Since in both labor and experimental economics class we are discussing about discrimination, I have been thinking on this topic for a little while.
It seems there is a general sentiment that taste-based discrimination is morally unacceptable, while statistical discrimination to some degree is permissible. A person who offers lower wage to minority out of his dislike of the minority is contemptible, but who can blame an insurance company that charges different premium based on gender, age, race, etc.?
As usual, I find myself having controversial thoughts. I find taste-based discrimination to be at least in some cases more permissible than statistical one. Why is it wrong to hate, say, women, but acceptable to hate those who hate women? If an employer strongly believe that racism is morally unacceptable and offers lower wages to racists, is he wrong to do so? Surely one is entitled to have opinions and like or dislike certain type of people, whether that taste is based on “truth” or not.
Besides, there is a sense of reciprocity in taste-based discrimination in that the discriminators pay in order to discriminate. On one hand this reveals how discriminatory a person is, but on the other hand it seems more acceptable than essentially selfish behavior of profit-maximizing even when it involves discrimination. The former foregoes his own earnings in order to discriminate; the latter foregoes non-discriminatory behavior in order to earn more.
Furthermore, taste-based discrimination can be mutual in the sense discrimination can occur from either supply or demand side; a white employer can offer lower wage to black employee, but a black employee could demand higher wage from white employer. This mutuality disappears in statistical discrimination since this discrimination arises from asymmetry of information.
The main reason I find statistical discrimination so disturbing is that it seems potentially self-fulfilling in some cases. As a crude example, I think it is plausible to think as follows. Possibly originating from taste-based discrimination, minorities are less productive and thus the status of minority sends a signal to the employers. Statistically discriminating employers will offer lower wage to the minorities. Given lower income level, the minorities cannot invest as much on their children, and thus the second-generation minorities are less productive as well. The signal is thus confirmed and Bayesian-updating employers continue to discriminate.
Taste-based discrimination can disappear with the flow of time, but statistical discrimination will form a cycle if the discriminatory behavior has an averse effect on the relevant characteristics of the discriminated people. I find this kind of discrimination to be the worst.
