News

Letter To The Editor

8/01/1999 8:00 PM Eastern

To the Editor:

In the July 15, 1999, edition of Multichannel News
Online
, BET Holdings Inc. chairman Robert Johnson stepped up to the plate in the
debate over the role of discrimination in the advertising industry.

Mr. Johnson blamed racial discrimination for keeping
license fees and ad rates low for Black Entertainment Television. Johnson is not the first
to play the race card against the advertising industry. A recent Federal Communications
Commission-funded study claims minority-owned radio stations are handicapped by the same
systematic practice of racism.

It used to be that racism was based on genetics. Just being
black, Hispanic, Asian, or white was all that was required to invoke feelings of dislike
or hatred. But the face of racism is changing. Now, discrimination has expanded its reach
past genetics and into statistics. With respect to this latest assault on advertisers,
racism isn't about race anymore -- it's about income.

It just so happens that in a world of uncertainty and
costly information, race can be a useful, though sometimes an imperfect, indicator of
income. Those familiar with the statistical evidence on income inequality among families
and individuals know that there are few better indicators of income than education, age,
gender and race. For example, if advertisers use the fact that the average income of
blacks and Hispanics is lower than that of whites in determining that the value of an
advertisement that targets these minority groups is worth less (implying that their
average propensity and ability to consume goods and services is smaller), then advertisers
are labeled racist.

One of Mr. Johnson's own examples can be used as a
case in point. Mr. Johnson asserts that the alleged discrimination that BET is
experiencing is similar to that of black-targeted magazines Ebony and Essence.
Mr. Johnson fails to recognize that market research indicates the typical reader of
minority-targeted magazines has an income about 36 percent less than those of
general-audience magazines.

Does an income differential of this amount justify lower ad
rates? It would be hard to say no. Does race play any role in the discounts in advertising
rates paid to black targeted magazines? Not according to the statistical evidence
(www.ec-group.net).

After accounting for audience size, income, and age, race
alone contributes nothing to ad rate differentials. Thus, these claims of discrimination
cannot be attributed to market failure, but only to a failure of the market to produce
outcomes desirable by particular groups.

While there remain many remnants of racism in modern
culture, purging society of systematic racism requires us to look in the right places. The
advertising industry does not seem to be a particularly fruitful spot. Accusations of
racist behavior should also be characterized by legitimacy, and not simply an attempt by a
few minority businessmen to increase their own wealth via the coercive power of the
currently willing government. Nor should a constituency-building presidential candidate be
allowed to so easily dupe genuine civil rights advocates.

John D. Jackson

Professor of Economics

Department of Economics

Auburn University

September