Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed.
PART 6 The Economics of Labor Markets
Chapter 19 of 36 Earnings and Discrimination
Section 13 of 15
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White passengers sat in the front and black passengers sat in the back.
In a 1986 article economic historian Jennifer Roback gave her findings after a study.
The segregation of races on streetcars was the result of laws requiring segregation.
Before these laws were passed racial discrimination seating was rare.
It was far more common to segregate smokers and nonsmokers.
She also found the firms that ran the streetcars often opposed the laws requiring racial segregation.
Providing separate seating for different races raised the firms' costs and reduced their profit.
A railroad company manager complained to the city council: with segregation laws "the company has to haul around a good deal of empty space."
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Roback described the situation in one southern city.
The railroad company did not initiate the segregation policy and was not eager to abide by it.
State legislation, public agitation, and a threat to arrest the president of the railroad were all required to induce the company to separate the races on their cars.
There is no indication the railroad company management was motivated by belief in civil rights or racial equality.
The evidence indicates their primary motives were economic, because separation was costly.
Company managers may or may not have disliked blacks, but they were not willing to forgo the profits necessary to indulge such prejudice.
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The story of southern streetcars provides a general lesson.
Business owners are more interested in making profit than in discriminating against a particular group.
When firms engage in discriminatory practices, the source of the discrimination often lies not with the firms themselves but elsewhere.
The streetcar and railroad companies segregated whites and blacks because discriminatory laws, which the companies opposed, required them to.
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Why did southern governments pass racial segregation laws when businesses didn’t want them?
ChatGPT:
Here’s an explanation, building directly on Mankiw’s summary and Jennifer Roback’s findings.
Segregation laws (Jim Crow laws) were not driven by business interests — they were driven by political and social pressures from white voters who wanted to enforce racial hierarchy.
Before the laws, many private companies (like streetcar lines and railroads) were not segregating voluntarily because:
It was costly — requiring separate sections, extra cars, and inefficient use of space.
It reduced profits — firms had to “haul around empty seats” to comply with segregation.
Managers’ incentives were economic, not ideological: they wanted maximum ridership, not social engineering.
However, politicians and local governments responded to pressure from white voters who:
Believed in maintaining social separation between races.
Viewed shared public spaces (like streetcars) as symbolic of racial equality, which they opposed.
Could use segregation laws to signal commitment to white supremacy and secure votes.
So, the government compelled businesses to adopt racial segregation that most firms would not have chosen voluntarily.
The Economic Lesson
This episode illustrates a core point of Mankiw’s and Roback’s analysis:
In a competitive market, discrimination is costly.
Firms that discriminate lose efficiency and profits, so competition tends to drive out prejudice unless laws or social institutions force it.
In other words, market forces push toward inclusion, while segregation laws artificially imposed exclusion.
Southern governments passed segregation laws because political forces, not market forces, demanded them.
Businesses opposed them because segregation raised costs and reduced profits.
This shows discrimination often persists not because of economics, but in spite of it — when governments or social norms override market efficiency.
… …
government does not have profit motive
seifu wa rieki no iyoku o motanai
政府は利益の意欲を持たない
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