I’m guessing that almost everyone has seen or heard about Senator Obama’s speech on race. If you haven’t check it out on youtube or read the transcript. I enjoyed the speech, and agree with many of the commentators that Obama did an excellent job broaching one of the most divisive issues in America today, and he did it with nuance uncharacteristic of a presidential candidate. We’ll see whether or not that nuance has a big impact on the electorate. I was particularly impressed with the way he captured white anger at certain features of the American racial system these days:

Barack Obama’s Speech on Race – New York Times:

In fact, a similar anger exists within segments of the white community. Most working- and middle-class white Americans don’t feel that they have been particularly privileged by their race. Their experience is the immigrant experience – as far as they’re concerned, no one’s handed them anything, they’ve built it from scratch. They’ve worked hard all their lives, many times only to see their jobs shipped overseas or their pension dumped after a lifetime of labor. They are anxious about their futures, and feel their dreams slipping away; in an era of stagnant wages and global competition, opportunity comes to be seen as a zero sum game, in which your dreams come at my expense. So when they are told to bus their children to a school across town; when they hear that an African American is getting an advantage in landing a good job or a spot in a good college because of an injustice that they themselves never committed; when they’re told that their fears about crime in urban neighborhoods are somehow prejudiced, resentment builds over time.

Like the anger within the black community, these resentments aren’t always expressed in polite company. But they have helped shape the political landscape for at least a generation. Anger over welfare and affirmative action helped forge the Reagan Coalition. Politicians routinely exploited fears of crime for their own electoral ends. Talk show hosts and conservative commentators built entire careers unmasking bogus claims of racism while dismissing legitimate discussions of racial injustice and inequality as mere political correctness or reverse racism.

Just as black anger often proved counterproductive, so have these white resentments distracted attention from the real culprits of the middle class squeeze – a corporate culture rife with inside dealing, questionable accounting practices, and short-term greed; a Washington dominated by lobbyists and special interests; economic policies that favor the few over the many. And yet, to wish away the resentments of white Americans, to label them as misguided or even racist, without recognizing they are grounded in legitimate concerns – this too widens the racial divide, and blocks the path to understanding.

My law student roommate summarized the thrust of Obama’s speech thusly: “The cure for racism is populism.” I don’t know if I agree 100%, but there is certainly a large element of that optimistic, trans-racial populism we’ve come to expect from Obama.

In any case, in honor of this speech, and especially the nice game theory reference (“…zero-sum game…”), I offer this tidbit from the Freakonomics guest blogger, economist Ian Ayres. He’s looked at a few studies about tipping and race, amongst cab drivers and servers. Here’s the key result from the cab driver study:

The Racial Tipping Point – Freakonomics – Opinion – New York Times Blog:

African-American cab drivers, on average, were tipped approximately one-third less than white cab drivers.

I always knew I didn’t like the tipping framework for paying servers and cab drivers and other such service providers, but I had not thought of this particular (and seemingly obvious) consequence. The blog goes on to ask some useful questions about trying to fix this disparity:

If the restaurants posted “no tipping” signs or instituted “service compris” (instead of putting a place on the credit card receipt for customers to write in the tip), the size of the racial disparity would almost certainly decrease.

But the harder question is whether the racial disparate impact of tipping is legally justified by the legitimate interest of businesses to enhance customer service. Not all employer practices that produce racial disparities violate Title VII. But the employer bears the burden of proving that the policy of promoting/allowing tipping is “consistent with business necessity.”

Today we think of tipping as beyond the scope of legal regulation. But in researching my Yale article I was surprised to learn that in the early twentieth century, progressives in seven states passed anti-tipping statutes that, to varying degrees, outlawed tipping.

At some point, I’ll write up some fabulous research on jobs and prisons done by Bruce Western and Devah Pager (both separately and together) but, to sum up, race matters in lots of ways, including well within the formal economy, despite statements to the contrary.

Preview of coming attractions: A post on how economists (fail to) debate trade and wages, featuring works by Paul Krugman and Gregory Mankiw.