DOES DIVERSITY ENGENDER EXCELLENCE? (2.0)
If diversity engenders excellence why is the NFL 65% black while the NBA and WNBA are 80%? What if the pursuit of diversity and excellence are mutually exclusive goals?
The field of financial economics enjoys a well-documented and demonstrated positive outcome from diversification. In a world where risk is measured by the variability of outcomes a well-diversified portfolio of assets reduces the variability of returns. Financial assets are subject to two kinds of risk: systematic and nonsystematic (random) risk. The larger number of diverse assets the smaller the random risk of a portfolio. This phenomenon can be and has been proven mathematically. Thus, portfolio risk, measured by beta, relates the returns of a portfolio with those of the entire financial market. A beta of zero means the returns of a particular portfolio are unrelated to those of the whole market. A beta of one indicates that the returns of the associated portfolio vary in the same manner as the entire market.
Therefore, diversity of assets in a portfolio reduces the risk of the portfolio, vis-à-vis, an undiversified portfolio. A virtual infinite number of such portfolios exist. The leading edge of this portfolio array consists of an assortment of portfolios none of which are superior to the rest as the returns on those portfolios are consistent with their systematic risk. Thus, if one wishes maximum expected return then one must bear commensurate systematic risk. That is, the expected return must be consistent with its associated risk.
Efforts to find an equally clear and demonstrable effect of diversity on efficiency and effectiveness prove elusive. If a particular medical issue requires a team of physicians would a well-diversified team be better able to resolve the issue or a team selected for their experience, training and competence? One could argue that if the diversified team had the same credentials then it would be able to resolve the issue as well as the ‘merit’ based team. If so then it would not be the diversity that leads to an appropriate solution but the team’s merit.
For instance, when Apollo 13 malfunctioned a team of highly trained and skilled scientists and engineers creatively designed a means of returning the damaged module safely back to Earth. Could a well-diversified team have performed any better or as well? Only if it possessed the same education, training and experience. Again, the successful effort to save the Astronauts depended on the expertise of the team and not its composition.
Does this argument mean that a highly diversified team would never be appropriate? Hardly. Instances where the outcomes of the team’s efforts and experiences are highly subjective could call for a diverse rather than specialized inclusion. But this conclusion subsumes that diversity consists of more than ethnic, racial, gender, and age considerations. Diversity is not diversity if certain viewpoints, opinions, beliefs and theories are excluded. Elsewise, the result is just another biased and inappropriate exercise.
Diversity, as popularly defined, provides little improvement in the acquisition of technical or scientific skills. A variety of lifestyles, heritage, and skin colors contribute little to the understanding of mathematics, physics, chemistry, economics, or astronomy. There appears to be little reason that a diverse classroom learns these skills any quicker or better than classrooms composed of relevant highly specialize groups. A high order mathematics classroom composed mainly of, say, Asians would presumably master the subject faster and more thoroughly than one composed of most any other racial/ethnic group or a random mixture thereof. A richer environment provided by a diverse group of learners/teachers is poor substitute for proficiency in high order mathematics or the hard sciences.
This argument assumes instances exist where a group composed of individuals with selected backgrounds will perform more efficiently and effectively than a similar group chosen randomly from a broader diverse population. It is not clear how or even if a diverse group contributes to efficiency or effectiveness particularly if individuals with differing theories, viewpoints, and beliefs are excluded. The latter hardly qualifies as ‘inclusive’.
It seems antithetical that those who adhere to the popular precepts of diversity object to the ideas, opinions, theories and practices of those that believe or think differently. Proponents of ‘climate change’ eschew the ideas, theories and evidence of those who think otherwise. If the beliefs of the latter group were so bizarre would they not fall of their own weight? A truly diverse scientific team would never believe, “the science is settled.” A truly inclusive and competent team of scientists could very well arrive at a set of conclusions that might defy the ‘conventional PC wisdom’.
According to Issac Newton (Rule 4, Principia) science and philosophy are iterative processes that are subject to what Frederick Hegel called The Dialectic, aka, The Hegelian Dialectic. As processes, both philosophy and science continuously and asymptotically approach ‘truth’. That is, scientific theory is approximate and conditional always waiting the arrival of new evidence. As such they continually create new theses from which spring antitheses that in logical course create a synthesis that becomes the next thesis. This process repeats itself continuously in constant search for truth. Thus, science is never settled.
Persistent calls for diversity could be interpreted as an implicit admission that abilities, experience and talent are not distributed equally among races, ages, genders and ethnic groups. If these traits were equally present in all groups then there would be little need to call for diversity, as it would occur naturally. That is, there would be no reason to differentiate among those various groups in the first place. It hardly seems likely that blacks dominate the sport of basketball because of an inherent bias against other races. Gonzaga University seems to be the exception to this rule.
Likewise, could it be that persistent accusations of ‘white supremacy’ are tacit admissions that whites are superior in some critical ways? How can some claim others assume superiority in the absence of any evidence of that superiority? The detractors may be confirming the implied superiority of whites even though that is not their intent. Do these detractors protest too much?
LIBERALS THINK I'M CONSERVATIVE, CONSERVATIVES THINK I'M LIBERAL. BASICALLY, I'M A MILTON FRIEDMAN TYPE OF LIBERTARIAN BELIEVING THAT ALL THINGS ECONOMIC SHOULD ADHERE TO LOGIC, EVIDENCE AND COMMON SENSE. READERS OF MY BOOK (WITH KIM HILL), DEATH ON DEMAND, HAVE A DIFFICULT TIME ASCERTAINING WHERE ON THE ECONOMIC SPECTRUM I FIT BUT THAT'S OKAY. LABELS SOMETIMES GET IN THE WAY OF EXPLAINING IDEAS. THE LATTER STATEMENT IS THE SOLE GOAL AND PURPOSE OF THE ESSAYS PRESENTED HEREIN. HOPEFULLY, YOU WILL FIND THEM OF VALUE.
ON THE OTHER HAND
*ECONOMIC IDEAS, COMMENTARY AND ANALYSIS*
DALE O. CLONINGER, PROFESSOR EMERITUS
What Price US $100 bills? Estimating Black Market Size and Growth
The rapid growth of these bills over the past 20 years implies some nefarious purpose.
It’s not often that customers at US retail stores like Walmart, Kroger, Walgreens, Target, or most any other retail outlet tender a $100 bill in payment for merchandise. They might show up at gambling casinos, racetracks, and massage parlors. The point is that most ordinary retail customers carry $100 bills as they do ones, fives, tens and twenties. Most cash register drawers do not have a slot for $100 notes instead the occasional hundred is slipped under the drawer. Many business establishments display poorly written/printed signs stating they do not accept bills over $20 denomination. Even in establishments that do not display such signs, the cashier when tendered a ‘hundred’ often will call a supervisor or refer the tender to the customer service window.
So what good are these bills? Perhaps, the most relevant purpose is that a rather large sum of cash can be transported in relatively small innocuous containers such as attaché cases and the like. For this reason alone they are often used to settle payments for illicit transactions involving large sums. This reasoning might suggest that the magnitude and growth of the ‘underground’, i.e. Black Market, economy could be approximated by the abnormal growth of ‘hundreds’ in circulation. https://www.researchgate.net/publication/23747685_OVERSEAS_HOLDINGS_OF_USCURRENCY_AND_THE_UNDERGROUND_ECONOMY
The accompanying table indicates that there are more one hundred dollar bills in circulation than ‘ones’. Yet an ordinary US citizen rarely sees any ‘hundreds’. Perhaps, even more noticeable is their rate of growth, 4.31 percent per year whereas the rate of growth of all other denominations is 1.86 percent per year or less than half that of their $100 bill counterparts. Where do the 12.5 billion ‘hundreds’ (valued at $1.25 trillion) go?
Assuming that the rate of growth of all other denominations reflects of the volume of cash transactions in the legitimate economy then the rate of growth in ‘hundreds’ in excess of all other denominations [last column] may be used as a first approximation of the rate of growth in the underground economy, or in this case 2.45 percent per year. Abstracting from inflation in the ‘legitimate’ sector and assuming a constant money multiple for the illegitimate sector indicates the growth in the black market economy approaches 2.5 percent per year.
This estimate would apply even if extensive money ‘laundering’ exists. Such laundering consists simply of taking illegitimate cash flows and transforming them into legitimate flows either digital or otherwise. The cash can then be ‘recycled’ in the black market. Assuming the money multiplier for the black market roughly equals the ‘legitimate’ multiplier (~1.5) the US Black Market GDP would be approximately $1.925T or almost twenty percent of the legitimate economy. https://fred.stlouisfed.org/series/M2V. However, this value assumes the entire supply of ‘hundreds’ is available to the Black Market economy. Estimates indicate that up to 72 percent of all ‘hundreds’ lie outside the US. https://ideas.repec.org/b/upj/ubooks/eue.html Limiting this value to the estimated supply of ‘hundreds’ available outside the USA yields $1.4T GDP in the illicit economy or roughly one-seventh the size of the total US GDP a result consistent with earlier estimates.  Although listed as ‘outside’ the US these ‘hundreds’ support the illicit flows into and out of the US.
Mitigating this argument is evidence that other currencies, e.g. the Euro and Bitcoin, serve as substitutes for dollars in the black market. http://www.slate.com/articles/business/moneybox/2004/12/euro_trash.html and http://www.dailymail.co.uk/indiahome/article-3552796/Bitcoin-I0707all-thendia-s-currency-choice-drug-trafficking-illegal-arms-prostitution.html. Even if correct the international economy remains awash with US hundred dollar bills.
A sudden unannounced collapse of these international currencies would have a devastating, albeit one time, impact on the black market trade. Dealers in illicit goods and services recognize this possibility and, hence, have diversified into alternatives to the US dollar. Is there a moral obligation of issuers of these currencies to discourage their use in the illicit trades? Moral obligation or not, tacit support of these dealers in illicit goods have a detrimental effect on the legitimate economy by supporting illegal drug trade, narcotic addiction, human trafficking, prostitution, child pornography and the like. These activities provide a drag on the legitimate economy while at the same time are excluded in the legitimate economy’s estimated Gross Domestic Product.
Many governments devote enormous resources to combat the illicit trade and its devastating effect on the lives of its people. At the same time other governments try to find ways to tax it.