Rothbard the Urbanist Part 5: Diversity and Discrimination

This 5th installment of the Rothbard Series dovetails well with the most recent post on segregation by guest blogger, Stephen Smith, as well as a post back in July over at Austin Contrarian. 

If you haven’t kept up with our discussion, Murray Rothbard’s classic For A New Liberty can be downloaded free from Mises.org as pdf, web page, and audio book, and you can read the first four parts:

Rothbard the Urbanist Part 1: Public Education’s Role in Sprawl and Exclusion

Rothbard the Urbanist Part 2: Safe Streets

Rothbard the Urbanist Part 3: Prevention of Blockades

Rothbard the Urbanist Part 4: Policing

In the comments of the first post of this series on public education’s roll in segregation, the discussion delved into the topic of discrimination.  Bill Nelson and I shared our thoughts on discrimination by co-op boards, while another guest inquired about my statement, “elitist institutions often exclude others to their own detriment”  (Rothbard’s words further below make a similar case)  I also referred the guest to a great article on the economics of discrimination and a snippet from an article discussing how private streetcar companies fought discrimination:

The Market Resists Discrimination

The resistance of southern streetcar companies to ordinances requiring them to segregate black passengers vividly illustrates how the market motivates businesses to avoid unfair discrimination. Before the segregation laws were enacted, most streetcar companies voluntarily segregated tobacco users, not black people. Nonsmokers of either race were free to ride where they wished, but smokers were relegated to the rear of the car or to the outside platform. The revenue gains from pleased nonsmokers apparently outweighed any losses from disgruntled smokers.

Streetcar companies refused, however, to discriminate against black people because separate cars would have reduced their profits. They resisted even after the passage of turn-of-the-century laws requiring the segregation of black people. One railroad manager complained that racial discrimination increased costs because it required the company to “haul around a good deal of empty space that is assigned to the colored people and not available to both races.” Racial discrimination also upset some paying customers. Black customers boycotted the streetcar lines and formed competing hack (horsedrawn carriage) companies, and many white customers refused to move to the white section.

In Augusta, Savannah, Atlanta, Mobile, and Jacksonville, streetcar companies responded by refusing to enforce segregation laws for as long as fifteen years after their passage. The Memphis Street Railway “contested bitterly,” and the Houston Electric Railway petitioned the Houston City Council for repeal. A black attorney leading a court battle against the laws provided an ironic measure of the strength of the streetcar companies’ resistance by publicly denying that his group “was in cahoots with the railroad lines in Jacksonville.” As pressure from the government grew, however, the cost of defiance began to outweigh the market penalty on profits. One by one, the streetcar companies succumbed, and the United States stumbled further into the infamous morass of racial segregation.

From Jennifer Roback, “The Political Economy of Segregation: The Case of Segregated Streetcars.” Journal of Economic History 56, no. 4 (December 1986): 893–917.

So, now we get to hear what Professor Rothbard had to say about discrimination:

Street Rules

One of the undoubted consequences of all land areas in the country being owned by private individuals and companies would be a greater richness and diversity of American neighborhoods. The character of the police protection and the rules applied by the private police would depend on the wishes of the landowners or street owners, the owners of the given area. Thus, suspicious residential neighborhoods would insist that any people or cars entering the area have a prior appointment with a resident, or else be approved by a resident with a phone call from the gate. In short, the same rules for street property would be applied as are now often applied in private apartment buildings or family estates. In other, more raffish areas, everyone would be permitted to enter at will, and there might be varying degrees of surveillance in between. Most probably commercial areas, anxious not to rebuff customers, would be open to all. All this would give full scope to the desires and values of the residents and owners of all the numerous areas in the country.

It might be charged that all this will allow freedom "to discriminate" in housing or use of the streets. There is no question about that. Fundamental to the libertarian creed is every man’s right to choose who shall enter or use his own property, provided of course that the other person is willing.

"Discrimination," in the sense of choosing favorably or unfavorably in accordance with whatever criteria a person may employ, is an integral part of freedom of choice, and hence of a free society. But of course in the free market any such discrimination is costly, and will have to be paid for by the property owner concerned.

Suppose, for example, that someone in a free society is a landlord of a house or a block of houses. He could simply charge the free market rent and let it go at that. But then there are risks; he may choose to discriminate against renting to couples with young children, figuring that there is substantial risk of defacing his property. On the other hand, he may well choose to charge extra rent to compensate for the higher risk, so that the free-market rent for such families will tend to be higher than otherwise. This, in fact, will happen in most cases on the free market. But what of personal, rather than strictly economic, "discrimination" by the landlord? Suppose, for example, that the landlord is a great admirer of six-foot Swedish-Americans, and decides to rent his apartments only to families of such a group. In the free society it would be fully in his right to do so, but he would clearly suffer a [p. 207] large monetary loss as a result. For this means that he would have to turn away tenant after tenant in an endless quest for very tall Swedish-Americans. While this may be considered an extreme example, the effect is exactly the same, though differing in degree, for any sort of personal discrimination in the marketplace. If, for example, the landlord dislikes redheads and determines not to rent his apartments to them, he will suffer losses, although not as severely as in the first example.

In any case, anytime anyone practices such "discrimination" in the free market, he must bear the costs, either of losing profits or of losing services as a consumer. If a consumer decides to boycott goods sold by people he does not like, whether the dislike is justified or not, he then will go without goods or services which he otherwise would have purchased.

All property owners, then, in a free society, would set down the rules for use of, or admission to, their property. The more rigorous the rules the fewer the people who will engage in such use, and the property owner will then have to balance rigor of admission as against loss of income. A landlord might "discriminate," for example, by insisting, as George Pullman did in his "company town" in Illinois in the late nineteenth century, that all his tenants appear at all times dressed in jacket and tie; he might do so, but it is doubtful that many tenants would elect to move into or remain in such a building or development and the landlord would suffer severe losses.

While Rothbard had some good things to say on how the free market enables diversity in terms of racial discrimination and diversity among and within districts, he missed the opportunity to specifically address ideas relating to Jane Jacobs’ generators of diversity within urban districts other than stating, “commercial areas, anxious not to rebuff customers, would be open to all.”  Jacobs generators of diversity:

1. The district, and indeed as many of its internal parts as possible, must serve more than one primary function; preferably more than two.  These must insure the presence of people who go outdoors on different schedules and are in the place for different purposes, but who are able to use many facilities in common.
2. Most blocks must be short; that is, streets and opportunities to turn corners must be frequent.
3. The district must mingle buildings that vary in age and condition, including  a good proportion of old ones so that they vary in the economic yield they must produce.  This mingling must be fairly close-grained.
4. There must be a sufficiently dense concentration of people, for whatever purposes they may be there.  This includes dense concentration in the case of people who are there because of residence.

Obviously, Jacobs wasn’t referring to racial diversity, and I’m glad she wasn’t because the abuse of the concept has gotten tiresome to me.  She was referring to the types of diversity in the built environment that are necessary to make a urban places vibrant. Nonetheless, Rothbard’s analysis of racial discrimination and diversity could be applied to the built environment, because a landlord would have market incentives to provide as much space as is economically optimal to as many potential tenants as possible, likely forgoing personal preferences and prejudices. Thus, mixing of uses is likely to occur when a landlord is unlikely to discriminate one use over another or give undeserved preference to one type of tenant over another.

I can see a system of fully private ownership emerging into two very distinct patterns: – aglomerative consolidations and bottom-up dispersion of ownership, each existing in certain circumstances.

• One could argue that Jacobs’ generators of diversity would likely exist within large privately-owned districts, but a landowner would likely need to consolidate a significantly-sized district in order to properly capture the positive externalities associated with diversely mixed uses.  At the same time, large, privately-owned gated communities would likely exist in less centralized locations where private space and separation could meet the desires of those who are willing to pay a premium for the extra space.
• In other locations it would be optimal for land to be owned by smaller dispersed entities.  In this case, diversity would simply emerge bottom-up through the free-market process, as it had prior to zoning.  I could imagine that, left unhampered by government coercion, diverse patterns that meet people’s specific needs and natural pursuit of interaction would inevitably emerge through dispersed and competitive ownership of smaller parcels.  (See Mathieu Helie’s Emergent Urbanism)

I would think the larger-scale commercial activity and gated communities will occur in the former, and just about everything else, the later.