David Henderson explains that L.A. Clippers owner Donald Sterling is Exhibit A in support of the thesis – developed by Gary Becker, Armen Alchian, Thomas Sowell, Walter Williams, and other economists – that the market often makes racists act like non-racists.
Of course, one’s income is determined not just by luck of birth but also by choices. Even a risk-averse person might accept that some inequality is necessary to preserve the incentive to work hard. In addition, many individuals make deliberate choices to sacrifice income to improve their lives along other dimensions. For example, a highly talented individual who could have had a high-paying career as an investment banker may instead choose a more satisfying career at a nonprofit or as an academic. By making such a choice, the individual reveals that he or she is better off with the lower income.