In 2019, Black people made up 12.2% of the U.S. population (U.S. Census Bureau, American Community Survey). Blacks, however, represent 26.6% of total arrests, including 51.2% of murder arrests, 52.7% of robbery arrests, 28.8% of burglary arrests, 28.6% of motor vehicle theft arrests, 42.2% of prostitution arrests, and 26.1% of drug arrests (FBI’s Uniform Crime Report, Table 43).

Black residents also have the highest level of incarceration rates of any racial group. As of 2019, Blacks were incarcerated in local jails at a rate of 600 per 100,000 U.S. residents, which is more than three times the rate for Whites (184 per 100,000 U.S. residents) (Zeng and Minton 2021). The combined state and federal imprisonment rate for Black sentenced prisoners in 2019 was 1,096 per 100,000 U.S. residents compared to 214 per 100,000 U.S. residents for Whites (Carson 2020).

Combined, do these basic data indicate that systemic racism exists in criminal activity?

One interpretation of the data is that Black people commit more crimes relative to those of other races; thus, they are arrested and sentenced to prison at higher rates. Let’s run with this possibility. (An alternative argument to explain the data is that there is systemic racism at the point of arrests and sentencing. For the sake of brevity and to focus on commission of crimes, we will pause this explanation).

Why does any individual commit a crime? Since Gary Becker’s (1968) seminal paper, criminal activity is viewed as a choice. Criminal activity is analyzed like any other economic activity – as a rational choice within an individual’s constraints. Criminals are rational actors comparing costs and benefits of legal versus illegal activities to achieve their goals, including maximizing income, social status, and psychic reward. As Becker states, “some individuals become criminals because of the financial and other rewards from crime compared to legal work, taking account of the likelihood of apprehension and conviction, and the severity of punishment” (p. 176).

If we take Becker’s rational choice approach to crime, the question becomes why would Black individuals choose to commit more crimes relative to their non-Black counterparts? If they are committing relatively more crimes, they must have a rational reason to do so. This suggests that individuals face constraints that incentivize criminal behavior that differ along racial margins. In other words, the costs and benefits for criminal activity are different for Blacks versus Whites. But why?

A large literature suggests that economic determinants of crime include educational attainment, income, poverty level, and employment status (Buonanno 2003; Cerulli et al. 2018). Racial gaps in poverty, education, income, and employment exist and have persisted for several decades. For example, in 2019 the poverty rate (Semega et al. 2020) and unemployment rate (BLS Reports 2020) for Blacks was roughly two times the poverty and unemployment rates of non-Hispanic Whites. Forty percent of White adults hold a bachelor’s degree compared to 26% of Blacks (Harris 2022). Educational disparities lead to pronounced differences in economic security across racial groups.

Black Americans are possibly committing relatively more crimes because of facing higher economic insecurities and limited economic opportunities. This is plausible. If it is more difficult for a Black man or woman to obtain legal work and income, engaging in illegal activity (robbery, theft, burglary, prostitution, drug violations, for example) becomes a lower cost alternative. However, this explanation simply pushes the analysis one step back – if it is economic disparity that alters the relative payoff for criminal activity, what are the root causes of economic inequality between Blacks and non-Blacks? What are the barriers preventing Blacks from participating fully in legal work, obtaining higher levels of education, getting higher paying jobs, and rising out of poverty?

Decades of government spending, including transfer payments based on income, has attempted to address racial income, wage, and educational inequalities. In 2022, the total welfare spending on a family of four in poverty was $128,122, yet the poverty line for the same family was $29,950 (Federal Safety Net). Not only is the welfare system broken, but we also must consider that the system creates perverse incentives, namely creating dependency and discouraging work. Additional barriers to economic opportunities arise from government policies despite those policies' stated intention of helping the poor, including poor Blacks. This includes minimum wage laws, affirmative action, occupational licensing, and school choice programs (or lack thereof), to name a few.

Many of these policies create barriers instead of opportunities. For example, occupational licensing, the necessary legal steps and payments to obtain a government required license to practice a specified profession, creates hurdles to work legally. Occupational licensing creates barriers to entry, reducing competition and limiting job options without evidence of an increase in public safety or product quality. It creates unnecessary time and financial burden since the process can involve financial payment, educational requirements, and fees for exams.

Occupational licensing exacerbates economic inequality as it puts additional burdens on those that are economically disadvantaged. As such, it is more difficult for low-income individuals to obtain legal work. At the margin, it could push an individual into criminal activity as the relative price to do so is lower when facing the costs of obtaining a legal license to work.

Another potential barrier to economic opportunity is access to credit. Starting a business requires capital and resources. Limited access to funding can hinder Black entrepreneurs from establishing successful ventures. Black business owners make up only 4.3% of total business owners in this country. Blacks, on average, have lower credit scores compared to Whites, 677 versus 734, respectively, and are less likely to use conventional financial institutions (Broady et al. 2021).

One possible source of lack of access to credit is burdensome financial regulation preventing lenders from being willing to serve a riskier population. Regulation raises the cost of capital and banking practices. Similar to how minimum wage laws cause unemployment among the lower skilled, banking regulations raise the price of serving low-income and marginalized communities. Thus, banks may not find it feasible to lend to riskier borrowers, decreasing the ability of low-income individuals to obtain legal access to banking and credit.

Supporting this argument, Bolen et al. (2023) demonstrate that a 36% APR interest rate cap in Illinois decreased the number of loans to subprime borrowers by 38%. This finding has national level implications as lawmakers continue to propose interest rate cap legislation, which would further limit access to credit to those with poor credit scores and amplify existing economic disparities.

Lack of economic opportunities helps explain the benefit of engaging in criminal activity, but what about the expected costs of getting caught? Interestingly, Dill et al. (2010) casts doubt on government-based deterrence of crime variables such as arrest rates, incarceration rates, police size, and capital punishment, empirically showing that standard deterrence variables do not reduce crime. Instead, the authors find that crime arises in part due to government prohibition policies that affect legal dispute resolution.

This essay spoke in broad racial categories as a means of comparison. However, there is diversity within racial and ethnic groups that do not accurately portray all individuals in those categories. Individuals along all racial lines move in and out of poverty over their lifetimes. Generalizations can be helpful to frame social questions; however, analysis is best done at the individual level, understanding the incentives faced by an individual and considering his or her own preferences, values, and perceptions of costs and benefits.

Back to the original question: do Black individuals commit more crimes explaining the relatively higher arrest and incarceration rates? Maybe. But the real issue is government-created barriers to education, employment and other opportunities that lower the relative price of committing a crime.

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Becker, G.S., 1968. Crime and punishment: An economic approach. Journal of political economy, 76(2), pp.169-217.

Bolen, J.B., Elliehausen, G. and Miller Jr, T.W., 2023. Credit for me but not for thee: the effects of the Illinois rate cap. Public Choice, 197: 397-420.

Broady, K., McComas, M. and Ouazad, A., 2021. An analysis of financial institutions in Black-majority communities: Black borrowers and depositors face considerable challenges in accessing banking services. Brookings Institute: Washington DC.

Buonanno, P., 2003. The socioeconomic determinants of crime. A review of the literature. Working Paper Dipartimento di Economia Politica, Università di Milano Bicocca; 63.

Carson, Ann E. 2020. Prisoners in 2019. U.S. Department of Justice, Office of Justice Programs, Bureau of Justice Statistics.

Cerulli, G., Ventura, M. and Baum, C.F., 2018. The economic determinants of crime: an approach through responsiveness scores. Report, Department of Economics, Boston College.

Dills, A.K., Miron, J.A. and Summers, G., 2010. What do economists know about crime? In The Economics of Crime: Lessons For and From Latin America. Edited by Rafael Di Tella, Sebastian Edwards, and Ernesto Schargrodsky (eds). University of Chicago Press, 2010. Chicago Scholarship Online, 2013. https://doi.org/10.7208/chicago/9780226153766.003.0009.

Federal Bureau of Investigation Uniform Crime Report. 2019. Crime in the United States, Table 43.

Federal Safety Net. Poverty and Spending Over the Years. https://federalsafetynet.com/poverty-and-spending-over-the-years-2/.

Harris, B. 2022. Racial Inequality in the United States. U.S. Department of the Treasury.

Semega, Jessica, Melissa Kollar, Emily A. Shrider, and John F. Creamer. 2020. Income and Poverty in the United States: 2019. Current Population Reports. U.S. Census Bureau.

U.S. Bureau of Labor Statistics, 2020. Labor force characteristics by race and ethnicity, 2019. BLS Report no. 1088.

U.S. Census Bureau. 2019. American Community Survey

Zeng, Zhen and Todd D. Minton. 2021. Jail Inmates in 2019. U.S. Department of Justice, Office of Justice Programs, Bureau of Justice Statistics.

This essay explores the link between systemic racism and crime. To do this, we’ll first explain what we mean by systemic racism, then we’ll consider factors that tend to foster criminal behavior, and explore what might cause those factors to disproportionately affect protected minorities.

Definitions of systemic racism are vague. This is useful politically but less helpful for analysis. Systemic racism in this essay means that treating people differently based on race is ingrained in the fabric of society, either by laws or social custom. To be systemic, these behaviors or outcomes must be pervasive, and to be important, their influence must be large. “Pervasive” and “large” are subjective, and I will leave those decisions to the reader.

In what follows I consider behavior, not feelings or thoughts. A racist police officer who targets members of a particular race is a problem, but if that same officer does not act on his racist feelings, then his racism is harmless. This is important, because feelings and thoughts do not respond to laws or social norms as much as behavior does. Similarly, outcomes matter, but intentions do not. A law that creates incentives to have children out of wedlock is harmful, regardless of whether it was passed with the intent of reducing widespread poverty among members of a racial group.

Factors affecting criminal behavior do seem to be correlated with race. For example, protected minorities tend to have less formal education than Whites or Asians, and more schooling tends to mean less criminal behavior, even after controlling for other factors.[1] Few argue that government-funded, public K-12 education in the US is successful in producing individuals able to function well in a competitive labor market and an evolving society. This is indeed a systemic problem. Part of the problem is that students are tied to the school in their neighborhood. Escaping to a private school or a public school in a different area is costly at best. As a result, public schools face little competition and have few incentives to improve.

Evidence shows that students in poor schools can achieve high levels of performance if placed in a better school. Thomas Sowell found that students in charter schools in low-income Black neighborhoods were about six times more proficient in mathematics than those of the public school located in the very same building![2] He points to the much stronger influence of teachers’ unions in the public schools as the main reason for the performance gap.

This is not an isolated result. The Center for Research on Education Outcomes at Stanford University found that “… from 2015 to 2019, the typical charter school student in our national sample had reading and math gains that outpaced their peers in the traditional public schools (TPS) they otherwise would have attended.”

Forcing public schools to compete for funding is one potential solution. Rather than funding schools, society should fund students. Under this approach, governments would give each student a voucher redeemable only for education. Fierce union resistance has prevented progress on such legislation. The government’s policy of funding schools rather than students contributes to this systemic problem, which disproportionately affects protected racial minorities.

Fortunately, the systemic problem of funding schools rather than students may be eroding. Parents want school choice, and progress has accelerated since the school closures during the government’s reaction to COVID-19. Funding students instead of schools is no panacea. It is, however, an important step in ensuring equal opportunity in education.

Minimum wage and occupational licensing laws serve as barriers to protect current workers from competition from new entries into the labor force. Many minimum-wage advocates sincerely intend for these laws to help, but the result is a systemic policy that harms protected minorities more than Whites and Asians. High unemployment erodes job skills and denies new entries into the labor force the opportunity to develop skills in the first place. Minimum wage laws reduce employment opportunities and affect low-skilled workers disproportionately. Those workers tend to be protected minorities. Before minimum wage laws, Black unemployment levels approximated those of Whites. Since the advent of minimum wage laws, though, Black unemployment has been about double that of Whites. One can make a good case that minimum wage laws are systemically racist, and to the extent this contributes to higher crime rates among protected minorities, it traces to poor government policy, however well-intended.

Another presumably well-intended government policy that limits employment opportunities is occupational licensing. Many skilled trades require a license. Obtaining such licenses can be expensive and time-consuming, sometimes requiring formal training that is better obtained through apprenticeships. Licensure requirements serve as a barrier to entry.

Federal and state authorities have criminalized recreational drug use. Whether rational and well-intended or not, this war on drugs often turns supporters of the police into opponents. In The State Against Blacks,[3] Walter Williams argues that harsher sentences for such non-violent offenses contribute to the higher minority incarceration rates.

Enforcing laws against recreational drug use necessarily increases the number of tense encounters between law enforcement and suspects. To the extent that protected minorities commit more crimes of this type, the frequency of violent escalation increases. This contributes to the persistent media narrative that police target them. However, Roland Fryer of Harvard University found that police are less likely to use lethal force against Blacks. Christopher Ferguson and Sven Smith found that “… overrepresentation among perpetrators of crime explains incarceration disparities to a greater degree than does racism in the criminal justice system.” Whether current drug policy is good or not is debatable, but again, the law has created a system that affects protected minorities disproportionately.

Jason Riley identifies what, to me, is the most important factor in the disproportionate number of protected minorities incarcerated. It is not poverty, nor lack of education, nor unemployment. Those are merely symptoms of the root cause. Riley writes that “Black violent crime rates were significantly lower in the 1940s and ‘50s, when the Black population was significantly poorer than it is today, and when racism inside (and outside) the criminal-justice system was rampant and overt.” He continues, “Our jails and prisons aren’t teeming with people from intact families.”  The breakdown of the family is the problem.

Thomas Sowell shows that the collapse of the family structure among Blacks is correlated with unemployment, too. In Social Justice Fallacies, he writes that for more than 25 years, the poverty rate of Black married couples has always been in single digits. For comparison, the poverty rate of Americans collectively has always been in double-digits.[4] Walter Williams adds that the absence of positive role models and inadequate parental guidance can perpetuate through generations.

The destruction of the family results in poverty, increased drug use and suicide rates, poor education achievement, unemployment, and, inevitably, criminal behavior. Trends in the data give little cause for optimism. Very likely, tomorrow’s problems springing from this will be worse.

The decline of the Black family surely tends to increase minority crime rates, but is this a systemic problem? To me, the answer is obviously yes. The two-parent family is also becoming progressively less common among Hispanics and Whites. This suggests that forces not unique to the Black community are driving these trends. This is indeed a systemic problem, but it is hard to call it racist if it affects all races.

Rather than ask whether these forces are racist, a better question is, “What is the cause of family breakdown?” This has no simple answer, but government policies, perhaps well-intended, are certainly a factor. Aid to children of broken homes and other welfare programs reduce the cost of divorce and out-of-wedlock births, and many programs pay more to single parents with more children. This creates incentives for single parents living in poverty to have still more children. Many programs reduce funding as family income rises. This effectively serves as an additional income tax, reducing work incentives.

Government programs are not the only force threatening the two-parent household. Changing societal norms play a large role, too. In decades past, single-parent homes were relatively rare and faced a social stigma. As the number of broken homes and out-of-wedlock pregnancies grew, the social stigma attached to such situations began to wane. Today, about thirty percent of families have only one parent, and little stigma remains as a deterrent. We know that the proportion of Black children living in two-parent households is only about half that of Whites, and we know that children in single parent homes tend to commit more crimes. This is a systemic problem, but given that it affects all races, calling it systemic racism is unwarranted.

In this essay I have defined systemic racism as treating people differently based on race that is ingrained in the fabric of society, either by laws or social custom. The evidence suggests that systemic racism does exist, that it traces in large part to government policy, and that these policies do create the conditions that foster criminal behavior. These policies may be intended to help protected minorities, but intentions do not matter to their victims.

[1] Lochner, Lance and Enrico Moretti (2004). “The Effect of Education on Crime: Evidence from Prison Inmates, Arrests, and Self-Reports.” The American Economic Review, March. pp. 155-189.

[2] Sowell, Thomas. (2023). Social Justice Fallacies. Basic Books.

[3] Williams, Walter. The State Against Blacks. McGraw-Hill. 1982.

[4] See also Kearney, Melissa S. (2023) The Two-Parent Privilege. How Americans Stopped Getting Married and Started Falling Behind. University of Chicago Press.

“Systemic racism,” the Wise Men say, is everywhere.

 Academics like the best-selling author Ibram Kendi have argued for years that essentially all large gaps in performance that we see between racial and regional groups are due to some form of bigotry “within systems,” however subtle and hidden. By this point, this claim has been made across contexts that range from group income differences to test scoring patterns to trends in hiring, as discussed by such authors as Charles Murray in his Facing Reality. Dr. Kendi, in fact, would likely argue that anyone who disagrees with him re this point is a genetic racist. Per one of his most famous interviews, and many others from him and other scholars, the only possible explanations for human performance differences like those we see across almost every arena are “racism” and “inferiority.”

The arena of crime, and of citizen/police interactions more generally, may be the ultimate example of an American domain within which claims of subtle, systematized racism are constantly made. The core argument of the 2012-2021 Black Lives Matter Movement, of course, was that Black citizens are killed very disproportionately – and almost at random – by White policemen and vigilantes. Activist Cherno Biko once claimed on Fox News in prime-time that an innocent, presumably unarmed, Black man is “murdered” by American police about once daily. Benjamin Crump, Trayvon Martin’s family counsel and one of the best lawyers in the USA, wrote a completely unironic 300-odd page book titled Open Season: the Legalized Genocide of Colored People.

The logic here is purely the logic of Kendi: the sheer existence of the gap in rates of police shooting demonstrates the existence of the bias which must have created it. Much the same logic is often extended well beyond this single topic. We often hear that Black/White differences in arrest rate, incarceration rate, sentencing rate and average sentence length, and so one all demonstrate racism. Indeed, books like Michelle Alexander’s The New Jim Crow often take a practical next step: the existence of these differences indicates that the ‘carceral system’ has replaced caste-ism as a tool for the intentional control of the USA’s Blacks (and, to a lesser extent, Hispanics, Natives, poor White “hillbillies,” and other undesirables).

 However, to a striking extent, these arguments collapse whenever they are empirically tested using contemporary social science tools such as multi-variate regression. It is worth breaking this technique, which is decades, if not centuries, old and the backbone of the contemporary quantitative social sciences, down in some detail. In almost every case, population groups that vary in terms of a highly significant characteristic like race/ethnicity or political orientation also vary in terms of other characteristics like social class, region of residence, and personal behavior. As I may have noted a time or two before, the modal average age for a Black American is 27, while that for a White American is more than 30 years older – currently stable at 58.

Patterns like this are common. It is thus not possible to establish the existence of bias simply by pointing to a univariate difference between two groups (much less between two small survey samples of individuals taken from those groups). In all serious, quantitative academic papers – and this is the point – the influence of race or racism on a dependent variable like arrest rates is tested using a computerized mathematical analysis within which all other variables that might be relevant, like those given above, are held constant at their median.

When this is actually done, race often proves to have little or no remaining influence. The fact that Black Americans are more likely than White American to be shot by police, for example, appears to be a pure artifact of the fact that the Black crime rate is roughly 2.4 times the White rate – something you can calculate using Table 14 of this recent National Crime Victimization Survey report – and this alone predicts high Black rates of arrest and of hostile police encounters. And, in fact, police shooting rates track those “hostile encounters” almost exactly. In 2022, 225 of 1,096 police shooting ‘victims’ were African American, with this 20+% representation for a group compromising 12-13% of the national population largely matching (in fact slightly training) national criminal demographic patterns.

An even more in-depth multivariate examination of the police shootings question, conducted by Harvard University’s Roland Fryer, produced the same result several years ago. Using sources of data like the Police-Public Contact Survey, and including controls for the behavior of suspects alongside other “important context,” Fryer concluded that: “On the most extreme use of force – officer involved shootings – we find no racial differences.” Indeed, White officers were quite a bit (about 28%) more likely to shoot White suspects than equivalent Black suspects.[1] Fryer’s explanation for this “unexpected” finding is simplicity itself: police officers are normal citizens who don’t really want to kill anyone – and also tend to be “utility maximizers” who would prefer not to be accused of Ku Klux Klan-level racism specifically for killing Black citizens.

Racial sentencing gaps turn out to be subject to the same sort of Statistics 300-level methodological adjustments as gaps in police shooting rates and indeed crime rates (recall that age difference between White and Black males). Of course, it initially “looks bad” to say that one racial group is up to 5x as likely as another to go to state or federal prison, and tends to remain there longer. However, as we have also noted, it is also the case that some groups commit crimes and get arrested much more than others do. And, it also seems fair to hypothesize that members of high-crime groups might on average have longer criminal records than members of lower-crime groups, potentially explaining lengthier sentences for any particular crime.

 Indeed, again, that is exactly what multivariate tests that adjust for things like “extensive prior record” find. During just the past few weeks, Stetson U’s Christopher Ferguson and Sven Smith conducted what may be the best ‘meta-analysis’ of justice system outcomes so far – including no less than 51 distinct past studies – and found that there appears to be little if any actual “systemic racism” operating inside the American criminal justice system. Overall, the pair concluded that “[no] class nor race biases for criminal adjudications for either violent or property crimes could be reliably detected.”

 Some influence of race and class was – in the interest of frank honesty – found in the context of drug offenses. However, all of the relevant “effect sizes” were “very small:” a poor Black defendant in a drug case might be a few percentage points more likely to lose a criminal case than a more advantaged offender. And, even this disparity (the authors say) may well be due mostly to the poor quality of many previous studies. Overall, per Ferguson and Smith: “Narratives of ‘systemic racism’ as relates to the criminal justice system do not appear to be a constructive framework from which to understand this nuanced issue.”

It is hard to disagree with, and almost impossible to ‘debunk,’ research this sweeping and comprehensive. So: why is there such a massive gap between (probable) reality and mainstream, upper-middle class perception? Dr. Ferguson’s line about poor study design provides a clue. Simply put, many academics who research race have historically opted – intentionally or not – to not adjust for obvious factor variables which influence performance gaps between Whites and Blacks, and which would reduce or eliminate them when taken into account.

Ferguson and Smith, speaking with exquisite politeness, point out that the field of criminal justice has historically been no exception to this general trend. As I noted in a short analysis of their original piece for National Review, “In a surprising number even of the better-known studies in their field… ‘control variables are comparatively lacking – many studies that examine race don’t control for class.’ ‘Most’ studies control for ‘age and prior criminal record,’ but not all.” There is evidence, even beyond that suggested by common sense, that ideological bias plays a role here: “Studies with ‘citation bias’ toward one side of the debate about whether racism exists in the modern criminal justice system – generally, a bias in a liberal direction – were far more likely to find racism than were unbiased fair-test studies.”

While this is not the focus of this short article, the same unraveling of narrative just seen in criminal justice happens basically everywhere, when we properly adjust for the other things that obviously vary among different-age members of different races (or men and women, etc.). As economist J. O’Neill famously noted back in the 1990s, the 15-18% income differential between adult men of different races – something almost universally attributed to racism – drops to roughly 1% after adjustments for variables like mean age, region of residence, and aptitude test scores.

On a related note, per the Sociologists Darolia and Koedel, the claim of the List Experiment that job applicants with stereotypically Black names are dealt with more harshly than those with more White-sounding names seems at best dubious when social class is adjusted for. Simply put, “Jamarrian” might have a harder time getting on-boarded than “Billy,” but there is little evidence that “Marcus Blackman” or “John Lopez” would.[2] Even the famous Black/White gap in aptitude test scoring seems increasingly unlikely to be attributable to racial bias (or genetic factors): the hardly conservative Brookings Institute recently pointed out that Asian American school-children study roughly twice as much as White Americans and three times as much as Black Americans – and these patterns track extremely well with trends in later SAT scoring.

Simply put, racism – or, more specifically, discrimination: racism as praxis – can be said to exist where and only where one of two otherwise identical persons is treated differently from the other because of the sole factor variable of race. Simply finding a gap in performance, or even in treatment, between two different people proves nothing. In the arena of American crime and criminal justice, what we see today is almost entirely the second thing.

[1] To be fair, officers displayed some biases in both directions, and were up to 50% more likely to go “hands on” with both Black and Caucasian Hispanic suspects. As far as I can tell from my read of Fryer (2017) no extreme – i.e. highly statistically significant - patterns of racialized police behavior toward either white or POC suspect populations were on display.

[2] These names are very similar to, but not identical to, those used in Darolia and Koedel’s study.

How do we begin to discuss systemic racism? Often these discussions have a confusing overlap of different definitions, with unspoken assumptions about how the world works. Economists often avoid these discussions because the discussions can swing from the external world (laws, programs, and regulations) to the internal (thoughts, beliefs and values) within the same conversation. Economists tend to be far more comfortable sticking with discussions that can be empirically measured and tested rather than investigating the “black box” of a person’s innermost thoughts and ideas.

The first order of business, then, is to clarify a working definition that can be used to examine concrete examples of systemic racism. I use that definition- based on historical laws and policies-to examine examples that occurred in the U.S. housing market up to the late 1960s. After the legal reforms of 1968, I argue that newer housing policies that aim to combat systemic racism have outcomes that mirror past racist policies, another example of the law of unintended consequences. As a result, gaps in household ownership remain stubbornly large between Black and White families.

In the end, we economists are generally more interested in examining external outcomes than internal motives. Whether or not the regulations are deliberately racist or end up hurting Black families “as if” they were, this distinction is immaterial to the Black family struggling to get a foothold into the American Dream of owning a home. It is on these grounds of outcomes, rather than intent, that we must judge the housing policies’ final impact.

As an example of the confusing variations in definitions, preeminent scholars Massey and Denton (1993) describe systemic racism as a type of racial discrimination that can affect institutional structures, social structures, individual mental structures and everyday interaction patterns. Braveman, et. al. (2022) argue that systemic and structural racism are often used interchangeably, to mean “involvement of whole systems, and often all systems—for example, political, legal, economic, health care, school, and criminal justice systems (that also include) laws, policies, institutional practices, and entrenched norms.”

These definitions are a lot to take in. They are so broad that almost every action in life could be examined through these lenses, yet it would be hard to say where racism begins and ends. As an alternative approach, Table 1 divides racism into different buckets, some of which are easier to measure than others. It is based on information from the National Museum of African American History and Culture (NMAAHC) and University of Southern California’s School of Social Work. Note that systemic racism by these scholars has a much narrower focus than Massey & Denton or Braveman et. al.’s all-encompassing definitions.

In this definition by NMAAHC, systemic racism is buttressed by systems that are founded on racist principles or practices, such as a legal framework that creates different opportunities to obtain resources. The most egregious example of systemic racism in housing was the South African apartheid system, a formal legal system that existed from 1948-1994. Whites could own land with titled deeds, whereas Blacks were forced to live in crowded settlement areas, with no hope of homeownership. As seen in Table 2, cultural attitudes, informal rules, or personal beliefs can also be racist, but are inherently subjective and typically outside economists’ scope of inquiry. Thus, sociologists and psychologists are better equipped to study these latter aspects of racism than economists.

For the purpose of this article, I define systemic racism as laws, policies and regulations that result in quantifiably different outcomes for different races. As I will later detail, systemic racism can be either explicit or implicit in nature.

Government Policies: Examples of Explicit Systemic Racism in the United States

While free market conservatives may differ on a number of different issues from progressives and liberals, one area of agreement is that government is a powerful system that can create and sustain systemic racism over the long haul. Over the United States’ history, laws and local regulations were put in place that explicitly prevented Black families from acquiring property and financial capital, through locking out access to neighborhoods and mortgage credit. Here are four examples of systemic racism.

Many examples over history prevented Blacks from enjoying the same access to property as Whites. One way was through racial covenants. A racial covenant is a private contract in which property owners within a defined geographic area collectively agree not to rent or sell to Black residents. For example, in 1927, the Chicago Real Estate Board created a way to block the entry of Blacks into White neighborhoods known as a “racial covenant.” The Board offered the model to other cities for adoption throughout the country (Massey & Denton, 1993). Violators could be sued in civil court, after the racial covenant was approved by the locals. Here we see the government as not the instigator, but the enforcer of systemic discrimination, using a racial covenant that works as effectively as a local law.

In 1933, the Roosevelt Administration created the Home Owners Loan Corporation (HOLC) to help middle class homeowners refinance their mortgages using long-term, federally insured, low-interest loans. HOLC created maps with color-coded neighborhoods according to their perceived creditworthiness. Green was safe, yellow was caution, and red was excessive risk, or what became known as “redlining.” Black city residents almost always lived in the red zones.

The Federal Housing Administration (FHA) insured these loans. It sponsored redlining policies between 1934 to the late 1960s, with an FHA Underwriting Manual that concluded that “no loan could be economically sound if the property was located in a (red-lined) neighborhood that was or could become populated by Black people, as property values might decline over the life of the 15- to 20-year loans they were attempting to standardize. The FHA emphasized the negative impact of "infiltration of inharmonious racial groups" on credit risk (Federal Reserve, 2023). This made it nearly impossible for Black residents to obtain a mortgage (Rothstein, 2017).

Without access to mortgage credit, even if Blacks owned their homes, they could not tap into their home equity to qualify for federally insured second mortgages in order to make home repairs or improvements (Dickerson, 2021), something White households could do to maintain or increase household wealth over time.

After World War II, the federal government arranged for a parallel mortgage loan program for veterans through the G.I. bill, which by itself did not exclude Black soldiers. However, the mortgage loans needed the guarantee of the FHA and as a result, the vast majority of Black veterans could not get loans in majority Black neighborhoods where most lived. For example, in New York and northern New Jersey, out of 67,000 mortgages insured by the G.I. Bill, fewer than 100 of those were issued to non-Whites (Katznelson 2006; Blakemore, 2023).

In the 1960s, hundreds of cities engaged in federally funded highway projects, which were optimistically called “urban renewal.” With these projects, cities sought the path of least resistance and the lowest opportunity cost in terms of lost tax revenue. Unfortunately, the renewal reinforced previous housing policies, largely sparing wealthier, Whiter residents, whereas Black neighborhoods were often demolished. They were the least valued in both an economic and political sense, having lower property values and little political power to oppose the change. Relatively class-diverse Black neighborhoods and thriving business districts were replaced with decaying neighborhoods with no way to plug into a once thriving economic network (Richardson 2023b).

How New Housing Laws Created Implicit Systemic Racism: two examples

Over time, the federal government transformed overtly racist regulations into self-described “remedies” for the past regulations. The 1968 Fair Housing Act prohibited discrimination in the housing market based on race, religion, national origin and sex (HUD, n.d.).

Compelling evidence indicates the failure of these new government policies to reverse long-standing trends. Decades later, Black households have the lowest homeownership rate nationally—30.0 percentage points lower than White households, at just 44.7 percent. This gap has held for more than 50 years and in recent years has even widened, as seen in Figure 2 below.

The new form of implicit systemic racism contains policies that are not overtly or deliberately racist in their language, in contrast to the pre-1968 federal housing policies. It operates through apparently neutral legal mechanisms that act in a much more invisible way to sustain historical differences in Black and White household ownership patterns. I examine two of them, zoning regulations and the 2008 Dodd-Frank Banking Act.

Although tax, lending, and land use laws do not explicitly discriminate against nonwhites, many of these laws continue to favor the status quo, made up of homeowners who are disproportionately White and higher income. In this sense, they can be characterized as a form of implicit systemic racism. For example, current zoning laws and policies seek to preserve the “character” of neighborhoods in order to perpetuate the status quo of neighborhoods that are segregated by race and by income. These zoning laws either ban or make it cost prohibitive for developers to build affordable and multi-family housing in higher-income and predominantly White neighborhoods.

These laws stem from homeowners’ strong feelings that increased density will decrease their property values and wealth. Understandably, homeowners don’t have to be racist to want to preserve their wealth, but the zoning laws still end up isolating one racial group from another, since Black families typically have far less ability to purchase a home. That leads to pockets of poverty on one hand, and growing wealth and property values on the other in many cities across the United States. In this sense, these regulations are not overtly racist but they lead to outcomes that do not give those in the lower tier of income the same opportunity to move up the economic ladder.

The DFA, in its effort to discipline the large Wall Street banks after the Great Recession of 2008-10, made it more expensive to be in the banking business in general. It required an extensive and intensive income verification process, and lenders were forced to provide special training to all loan officers. Ironically, the largest Wall Street banks were able to shoulder these increased costs far more easily than smaller banks. Community banks, which are most likely to lend to Black communities, were hit particularly hard by these rising fixed costs, since they issued a larger share of small dollar mortgages and had less financial capital to absorb these blows. These regulatory changes were imposed without regard to the social capital and local knowledge possessed by community banks for their customers. Thousands of smaller banks have either merged with larger banks or gone out of business, making it far more difficult for Black households to obtain mortgages (Richardson, 2023a).

Besides raising overhead costs across the banking system, the DFA capped the fees and points that lenders can charge for processing a loan on a sliding scale, based on the size of a loan. The caps were meant to prevent “exploitative behavior” on the part of the banks for charging “unfair” or “greedy” prices for executing loans and were meant to protect low-income families. However, the caps also created a disincentive for banks to originate small loans since they were even more unprofitable. This disproportionately hurts Black families more because they are more likely to seek smaller loans, given their smaller wealth position on average (Richardson, 2023a).

Even after the abolishment of slavery in 1865, the United States’ government systematically excluded Black families from building wealth up until 1968. It did so through laws and policies that specifically made it difficult or impossible to purchase property. That history of explicit systemic racism, thankfully, is behind us. However, persistent differences in the Black-White Homeownership gap suggest that much work needs to be done. Cities need less restrictive zoning to allow easier entry into homeownership and in addition, the Dodd-Frank Act needs modification to reduce overhead costs for smaller banks, which have traditionally offered more mortgages to communities of color. Until that is changed, long-standing wealth gaps will exhibit the qualities of implicit systemic racism, even if the policies themselves are not explicitly directed to achieve racist goals.

Blakemore, Erin (2023). “How the GI bill’s promise was denied to a million Black WWII Veterans.” History.com, June 21.

Braveman, Paula, Elain Arkin, Dwayne Proctor, Tina Kauh and Nicole Holm (2022). “Systemic and structural racism: definitions, examples, health damages, and approaches to dismantling.” Health Affairs 41(2). Feb. 2022.

Cortright, Joe and Dillon Mahmudi, “Lost in place: why the persistence and spread of concentrated poverty- not gentrification- is our biggest urban challenge,” City Observatory, December 2014.

Dickerson, A. Mechele (2021). “Systemic Racism and Housing.” Emory Law Journal. 70 (7), pp. 1535-1576.

Federal Reserve (2023). “Redlining.” Online article, June 2.

U.S. Department of Housing and Urban Development (HUD). “History of fair housing.” Online article, n.d.

Katznelson, I. (2006). When affirmative action was white: An untold history of racial inequality in twentieth-century America. W. W. Norton.

Massey, D. S., & Denton, N. A. (1993). American apartheid: Segregation and the making of the underclass. Harvard University Press.

Badger, Emily (2017). “How redlining’ racist effects lasted for decades.” New York Times, August 24th.

Richardson, Craig and Zach Blizard (2023a). “Did the 2010 Dodd-Frank Banking Act deflate property values in low-income neighborhoods? Public Choice, 197(3), pp. 433-454.

Richardson, Craig and John Railey (2023b). “A transitional gains trap: How city backed transportation monopolies in the early twentieth century damaged economic mobility for the next one hundred years.” Journal of Private Enterprise 38(3), pp. 25-45.

Rothstein, R. (2017). The color of law: A forgotten history of how our government segregated America. Liveright Publishing: New York.

Systemic racism refers to systems and structures that create and foster racial inequality. In the case of housing, examples of systemic racism include high rejection rates for home mortgages, steering by realtors, low ball appraisals, zoning laws and the vestiges of Depression Era actions by the Federal Housing Administration (FHA). In this essay I will elaborate on factors that are asserted to affect home ownership: the accept/rejection of mortgage applications and the insurance guarantee by the FHA. Steering by realtors would not affect homeownership rates, only where the homes are located. Similarly, low ball appraisals would not affect homeownership rates - only which house is purchased. For instance, if the purchase price of the house were greater than the appraisal and if the buyer were not willing to make up the difference, then the buyer would seek another house to purchase. Zoning laws would affect the quality of the housing stock and its price but may have a lesser impact on homeownership rates. However, the availability of FHA guarantees may affect the homeownership rate if a condition of the mortgage is to have it insured.

It has become convenient for many to claim that systemic racism occurs whenever there are racial disparities. This, of course, assumes that there are no inherent differences between races and that where such differences occur, they must be the result of systemic racism. One such instance is in the case of housing where home ownership by Whites is greater than that of minorities.  In 2019 the home ownership rate for Whites was 73.3 percent while that for Blacks was 42.1 percent.[1] Interestingly, this gap was the largest since the Census started reporting the data in 1994. Does this imply that racism in homeownership is increasing?

Those who argue that this is due to systemic racism point to discrimination in the mortgage loan decision by lenders as one factor where Black applicants are more likely to be denied than White applicants. For example, a report by CNN found that one major lender accepted over 75 percent of applications from Whites while denying over 50 percent of Black applicants.[2] While CNN does not explicitly state that the acceptance disparities are due to racism, it does illustrate that one of the reasons for disparities in home ownership may be due to racial disparities in the acceptance of mortgage applications. Also, as CNN rightly points out, the application denial by one institution does not mean that the applicant cannot get the loan from another lender. If this is the case, the rejection statistics are not an accurate picture of why Blacks have lower rates of home ownership.

I have done extensive research in the area of discrimination in lending and am co-author of its seminal paper.[3] When we first started the analysis our priors were that discrimination would likely occur in markets characterized by little competition among lenders. Most mortgage loans were made by savings and loans. Credit unions could not originate mortgages. We found weak evidence of discrimination by race and a stronger indication of redlining. Economics tells us that if there is excess demand for mortgages and few lenders, then the lenders can reject loans that would be profitable because of the limited supply of funds available. However, this is not the case today. Now banks, savings and loans, credit unions, and online lenders can originate mortgages. Thus, rejection of profitable loans would be irrational on the part of the lenders. In many institutions the mortgage loan officer is compensated by the mortgages underwritten. It would then be irrational for a loan officer to reject a qualified applicant if it lowered the officer’s compensation. Also, the regulators who examine the lender’s decisions are junkyard dogs looking for discrimination. As a consequence, a lender who discriminates in today’s environment is not only irrational but is also foolish. It would be akin to speeding at 100 MPH with a state trooper at every mile marker. Finally, many mortgages are not held in the originator’s portfolio and are sold to Fannie Mae, Freddie Mac, and in the secondary market meaning that the originator does not bear all the risk associated with making a bad loan.

Let us assume that the mortgage can be rejected based either on the riskiness of the applicant or the riskiness of the location of the property (redlining). Even if the minority applicant were equally qualified for mortgage application approval but the property site were deemed risky, then more applications from minorities would be rejected.

The statistics for percent homeownership by race need to be decomposed. As it reads, the assumption (which is certainly false) is that the homeowners have the same characteristics save for race. However, Zillow reports that “Households in the bottom 20 percent of income have a homeownership rate of 30 percent nationally, while those in the top 20 percent have a homeownership rate of 87 percent.”[4] Given that there are greater percentages of low income minorities than Whites, the differences in home ownership are not surprising. What needs to be done is to look at home ownership by income cohorts by race. For example, Choi points out that “The $38,183 median household income of Black households is substantially lower than the $61,363 median household income of White households. If the household income distribution were the same for White and Black households, while other household and MSA level factors remained constant, the gap between Black and White homeownership rates across MSAs would drop by 31 percent, or 9.3 percentage points.”[5] Choi finds that much of the difference can be attributed to income, marital status, and credit scores. He notes “Compared with White households, Black households are less likely to marry. If Black households were married at the same rate as White households, the Black-White homeownership gap across MSAs would decrease by 27 percent, or 8.1 percentage points, once other factors are controlled for. Credit scores account for part of the gap as well. To quote Choi “More than 50 percent of White households have a FICO credit score above 700, compared with only 21 percent of Black households. Additionally, 33 percent of Black households have credit-use levels that are insufficient to generate a credit score (thin files), and only 18 percent of White households have a thin file.”

Thus, is the homeownership gap due to systemic racism? One could argue that the differences that explain the gap: income, marital status, and credit scores, are due to racism. But that assumes that the gap would persist within each category. That is poor Blacks have lower homeownership than poor Whites, single Blacks have lower homeownership than single Whites, and Blacks with low credit scores have lower homeownership rates than Whites with low credit scores.

Regardless of differences between cohorts, two Federal agencies chartered in the 1930s were instrumental in promoting systemic racism in housing. The Home Owners’ Loan Corporation (HOLCC) was established in 1933 to refinance home mortgages that were in default. The HOLC made maps of neighborhoods and color coded them according to risk. The most risky neighborhoods were colored red leading to the term redlining. However, the HOLC made loans in these areas which were in many cases Black neighborhoods.[6] This was in contrast to the actions of the FHA which as a matter of course denied Federal insurance guarantees to Black borrowers. While the HOLC concentrated on existing housing, the FHA focused on new housing. The denial of loan guarantees therefore affected the growth in new homeownership and had an adverse impact on new Black homeownership.[7] Rose notes that from its inception, the FHA excluded core urban neighborhoods with Black borrowers. In that these neighborhoods were colored red by HOLC, the FHA engaged in redlining. Rose states “Our research leaves no doubt that the existence and legacy of redlining is real. We argue, however, that to the extent that federal agencies institutionalized redlining by drawing specific borders, this largely occurred through the FHA.”[8] More significantly, Rothstein asserts that the FHA’s policy explicitly forced Blacks to live in different locales than Whites. He states “The second program that the federal government pursued was to subsidize the development of suburbs on a condition that they be only sold to White families and that the homes in those suburbs had deeds that prohibited resale to African- Americans.”[9] Rothstein gives the example of Levittown in New York where he says “What the federal government did, the FHA, is guarantee bank loans for construction and development to Levittown on condition that no homes be sold to African-Americans and that every home have a clause in its deed prohibiting resale to African-Americans.”

Thus, the Federal government contributed to the pattern of racial segregation in housing and diminished the ability of black borrowers to own homes. Although these actions are in the past with the passage of the Fair Housing Act of 1968, that act looks forward and not to the past. Research has shown that cities mapped by HOLC are today more segregated than cities that were never mapped. Those areas that were mapped saw decreases in property values resulting in increased racial wealth gap and lower appraised values.[10]

Given that the effects of the HOLC and in particular the FHA remain today and are significant determinants of the pattern of Black homeowners, property values, and appraisals this points to an important point regarding systemic racism. Such racism that is created to foster inequality may have its greatest impact if endorsed by the government whether local, state, or in this case Federal. Government agencies promoting racism will find that individual citizens and groups will reinforce the racist policies of the government. Hence, individual lending institutions, zoning ordinances, realtors and appraisers may exercise their prejudices without fear of retribution by the government. In the case of home ownership, while it may be the case that racism in housing is less evident than in the past, the legacy created by the FHA still remains.

[1] “Home ownership rates show that Black Americans are currently the least likely group to own homes,” USA Facts, October 3, 2023.

[2] Casey Tolan, Audrey Ash and Rene Marsh, “The nation’s largest credit union rejected more than half its Black conventional mortgage applicants last year.” CNN, December 12, 2023.

[3] Harold Black, Robert L. Schweizer and Lewis Mandell, “Discrimination in mortgage lending.” American Economic Review, May 1978.

[4] Cody Fuller, “Home ownership really is about the money,” Zillow, April 22, 2015.

[5] J. H. Choi, “Breaking down the Black-white homeownership gap,” Urban Institute, February 21, 2020.

[6] See Jonathan Rose, “Revising how two Federal housing agencies propagated redlining in the 1930s,” Policy Briefs, Federal Reserve Bank of Chicago, April 2022.

[7] My parents were denied an FHA guarantee in their purchase of their first home in Atlanta.

[8] Rose, p. 3.

[9] Richard Rothstein, NPR interview, “The Color of Law details how U.S. hosing policies created segregation, May 17, 2017.

[10] Jacob faber, “Impact of government programs adopted during the New Deal on residential segregation today,” Research Policy Brief 51-2021, Institute for Research on Poverty, February 2021.

Reilly’s essay addresses the issue that I left unexplored – is there systemic racism within the criminal justice system? In other words, are Blacks targeted relatively more than Whites by police, prosecutors, judges, and juries? As he so eloquently lays out, once you control for all relevant variables, race has very little to do with explaining differences in arrests rates or police shootings, for example. Blacks compared to Whites commit crimes at a much higher rate.

So, this brings us back to my original question: do Blacks Commit More Crimes Than Whites? And if so, why?

Similar to my original essay, DeGennaro investigates whether systematic racism explains differences in crime across racial groups. He explores factors that underlie criminal activity and then explains why these factors may affect minorities more than other races.

A factor that keeps coming up is education, and the evidence keeps pointing to educational choice – funding students not schools. Yes! There are many reasons this should be the approach to public education even if it does not affect crime rates. It’s hard to imagine, however, that parents and students gaining access to better education would not reduce the incentives to commit crimes.

In doing some reading on the links between education and crime, it’s harder to understand exactly why the public education system is so much worse in areas that are predominantly Black. It is not hard for me to understand how public education functions, or more accurately, disfunctions. I grew up in rural West Virginia attending WV public schools from kindergarten through Ph.D. To use Reilly’s wording, I am a hillbilly, and a fellow undesirable. We didn’t have any viable private school options in our area. But my educational experience was good enough (though, I didn’t know what economics was until I got to Marshall University).

So why do some public schools, even in disproportionately poor areas, perform better than others? Furthermore, why are the public schools that are performing poorly correlated with Black neighborhoods? Is it simply a rural/urban divide? Luckily, we don’t have to solve this social dilemma before improving a child’s educational options. School choice puts the power and control back in the hands of the parents and students, realigning incentives and improving quality. If it also reduces crime, that is a win-win.

As with my reaction to the question of why the worst public schools seem to be in Black areas, I am curious as to how Black individuals are disproportionately harmed by the war on drugs. We know that Whites also use recreational drugs – the opioid crisis brought this to the forefront of our attention with my home state and Appalachia in general being disproportionately harmed.

We are identifying deeper explanations to explain race and crime (education, barriers to employment, war on drugs, etc.), but I believe there’s more to it. We need to dig deeper to have a better understanding of root explanations for how these factors disproportionately affect individuals across racial groups. Social norms and culture surely play a role, but understanding the interplay between government policies and culture, for example, is complex and not easily understood.

The housing market and home ownership disparities provide another interesting area to study systemic racism. Richardson and Black outline how through the 1960s there was overt and explicit systemic racism in housing—by the US government! Many laws and regulations were passed and enforced for the purpose of not lending to Black applicants, not allowing Black residents to move into certain neighborhoods, and the forced removal of Black neighborhoods for urban renewal. This led to less mobility, lower home ownership rates, more racial segregation, and less ability to accumulate wealth for Blacks. The legacy of these racist laws persists today.

Although the policies are not overt, many current regulations (zoning, banking and loan requirements, less competition among banks) have similar unintended consequences. Furthermore, the root causes of loan denial and lower home ownership by Blacks can largely be explained by other factors than race, such as income, marital status, and FICO scores. However, this puts us in a similar boat as with race and crime. Why do Blacks have disproportionately lower income or FICO scores, for example?

Throughout all the essays, a similar theme emerges. Systemic racism, however defined, can not and does not explain differences in crime, arrests, and incarceration rates or home ownership rates across racial groups. What does explain these differences is past and/or current government policies and regulations that either explicitly or implicitly promote lack of opportunities for Blacks compared to Whites. Less government intervention and more market freedom should be pursued to increase income and wealth and decrease poverty rates.

Increasing quality educational attainment, ending programs that disincentivize a traditional family structure, and eliminating barriers to employment such as minimum wage laws and occupational licensing will do more to improve crime statistics and home ownership rates for Black Americans than claiming systemic racism where none may exist.

These five essays by people of diverse backgrounds and perspectives share common threads. Their definitions of systemic racism vary, but I doubt that many people will be too upset. Definitions are sufficiently close that discussion can proceed without too much confusion.

One key insight is that different outcomes among races is not itself evidence of racism. This is obvious to most readers of these essays, but not to distressingly large portions of the population. If it were obvious to them, then popular narratives purporting to establish systemic racism would not survive. Professor Reilly most strongly voices his disdain for the intellectual laziness of such narratives. Other factors besides racism could explain the disparities.

Narratives based on lazy, cursory, or even intentionally misleading analysis are dangerous. First, they divide the nation, pitting groups against one another. Second, by missing the cause of the disparate outcomes, proposed solutions often fail to help, and often hurt. In many cases, no solution is even necessary, because the differences among groups are perfectly reasonable. How could anyone rationally expect groups with a modal age of 27 to have comparable incomes or wealth as a group with a modal age of 58? Most would not -- until reports frame this as simply, “Blacks have lower incomes and wealth than Whites.”

These five essays dig deeper than that. They recognize that any systemic behavior, including racism, can’t persist unless it is driven by a very strong cultural norm or is supported by government rules that, whether intentional or not, lead to disparate outcomes. To the extent these essays find systemic racism -- and they do find it -- its source is misguided government policy.

Professors Black and Richardson make a persuasive case that the federal government’s Federal Housing Authority (FHA) and The Home Owners’ Loan Corporation had been significant sources of explicit discrimination against Blacks until the Fair Housing Act of 1968. Segregated neighborhoods were the norm. Even the widely hailed G.I. Bill required mortgages to be FHA Insured. Although this itself did not discriminate, FHA loans explicitly barred large numbers of Blacks from the program without any economic justification. The result of these two laws is that only a vanishingly small number of Blacks qualified.

Competition in mortgage lending is much stronger now than in the 60s and 70s, when savings and loan institutions were the prime mortgage lenders, and regulators today are much more diligent. Concerning homeownership rates, Professor Black writes that, “…much of the [remaining] difference can be attributed to income, marital status and credit scores.”

Professor Richardson writes that the Dodd-Frank Act capped mortgage fees, thus wrecking the supply of small mortgages. Because Blacks and hispanics tend to seek smaller mortgages, this lack of credit hurts them more than Whites. The simplest and most direct way to fix the problem is to eliminate the cap on mortgage fees.

Professor Williamson Kramer and I reach similar conclusions regarding crime. Differences in crime rates and incarceration rates among races do exist, and they are distressingly persistent. We argue that this persistence traces to laws and regulations implemented by ostensibly well-meaning governments. For example, minimum wage laws prevent low-skilled workers from getting a toehold in the workplace. Occupational licensing serves as a barrier to entry into trades ranging from hair stylists to electricians. Dysfunctional public schools handicap protected minorities more than Whites, and the relative dearth of school choice programs shields these schools from competition by providing a captive audience.

By showing that crime is a choice, Professor Williamson Kramer highlights the need to study problems at the individual level. I view the breakdown of the family as fundamental. Professor Reilly sees the necessary first step as dispelling false narratives. For example, the idea that racism tends to lock Blacks and Hispanics out of the labor force is better viewed as selection based on class. He writes, “Jamarrian’ might have a harder time getting on-boarded than ‘Billy,’ but there is little evidence that ‘Marcus Blackman’ or ‘John Lopez’ would.”

The overriding message of these essays is, “Let’s stop dividing people over false narratives and focus on the real issues.” Yes, let’s do that.

Reading through the essays from my talented co-authors, Harold Black and Ramon DeGennaro, honed but did not alter my perspective on “systemic racism.'' The term is a vague and ethereal one, which often ends up meaning almost nothing when confronted with modern multi-variate analysis.

 Dr. Black, although more of a specific subject matter expert than I am, makes a point very similar to that in my piece, noting that: “It has become convenient for many to assume that systemic racism occurs whenever there are racial disparities.” For example, in his field of housing policy, Black notes that the 2019 U.S. rate of home-ownership “was 73.3 percent, while that for Blacks was [just] 42.1 percent.” The reason typically provided for this is racial bigotry or “systemic racism:” a 2023 report from CNN pungently pointed out that “one major lender accepted over 75 percent of applications from Whites while denying over 50 percent of Black applicants.”

However, in response, Black notes an obvious but rarely made point: turning down profitable loans simply to enjoy the ‘rush’ of bigotry would be insane behavior for a bank. Citing Choi, he points out that B/W gaps in home ownership close sharply – by 31% in the case of the first variable and 27% re the second – when adjustments are made for household income, marital status, and credit score. Amazingly, some 33% of Black households have levels of credit use and eligibility that are “insufficient to generate a credit score (italics mine),” and taking factors like this into account largely closes the racial gap in access to owned property.

Dr. DeGennaro’s paper takes a different tack, arguing that some current gaps and trends exist which can be called “systemic,” and which do on average disadvantage Blacks and other “people of color.” However, the targets of my fellow center-right writer are explicitly not those preferred by mainstream academia. He argues at one point that “minimum wage and occupational licensing laws serve as barriers” to POC and others seeking good jobs, and at another that “minorities tend to have less formal education” and less access to charter schools than Whites. Most notably, DeGennaro identifies the welfare-sped “collapse of the family structure” as the largest single cause of contemporary structural issues in the Black community.

I agree with DeGennaro on essentially all of the problems he identifies and solutions he suggests to them. However, a pesky question which arises is: what does this have to do with (current, conventionally defined) racism? The primary reason Blacks and Hispanics have lower levels of advanced education than Whites, in 2023, is not Jim Crow bigotry but rather the plain fact that we are doing a lot worse in secondary school. The mean-average Black SAT is 941, while that for Hispanics falls under 990. Whites are more than 100 points ahead at 1118, and Asians (Schroidinger’s Minority) beat them.

Further, this seems to be due far more to dubious study habits than to any sort of oppression. Recent data from the hardly-rightist Brookings Institute indicates that Caucasian school-children study roughly twice as much as Black teens and pre-teens, and Asian kids almost 3x as much. Largely as a result, SAT scores for Black scholars from families that earn at least $200,000 per year have long been below those for White students from households clocking in at just $40,000 annually.

 Similarly – and to a striking degree – patterns of intra-American family collapse date back to the Great Society of the 1960s rather than to historical ethnic conflict. Additionally, these patterns have become a problem for ALL major groups to an extent which is rarely acknowledged. Per a 2017 CDC report, rates of non-marital “illegitimate” child-bearing for U.S. populations are currently: 35.3% for Whites, 69% for Blacks/African Americans, 65.7% for Native Americans and Alaska Natives, 51.2% for Mexican Americans, 63.6% for Puerto Ricans, and 52.6% for Hispanics generally.

Sweeping patterns of this sort – are we speaking of welfare policy? Feminism? – strike me as being definable as racism only if we adopt the left-bloc definition of that vice as “literally anything which produces disparate group outcomes.” I would warn against doing so.

That said, one excellent point which both of the other writers in this series, especially Dr. Black, do make is that disproportionately many Black Americans are struggling today, due in part to the circumstances of our national past. Obviously, those circumstances – such as “HRA” red-lining policies which impacted Black family wealth – were often racialized. This reality does not imply the existence of any definable system of current racial oppression. Poor White people near where I live in Appalachia are just as broke today, for surprisingly similar reasons. However, it is a reminder that actually fixing the problems of today is more likely to help Black folks than members of almost any other group – and of our shared ethical duty to do exactly that.

If one begins with the belief that systemic racism undergirds the entire U.S. political and economic system, that goes hand in hand with the notion that market outcomes should not be trusted to play fair or solve problems related to systemic racism. Instead, those affected should wait for the political process to play out, becoming passive participants in a tedious political system that relies on a thread of hope:  if certain people are elected, and if they do what they say, and if the policies pass, only then will my life improve. This type of pessimistic outlook must surely impact results of a recent 2023 Wall Street Journal poll, where just 36% of Americans think that the American Dream- “if you work hard, you will get ahead”- still holds true. In 2012, 53% believed it to be true.[1]

The writers of these essays take a different tack: for the most part they explain behavior through the lens of a traditional economic model: choices are made under constraints, or in some cases, barriers to entry. There is a general theme- where systemic racism exists in crime or housing, the antidote is to re-evaluate government policies and regulations.  Persuasively argued, the authors show that time and time again, governments have instigated and perpetuated systemic racism rather than dissolving it. The antidote is a clearer-eyed understanding of how deregulation and markets can solve many of these problems by allowing individuals more freedom to pursue their own goals and dreams.

Claudia Kramer suggests that differences in crime between Black and White people are partially explained by differences in poverty rates, education, and income. These lead to more limited opportunities and a lower opportunity cost of committing crimes, using the well-known Becker model. Her explanation thus focuses on barriers to employment as one of the root causes. The source of those barriers, she argues, is government regulations that create disincentives to work in the social welfare safety net or make it difficult to get access to business credit because of burdensome financial regulations.

Ray DeGennaro identifies that the collapse of the two-parent household is directly tied to a rise in poverty, increased drug use and poor education achievement, that leads to higher crime rates. He notes that our welfare system encourages single parenthood through penalizing childcare and food stamp (SNAP) benefits once a single mother marries. This disproportionately affects Black families, leading to persistent gaps in earnings and wealth. Government programs, meant to help, again are one of the roots of the problem. Harold Black notes that discrimination against qualified minorities for mortgage loans would be “foolish” in today’s competitive market environment, since it would lead to lower compensation for the bank. The large differences in homeownership rates between Black and White families is a product of past FHA federal policies that explicitly forced Black people to live in certain neighborhoods. Craig Richardson notes that this, along with urban renewal policies, resulted in longstanding isolation of Black neighborhoods, disconnected from an economic network of jobs and places to shop. Lastly, Wilfred Reilly helpfully points out the limits of structural racism in explaining economic differences, with Asian-Americans being the highest prospering group in the United States despite having faced discrimination of their own.

For all the persuasive arguments and statistics presented by the authors in these essays,  racism and discrimination are exceedingly difficult to measure in practice. In most regression analyses, racism is “measured” by what’s in the error term, i.e. what’s left over after controlling for a series of observable differences not correlated with race. In other words, there is no variable for “racism.”

For example, if there is a White-owned house and a Black-owned house, and they have the same square footage, bedrooms, bathrooms, neighborhood and lot size, a lower market price for the Black-owned home could be used by some scholars as a measure of systemic racism in the housing market. But it could just as easily be unmeasured quality differences, such as higher-grade amenities in the White home.  The debate over the unmeasured then becomes a claim rather than solid evidence.

The danger of using broader measures of structural racism to explain all differences in economic outcomes is that it creates a metaphorical lead blanket wrapped around an individual, potentially leading to a sense of powerlessness and lost hope. While racism and discrimination certainly exist, the approach employed by these essayists allows for hope, encouragement and upward mobility based on individual freedom and initiative, while mindful of the serious headwinds that may occur along the way.

[1]  Cited in Lawler, Dave. “Americans think the American dream is dying.” Axios, 11/25 at https://www.axios.com/2023/11/25/american-dream-poll-wealth-inequality

It is fashionable to claim, as does one scholar, that “systemic racism pervades nearly every aspect of American life, from policing to health care to employment to housing.”[1] But the truth may be otherwise. In a Liberty Fund discussion on systemic racism in education and healthcare, the authors questioned whether systemic racism was as pervasive as some claim. The same is true in this current discussion of systemic racism in housing and crime. Regarding housing, in his essay “Systemic racism in the housing market,” Professor Richardson and I are in agreement that the driving force behind racism in housing is – or was – the Federal government with its New Deal agencies: the Home Owners Loan Corporation (HOLC) and the Federal Housing Administration (FHA).

Although the HOLC refinanced loans to Black homeowners, its legacy was to delineate neighborhoods by risk and to color code them. The riskiest areas were colored red, leading to the term redlining. The risky neighborhoods faced lower appraisals and lower new home construction. The FHA refused to guarantee new mortgage loans to Black borrowers which lessened the incidence of Black home ownership not only in Black neighborhoods but in all neighborhoods, as the FHA would not guarantee loans to Blacks regardless of the location of the home. Although the Federal government is no longer explicitly practicing discrimination, its prior actions no doubt had an adverse impact on Black homeownership.

Professor Richardson also shows how more recent government actions were implicitly racist through zoning laws at the local level and the Dodd Frank Banking Act at the national level. One interesting aspect of Dodd Frank was that the costs of implementation caused many poorer customers of banks to be dropped by their banks. One large bank stopped offering credit cards to approximately 15% of their customers mostly because they were deemed too risky. Certainly these were unintended consequences but the intriguing question is whether cities which become dominated by minorities continue the previous zoning practices or seek to rectify them.

The essays on crime by Professors DeGennaro and Kramer are similar. DeGennaro considers the effects of variables such as education, employment barriers, drugs, and the collapse of the nuclear family on Black crime incidence. Kramer writes about the impact of government welfare programs, occupational licenses, and access to credit. All are important and all play a role in the statistics. The essay by Professor Reilly questions the systemic racism narrative in policing by noting that the work of Fryer and his own work contradict the notion that Blacks are more harshly treated than Whites by police.

In a sense, we all are children of Thomas Sowell and as such should question the use of univariate statistics in analyzing these problems. For example, when the claims of racial discrimination in mortgage lending have been analyzed with multivariate analysis, the conclusions have been mixed at best. Most of the comparisons done here and elsewhere have just looked at raw disparities. For example, in housing the differential often cited in home ownership would be valid only if the two populations were identical except for race. This is certainly not the case. The same is true for crime but as DeGennaro and Kramer point out, this is not the case here either. Thus, one direction for future research will be to subject both housing and crime to analysis within similar cohorts and to apply multivariate analysis where appropriate.