September 2, 2022

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Stratification Economics?

Science is naturally subdivided into specialties and sub-specialties. In the physical sciences isolation of one specialty from another isn’t too much of a problem, because all share a common framework. Chemistry acknowledges the laws of physics and vice versa. There is also a shared framework in biology in the form of species classification, evolution, genetics, and the like. Social science is without this kind of common understanding. Specialties studying in effect the same thing can evolve in isolation from one another. Professional incentives (need to publish, get research grants etc.) favor fission, ‘niche creation,’ and self-isolation. As a result, the professional associations for psychology (which is mostly social) and sociology (which is all social) have subdivided into more than one hundred divisions, all without the kind of theoretical framework that links physical and biological science. Criticism is then confined to each division. There is virtually no chance for an experimental psychologist to vet, say, a paper on race and gender studies. Papers in the sociological section on Race, Gender and Class are unlikely to get much input from researchers in Science, technology and Society. Each division provides a safe-harbor for like-minded researchers.

Stratification Economics

Economics considers itself independent from sociology and even psychology, although a few interdisciplinary forays have been made. Despite its intentional separation from the rest of social science, economics is also subdivided. The American Economic Association has some twenty subfields (JEL codes), ranging from General Economics and Teaching to Other Special Topics. Each of these has half a dozen or more further sub-subfields.  The subdivisions within economics have the same downside as other subdivisions: They limit criticism. Once a new area is permitted its own code, it gains some standing and shelter from critical scrutiny. Perhaps this is why there is sometimes contention about an application for a new code.

The rather chaotic situation in economics and the rest of the social sciences can lead to some extraordinary departures from normal scientific practice. I will discuss one illustrative example: the attempt to establish a new subfield of Stratification Economics.

William Darity, a distinguished professor of Public Policy, African-American Studies, and Economics at Duke University, writes in 2022 in the Journal of Economic Literature,

On February 11, 2005, my presentation, in Charleston, South Carolina, of the Academy of Economics and Finance’s J. Anderson Davis lecture launched the subfield of stratification economics.

SE is concerned with income and wealth disparities between races. Superficially it might seem that SE belongs in the JEL area J: Labor and Demographic Economics, but Darity and his congeners wanted a separate subfield:

It has been difficult to gain formal professional recognition of stratification economics as a subfield…[S]tratification economics was relegated to the final catchall area of the JEL classification scheme, “Z. Other Special Topics.” Next, it was buried under “Z1. Cultural Economics, Economic Sociology, and Economic Anthropology,” despite the fact that stratification economics rejects cultural determinism and despite the fact that stratification economics is not a subdivision of either sociology or anthropology, although influenced by both. [emphasis added]

Darity describes the difficulty he encountered trying to publish an SE paper in the mainstream Journal of Economic Perspectives. The paper finally wound up in a book, The Hidden Rules of Race, which is less visible to economists.

It is worth looking a little deeper into this rather arcane dispute to understand just what is going on. First, just what is the question being addressed by SE? There is a positive answer and a negative one. The positive one is “Stratification Economics (SE) investigates significant and enduring disparities in income and wealth by social groups, particularly by race and gender, especially those associated with discrimination in labor and housing markets” Fair enough. SE is concerned with the causes of racial group disparities.

Darity’s negative answer is more troubling:

The objective [of SE] was to perform bypass surgery on the argument that groups in a subordinate position are so ranked because of their own deficiencies or self-defeating behaviors. The idea that group-based inequalities are due to defective cultural habits and practices on the part of the subaltern (or subordinated) community poses a conceptual occlusion that requires circumvention. [emphases added]

In other words, SE explicitly excludes from its analysis of group disparities anything to do with the interests and abilities of the individuals involved—which would only be legitimate if those factors have been proven to be absolutely irrelevant to socioeconomic variables. Otherwise, SE economists are left in the position of Aristotle when he concluded that heavier bodies fall faster than light ones. Aristotle was, of course, wrong, as he ignored air drag, which slows light bodies more than heavy ones.

Aristotle can be excused for his ignorance. But economic disparities cannot be understood if endogenous differences, differences in the interests and abilities of the disparate groups, are a priori excluded. Individuals differ, as do many groups, including racial groups, on behavioral measures vital to socioeconomic success. Nevertheless, SE expressly rejects group differences as any part of an explanation, which leaves the social, legal, and economic environment (“structural forces”) as the only possible cause for disparities.

A semi-official source summarizes SE forthrightly:

[T]his explicitly moral research discipline [Stratification economics] recognizes that structural forces limiting opportunities for Black Americans were set up by white Americans to preserve their economic dominance.…[Racial] inequities are the direct, intentional result of the institutions, laws, and norms that were established to maintain the economic dominance of white Americans [emphases added].

Two comments: First, “intentional result” alleges that laws and norms (even, or perhaps especially, laws that make no mention of race) were explicitly engineered to disadvantage people of color. This is a very strong charge that is almost impossible to prove. Certainly, the Founding Fathers and other lawmakers expressed no such intention. Unfortunately, unproven allegations of this sort, attributing malign motives to whole classes, either the bourgeoisie (by Marx) or white people (by Darity and many others), are common in this literature.  

Second, “moral” issues are certainly important for making policy, but they have no place in a scientific account. The scientific issue is always just the causes and processes involved in the phenomenon under study. Verifiable truth is the only concern for science, even social science. Whether the result is good or bad is a matter for religion, law, and politics to decide.

Is it all just the inheritance of Wealth?

The empirical problem addressed by SE is disparities of income and, especially, wealth between black Americans and the general population. Wealth disparities appear to be very large (although it must be admitted that measuring wealth is less precise than measuring income, since the IRS is not yet involved). The usual behavioral science approach to this problem would be to begin by looking at both endogenous and exogenous causes, at the interests and abilities of individuals and the social, legal, cultural, and economic forces acting on them. In a dramatic break with the standard approach, Darity admits at the outset that that SE intentionally ignores endogenous causes. It “rejects cultural determinism” and “The idea that group-based inequalities are due to defective cultural habits and practices on the part of the subaltern (or subordinated) community poses a conceptual occlusion that requires circumvention.”  

Again the language is extra-scientific. In what sense does a scientific hypothesis “require circumvention” as opposed to disproof? Is this part of SE’s claim to be a “moral” science? In fact it seems to remove SE from science entirely.

Darity does offer some evidence for his contention that individual behavior is irrelevant to wealth disparities, writing: “When wealth is taken into account virtually every group-based disparity in behavior customarily attributed to racial differences in cultural orientation disappears.” This will come as a surprise to many, given that there is an enduring and substantial IQ-average difference, as well as substantial differences in rates of criminal behavior, between black and white populations in the US. The cognitive (IQ) difference is a controversial finding that has nevertheless withstood vigorous criticism over many years. Do differences in cognitive performance disappear when wealth is taken into account, as Darity claims?

Probably not. For example, a very careful and comprehensive study of black and white children over the first four years of school by Fryer and Levitt concluded:

Black children enter school substantially behind their White counterparts in reading and math, but including a small number of covariates erases the gap. Over the first four years of school, however, Blacks lose substantial ground relative to other races, averaging 0.10 standard deviations per school year. By the end of third grade, there is a large Black-White test score gap that cannot be explained by observable characteristics.

Family wealth is unlikely to have changed much over the four years of this study, yet black kids continue to fall behind their white counterparts over that time. This can hardly be explained as a wealth effect. John Davis, in an article explaining how SE differs from mainstream economics (ME), quotes Darity, “Intergenerational transmission effects load heavily on the transfer of material resources across generations,” which is a little circular but seems to mean that inheritance is everything: Blacks in America are poorer than whites just because they inherit less, fewer material assets—not because blacks and whites are different in any other way.  But Fryer’s data  as well as other more circumstantial studies all disagree. In short, it is impossible to understand the causes of black-white wealth differences without taking into account endogenous factors like IQ. A field that explicitly excludes them can hardly claim to be scientific.

We don’t know the reasons why the economics JEL committee denied Stratification Economics its own niche, but the facts amply justify their decision. The real fault, of course, is the fragmentation of social science that has allowed such problems to arise.