Redlining

[Igor Chudov @ home]

E. Allen Smith wrote:
> 
> From:	IN%"ichudov at algebra.com" 11-DEC-1996 14:01:18.43
> 
> >The problem is, people can choose what credit history they want to have
> >(I can be a saver or a spender, for example), but nobody can change the
> >color of their skin.
> 
> >This is central point of the theory why discrimination based on credit
> >histories is OK, while the discrimination based on race is not.
> 
> 	First, I would point out that redlining does not necessarily
> equal credit discrimination based on race; it may mean credit
> discrimination based on poverty, which has an unfortunately high
> correlation with being a member of some races. (I won't go into the
> explanations for why this is the case here; most people who try to
> explain it don't take enough factors into account.)

Thanks for an interesting reply.

Do we consider discrimination based on poverty illegitimate?

Does the law consider discrimination based on poverty illegitimate?

I think that most people would answer no to both of these questions.

As I said in another letter, correlation, to me, is not an evidence
of discrimination, and just as well, making statements about averages is
not racist or sexist.

It is the cross-section test that evidences discrimination: suppose
we have two large groups with the same credit-related parameters
(credit history, etc). If one group gets better treatment from a
bank, I see a discrimination.

I do not see much problem if the percentage of whites with good credit
is higher than percentage of blacks with good credit: it is a fact of
life.

> 	Second, let's take a look at whether inequalities based on
> factors that people cannot change is something that is wrong. This
> topic is wider in its application than redlining and credit; one
> example important to me in my field is in genetic screening usage for
> insurance purposes. (In that case, you've also got that limits on
> insurance uses of data when individuals can gather the data in
> question mean that someone can predict their own chances of needing
> insurance... leading to those who are healthy not purchasing it,
> and those who aren't purchasing it.)

The crucial question is: do we believe that the characteristic
that we are considering directly linked with future performance?

> 	The first topic to mention in this regard is that of privacy.
> I believe I am among most people in finding a question about my
> behavior (e.g, my sexual activities) significantly more intrusive
> than a question about my personal characteristics (e.g., my gender).
> But I would hope that everyone would agree that it would be idiotic
> and irresponsible not to have someone's payments for insurance vary
> with their behavior; this would encourage irresponsible behavior and
> discourage responsible behavior.
> 	The second topic to mention in this regard is that inequality
> due to factors one cannot change is a fact of life. This is particularly
> true of capitalism (e.g., someone who has a genetic tendency toward
> large size will consume more food and thus spend more money on food),
> but it is also a problem in any other economic system - economics is
> not all of life. Even if one concludes that inequality is wrongful and
> needs to be "alleviated", there are many areas more important than
> credit on which one would logically start... such as forbidding
> merit-based admissions, which are biased in favor of those with higher
> IQs. I trust that my audience sees exactly why this idea, and similar
> ideas, are ultimately nonsense?

This is a valid concern.

> 	The third topic is that one commonly applied idea used by the
> proponents of absolute equality is that found in Rawls' _Theory of
> Justice_, under which the just outcome is said to be found by a group
> of people who do not know what situation they will be in. (This is
> a vast oversimplification of the book(s) in question, which upon
> closer examination may realize the idea I am about to write down.)
> The simplistic conclusion is that everyone will want everything to be

> the same, since any individual might be in a bad or good situation. But
> if you have a choice between 49 dollars and a 50/50 chance of 0 or 100
> dollars, you should take the latter. In other words, a situation in

Not necessarily.


	- Igor.