Tim Worstall

Discrimination, Right?

Must be. Clearly.

In 2004, blacks paid an average of 7%
interest on new car loans, while whites paid 5% and Hispanics paid
5.5%. 2004 was the most recent year for which data was available.

Certainly it’s possible. But what else, other than race, might influence the rate paid on loans? Risk perhaps? Am I about to say that those without lily white skin are more likely to default on a loan? No, I’m not, but I am going to suggest that those who are poor are more likely to default on a loan.

And what is the distribution of poverty across race like? Well, from a cursory look at the figures, the poverty rate amongst those the Census defines as black is over twice the poverty rate of those they describe as white.

That might indeed be evidence of discrimination against that impoverished group (there are also a number of other standard explanations, like the near annihlation of the family in some groups etc) but the specific connection between those loan rates and the reason for them is the incidence of poverty, not race.

In

8 responses

  1. Roger Thornhill Avatar
    Roger Thornhill

    If it were down to pure race discrimination and not empirical risk weighting some enterprising soul would have moved in and cornered the market in loans to such people.
    Evidently nobody has, therefore I am pretty certain that the shrill accusation of it being purely racially motivated is utter hogwash.

    Reply
  2. llamas Avatar
    llamas

    Heh.
    Around here (Detroit), the dealership that was an absolute byword for allegations of sharp business practices with minority customers was Mel Farr Ford. A large part of the dealership’s business was financing customers with poor credit histories, so there were many, many complaints of high interest rates and other, higher costs of ownership.
    Mr Farr is a retired Detroit Lions football player, and he is African-American. Must be racism, eh?
    llater,
    llamas

    Reply
  3. jameshigham Avatar
    jameshigham

    Am I about to say that those without lily white skin are more likely to default on a loan?
    Let’s just say that certain attitudes exist amongst certain sectors of the populace and leave it at that, eh?
    Tim adds: Err, no, let’s not. My point is that it is poverty and credit ratings causing these higher loan rates, not race or racism.
    We’ve already got the BNP coming round here commenting, let’s not drop conversation to their level shall we?

    Reply
  4. Bruce G Charlton Avatar
    Bruce G Charlton

    The people who do these uncontrolled studies of race (and sex – let’s not forget the sex studies) – where all the important confounding variables are left uncorrected – are incompetent, dishonest, or both.
    The bloggers (and MSM commentators) who regard such studies as evidence of racism are merely ignorant.
    Both the researchers and the commentators are demagogic hate-mongers. *They* are the problem – not racism.

    Reply
  5. Amanda Marcotte Avatar
    Amanda Marcotte

    So, you’re racist and sexist. How are you not a wingnut again?

    Reply
  6. Andrew Paterson Avatar
    Andrew Paterson

    You’re not an analyst are you Amanda?

    Reply
  7. emmanuelgoldstein Avatar
    emmanuelgoldstein

    Discrimination, Right?
    Almost certainly. Some more evidence.
    If it were down to pure race discrimination and not empirical risk weighting some enterprising soul would have moved in and cornered the market in loans to such people.
    Quite. That can’t be a £50 note on the kerb; somebody would have picked it up already.

    Reply
  8. JuliaM Avatar
    JuliaM

    “You’re not an analyst are you Amanda?”
    Obviously, she’s not much of a reader either. Or she just didn’t understand the post in the first place.

    Reply

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