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It costs more to lend money to black people even if FICO is held equal [1]. The lender doesn't care about your race, they care about your probability of repayme

It costs more to lend money to black people even if FICO is held equal [1]. The lender doesn't care about your race, they care about your probability of repayment. Is it legitimate to charge people higher interest rates solely because they are black? It costs more to employ a woman, since she'll get sick more and poses a higher risk of vanishing into babyland. Is it legitimate to lower her wage commensurately? I don't know the answer to these questions. But unless you are willing to bite the bullet and endorse the racial/sexual discrimination I propose above, you don't have a clear answer either. [1] See this comment for calculations: https://news.ycombinator.com/item?id=13156153#13167650 https://news.ycombinator.com/item?id=13156153#13167650

deleted 10y ago
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benchaney 10y ago
I think you are confusing two different issues. It is more expensive to lend money to black people because race is a predictor of poverty. Wealth can be measured directly, so discriminating based on race isn't really an effective strategy (ethics not withstanding). In the cost of fuel argument the root cause of the increase in cost is the weight of the passenger (it isn't just a predictor). The gender discrimination case is more complicated, but if companies want to modify wages based on expected medical leave required, I don't really see a problem with that.
- yummyfajitas 10y ago
  No, that's simply not true. See the comment I linked to. A black person with a 600 FICO has a 40% chance of default, compared to an Asian person with a 600 FICO who has only a 20% chance of default. With identical financial indicators the black person is less likely to repay. Race discrimination is directly profitable, given the available data [1]. Now it's true that in this example it's just a predictor. The very nature of lending is stochastic. Then again, airplane crashes as a function of weight distribution are also stochastic. [1] It's theoretically possible - likely even - that some hidden data may reduce the influence of race. For example, lenders are required (more or less) to ignore location data since that could be "redlining".
  - gragas 10y ago
    >A black person with a 600 FICO has a 40% chance of default, compared to an Asian person with a 600 FICO who has only a 20% chance of default. There's your answer. You have it all backwards and think that creditors are oppressing certain races, when in reality the creditors are merely quantifying hard evidence about each race. To be absolutely clear, I'm not saying being black definitively means you will default. But it's absolutely ridiculous to ignore hard evidence. Blacks default 40% of the time in that scenario and Asians default 20% of the time. That's not racist. Blacks are not inferior. Yet, it is untenably true. It is fact. If that upsets you, so be it. It is not the duty of creditors to ignore facts and appropriate costs.
    - yummyfajitas 10y ago
      That's fine. You seem to have figured out your ethics. But for those folks here who don't view this situation similarly, I think the airline example is also a tricky case. I certainly have no good answer.
      - snovv_crash 10y ago
        It isn't ethics or your thinly veiled accusations of racism, it is cultural differences. Asian cultures typically have a strong heirarchy, with respect being given to those to whom a debt is owed. Black culture in the US, for various valid reasons involving armed struggle and persecution, has developed a strong "stick it to The Man" mentality. Given these differences, repayment rates being higher for those who are culturally asian makes perfect sense. Thinking that attitudes towards authority don't bleed through into behaviour for things like debt repayment is naïve.
        yummyfajitas 10y ago
        I'm not accusing anyone of racism. I'm saying simply that a consistent, principled ethical system which allows height discrimination also seems to allow race or sex discrimination. So if you reject the latter, it seems like you should also reject the former (or perhaps provide some more detailed explanation of your ethical system). My only point here is "X seems to go with Y, but Y seems problematic so maybe X is too? Lets think carefully." The particular theory you bring up doesn't change this. According to you, "black" -> "stick it to the man mentality" -> "not pay back loan". That doesn't answer the ethical question of "is it acceptable to make fewer loans to blacks on the basis of black -> {whatever, doesn't really matter} -> default?" This is more or less analogous to "is it acceptable to charge more to tall people because tall -> {whatever} -> bad thing?" Maybe there is some clear and relevant distinction to be drawn. If so, what is it? I.e., what's the ethical principle, and how does it distinguish between these two cases?
KON_Air 10y ago
But all of those are statistical discriminations, which are largely blind to sex and race, it is the application which wanders into that dreaded racial/sexual discrimination zone, but those are social constructs anyway.

deleted 10y ago

[deleted]

benchaney 10y ago

I think you are confusing two different issues. It is more expensive to lend money to black people because race is a predictor of poverty. Wealth can be measured directly, so discriminating based on race isn't really an effective strategy (ethics not withstanding). In the cost of fuel argument the root cause of the increase in cost is the weight of the passenger (it isn't just a predictor). The gender discrimination case is more complicated, but if companies want to modify wages based on expected medical leave required, I don't really see a problem with that.

yummyfajitas 10y ago
No, that's simply not true. See the comment I linked to. A black person with a 600 FICO has a 40% chance of default, compared to an Asian person with a 600 FICO who has only a 20% chance of default. With identical financial indicators the black person is less likely to repay. Race discrimination is directly profitable, given the available data [1]. Now it's true that in this example it's just a predictor. The very nature of lending is stochastic. Then again, airplane crashes as a function of weight distribution are also stochastic. [1] It's theoretically possible - likely even - that some hidden data may reduce the influence of race. For example, lenders are required (more or less) to ignore location data since that could be "redlining".
- gragas 10y ago
  >A black person with a 600 FICO has a 40% chance of default, compared to an Asian person with a 600 FICO who has only a 20% chance of default. There's your answer. You have it all backwards and think that creditors are oppressing certain races, when in reality the creditors are merely quantifying hard evidence about each race. To be absolutely clear, I'm not saying being black definitively means you will default. But it's absolutely ridiculous to ignore hard evidence. Blacks default 40% of the time in that scenario and Asians default 20% of the time. That's not racist. Blacks are not inferior. Yet, it is untenably true. It is fact. If that upsets you, so be it. It is not the duty of creditors to ignore facts and appropriate costs.
  - yummyfajitas 10y ago
    That's fine. You seem to have figured out your ethics. But for those folks here who don't view this situation similarly, I think the airline example is also a tricky case. I certainly have no good answer.
    - snovv_crash 10y ago
      It isn't ethics or your thinly veiled accusations of racism, it is cultural differences. Asian cultures typically have a strong heirarchy, with respect being given to those to whom a debt is owed. Black culture in the US, for various valid reasons involving armed struggle and persecution, has developed a strong "stick it to The Man" mentality. Given these differences, repayment rates being higher for those who are culturally asian makes perfect sense. Thinking that attitudes towards authority don't bleed through into behaviour for things like debt repayment is naïve.
      - yummyfajitas 10y ago
        I'm not accusing anyone of racism. I'm saying simply that a consistent, principled ethical system which allows height discrimination also seems to allow race or sex discrimination. So if you reject the latter, it seems like you should also reject the former (or perhaps provide some more detailed explanation of your ethical system). My only point here is "X seems to go with Y, but Y seems problematic so maybe X is too? Lets think carefully." The particular theory you bring up doesn't change this. According to you, "black" -> "stick it to the man mentality" -> "not pay back loan". That doesn't answer the ethical question of "is it acceptable to make fewer loans to blacks on the basis of black -> {whatever, doesn't really matter} -> default?" This is more or less analogous to "is it acceptable to charge more to tall people because tall -> {whatever} -> bad thing?" Maybe there is some clear and relevant distinction to be drawn. If so, what is it? I.e., what's the ethical principle, and how does it distinguish between these two cases?

KON_Air 10y ago

But all of those are statistical discriminations, which are largely blind to sex and race, it is the application which wanders into that dreaded racial/sexual discrimination zone, but those are social constructs anyway.