Monday, January 26, 2009

Pride and Prejudice

Imagine having to assess a stack of applications to fill an executive post in a large company. Apart from education, intelligence and experience, research suggests that socially-sensitive attributes such as weight, appearance and race, significantly come into play.

Eugene Caruso of the Chicago School of Business uses a method called conjoint analysis in proving that they do (market researchers use this method in approximating the added costs consumers are willing to pay for products with certain attributes). His research demonstrates that despite what we say, our actions tell a different story on our tendency to discriminate based on some socially-sensitive trait.

A relatively recent article appearing in the Journal of Political Economy by Kerwin Kofi Charles from the Harris School of Public Policy Studies and Jonathan Guryan from Chicago School of Business, estimates that about a quarter of the racial wage gap comes from discrimination. Marianne Bertrand of the Chicago School of Business and Sendhil Mullainathan of Harvard University also show that resumes with stereotypic white names get more interviews than those with black sounding ones.

All this makes the election of America’s first black president rather astounding. During the primaries it became apparent how his opponents were willing to exploit social prejudice by using his foreign sounding middle name and mixed racial ancestry against him. He weathered through these attacks and succeeded not by positioning himself as a candidate with an agenda for advancing the interests of the black community, but as a vehicle for bridging the American cultural divide.

On Australia Day 2009, reconciliation took a step further when, following an official apology to descendants of the stolen generation, when the honour of Australian of the Year went for the first time to an indigenous leader Mick Dodson.

Given that researchers can detect racial discrimination, and that it seems to evade our own conscious efforts, that despite these symbolic milestones, human societies have yet to get over the biases that have been transmitted down from previous generations.

Tuesday, January 13, 2009

War on Recession's First Casualty

Now that the holiday season has passed, spare a thought for the one casualty of the “War on Recession”: Jdimytai Damour of Jamaica, Queens, New York a guard on duty at the Long Island Wal-Mart store on Black Friday, the day after Thanksgiving when limited stocks go on sale.

He was trampled on by impatient hordes of shoppers who were awaiting the 5 a.m. opening of the store He died of a heart attack as a consequence.

Some of the items on sale at the Wal-Mart store included a $798 Samsung 50-inch Plasma HDTV, a Bissel Compact Upright Vacuum for $28 and Men's Wrangler Tough Jeans for $8. Apart from causing the death of this 34 year old, the 2,000 strong crowd caused injuries to four other people including a lady eight month's pregnant.

This picture from NY Daily News shows the chaos of the stampede that erupted shortly after the shoppers had smashed through the front windows of the store. Even with the suspension of store operations, the arrival of paramedics and the announcement of the store employee’s death on the scene, shoppers were reportedly indifferent to the tragedy, stating that they had waited in line since the early morning of Friday.

This incident highlights the severe impact of employing non-market devices for rationing goods. Economic theory states that aside from the price mechanism, other institutional arrangements may be employed to allow the distribution and allocation of goods to buyers, when say price controls are in place.

One such device is a queue where customers are served on a first-come, first-served basis. Those with a lower opportunity cost of time can afford to spend it waiting in line. Another device is the use of coupons which restores some form of price system, as those in possession of these coupons can trade them with other who might value them more. With excess demand building up whenever price ceilings are imposed, black markets eventually arise to correct for such imbalances.

The Black Friday tradition is I am told a long-standing institution, coming at the heels of Thanksgiving, which is a uniquely American tradition itself. It appears however that with the death of this innocent store employee that the maintenance of such a tradition might be deemed too costly to continue.

At junctures such as these, the community through new policies or store operators themselves may choose to revise such traditions in order to improve safety and avoid the savage herd mentality that it seems to engender among buyers. Behavioral science tells us that human nature causes us to respond to peer pressure in ways that seem irrational: it can cause us to be courteous and civic minded to strangers in certain instances, and it can facilitate such cruel activity as the Black Friday stampede.

One simple way to counteract this and avoid a repeat of this undesirable outcome would be for the store to issue a fixed number of coupons per individual arriving at the front steps of the mall before it opens on a first come, first served basis. This would eliminate the need for shoppers to jostle and physically outmaneuvering each other at the gate.

What other solutions can you think of?