On racial stereotypes & spending

Bill Cosby has famously accused blacks of spend money unwisely, buying expensive sneakers rather than investing in their kids’ education and thereby reinforcing harmful stereotypes.

Research by Wharton’s Nikolai Roussanov, and Erik Hurst and Kerwin Charles of the University of Chicago has shown that what they’re doing is we all do — black, white, and hispanic — it’s called status signaling.


What really matters, Roussanov, Charles and Hurst found, is not one’s race but one’s economic situation relative to the “reference group” — people in the immediate community. “This is not really about race in the end. It is simply about what we observe about you and what peer group you belong to,” Roussanov says.

Poor blacks and poor whites both spend more on visible goods if they live in poor communities, because such spending gives them more status relative to others in the community. But poor blacks and poor whites living among wealthier people do not devote extra portions of income to visible expenditures, since they are too far behind to get more status from the extra spending they can afford. Moreover, the very fact of belonging to a particular group provides observers with information about one’s likely income (e.g. blacks are on average poorer than whites).

A low-income white person in Alabama, for example, is likely to spend more on visible goods than a low-income white person in Massachusetts. That’s because white people are generally poorer in Alabama; in wealthy Massachusetts, spending more on visible goods is a waste of money, since it does not boost one’s status.

Blacks and whites appear to have different spending habits only because blacks tend to be concentrated in poor communities more than whites, Roussanov says. Nationally, the poor white is likely to be surrounded by many whites who are not as poor, so he or she cannot afford to use conspicuous consumption to compete for status. But a black person of the same income is more likely to be surrounded by others of similar income, making this competition feasible.

So Cosby’s wrong on blame. But not on consequences:

Roussanov and his colleagues find that blacks and Hispanics spend 16% and 30% less, respectively, on education than whites of similar income. They spend 50% less on health care. Spending on health and education is not as visible to as many people as spending on cars and clothes, so it does not contribute as much to one’s status.

The article says that research suggests no simple fix. But as I read it (and that emphasis above is mine) one fix is to stop the concentration of blacks in poor communities! 

Note: I’m not among those picking on Cosby. He’s hit a wrong note from time to time and I don’t agree with all he says but on balance he’s a force for good. Like him or hate him the profile of him in the May Atlantic is well worth reading.

  • http://www.creditwritedowns.com/ Edward Harrison

    This is a great piece of research that I think friends of mine will also get great utility from. It really points to the isolation of the black underclass after de-segregation. This suggests that it is the isolation or ghettoization of black communities which has had the greatest impact on the ability to move up the socioeconomic ladder in those communities.

    Speaking of Cosby, I think he has a powerful, yet controversial message. The Atlantic has an article about him which I highlighted on my blog, Ed’s Forum. The article on Cosby is long but worth the read.

  • superdestroyer

    If you watch shows like Cribs on MTV the reinforce the visible consumption patterns for blacks more than whites.

    When I worked as a deliveryman, one of the things I always found odd are the homes where there were no books, magazines, or newspapers. I guess there is no status in going to the bookstore.

  • rudi

    SD the reinforcement is only in your mind. Whitey’s are buying large homes(Macomb and Shelby Township in Michigan) and Hummers beyond their mean, what about them?

  • pacatrue

    Yeah, shows like Cribs do the reinforcement for one social group. Home remodeling shows with SubZero and Viking kitchen appliances do it for another group. Lifestyles of the Rich and Famous reinforces the notion for another group, etc.

  • daveinboca

    Cosby is one of the only voices speaking out in the spiritual & moral desolation of black neighborhoods. When I was young, I canvassed for a Cong. candidate in St. Louis in the Pruitt-Igoe Projects. I was in virtually every apartment where someone answered the door in a project of thousands of apartments. In the close-to-thousand apartments I was allowed to at least look into, there were no books or newspapers. Not even a clock or often a wristwatch. I got a young kid a job at the Coke Bottling plant nearby & told him he’d have to be at work at 8 AM. He said Why? I told him to buy an alarm clock. He said he didn’t need a job where he had to go by clock time! Honest Injun! Of course, Pruitt-Igoe was the first set of projects to be dynamited to bits. Just a nest of crime & human pollution—-the stairwells were virtual urinals & craps games were on every other stairwell—-the elevators were perpetually broken because the repair people wouldn’t go near the place. Nor would the police, without a bunch of German Shepherds. P-I had to go. So much for human engineering.

    BTW, William Clay was eventually elected and was a prototype for William Jefferson of NO or Conyers of Detroit—I believe his son now holds his seat.

    Just the facts…..there has to be a moral change, not a redistribution of wealth. Thank God for Cosby & i’ll have to read the Atlantic article.

  • jpe

    Cosby is saying that black people are stupid for wasting money on non-capital expenditures; the study says that a lot of people are stupid like that. Those two positions aren’t contradictory.

  • runasim

    Here are my facts.

    I lived in a town for 5 years whose orchard economy was dependent on migrant workers, NONE OF WHOM WERE BLACK.

    They were paid once a month on a Friday, and they were lucky if any money was left on Sunday. The money went for take-out food, beer and wine, cheap toys and flashy clothing that didn’t survive the first laundering.
    Then it was on to the company store for the rest of the month, with its available crediit for food with shamelesslessly inflated prices.

    Somewhere along the generational lines, they got trapped in hopelessness. The exploitation got the better of them. Their lives as social outcasts got the bettter of them.. Their lives of rootlessmenss got the better of them
    Could they have done better? Sure.
    My father tried to counsel them about money, but it seldom took. It was too late and too temporary, and they had lost hope.

    I repeat: these were white migrants, as American as they come.
    Maybe they needed a Cosby to speak to them, but no one showed up, neither with a kind word nor a harsh word.
    It was easier to judge from a disitance.

  • superdestroyer


    I have always found it odd that progressives really like anecdotal stories when they support their points but call people racist when non-progressives use anecdotal stories, they are immediately called racist.

    Do you really think that there are white migrant workers? Do you realy think that were are company stores? You used a story from at least 40 years ago Yet, today I can go to the local shopping mall and find pink collar black women buying very expensive shoes that they cannot really afford.

    Even the Wharton School could not deny that poor blacks spend too much money to flashy luxury items. All the study did was propose a caucse that leaves poor blacks blameless for their actions.

  • CStanley

    I wholeheartedly agree with jpe. It isn’t a racial thing, it’s a class thing, driven by our consumerist culture. People without means are unfortunately buying into the idea that having a lot of consumable goods is the goal, rather than aspiring to attain wealth for security.

  • runasim

    SD -,

    Studies and statistics are vital to understanding individuals and societies. I appreciate all such endeavors..

    What could/ be the benefitcial consequence of these studies is a better understanding of those that are not like us and a recognition of the common humanity we all share.

    Instead, the result too often is for some people to distance themselves further and to issue a judgment: this is what they are doing wrong. Once their errors are identified, it’s safe to dismiss them like some alien misguided beings that have nothing in common with us.

    We are right (superior), and they are wrong, (inferior) and, therefore, we have nothing in common that binds us together. .

    Well, I judge too. In my judgement, an inabbility to imagine walking in the other’ man’s shoes,, not even for the few minutes it takes to read some statistics, is by far the greatest of human shortcomings. We end up building walls around us iinstead of bridges between us, and welcome strife and conflict as the primary means of contact.

    What I seek to learn from studies and statistics is so different from you, we will just have to accept living on opposite sides of a very high wall.

    I don’t think we will ever have a common language for discussions.

  • DLS

    “Whitey’s are buying large homes(Macomb and Shelby Township in Michigan) and Hummers beyond their [means]”

    … and doing a crappy job of driving them, as are so many others on the roads here. I can’t believe not only the speeding but all the tailgating and the other IQ-50 stunts like changing lanes without signaling first…it’s all about me, Me, ME.

    I haven’t seen that many for-sale signs so far, Rudi. I guess the credit lines aren’t exhausted yet.

  • DLS

    “Macomb and Shelby Township […] Hummers”

    Hall Road — every time I’ve been on it so far I’ve encountered at least one Hummer.

    T-Steel had posted several days ago a thread about the “magic” four-dollar mark for gasoline. I saw this earlier today in Ann Arbor — $4.00-a-gallon gasoline. I’ve been light on the throttle for months (and reduced the number and lengths of trips taken) to save fuel, but almost nobody else in Iowa or here in Detroit metro has also reached that point, judging by the speeds people are driving in town and on the highways.

  • pacatrue

    I think there are two answers to your question. 1) It’s always easier for people to see flaws in another’s argument than in their own. This is a reality for all people of all political persuasions. But 2) it also depends upon the purpose of the anecdote. In this case, with runasim’s anecdote (I still want to say domajot’s…), the purpose seemed to be that there were white people who acted this way; it was not to demonstrate what all white people are like. A truthful anecdote is good evidence of the existence of something; it is not good evidence for the universality of something.

    (to go all predicate logic on people, it’s existential versus universal quantification)

  • runasim


    My migrant story was not an argument at all, so your observations about the nature of arguments don’t really apply,, unless I’m missing something.

    My migrant story was an observation that statistics can’t, (and they are not intended to) show the human experience that underlies the statstics. .IMO, that is important to remember.

    Further, it was a meditation on how statistics and demographics and such, can have the effect of splitting people further apart (because they point out diffferences) rather than draw then closer together, (by evoking the common humanity in us all.)

    Also, I was lamenting the judgmentalism that creeps in when the focus is on differences. That, maybe, should have been left as an aside, and I might have done so were I prepareing a full fledged academic tratise. As it was, I was just frre associaitng.

    Since I’m ;lookomg at this from a differemt amgle, we are not talking the same lnaguage. Therefore it can’t be an argument, it can only be parallel observations..