Monday, January 20, 2003

Sauce for the firm is not sauce for the government 

One of the reasons I wanted this to be a group blog was that I would on occasion have to disagree with someone else on the blog. I think that makes for a healthy blog. Michael Lopez and Jeff Kahane at HigherEd Intelligence run a lively blog in part through their differing views. So today I am going to feel good about the fact that I disagree with Dave on his previous post.

First off, I dislike the current use of the word "discrimination". Someone with "discriminating tastes" in wine, cars or interior design has something potentially good and useful -- an ability to make careful, nuanced choices among many alternatives. I realize that proponents of affirmative action will say I'm splitting hairs here, but that's just the point: In private practice, splitting hairs is exactly what one should do. Insurance companies are private firms whose purpose is to make a profit. They have to find ways to ascertain the risks in writing a policy and price them so that they do not lose money.

When I moved from here to California about ten years ago for an extended leave, I had to notify my insurance company that I was in LA county. Immediately, my premiums doubled. Was that fair? Of course it was; imagine if a law said the insurance company shouldn't do that. I could then move to St. Cloud just long enough to get an insurance policy and then return to LA. Rational insurance companies would be forced to charge the same for insurance in all states, shifting the costs of auto insurance onto rural policyholders from their urban counterparts. As a result, fewer people in the rural areas would keep policies, while more dangerous drivers would be able to afford insurance in urban areas.

You wouldn't want this. But it's the hypothetical law that has gummed things up. In a laissez-faire marketplace, creative insurance companies learn how to assess risk and price insurance higher for those engaged in riskier behaviors. Insurance companies that fail to do this receive wonderful feedback in the form of losses. (This is a pet peeve of many economists: It's not the profit system, but the profit-and-loss system.)

The problem for government is that it has no feedback mechanism. That's why I've asked over and over, "how do you know when you have enough diversity?" A private university can engage in the type of behavior because at the end of the day, there's an income statement that says whether or not they've hit the balance correctly. There is no such pressure, however, at public universities. As pointed out on Best of the Web today and in particular by Josh Chafetz, the Supreme Court has already ruled on whether or not racial diversity for the sake of race itself is constitutional. It's not: Justice Lewis Powell state in Bakke that "Preferring members of any one group for no reason other than race or ethnic origin is discrimination for its own sake." In other words, Chafetz says, "your end goal can't be racial diversity; it has to be the diversity of viewpoints that (you have to argue) can only come with diversity of skin color." And there's nothing that says that's true.

The Bush administration briefs have not argued against the point that diversity of viewpoint correlates with diversity of skin color, partly, as Chafetz notes (correctly IMO), because you don't make big pushes against precedent. Bakke exists and 25 years of law have built on (a perhaps incorrect) interpretation of Powell saying racial preferences are OK as long as you can say they're not quotas. Those in private universities who continue to pretend that racial preferences promote viewpoint diversity have to answer to boards of trustees that see declining alumni contributions and dropping out of the USN&WR rankings and start asking why. Those pressures do not come from trustees of state institutions. That's why it's vital that some day soon the Supreme Court rule that all of these preference programs --including Dave's -- are contrary to the Fourteenth Amendment. Particularly at a state institution, everyone must have equal protection of their right to admission to higher education. Even boring white guys.