Economics and Intolerance, Painted with a Crude Brush

By: Henry Rouse

Every day, the people of the United States bear fresh witness to our society’s continuing intolerance. Experience tells us that the problem is intractable and multifaceted. Reason tells us that an all-out effort to fix the situation requires examining it from all angles.

Economics, abstract and cold though it may seem, provides one such useful angle. For many years, economists have used their tools to draw conclusions about intolerance and its preconditions. Among other things, they have posited that: (a) increased trade will lead to increased tolerance, as trade requires contact that fosters mutual understanding, and (b) that most people’s individual self-interest is advanced by tolerance, because the staunchly intolerant forfeit important economic benefits (i.e. they lose the chance to collaborate with the best partners, employ the best workers, and sell to all potential consumers). For those reasons, economists have opined that as a country’s economy grows more sophisticated and its trade increases, its prejudice will diminish concurrently.

Recently, two Swedish economists, Therese Nilsson of Lund University and Niclas Berggren of the Research Institute of Industrial Economics, have taken a critical look at these assumptions, and reported their findings in a paper titled “Does Economic Freedom Foster Tolerance?

As an initial matter, they acknowledge that they are painting with a crude brush, and that many other factors (including local politics, culture, and history) combine with economic structures to yield any one society’s overall level of tolerance. With those caveats, they go on to make some tentative observations based on their comprehensive examination of sixty-six countries:

  • Societies with greater wealth and greater economic freedom do exhibit greater tolerance toward gay people, but do not exhibit greater racial tolerance.
  • Across countries, higher levels of education are not significantly correlated with higher levels of tolerance.
  • Income inequality is not a significant variable.

Now, the authors are quick to note that even after putting aside non-economic factors, there are certain snags that narrow the applicability of their findings. Specifically, only certain features of economic freedom (rather than all features in combination) are strongly correlated with greater tolerance. For example, a smaller government (calculated by its share of the gross domestic product) is correlated with decreased tolerance towards gay people. On the other hand, low inflation and high property rights security are positively correlated with tolerance towards gays.

Thus, it would clearly be premature to use this study to make any concrete conclusions. But, that does not mean it is not important and useful. First, it indicates that we should re-examine some long-held, pat assumptions, such as the belief that increasing tolerance is the necessary, or even likely, byproduct of economic advancement. Second, it is yet another indication that different kinds of prejudice are affected by different factors, and that we can achieve big gains along one front while stagnating or even moving backward along another. And finally, it provides an example of how multidisciplinary approaches can do their part to nudge us toward some solutions. Marching orders? No. Food for thought? Yes.

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