aTypical Joe: a gay New Yorker living in the rural South

Tuesday, April 08, 2008

The truth about racial sterotypes and spending

Bill Cosby has famously accused blacks of spend money unwisely, buying expensive sneakers rather than investing in their kids’ education and thereby reinforcing harmful stereotypes.

I have to admit that I have been unsure of what to think myself. I’ve tended to choose the more generous notion that such spending is in line with the nouveau riche, who just haven’t yet learned how best to spend their money, something I can also relate to.

Research by Erik Hurst and Kerwin Charles has definitively resolved my doubts. Chicago GSB Magazine:

The anecdotal evidence seems to be everywhere. “There’s a perception that if you go into poor black neighborhoods, the value of cars is much higher there than in comparable-even white, middle-class-neighborhoods,” said Hurst, professor of economics and Neubauer Family Faculty Fellow. And, in fact, he found supporting data eight years ago with Kerwin Charles, Steans Family Professor in Education Policy at the university’s Harris School of Public Policy Studies and visiting professor for 2007–08 at the Becker Center on Chicago Price Theory at the GSB. They stored the idea away while they worked (together and independently) on other studies about racial wealth differences.

When Cosby made his remarks in 2004, Hurst, who is white, and Charles, who is black, had been focusing on conspicuous consumption and the signaling value it communicates. The resulting study, “Conspicuous Consumption and Race,” shows that blacks and Hispanics spend 30 percent more than whites on clothing, cars, and jewelry—an amount that averages out to around $2,000 per year per household. What’s more, blacks and Hispanics are spending less on education and health care and saving less money.

The reason? Status, according to Hurst and Charles. Because blacks and Hispanics have lower income on average, they’re more likely to be perceived as poor. Wearing nice clothes, driving a flashy car, and sporting fancy jewelry, they hope, shows other people that they are not poor.

What’s more, white people do it, too, their research shows.

In comparing spending data for whites in southern states with that of whites of comparable income in the Northeast, they discovered that southern whites outspend northeastern whites when it comes to highly visible, highly portable consumer goods that denote status. “People do care about their position in society and will work hard to signal their relative rank,” Hurst said. “If people don’t know your income and you want to show them, the way to do it is to consume visible goods. You see it among blacks, whites, and Hispanics.”