Black America, Reparations and the Black Economy of Uncertainty

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The economy is huge on uncertainty. Some of the most reputable economists have explored the subject.[1] It is important to note that the most widely used quality of life indices reflect the impact of uncertainty indirectly or directly. One question to which we believe the answer is a resounding “yes” is: Are the lives of black Americans more insecure than those of white Americans?

If this is the case, and if we know that living with uncertainty has adverse effects on psychological and physical health, then why is uncertainty not identified as an explicit factor in the value equation of reparations to black Americans?

Psychologists are quick to conclude that uncertainty can be a cause of anxiety.[2] This anxiety can be stressful. There is evidence that stress, experienced in sufficient doses and persistently aggravated (i.e. chronic stress) over time, can kill.[3]

We can deduce that uncertainty is important for quality of life measures because they usually try to account for uncertainty. They capture uncertainty indirectly through measures of inequality (i.e. the United Nations (UN) Human Development Inequality Index (HDI)) or through measures of economic or environmental insecurity (i.e. , the Organization for Economic Co-operation and Development (OECD) Index” (BLI) “Better Life Indicator”. Furthermore, uncertainty is captured directly in a widely used “quality of life” index (QLI) by taking into account the “degree of control one has over one’s life” and the “amount of worry one has. a in life” (namely, the Ferrans and Powers QLI).[4]

There are good reasons to think that black Americans experience more uncertainty than white Americans. On the other hand, one could argue that uncertainty is an integral part of entrepreneurship and that whites are much more engaged in business than blacks. We check this reasoning by countering that white business bankruptcies are less frequent/likely than black business bankruptcies..[5] This can be attributed, in part, to the fact that the potential financial harm that could arise from white entrepreneurship is shielded by organizational form (partnerships, LLCs, and corporations as opposed to sole proprietorships).

Additionally, white businesses are initiated with more financial capital than black businesses.[6] This financial capital extends the window of opportunity for white businesses to determine how to become profitable, while the window of opportunity for black businesses is smaller.

Let’s consider a few reasons why we think black uncertainty exceeds white uncertainty for some basic requirements of life. We do this by asking the question: “Who has the most uncertainty?”

• For housing: Mortgage holder or tenant?[7]

• For the mode of transport: Owner of a new car (unlikely to break down) or owner of an older or used car?[8]

• For punctual transport: The one who owns a vehicle and drives or the one who is at the mercy of public transport.[9]

• For health: holder of a health insurance contract with standard copayment or without health insurance.[10]

• For education: A student and parents who have saved well and need little financial assistance or a student and parents who have not saved and rely more on financial assistance?[11]

On the other hand, black Americans, who reside in fresh desserts, are often chastised for frequenting fast food establishments. Uncertainty may help explain this behavior. One faces more certain results when visiting a McDonalds, Wendy’s, Chick-Fil-A or Kentucky Fried where the price is always and forever $X.99 per meal compared to the apprehension of volatile food prices in a grocery store? Also, one can save on transportation costs, meal prep time, and cleanup effort with fast food outlets.

It is fundamental that increasing income and wealth can contribute positively to reducing uncertainty and improving our quality of life, although these options can be complex and difficult, if at all. are. However, we should be able to improve our psychological and physical health-related quality of life by reducing uncertainty.

Whether we care about uncertainty in housing, transportation, health, education, food, employment, etc., we must be vigilant in making decisions that reduce uncertainty, improve health outcomes and our quality of life. Which brings us to our conclusion and the question, “Why is the uncertainty that Black Americans endure – due to racism and accompanying discrimination, which can cause anxiety, stress and premature death? – is it not explicitly taken into account in the repair valuation equation? 12 If uncertainty is not explicitly taken into account in this equation, then it is reasonable to claim that the accounting for the reasons for repairs is incomplete.

Dr. Brooks Robinson is the founder of the BlackEconomics.org website.

References:

[1] For the uninitiated, here are the selected and popular names of those who have sounded loud and clear about economic “uncertainty”: John von Neumann, Oskar Morgenstern, Daniel Bernoulli, Kenneth Arrow, Jack Hirshleifer and Daniel Kahneman (winner of the prize Nobel).

[2] See Michael Stein (2020), “Uncertainty Avoidance: Generalized Anxiety Explained”, Psychology Today; https://www.psychologytoday.com/us/blog/understanding-the-anxious-mind/2… Explanation of Generalized Anxiety (Ret. 090622).

[3] See Jennifer Morey et al (2015), “Current Directions in Stress and Human Immune Function”, Current Opinion Psychology; https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4465119/ (Ret. 090622).

[4] Readers can learn more about the UN IHDI at https://hdr.undp.org/inequality-adjusted-human-development- index#/indices/IHDI; on the OECD BLI on https://www.oecdbetterlifeindex.org/#/11111111111; and on the Ferrans and Powers QLI at http://qli.org.uic.edu/index.htm.

[5] See Marie Mora and Alberto Dávila (2014), “Gender and Business Outcomes for Black and Hispanic New Entrepreneurs in the United States”, American Economic Review, vol. 4, no. 5; p. 245-49.

[6] See Lee et al (2022), “African American Entrepreneurs: Contributions and Challenges”, US Small Business Administrations; https://cdn.advocacy.sba.gov/wp-content/uploads/2022/05/24115922/Report_… Entrepreneurs-Contributions-and-Challenges-508c.pdf (Ret. 090722).

[7] According to FRED of the St. Louis Federal Reserve Board, in 2022: QII, 45.3% of black American households were owners, while 74.5% of white households were owners; https://fred.stlouisfed.org/ (Ret. 090722).

[8] The US Federal Reserve’s 2019 Survey of Consumer Finances reports in its public data file (Table 9.19, Averages) that for households that owned vehicles, white household vehicles had an average value of 29.1,000 $, while vehicles from black households had an average value of $18.4,000. https://www.federalreserve.gov/econres/scfindex.htm (Ret. 090722). Here, we assume that vehicle quality is positively correlated with vehicle value.

[9] Same. See Table 9.19 (% and medians), which shows that 89.3% of white households owned vehicles, while only 71.5% of black households owned vehicles.

[10] See Katherine Keisler-Starkey and Lisa Bunch (2020), Health Insurance Coverage in the United States: 2019, US Census Bureau, US Department of Commerce; https://www.census.gov/content/dam/Census/library/publications/2020/demo… (Ret. 090722).

[11]The National Center for Education Statistics 2020 Digest of Education Statistics (Table 331.35) reported that for the 2015-2016 college years (latest available data), 95.5% of full-time Black American undergraduate students and all year received financial aid, while only 85.7% of white American students received financial aid; https://nces.ed.gov/programs/digest/d21/tables/dt21_331.35.asp?current=yes (Ret. 090722)

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