Comment of the Day and Ferguson Thread Highlight: Chris Marschner On The Elusive Equal Treatment Problem

Doesn't seem right, somehow...

Doesn’t seem right, somehow…

At least one good thing has out of the Ferguson Ethics Train Wreck, anyway: several unusually intense, frank and thought-provoking threads about race, “privilege” and poverty led by Ethics Alarms All-Stars Chris Marschner, deery, and urbanregor, with trenchant contributions by others as well. The most vigorous thread emerged here, in response to Marschner’s Comment of the Day on this post, on the unfolding Ferguson situation.

I could have chosen any number of comments to highlight by a separate post, but decided on this one, by Chris. First of all, it is remarkably thoughtful. Second, it transcends Ferguson and addresses the larger, related issues of poverty and perceived inequality of opportunity in the U.S. Third, it constitutes a first: a Comment of the Day, by the author of a Comment of the Day, commenting on his own piece. Guinness has been notified.

Here is Chris Marschner’s Comment of the Day on his previous post, Comment of the Day: “Ethics Train Wrecks Collide, As The Redskins And Trayvon Martin’s Mother Board The Ferguson Express”:

I think we all can agree that equal treatment is the goal. The issue is how to get there. As a management consultant I often work with businesses that have no clearly defined metrics for success. As a result, they jump from tactic to tactic or continue to embrace the same old ways of doing things expecting things will get better. Without a clearly defined set of goals that reflect the desired outcome we cannot develop rational efficient tactics to achieve the desired outcome. We cannot continue to simply argue that the field is not level without offering any constructive new ideas on what it will take to make things better and gain an agreement on what constitutes success.

I think we must first acknowledge that not every person will achieve the same results despite equal work. In fact it is quite probable that the level of exertion on the part of one may be significantly less that the exertion of another earning significantly less. Two managers using the same tactics do not always get the same results because one could lack the ability to execute that game plan as efficiently as the other and there are no two identical environments in which people choose to operate – location, location, location. Another reason one will succeed more (in monetary terms) than another in a competitive environment because each and every one of us places a different value on the work reward tradeoff. More importantly, some see success in terms of money earned and others in non-monetary terms. If we can accept this then we can begin to move on. We cannot simply assume that what we value highly is the same across the entire population.

Reading everyone’s comments has given me some new thoughts on this subject. Deery chastised me about my comment regarding why we would want to lock up black people at $27K a year. After some thought, I recognized that there could be in fact a for profit correctional industry that has been created inadvertently and will do what it needs to do to survive. Maryland has no private facilities except for juvenile offenders. Such an industry is no different than any of the government social service agencies that must continue to demonstrate a “need” for them. In both cases, those charged with affecting the lives of others have no incentive to help others make a constructive change in their lives to get them out of the system. Ironically, it was Deery that reminded me that I made similar claim in 1995 when I was looking for ways for the incarcerated students I was working with to earn enough money to cover the costs of their education. My plan then was to integrate the construction trades program in the prison with the management program to build modular homes to be made available and sold to low income occupants. My reasoning was that we had the assets to make the program work requiring no new public investment and that the private sector had no right to taxpayer funded commercial transactions for social investments that they would not otherwise provide without government subsidy. To me this was a make or buy decision. I was overruled by state legislation that gave a monopoly to State Use Industries; they rejected the plan.

The common theme in both situations is that the average citizen does not have the objective desire to expand either; only those whose economic conditions would be impacted negatively would have a rational reason for promoting expansion. Please keep in mind when I use the term rational I simply mean it in a purely economic context such that people will behave in a manner that that benefits them and eschew that which can hurt them.

Thus, the nation’s strategic objective metric, with respect to crime reduction, should not be just the number of violent and property crimes committed; acknowledging that reported crimes have been going down according to FBI stats, but we must also include as a metric of success the concurrent reduction of arrest and conviction rates. Measuring success in public safety in terms of reported crime stats that may be directly correlated to rates of arrest and convictions will tend to create perverse incentives to justify an entities existence or rate of work; or in the case of the rank and file worker, the rate of promotional opportunities. The establishment of goals or quotas that do not reflect the overarching strategic objectives and focus only on one type of tactic that “seems” to work will cloud our decision making capacity to evaluate other alternatives that may move us closer to our desired future.

Throughout much of this discussion much has been said about a “level playing field”. No one has ever defined what a level playing field is because it is undefinable due to human choices. Urbanregor quoted some stats about differential earnings of whites and black with equivalent education. He also mentioned differential rates of home ownership. In the aggregate, it appears to demonstrate inequity. The problem with examining demographic income distribution or housing choices in aggregate terms is that the distribution can also reflect differential rates of individual choice in terms of employment and housing. For example: a person with an MEd can earn significantly less than an MBA working on Wall street and an MBA working for a small start-up or even a mid-cap firm will earn far less than his/her Wall Street or Fortune 100 counterpart. Therefore, income levels are in large part determined by the type and place of employment opportunities sought. Obviously, personal connections will create some immediate benefit for some coming from more affluent families more than others but such connections do not guarantee success nor does it preclude the less affluent from ever making such connections and becoming successful. The wealthy become wealthy by making efficient choices and not by propping up underperformers because they know them and like them.

With respect to housing, our paradigm of creating publicly funded low income rental housing projects should be examined. Current policy creates powerful disincentives for home ownership. First it subsidizes rentals making ownership more expensive relative to renting because low income earners do not need the tax shield and more of the monthly income is devoted to housing when buying with no subsidy. Second, unlike a mortgage it is indefinite duration. Third, from a societal investment point of view, it requires an on-going commitment by the taxpayer to fund the housing of others while not reaping any benefit to the tax base. Rental housing never allows the occupant to amass any wealth from equity building which could be the only method of saving and investing for those just making ends meet. Low bid public funding of rental housing also creates an incentive for private enterprise to build it as cheap as possible reducing its long term value as an asset. And finally, it does nothing to promote a vested interest in keeping the asset in good order by the user.

My suggestion is that instead of trying to qualify people for mortgages by increasing the minimum debt to income ratios or increasing the percent of total debt relative to income (which is the reason for the housing meltdown) we might consider allowing Section 8 subsidies to increase the actual reportable earnings of the mortgage applicant. Rather than passing the subsidy to the private landlord it is passed to the mortgagee as guaranteed part payment of the debt. This allows the occupant to have an ownership interest in the property in which he/she will reap the benefits of long term capital gains. Instead of the government contracting out the construction and management of the project it will retain an interest in the property in the event of default (like a VA loan). Given that Section 8 requires the recipient to use 25% of its monthly income for the cost of housing the private bank is only on the hook for 25% or less. This gives the low income occupant the ability to begin developing a good credit history. If the occupant needs to move to a larger home the property is sold at the Fair Market Value perhaps to another needy family and the initial principal is returned to the private lender and the equity gained over time is applied to the principle of the new home. The VA is the lending model and HUD Section 8 is the financing.

Again by focusing on measuring the desired results and not the efficiency of tactics that may lead to perverse methods of achieving them, we can develop alternate strategies to achieve the desired result.

We should not simply follow those that cry foul when they are unwilling to negotiate an agreeable set of standards for equity that acknowledges that people make different choices while also not offering any concrete metrics for when success is achieved or offer plans that make all the participants responsible stakeholders.

4 thoughts on “Comment of the Day and Ferguson Thread Highlight: Chris Marschner On The Elusive Equal Treatment Problem

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