idea" where education is a strong foundation along with collaborating with people one may disagree with. Although he had some interesting ideas, I view this candidate as a potential advisor on educational policy, especially for higher education institutions.

Out of the two un-electables, I really would have endorsed Vinehout if she was given enough media attention and was electable according to the party higher ups. Unfortunately, this state senator is not. Regardless, I liked her strong voice during the debate and she actually gave ideas on how to work on pushing legislation through realistically... and not in a populist was like how some of the other mainstream candidates would do.

My Prediction
I agree with the polls showing a good lead for Mayor Tom Barrett. Although he is not the strongest candidate the Democrats got out there right now, he has a realistic chance against Walker. Therefore, I predict it will be Barrett vs. Walker round 2.