First, consider historical credit markets. As @MarthaOlney has shown racial discrimination in even basic credit markets would have made it impossible for blacks to get into serious debt. You have to be extended credit to do that and that didn’t happen.
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Blacks were only extended credit when there was collateral, which in historical credit contracts was easy for the lender to repossess.https://www.cambridge.org/core/journals/journal-of-economic-history/article/when-your-word-is-not-enough-race-collateral-and-household-credit/D2E52122527DB8A1A8B6F7E3619114E8 …
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Second, blacks had very high savings rates historically. This was first noted by Tobin (1951) “Relative Income, Absolute Income, and Saving” where the high rate of saving was (once again) due to discrimination.
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Third, the access that blacks did have to wealth building were predicted on racial discrimination. Blacks were more likely to be homeowners in highly segregated areas. But these homes were also of lower cardinal quality and in areas where black home prices were falling.
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Replying to @TrevonDLogan
This point deserves further elaboration—was the fall in home prices exogenous? If the home prices were falling, they were higher before, which would imply higher past rates of wealth accumulation, no?
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Replying to @matthews_bd
Exactly, and, more important, white home prices continued to accelerate. And this homebuying was subsidized by the federal government. In fact, we find whites *less* likely to be homeowners in highly segregated areas as the racial price differential was more acute there.
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Replying to @TrevonDLogan
Exogenous or endogenous, though? Do tax dollars tend to redistribute money from big cities to burbs? The mortgage interest tax deduction theoretically does, but urban landlords can deduct their interest, too, so that’s a wash unless multifamily property owners are less levered.
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Replying to @matthews_bd
Another subsidy is highway construction, which led to greater suburbanization and created jobs held disproportionately by whites.
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Replying to @TrevonDLogan
I think the crux of the issue is whether suburbanization was an exogenous thing that reduced property values, or if it was the result of white city-dwellers expressing a strong/expensive preference not to have black neighbors.
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Replying to @matthews_bd @TrevonDLogan
Because in the latter case—without endorsing the consumer preferences—you’d still treat neighborhood racial composition as an externality, and the question becomes: who should optimally bear the cost of that externality?
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I have a very strong preference for separating utility-maximizing policies from redistribution away from people whose utility functions are judged socially harmful. Ie I’m a Coasian, not a Pigouvian.
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