Discrimination Due to ESG Will Raise Prices

It's Not Just Inflation

If you aren’t familiar with the economist Gary Becker, you should be. You use the ideas he studied every day in your life. He took the ideas of economics and applied them to concepts never before looked at through the lens of economics.

A great comment on my last blog talked about how a small independent business was forced by a big corporation (Tyson) to come up with an ESG policy for their business if they wanted to continue to do business with Tyson.

That’s irritating. Try and put yourself in the businessperson’s shoes. If you are like 99.9% of the businesses out there you don’t discriminate. You want to keep the client because you like the revenue they provide you. So, you just make up some bullshit statement to adhere to Big Corporate’s edict so you don’t lose the business. Then, you go about your business.

However, what happens when Big Corporate forces you to enroll in their CRT diversity class if you want to do business? What do you do then?

In 1957, Gary Becker published his book, The Economics of Discrimination. This should be required reading in high school. Economics professor Kevin Murphy dissected the book in this piece back when Gary Becker passed away. He wrote, Employing this approach, Becker made a central observation: discrimination has consequences for people being discriminated against, as well as for the people engaged in it. If discrimination depresses the wages of black workers relative to those of similarly qualified whites, a discriminator who, say, does not want to hire black staff will have to pay more to hire white employees. This creates two costs: the black worker is paid less, and the discriminating employer incurs greater expense to obtain the same productivity.

Becker predicted that over time black workers would be pushed out of places where discrimination was prevalent and disproportionately work where discrimination was least evident. This, in turn, would reduce the impact on black workers relative to a world where they were allocated randomly across employers. Becker’s economic model reduced a charged social issue to an economic fundamental, supply and demand.

Read the whole linked article but better yet, the book to truly understand what Becker was getting at. At the time because of the way the world was competition alone couldn’t correct the scourge of discrimination. However, the US has progressed today to the point where there is little to no discrimination and there is an entire legal framework supported by US Supreme Court decisions.

America is not a racist country and there is more opportunity here for anyone than anywhere else in the world.

ESG advocates will point to disparities in wages between one group and another group. The problem with their argument is generally the difference can be boiled down to two things:

• how far they went in education (non-grad, high school grad, college grad, advanced degree grad)

• the choice to have children and if they were married when they had them

ESG advocates are generally against things that will solve the education problem like school choice. ESG advocates are generally for government programs that crush the formation and support of nuclear families. Maybe VP Harris can Venn diagram it for us.

My prediction is that we will see the same when it comes to companies that actively engage in ESG. They will face higher costs. That goes for the government as well. The US government will pay more for goods and services in order to engage in active discrimination using ESG as the benchmark, not race.