Yes, there are. It's called finite capital.

wut. I'm pretty sure that the large majority of startups that go out of business every year do not do so because their owners chose to let them. They went out of business because they made losses and their owners ran out of capital to keep them afloat.

You realize that this cannot continue indefinitely, right? Again, finite capital? And that everyone in the thread that you are arguing with is talking about the long term, right?

And? So what? He's paying a price, isn't he? He has less profits to reinvest in expanding the business, and his firm will tend to suffer compared to firms that do not make this mistake, and who instead retain those excess profits for reinvestment, all else being equal.

Sure, but discrimination does not necessarily lead to financial ruin. A firm earning a subnormal profit can be still be making a profit. And a firm making a loss can still survive if the owner has outside income which he uses to subsidise it.

So any firm that pays out dividends is apparently making a "mistake" because it can't reinvest those profits?

It is called time preference imo.

imo there is way too much market efficiency being assumed ITT.

I don't dispute that. I dispute that discriminating firms will necessarily be driven out of business based on the evidence that dividend paying firms haven't all been driven out of business. The discriminatory hiring practices can produce a "psychic dividend" to their prejudiced shareholders. This is similar to why firms can undertake "socially responsible practices" which sacrifice some profit, because the shareholders value it.

Well I may be wrong, but I think what he is trying to say is not necessarily that those firms will be driven out of business, but that firms that do not engage in such practices will profit at the expense of that discriminatory firm, as they will tend to be operating closer to "optimal efficiency," if you will. That discrimination is a real opportunity cost. Now, whether or not that cost is worth it is up to the individual and subjective preferences of the consumer.

Nichlemn, the firms will not necessarily be driven out of business, but they will experience a decrease in profit margins. This will drive marginal producers out of business, and it will cause capital to flow to the firms which are taking advantage of the comparatively cheap labor.

Yes, some racist shareholders may decide to continue to invest in the companies which only hire whites, but most are more interested, rather, in maximizing their own gains. To argue otherwise is simply absurd.

We need to make some assumptions about these discriminating firms. Is part of the reason they're discriminating is that they don't actually realise how costly it is for them to do so? In that case you could see discriminating firms going out of businesses because of their underestimation of costs. However, if the firms are aware that discrimination costs them but do it anyway, we should only expect discrimination to be practiced by the firms that can afford to do it. Even though random fluctuations could mean these firms become unprofitable in the future, they can simply choose to end discriminatory practices when it puts them in too much jeopardy.

The fact that the discrimination exists at all in the first place proves that there are people who are willing to pay money to satisfy their prejudice. So long as enough of them exist, it should continue, regardless of the preferences of the vast majority of the population.

I guess I am failing to see what exactly the problem is with any of this.

Well, out of "Firms can discriminate without it causing them to go out of business, discrimination is bad, therefore we should do something about it", I'm only arguing the first point.

It doesn't matter!

Efficient firms don't just try to stay afloat... they try to maximize profit. Those that do engage in practices that purposely forfeit profit for ideological reasons will lose capital, and will fall by the wayside to those who run their firms intelligently.

Do you seriously believe that a firm that is bringing in sizable profits and is staying on top of the competition is going to fire off workers of a certain race and sacrifice capital just to satisfy some irrational hatred for those of another color? Are you sure that somewhere along the line of opposing the posters on this forum who champion the free market that you haven't lost your grounding in reality?

This is not a problem that can be solved through government mandate, as you foolishly assume. In fact, government can exacerbate the problem by externalizing the costs of discrimination, while the free market forces those who discriminate to bear the full costs of their choices.

I don't think anyone was really disagreeing with the first part, tbh, they were just saying that firms would bear the full cost of their choices.

Like AKSpartan mentioned, this isn't going to change with government mandate and in fact, government mandate will probably just make it worse.

You're assuming that monetary profit is all that anybody cares about. Firms will not maximise profits so long as its shareholders have preferences for something else.

Why not? People take actions all the time that cost them monetarily to satisfy preferences that you might find strange or "irrational". Why can't firms, owned by people, do the same thing?

Also, is tubasteve also one of those staunch opponents of the posters who champion the free market that he has lost his grounding in reality, too?

Can you point to where I foolishly assumed this?

http://en.wikipedia.org/wiki/Market_segmentation

I mean after controlling for intelligence of course.

Meh, I think some people are being a bit hyperbolic so as not to get bogged down in specifics that cant actually be known. And I think some people demand too much efficiency in order to consider it a "solution." Obv nothing is absolute, some number of bigots will always be successful, blah blah blah. But random anecdotes dont really do much to dispute the larger point that the market will exert forces towards these "desirable" goals. And if the complaint is that they arent perfect (which is ALWAYS the complaint) then its no big surprise that some people exaggerate how efficient the market would be.

If the complaint is that the market isn't efficient enough, then maybe we should have more economic freedom.

Or an infinite amount of capital and people so there could be an infinite number of firms and then the market would be REAAAAAAAAAALLY efficient.

Besides, market efficiency shouldn't really be my focus; I should be emphasizing that not all firms necessarily attempt to maximize profits, and in some industries it simply doesn't matter due to supply and demand. A monopolist can charge less than his optimal price if he gets more utility from doing so.

Nobody claimed that they do. In fact, when they don't attempt to maximize profits, then racism or sexism will have an ever stronger effect on that firm.

Another case in which there would not be competitive pressure on discriminating firms is when discrimination is a self-fulfilling prophecy. That is, employers initially base pay on incorrect stereotypes, and these stereotypes affect workers' incentives. For example, if employers expect women to be bad at science and pay them less because of this expectation, the return to studying science will be lower for women than for men. Thus women may in fact become worse at science because of the initial stereotype.

See pages 37-47 of these lecture notes (link) for a summary of a formal model of self-fulfilling discrimination.

I agree market forces will exert forces towards these desirable goals. The larger the inefficiency generated by some form of descrimination, the larger the gains one has from exploiting it.

All I'm saying is that labor market inefficiency in the status quo (essentially specialized labor being an extremely illiquid, information-asymmetric resource with massive transaction costs) can lead to instances in which some group is descriminated against and the consequences employers face are pretty limited.

That does not imply that any regulation could fix this problem, or that the problem would worsen if markets were freer.

FWIW I think government-imposed labor market rigidities (both in the micro-sense of worker protections that discourage hiring, etc and the macro-sense of immigration barriers) are some of the worst things governments do on a day to day basis, outside of killing people obv.

T50,

It's discrimination.

Haha thanks. That's one of the spelling errors I always make when I type without rereading, although the word looks absolutely horrible to me as I wrote it.

I guess you can log this in the next thread about public education.

Wage gap is a myth - but still actively used by the feminazis and feminized men.

There was an interesting statistic that women will soon own more assets than men do - if they already dont.

The pussification of America. I'm glad to see that most of the guys here have not abandoned reason.