Good Economics for Hard Times

by Abhijit V. Banerjee

  It would be very interesting to replicate this experiment in the United States. The effect may also depend on how politically engaged the reader is. It is not entirely clear that many internet readers in the US make a conscious effort to correct the bias in what they read. But this study suggests a key problem of seamless customization: its very seamlessness. Correcting slant requires an understanding of what the source’s slant is. When we always read news from the same source, we are familiar with it. But when an algorithm is serving us articles from all over the internet, some of which comes from known sources and some from more unfamiliar corners, and some of which may be entirely fake, we won’t know how to read those signals. Moreover, because we have not made the choice ourselves, we may not even remember to make the correction.

  RUNNING TOGETHER

  As we lose the ability to listen to each other, democracy becomes less meaningful and closer to a census of the various tribes, who each vote based more on tribal loyalties than on a judicious balancing of priorities. The biggest coalition of tribes wins, even if its candidate is a known child molester, or worse. The winner does not need to deliver economic or social benefits even to his own supporters as long as the supporters worry enough about the possibility of takeover by the other side; knowing that, he or she will do their best to stoke those fears. In the worst case, the winner can then use the power gained in this way to take control of the media to shut down any alternative voice, so there is no more competition to worry about. Prime Minister Orbán has successfully done this in Hungary, and many others are not far behind.

  Moreover, there is an expanding circle of violence—against blacks, women, and Jews in the United States, against Muslims and lower castes in India, and against immigrants in Europe—that is probably not uncorrelated with the unabashed expressions of vituperation the current polarized climate permits, including by heads of state. The murderous mobs in India and Brazil, and the recent shooters and pipe-bomb senders in the United States or New Zealand seem to all emerge from those vortices of paranoid thinking, where the same falsehoods bounce back and forth. It has not yet reached proportions of a civil war or a genocide, but history suggests that it could.

  As we have already seen, our reaction to the other is closely tied to our self-confidence. Only a social policy founded on respect for the dignity of the individual can help make the average citizen more open to ideas of toleration.

  There are also possible interventions at the group level. Racism, anti-immigrant views, and the lack of communication across party lines originate, for many people, with an initial lack of contact. Gordon Allport, a professor of psychology at Harvard, formulated what he called the contact hypothesis in 1954.81 This is the idea that under appropriate conditions, interpersonal contact is one of the most effective ways to reduce prejudice. By spending time with others, we learn to understand and appreciate them, and as a result of this new appreciation and understanding, prejudice should diminish.

  The contact hypothesis has been intensively studied. A recent review identifies twenty-seven randomized controlled trials (RCTs) investigating Allport’s idea. Overall, these studies find that contact reduces prejudice, although the review calls attention to the importance of the nature of the contact.82

  If this is right, schools and universities are obviously key. They bring together young people from different backgrounds in a single location, at an age when everyone is much more plastic. In one large US university, where roommates were assigned at random, a study found that white students who happened to end up with African American roommates were significantly more likely to endorse affirmative action, and that white students assigned roommates from any minority group were more likely to continue to interact socially with members of other ethnic groups after their first year, when they had full freedom in choosing whom to associate with.83

  This process of socialization could start even earlier. A policy change in Delhi demonstrated the power of bringing together young children from very different backgrounds. Starting in 2007, elite private schools in Delhi were required to offer places to poor students. In an ingenious study on the impact of this policy change, randomly chosen children were given the responsibility to select teammates for a relay race.84 Some of them attended schools that had already admitted poor children, and some attended schools that had not done so yet. And, within schools, some children were in study groups with poorer children (based on the first letter of their first name), and some were not. To help them decide who they wanted to partner with in the race, they were all given a chance to observe everyone else run a test race. There was, however, a catch. They had to agree to have a playdate with whomever they picked for their team. The study found that those students from affluent families who had not been exposed to poor students in their school avoided picking them, even when they were better runners, to avoid having to spend time with them. But those who’d had some exposure to children from less-well-off families in their schools, thanks to the new policy, were much more likely to pick the best runner even if the child was from a poor family, because the prospect of a playdate was no longer all that daunting. And those who were in a study group with poor children were even more likely to invite poor child to run and play with them. Familiarity performed its magic.

  STUDENTS FOR FAIR ADMISSION VS. HARVARD

  One implication of this evidence is that diversity in the student body of educational institutions is valuable in and of itself, because it durably affects preferences. Affirmative action was originally envisioned in the United States partly as compensation for historical injustice, and partly as a way to level the playing field between the whites, who had the advantage of many generations of advanced education, and the rest. But it goes much beyond that. What the twenty-seven RCTs on the effect of contact on tolerance imply is that this mixing is one of the most powerful instruments we have for making society more tolerant and more inclusive. The problem is that affirmative action itself is now a polarizing idea.

  In the spring of 2018, New York City struggled with the redesign of the admission system for its elite public schools, which is currently based on an exam and lets in very few Latinos and African Americans. At the same time, Asian Americans were suing Harvard for discrimination, on the grounds that, in order to achieve its diversity goals, Harvard artificially limits the number of Asian American students it admits. Additionally, the Trump administration has been urging schools to stop taking race into consideration in their admission decisions. The US Supreme Court has so far resisted pressure to forbid any discrimination based on race, but it is not clear how long it will hold out.

  In India, the debate is framed in terms of the actual quotas in educational institutions and government jobs for the castes historically discriminated against. These quotas are much resented by the upper castes, resulting in frequent protests and lawsuits challenging the validity of the law, especially on the grounds that a disproportionate share of the reserved slots end up with the more privileged among the lower castes, who perhaps need them less. (They are poetically referred to as the “creamy layer.”) The Indian court system has been sympathetic to this complaint, and has made eligibility for the quotas subject to an income qualification: you have to be poor enough to qualify. At the same time, other social groups have been lobbying to be included in the quotas, which would serve to dilute them. As a result, the system of reservations is almost incessantly being fought over somewhere or the other in the country, with not infrequent outbreaks of violence.

  The idea of “merit” plays a key role in this debate. At the heart of the argument is the idea that test scores provide an objective measure of merit, a measure of how suitable the candidate is for the job or a place in the university, and therefore affirmative action discriminates against “meritorious” candidates, as they are called in India. Given everything we have seen in this chapter, that seems like a very unlikely proposition. Self-discrimination undermines confidence and test performance. A history of being underestimat
ed, patronized, ignored, or despised by teachers and supervisors because you happen to be from a particular group will make it harder to achieve. Moreover, as we both know, growing up in a household where books are everywhere and dinner table conversation often centers around fine points of mathematics or philosophy, whether or not you always enjoy it, becomes a distinct advantage when you are writing your college essays. A lower-caste candidate who performed as well as Abhijit in the high school leaving exam had to jump through more hoops to get there and is for that reason likely to be more talented.

  The fuzziness of the notion of merit was the bone of contention between two first-rate empirical economists, David Card and Peter Arcidiacono, who were retained by the two sides in the Students for Fair Admission v. Harvard trial. On the plaintiffs’ side, Arcidiacono argued that Asians must be discriminated against because admitted Asians have higher grades and higher test scores than any other group. In other words, given the same test scores, an Asian student is less likely to be admitted to Harvard than a white student (or an African American).

  On the Harvard side, Card had a number of objections to Arcidiacono’s analysis, including the point that the objective of diversity in parental background and intended major was legitimate. But the most striking difference came from their interpretations of the “personality rating,” meant to capture the candidate’s leadership qualities and integrity. Asian students systematically have higher academic and extracurricular ratings, but lower personality ratings, and once we account for that they are no less likely to be admitted than white students.

  For Card, this proves there is no discrimination. Arcidiacono contends that the personality rating is exactly the way Harvard discriminates against Asians. In the debate, a rather ironic parallel with history did not go unnoticed. In the 1920s, then Harvard president Abbott Lawrence Lowell attempted to introduce quotas to limit the admission of Jews to the university. This failed, but he put in place the system of “holistic” admission, meaning a system that values personal characteristics beyond grades, which was used to limit the number of Jews. Students for Fair Admission wants to make the case this is happening again.

  The debate illustrates the essential treacherousness of the idea of merit, and the very notion of what constitutes quality. On the one hand, “personal qualities” may reflect (perhaps unwittingly) a form of belonging to a club, with secret handshakes not taught in the average public school. The personality rating may indeed be a not so subtle way to keep a certain type of student out (whether or not they are Asian) and ensure the smooth intergenerational transmission of elite status. On the other hand, the fact that among applicants African Americans systematically have higher personality ratings than whites or Asians may well reflect what we mentioned earlier: since admissions at Harvard require a sterling academic record, a child from a disadvantaged background must have quite unusual personal skills to be even considered, especially since the child might have had to survive worse schools and perhaps a more challenging home environment.

  There is no evident solution to this problem. As a flagship producer of the next generation of leaders, Harvard clearly needs to find a place for students from all social groups, and a massive overrepresentation of any particular social group relative to its weight in the population is both perhaps undesirable in a democracy and likely to lead to political problems. But we need a more transparent social conversation about the design of affirmative action. The current implementation of affirmative action policies, which dances around the concept of race instead of directly confronting it, is probably not anywhere close to ideal. The Harvard challenge is both inevitable and perhaps desirable in that it makes society confront its own inconsistencies.

  From the perspective of the narrow objective of affecting preferences by increasing contact between social groups, the growing resentment of affirmative action poses a problem. Allport’s original hypothesis was that contact would reduce prejudice, but only if some conditions were satisfied. In particular, he held that reduced prejudice would result when the contact happened in a setting where there was equal status between the groups in the situation, common goals, intergroup cooperation, and the support of authorities, law, or custom. Extremely contentious integration is unlikely to produce these conditions. For example, if high school students feel they are competing for slots in college and, worse, if they have the impression this competition might be tilted against them, they may come to resent the other group even more.

  CRICKET LESSONS

  That this is a very real concern is demonstrated by a clever recent study.85 In the state of Uttar Pradeshin in India, a researcher ran an eight-month-long cricket league involving 800 players, all young men, chosen randomly out of 1,261. In the league, about a third of the players were assigned to homogeneous-caste teams; the others were in mixed-caste teams. Like others, the study found many positive effects of collaborative contact. Compared to those who played on single-caste teams, the young men who played on mixed teams were more likely to be friends with people from other castes after the experiment, and not just those from their teams. When they had a chance to select their teams, they selected better teams for future matches, since they made their choices based on talent, not caste.

  But who they played against mattered. Those in teams randomly assigned to play against other-caste teams were less likely to make friends with people from other castes than those who played only against their own caste, or even those who never got to play anyone. Competition undermined contact.

  These somewhat less optimistic results make the important point that contact may not be enough to produce tolerance; it may be necessary to have shared goals. Both in 1998 and in 2018, the victory of France’s team at the soccer World Cup had exactly this effect on the nation as a whole. In particular, the fact that some of the team’s champions grew up and learned their skills in the suburbs of Paris notorious for their dilapidated housing projects and their car-burning riots did create a sense of goodwill and shared purpose. In that moment, everyone could see that the kids from the 93 (as one disadvantaged district in the north of Paris is known) were not all lazy bums who skipped school and committed petty crimes. Behind France’s winning black-blanc-beur (“black-white-Arab”) team was the effort and the discipline of tens of thousands of young kids working hard to make it.

  ZONING FOR PEACE

  Since there are obvious limits on integration through universities, mixed neighborhoods offer a useful alternative. The problem is that mixed neighborhoods have a proclivity toward being unstable, as Tomas Schelling, who won the Nobel Prize in economics, demonstrated.86 Suppose homeowners are happy to live in mixed neighborhoods, but not in neighborhoods mostly dominated by another group. Then they must live in fear of the day when, by chance perhaps, a few of their own move out and are replaced by the other. The neighborhood becomes a little less attractive to people like them, and now they all start worrying that if a few more leave, let’s say because they are also having the same thoughts, or because they are less tolerant, they will be forced to leave as well. The tension of whether and when that may happen can become unbearable, so anyone who can get out leaves. This is what Schelling called the tipping point.

  David Card studied the increase in segregation that happened in the United States in the 1970s, 1980s, and 1990s, and it does indeed look like there is this tipping point property.87 If the fraction of blacks in the neighborhood was less than some number, it remained stable; if it became higher, there was a large outflow of the white population in subsequent years. Chicago, for example, had a particularly low tipping point. If the black population in a neighborhood was less than 5 percent in 1970, it remained at that level afterward, but if it was any more than that the fraction of whites soon plummeted. On average across US cities, Card and his colleagues found tipping points ranging between 12 percent and 15 percent.

  The way to prevent the segregation implied by the tipping point logic is to build public housing targeting low-income residents and d
isperse that housing throughout the city, so there are no “pure” neighborhoods available. In a fancy neighborhood in Paris, where we spent a year, the building next to us was a housing project. The children all attended the same neighborhood school and played in the same park. At that age, they clearly inhabited the same universe. It may not be possible to be as bold as Singapore, where strict quotas ensure some amount of mixing between ethnic groups in every block of residential housing, but it seems possible to reserve a certain fraction of public housing in every neighborhood.

  The challenge of implementing such a policy is mostly political. It seems easy enough to imagine how to do it well if the political will is there: spread the public housing around, give everyone a lottery number, have a public lottery every time new housing becomes available, and make it easy to check that the winners get the housing. The difficulty is that public housing in fancy neighborhoods is very tempting for local politicians to use as patronage, but with enough political will it can probably be overcome.88