A Sterling Economics Lesson

by Don Boudreaux on May 4, 2014

in Civil Society, Competition, Complexity & Emergence, Current Affairs, Seen and Unseen, Sports

Here’s a letter to the Washington Times:

Regarding the privately recorded racist remarks by L.A. Clippers owner Donald Sterling (“NBA’s Sterling hypocrisy on racism,” May 4): There’s an important angle to this story that everyone but a few economists on some blogs (such as David Henderson at EconLog) is missing.

All agree, with good reason, that Mr. Sterling is a racist in private.  Yet Mr. Sterling acts like a non-racist in public. Counting Blake Griffin – whose father is black and mother white – 86 percent of Mr. Sterling’s team is black (with, of course, Mr. Sterling paying all of these players salaries that are extraordinarily high).  And Mr. Sterling has also made sizeable contributions to the NAACP.

Why does Mr. Sterling only talk the racist talk but not walk the racist walk?  The reason is market competition.  Were he to act like a racist in public – say, by employing only white players – his team would be worse on the court and worth less on the market.  Mr. Sterling can either make as much money as possible or he can indulge his racism, but the market prevents him from doing both.

Because Donald Sterling chose not to act​ publicly like the racist that he is, we have here strong evidence that the competitive market is a powerful force for reducing racism by confronting racists every day – rather than only occasionally, such as when disgruntled mistresses leak private recordings to the media – with the costs of their prejudices.

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030​

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