Nea presidential address: Political economy, race, and morals

NEA PRESIDENTIAL ADDRESS: POLITICAL ECONOMY, RACE, AND MORALS

Samuel L. Myers, Jr.

Long before economics acquired the apt designation as the dismal science, it was known as political economy. Its muses, though, were not known as political economists. Instead, they often responded to titles like "moral philosopher" and "professor of theology and jurisprudence." For example, you might recall that the father of modern economics, Adam Smith, was a professor of moral philosophy at the University of Glasgow when he penned his An Inquiry into the Nature and Causes of the Wealth of Nations. 1 Morality in the context of the heirs to political economy often referred to issues of the public good. The focus repeatedly was upon the role of government and the state in the regulation of private affairs. The private affairs of dominant concern to these early writers were not those that evoke passionate discourse among moralists today. Church going behavior, reproductive choices, use of drugs, and crime were not the core elements of discourse in political economy. Yet, in a manner, discussions that appear at best on the boarders of such conventional economic phenomena as prices, markets, trade and wealth, are very much in the early tradition of political economy. Thus, Jeremy Bentham, an early precursor to modern utility theory which underlies much of contemporary studies of consumer demand, expounded at length on crime and criminal policy. Adam Smith, moreover, devoted considerable attention in his famous lectures on jurisprudence to the role and financing of police and the militia. 2 The theme of this paper is partially about morality in this classical political economy sense. On several aspects of public policy formation affecting blacks in America, private decisions come into conflict with public goals. The examples that emerge are notable ones of government

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regulation of private affairs where there are substantial public consequences: family disruption, crime and drugs. But the intention is not to reconstruct Milton Friedman's line of reasoning in Capitalism and Freedom 3 or his more recent Free t o C h o o s e . 4 Nor is the intent to rant and rave about the horrible consequences for blacks and their communities of the break-up of the nuclear family, the rise of drugs and the escalation of crime and thus a call for government intrusion. Instead, the intention is to raise the question of how the appeal to morals and morality in public policy discussions often hinders the development of effective and rational policies. In this sense, the theme of this paper is about morality of the more familiar sort. Three instances highlight an unpopular view about racial inequality in American life. This view suggests that racial inequality, from whatever original roots, is sustained and perpetuated by public policies hiding behind a mask called morality. 5 The three instances pertain to how public policy has contributed to widening racial inequality or at least has not worked in the best interest of the black community when the policy objectives become ensnarled in rhetoric related to the morals of the poor. The first example has to do with the setting of alimony and child support payments, and the effect that the morals of mothers have on court awards. The argument in this first example is that the objective of keeping children out of poverty takes a back seat to the demand that errant spouses be punished for their immoral behavior. A second example concerns drug policies and the recent debate about the legalization of heroin, cocaine and marijuana. In this example the argument is that the opposition, particularly from the black leadership class, based on the immorality of drugs, is in direct conflict with the best interests of the black community which must continue to deal with the consequences of high profits and unlimited incentives of the drug trade. The third relates to the problem of job training for disadvantaged youth. Here the argument is that attempts to exploit the entrepreneurial talents of street-wise hustlers and dopedealers in the inner city to enable them to become managers and owners of legitimate inner-city businesses have been hindered because of the moral aversion for providing assistance to criminals and other misfits. These illustrations are overly simplified ones. Many doubts about direction of causation and functional dependence are likely to arise. The explanations may invoke disagreements and anger. However, they are intended to raise a concern about an underappreciated area of research. This is research on and models of policy makers and decision makers who affect the lives of the poor and of the disadvantaged.

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ALIMONY AND CHILD SUPPORT

The first example flows from joint research by William A. Darity, Jr. and myself supported by grants from the University of Wisconsin's Legal History Program. A part of a larger study of the relationship between the black family and the courts deals with an examination of child support and alimony awards in the District of Columbia. Data on every child support and alimony appeal in Washington, D.C. from 1950 to 1980 were collected. Appeals of alimony and child support awards are rare but they have broad effects on public policy because appeals courts in these instances have the opportunity to reverse previous precedents or to interpret exiting law. The District of Columbia is an interesting jurisdiction to examine because its law on the award of alimony and child support has survived almost a century of changes in family relations. That law states simply that alimony and child support may be awarded " i f it be deemed just and proper." Later court decisions clarified what was "just and proper." This is the ideal of protecting mothers and children: alimony and child support awards should consider the welfare of these potential wards of the state. Dozens of cases that question this motive were unco~zered. One particularly revealing case involved the wife of a prominent black physician who was forced to go on welfare because of the meager award she received. This case managed to reach the United States Supreme Court and is cited even now for some of the tangential constitutional issues raised. 6 The case illustrated the importance of morality in decisions about monetary awards. Here was a case of a woman who abandoned her husband and family, although for a cause, only to find that when she later returned to claim the children of the marriage and to file for divorce she was to be denied an alimony that would keep her out of poverty. So low was the award, the mother was forced on the rolls of the local welfare agency. This case questions the contention that the primary objective of alimony and child support is to secure the welfare of the mother and children. The statistical analysis of the more than 150 appeals confirmed that cases of wives' adultery, desertion, and abandonment result in lower combined alimony and child support awards at the trial stage, controlling for fathers' ability to pay, number of dependent children, length of marriage and a host of other variables. The results also showed that blacks-those few who manage to appeal their cases to the higher courts--

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systematically receive lower alimony and child support awards. The decisions of the judges, which in some documented cases had the effect of creating welfare dependency, were motivated less by the welfare of the mothers and children and more by the actions, behavior and morality of the litigants. LEGALIZATION OF DRUGS Another example of how morality interplays with policy making concerns a recent attempt by a brilliant black mayor of a typically troubled big city to consider alternative methods of curbing the drug trade in inner-city neighborhoods. Noting the tragedy of losing so many young black males to the lure of high profits in dealing illegal drugs, Rhodes Scholar, Yale and Harvard-trained Kurt Schmoke, mayor of Baltimore, called for a debate on the legalization and decriminalization of drugs. The attack on his idea was immediate and ferocious. Especially from church leaders in the black community, the uproar was deafening. Opponents consider any form of regulation of drugs as giving up the battle, conceding to the destructive power of inner-city gangs, and virtually handling over the keys to our cities to ruthless, murderous and uncontrollable drug-sellers. This response was ironic for several reasons. Mounting evidence suggests that the existing policy of drug interdiction--of attempting to curb the sale of drugs by reducing the supply of drugs entering the country, has failed. 7 The impact of cutting the supply of drugs, even if it works, is to raise the price and thus increase the attractiveness of dealing in drugs. Yet, so many analysts have concluded, the supply of drugs did not diminish. And, in any event, most of the profit-taking in the drug trade comes at the distribution level and not at the import-entry stage. Moreover, the redirected federal attention on drug interdiction helped to divert federal drug enforcement funds away from local law enforcement agencies that are virtually straggled by the massive influx of drugs in several local markets. The upshot of it all is that an attractive and alluring market place for illegal drugs--with many avid buyers and sellers--has evolved in many black communities. Aside from the perceptions of enormous profits to be made in this market, little is more apparent about this market than the side effects of the drug trade: major cities across the nation are recording record numbers of violent murders and gang-style slayings that are direct results of the disorganized nature of the buying and selling. Or, as the newspapers say, the cause is economic competition.

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So, why are black community leaders so reluctant to consider alternative structures of the local drug markets that may reduce the profit-taking and its apparent side-effects? Why is there such opposition to organizing the market with direct government intervention when the path that history suggests is the norm is market organization and monopolization without government reaping any tax-revenues? Opponents were unambiguous is their response. Drugs are immoral. Legalizing their use sends the wrong signal to our youth. We must continue the fight already begun of teaching them to "just say n o , " instead of yielding to some cold calculation of economic policy analysts. This, then, is another example of how morals and morality conspire to upset sound policy analysis. Lest readers be left with the impression that we know all that we need to know without resort to moralizing in order to solve the drug problem, the following point must be made. Whether decriminalization or creation of a state monopoly for the control and distribution of certain drugs will increase or decrease drug use and/or crime rates is still very much an open question. Much of the answer depends on the price elasticities of demand for different drugs and the marginal rates of substitution among them. And yet, it seems that little if any of this important information is a part of the ongoing debate about drug legalization. E N T R E P R E N E U R I A L T R A I N I N G FOR D I S A D V A N T A G E D Y O U T H

Some years ago analysts of the dual structures of inner-city labor markets questioned the appropriateness of traditional human capital strategies for improving the earnings opportunities for the most hardened minority youth. They drew on the works of writers like Elliott Liebow 8 who chronicled the lives of obviously intelligent and adventurous innercity blacks. A novel idea was advanced by writers like Michael Piore 9 who were dissatisfied with the prevailing training schemes. The new strategy was to train young disadvantaged blacks to be managers and entrepreneurs rather than to be low-paid workers. The strategy recognized the existing strengths of many of our young black males who all too frequently are destined for lives of crime, drugs and ultimately imprisonment; or joblessness, unemployment and ultimately economic dependency. This strategy valued the attributes of young teenage mothers, on welfare and out of school with no skills and no hope of obtaining them. In essence, this strategy gave the disenfranchised the hope of owning and running legitimate enterprises as an alternative to making babies or doing drugs.

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This strategy never became public policy. Architects of training programs for the disadvantaged, focused instead on remedial education, job-readiness preparation, and human capital acquisition in a model that assumed clients had certain basic deficiencies that had to be removed before they could be productive labor market participants. The logic was simple. Blacks and other disadvantaged workers would be trained in the basic skills needed for success in industrial and manufacturing jobs. Indeed, while much of this effort was underwritten by the federal government through the Department of Labor, other local efforts received substantial assistance from manufacturing and industrial concerns. In hindsight, the irony of this situation can be seen. Blacks and other minorities were being trained for jobs that w~re disappearing. The massive outlays on Model Cities, MDTA, CETA and JTPA all seemed to do little to reduce the joblessness of large numbers of young black males. The training programs of the 1970s treated clients as unskilled, inefficient and undisciplined dropouts. They needed the infusion of human capital in order to overcome the labor market deficiencies that were at the heart of their low earning power. How, then, does one mesh that vision with the views of Michael Piore and Elliot Liebow? The street corner dude was inept at manual or industrial work but he was a perfect manager, a first rate risk taker, a fine entrepreneur. We tried to train these hustlers to be workers when they had all the Harvard Business School talents to be owners. Meanwhile, the majority of the black entrepreneurial class fled the black community. Except for the Black Muslims, the black smallbusiness class vanished to the suburbs, into corporate management and into managing the poor. This means that now the small food stores, convenience stores, clothing stores, and variety shops are either owned and run by new waves of immigrant entrepreneurs or they have disappeared into the malls and into the safer neighborhoods. Meanwhile, in cities like Los Angeles, Washington, New York and Chicago, the notion of hiring a black maid, or a black handyman or gardener has vanished. Of course, government training programs do not stoop so low, and blacks themselves look down on these occupations. Yet with the rise of two-earner families the demand for household and related services has skyrocketed and the going rate for yard work in a place like Silver Spring, Maryland, is several times the minimum wage, generating a groundswell of entrepreneurial activity among Hispanic, Haitian and other immigrant workers. Meanwhile black youth are applying their en-

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trepreneurial skills to a booming and lucrative drug market and are killing each other daily in an economic activity with high payoffs but low longrun returns. All of this because we wanted to make workers out of the poor when they could be entrepreneurs. We could have trained welfare mothers in accounting, tax law, finance and bookkeeping so that they could run their own businesses. We could have helped market the phenomenal talents of young street hustlers so that they could produce and sell food and clothing products in the black community. But we wanted them to be workers. So now the welfare mothers are more deeply entrenched on welfare and the street hustlers are killing and plundering in their drug wars. There were a few exceptions. In a recent report for the Baltimore Urban League, I reviewed some of the initiatives over the years that have attempted to provide entrepreneurship training to disadvantaged youth. There is, for example, a program called Renaissance, a youth employment and training center in San Francisco, that started three businesses to train and employ its clients. These businesses included carpet cleaning, computer cable assembly, and packaging. Another was the " B e Your Own Boss" program run by the Broward County, Florida Employment and Training Administration using CETA Title VII funds in 1980. Businesses established included an appliance repair shop, home maintenance service, plant nursery, and a nonprofit shelter for mentally retarded. One success story involves a former welfare mother who set up a pest-control firm and ended up making money by doing business in the various housing projects. Another program still in existence after the elimination of many novel CETA-inspired activities is RISE, based in Daytona Beach. RISE, like the Broward County " B e Your Own Boss" program, sought to give training in managerial and business skills to people who would own their own firms, rather than equip people to be part of an unemployed work force. RISE, however, no longer serves minorities or the disadvantaged exclusively and like the recent initiatives in Iowa, and those to begin this year in Massachusetts it is designed for unemployed workers, often those with considerable skills. The idea of entrepreneurship training for disadvantaged workers simply never became public policy. There was enormous opposition from the start in many federal quarters. The U.S. Department of Labor adhered to the human capital model of remedying worker deficiencies. Workers should be trained to be workers. The Commerce Department's Minority Business Development Administration was also skeptical until recently.

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It believed that medium sized businesses should be preferred over small businesses, given the higher employment-generating impacts and lower failure rates of these firms. The opposition of federal agencies that implement public policies, however, was only a part of the story. There also was opposition from policy makers and those who influence them. Minority contractors and small black businesses were primarily concerned about expanding the pool of business that they should receive. This uphill battle was enough in itself. There was little motive for advocating expanding the pool of minority firms that should compete for the already scarce goods and services contracts reserved for 8(a) firms; there was even less motive to expand the pool to include hustlers, pimps and prostitutes. Given the legal difficulties that many conventional black businessmen have been facing of late, it is no wonder that policy makers have been wary of transforming certified crooks into legitimate businessmen. Why the wariness? It revolves back to the issue of morals. How can we justify providing entrepreneurship training opportunities for the least deserving, most morally corrupt members of society when there are unmet needs among large numbers of deserving, hard-working legitimate minority business owners. Again, morals and morality interfere with public policy discussions. THEORIZING ABOUT THE B E H A V I O R OF POLICY M A K E R S

The three examples suggest that the objective of policy makers, even black policy makers, might not be simply to maximize a conventional social welfare function. Policy makers seem to have something else in mind when they formulate plans and strategies for resolving the problems confronting the poor and the disadvantaged. We might need more than a passing glance to discover what that something else is. Much attention has been directed toward trying to uncover the determinants of the behavior of the poor and of the black underclass. Yet, too little economic theorizing has been directed toward understanding the behavior of those who develop, legislate and enforce policies toward the poor and the black underclass. Much research has been initiated on understanding the deviance and self-defeating behavior of young black males. Yet, too little economic theorizing has been directed toward understanding how policy makers respond to deviance and self-defeating behavior among the poor.

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Academics seem to be rushing to uncover the behavior that leads blacks to become dependent on welfare; to become addicted to drugs; to withdraw from the labor force and to become economically dependent. Yet, too little concern is placed on how judges and social workers affect AFDC options; how national leaders' attitudes toward drug enforcement policies affect drug users' decisions; or how the business community's opposition for training crooks to be entrepreneurs affects the attitudes of job-training program participants. There is an urgent need for a unified theory of how policy makers behave and how their behavior affects the poor. Several models offer useful beginnings. The conventional optimization model provides a familiar terrain upon which new twists and novel constraints can be sprinkled to develop a version of policy-maker rationality that is remotely similar to what we see. Interest group and rent seeking models of the Virginia School offer conservative perspectives on why policy makers, while acting in their own self-interest, may not act in the interest of the poor. Managerial class models, especially those developed by William Darity in discussions of black elites, offer radical perspectives on how policy makers acting in their own self interest may not act in the interest of the poor. The most relevant point, however, is not which model to adopt. The question is not whether the best model for understanding the behavior of policy makers towards the poor is the neoclassical, conservative or radical model. The question is "What is it about public policy makers' decisions that is worth exploring more carefully?" What do we hope to learn? What do we need to explain? The three examples discussed offer a clue. Is there a tension between the interests of the policy makers and those of the "policy recipients"? Why does it appear that policy makers' behavior is so influenced by policy makers' concerns about the morality of the behavior of "policy recipients" ? The morality of recipients, clients, inmates, and other objects of public policy making has always appeared to be a crucial factor in government interventions on behalf of the have-nots. Historians point to the uniform opposition to programs of "outside relief" in nineteenth century America when the alternative was poor houses that could inculcate good morals and desirable work behavior. Yet, even now in many high level policy discussions on what to do about poverty and welfare dependency, economists focus on such undesirable behaviors as work disincentives and

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family instability without recognizing for a moment that this is Victorian moralizing at its worst. The decision to ignore morals altogether, however, is no solution. An argument in the paper "The Economics of Bail Jumping," in the Journal of Legal Studies, lo was that higher cash bail amounts set by judges reduce the optimal amount of bail jumping. This finding is entirely consistent with a model of judges' behavior wherein bail is set so as to minimize the risk of flight. Yet is this, as was assumed, really the way judges behave? In the face of never-ending court backlogs, overcrowding of jails, low incomes of most defendants and the high risk of flight among defendants who somehow can post high levels of bail, does it really seem reasonable to assume that the complex decision of minimizing flight subject to these many constraints and interdependencies can be made without some acknowledgement of the morality of the criminal? Indeed, those researchers who find that type of crime is a key determinant of bail risk confirm that the judge ought to be on the lookout for the moral behavior of the defendant. It seems that these moral judgments are made on a daily basis and decisions may vary little because in the eyes of judges the morality of the defendants varies little. And here is the key to what a good theory will have to explain. To what extent are policy makers like judges in a bail setting environment? While they may believe they are maximizing an objective function that is value-free, is it possible that their actions are inconsistent with their very own objective functions? One would like to assume that the policy maker as a judge acts in the interests of the welfare of the children of a divorce; or of drug-infested black communities seeking respite from killing and violence; or of disadvantaged youth with entrepreneurial skills who can become productive contributors to the community. Yet, it seems almost impossible that this objective can be met if the dominant concern is with the morality of the recipient of the policy. Children will be punished for the immorality of the mother. Drug-infested black communities will sink deeper into chaos to punish immoral drug users. And disadvantaged youth, denied the opportunity realistically to develop existing skills honed on the streets, will be punished because of the criminal enterprises of their peers. The policy maker as judge thus speaks. Morals are very much alive in political economy. Moral judgments affect policy decisions in very intimate ways. And, black economic welfare, whether we like it or not, is influenced not simply by the morality

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of blacks' behavior. Perhaps more chilling is the influence on black economic welfare of policy makers' moralizing about the poor, the disadvantaged and the downtrodden. NOTES 1. See Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, Campbell, R.H. and A.S. Skinner eds., Oxford, England (New York, NY: Clarendon Press, 1976). 2. Some historians of economic thought contend that Smith was less successful in achieving a full separation of morality and political economy than his followers. For Smith, according to Lewis Haney in History of Economic Thought (MacMillan, 1936), virtue for its own sake is a primary consideration. Moreover, Smith regarded the selfinterest of man as being entirely consistent with achievement of moral goodness. The reference to the view of morality that we make here is to the broader notion held among late political economists who sought a distinct limitation of government involvement in private affairs (and therefore in issues of private morality) except in the few instances of maintenance of the public good. 3. Milton Friedman, Capitalism and Freedom (Chicago, IL: University of Chicago Press, 1962). 4. See Milton Friedman, and Rose Friedman, Free to Choose: A Personal Statement (New York, NY: Avon, 1981). 5. One of the dominant views of the origins of social policy towards the poor in the United States is that almost every effort to help, whether public or private, was constrained by the desire to instill a middle-class set of virtues or morals, particularly as these values relate to the respect for work. See Critchlow and Hawley's provocative set of essays, Poverty and Public Policy in Modern America (Chicago, IL: The Dorsey Press, 1989). 6. One such issue was the performance expectations of people who defend themselves without counsel. 7. See for example Reuter and Kleiman, "Risks and Prices: An Economic Analysis of Drug Enforcement," Crime and Justice 7 (1986), pp. 289-340. 8. Elliot Liebow, Tally's Corner (Boston, MA: Little, Brown and Company, 1967). 9. Michael Piore, "Public and Private Responsibilities in On the Job Training of Disadvantaged Workers," mimeographed (Cambridge, MA: Massachusetts Institute of Technology, 1968). 10. Samuel L. Myers, Jr., "The Economics of Bail Jumping," The Journal of Legal Studies, Volume 10, No. 2 (June 1981).