Posted on October 27, 2020

Problems with Theories on the Black-White Wealth Gap

Lipton Matthews, Mises Institute, October 5, 2020

The wealth gap between white and black Americans is frequently discussed. Today it’s becoming popular to attribute disparities to black culture. Clearly all cultures are not equal, but can the subculture of some black American communities explain variations within the wealth gap?

{snip} Discussing this issue is quite complicated since black culture is not monolithic. The culture of upper-class black Americans is different from that of their working-class peers. There are even subtle differences among various people from the working classes. Notwithstanding such nuances, the culture thesis is gaining widespread acceptance.


{snip} Studies have demonstrated a strong relationship between self-control and success, so the strength of the culture thesis is understandable.


Cultural theorists are sensible to highlight the pernicious effects of inner-city subcultures on the life chances of black citizens, yet they are just skimming the surface. Moreover, when we review the data it becomes apparent that culture is important, so clearly the problem is that theorists are avoiding the more salient issues.

As Lawrence Mead ably points out in his recent paper “Poverty and Culture”:

Attempts to attribute long term poverty to social barriers, such as racial discrimination or lack of jobs, have failed. Some scholars now attribute poverty to culture in the sense that many poor become disillusioned and no longer seek to advance themselves. More plausible is cultural difference. The United States has an individualist culture, derived from Europe, where most people seek to achieve personal goals. Racial minorities, however, all come from non-Western cultures where most people seek to adjust to outside conditions rather than seeking change….These differences best explain why minorities—especially blacks and Hispanics—typically respond only weakly to chances to get ahead through education and work, and also why crime and other social problems run high in low-income areas….The black middle class has converted to an individualist style and thus advanced, but most blacks have not.


Middle-class black Americans are still not as individualistic as their white colleagues. Individualistic individuals are more likely to take risks and express less fear of the unknown. So it is unsurprising that research suggests that black Americans are less inclined to invest in risky assets. All investors know that investing is a gamble, so this venture automatically selects those willing to embrace an uncertain future. Thus research suggests that relatively fewer blacks than whites embody this “Promethean spirit” of the West. Even the richest black Americans are relatively hesitant to invest in volatile assets.

Further, we cannot appreciate the intricacies of individualism without acknowledging that it has multiple dimensions. Indeed, scholars have delineated the distinction between horizontal individualism and vertical individualism. Whereas people in the former category strive to be different, vertical individualistic people are interested in being exceptional. Research by Meera Komarraju and Kevin Cockley suggests that African Americans score higher on the former. {snip}