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Allied by Surprise? The Economic Case For an Anti-Discrimination Statute

Published online by Cambridge University Press:  06 March 2019

Andreas Engert

Extract

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The Bundestag's 1998-2002 term witnessed an unprecedented agenda in private law legislation. Besides profound changes in various areas, including a radical overhaul of the German Law of Civil Procedure, the German Bundestag (parliament) enacted a sweeping reform of the Bürgerliches Gesetzbuch (German Civil Code). Compared to these radical changes the proposed Act to Prevent Discrimination in Private Law seemed a rather modest endeavor. The project nonetheless turned out to be more troublesome than expected. In May 2002, it was shelved, due also to heavy lobbying activities by, inter alia, the Catholic and Protestant Churches. Yet it will no doubt soon re-enter the stage as Germany is under an obligation to translate two EU anti-discrimination directives into national law.

Type
Private Law
Information
German Law Journal , Volume 4 , Issue 7 , 01 July 2003 , pp. 685 - 699
Copyright
Copyright © 2003 by German Law Journal GbR 

References

1 Cf. Federal Ministry of Justice, Discussion Draft of an Act to Prevent Discriminations in Private Law (Diskussionsentwurf eines Gesetzes zur Verhinderung von Diskriminierungen im Zivilrecht), available at http://www.bmj.bund.de/images/11312.pdf (in German). But see Neuner, JZ 2003, 57 at 57, contending that the proposed provisions were “at least as significant as the reform of the law of obligations.” See the contributions by Baer, Mahlmann and Nickel in Annual of German & European Law (Russell Miller/Peer Zumbansen eds., Berghahn Books, 2003, forthcoming); see also the debate in 3 German Law Journal (2002) with contributions by Vennemann, Ladeur and Winkler, available at http://www.germanlawjournal.com. Recently, Brigitte Zypries, the newly appointed Federal Minister of Justice, indicated that the discussion draft's ambitious scope will be cut back and the German legislature might confine itself to a mere translation of the relevant EU directives (see n. 3), cf. Frankfurter Allgemeine Zeitung of March 8, 2003.Google Scholar

2 Cf. Süddeutsche Zeitung of April 9, 2002, p. 11, and of May 22, 2002, p. 11, noting that enactment has been prevented by the Churches as well as the housing and insurance industries.Google Scholar

3 See Council Directive 2000/43/EC of June 29, 2000, and Council Directive 2000/78/EC of November 27, 2000.Google Scholar

4 See Art. 1 of Directive 2000/43/EC as opposed to Art. 1 of Directive 2000/78/EC.Google Scholar

5 See the proposed sec. 319a para. 1 of the Civil Code, according to the draft (n. 1). For an overview of the bill and its background in European law see Mahlmann, Legal parameters of European Anti-Discrimination Law, in Annual of German & European Law (Russell Miller/Peer Zumbansen eds., Berghahn Books, 2003, forthcoming).Google Scholar

6 See Nickel, NJW 2001, 2668 at 2672. See also Nickel, Gleichheit und Differenz in der vielfältigen Republik (1999) at 154-5 and passim; Baer, ZRP 2002, 290; Vennemann, Germ. L. J. 3 (2002), issue 3 at § 23; Winkler, Germ. L. J. 3 (2002), issue 6. Cf. also Bezzenberger, AcP 196 (1996), 395 at 410-2 (1996), deriving a ban on ethnical discrimination from Kant's Categorical Imperative.Google Scholar

7 See Adomeit, NJW 2002, 1622 at 1622-3; Ladeur, Germ. L. J. 3 (2002), issue 5; Picker, JZ 2003, 540; and the references cited in note 8. For a more balanced assessment and critique of the draft see Wiedemann/Thüsing, DB 2002, 463 and Neuner, JZ 2003, 57.Google Scholar

8 See Säcker, ZRP 2002, 286 at 289: “Robespierre would have liked this statute.” See also Braun, JuS 2002, 424 (in a fictitious dialogue).Google Scholar

9 Even R. Posner, perhaps the most eminent proponent of efficiency-minded law and economics, concedes that there is more to justice and the law than just efficiency, see R. Posner, Economic Analysis of Law (2003) at 27-8. The standard reference in the German legal literature is Eidenmüller, Effizienz als Rechtsprinzip (1995).Google Scholar

10 The arguments used by the two sides support this classification though it is of course greatly simplified. See the references in n. 6, 7, and 8.Google Scholar

11 See R. Posner, Economic Analysis of Law (2003) at 27.Google Scholar

12 For an economist's disapproval of anti-discrimination legislation on grounds similar to those of the German critics see Friedman, Capitalism and Freedom (1962) at 113. Friedman even went to the extreme of finding a similarity “in principle” between anti-discrimination laws and the Nazi regime's Nuremberg laws.Google Scholar

13 It has never been accurate to associate economics (or “law and economics”) with the view that “markets fix everything”, as does Baer, ZRP 2002, 290 at 292-3, mistakenly citing R. Posner.Google Scholar

14 See Säcker, ZRP 2002, 286 at 289; Ladeur, Germ. L. J. 3 (2002), issue 5 at § 9.Google Scholar

15 Cf. the proposed sec. 319b para. 1 of the Civil Code, according to the draft (n. 1), and art. 2 para. 2 lit. a of the Council Directives 2000/78/EC and 2000/43/EC. See also the broad discussion of definitional issues in Schwab, Employment Discrimination, in: Bouckaert/De Geest, Encyclopedia of Law and Economics (2000) at 572.Google Scholar

16 For the various attempts at defining “discrimination” see Hasnas, Equal Opportunity, Affirmative Action, and the Anti-Discrimination Principle: The Philosophical Basis for the Legal Prohibition of Discrimination, George Mason Law and Economics Working Paper 02-28, available at http://papers.ssrn.com.Google Scholar

17 The seminal reference is Becker, The Economics of Discrimination (2 ed 1973), originally published in 1957.Google Scholar

18 A more interesting account would specify under which circumstances discriminatory patterns emerge. Also, taste theory is not very interesting for normative economic analysis, which I am going to undertake in the second section (II.): If discrimination is just a taste then it is always efficient because the discriminator “pays” for it by foregoing profitable trading opportunities with those persons against which she discriminates, see R. Posner, Penn. L. Rev. 136 (1987), 513 at 515-6.Google Scholar

19 See Posner, R., The Economics of Justice (2 ed 1983) at 352-3 and Schwab, Employment Discrimination, in: Bouckaert/De Geest, Encyclopedia of Law and Economics (2000) at 572. A similar argument – though not in economic terms – is made by Adomeit, NJW 2002, 1622 at 1623.Google Scholar

20 For a more detailed discussion see Schwab, Employment Discrimination, in: Bouckaert/De Geest, Encyclopedia of Law and Economics (2000) at 572.Google Scholar

21 The standard references include Phelps, Am. Econ. Rev. 62 (1972), 659 and Arrow, The Theory of Discrimination, in: Ashenfelter/Rees, Discrimination in Labor Markets (1973) at 23 et seq.Google Scholar

22 Note that statistical discrimination need not be the result of asymmetric information: It may well be that a person does not know the nature of her own trait. For instance, people usually do not know about their individual probability of contracting cancer. Such cases constitute a problem of symmetric lack of information; group characteristics such as sex or age are the best available information even for the person herself.Google Scholar

23 See Süddeutsche Zeitung of April 14, 2002, p. V2/32, citing the head of the German Association of Trade Unions’ Service for Advice to Foreigners as saying that from time to time it was hard to distinguish whether foreigners were rejected as tenants out of racism or for other reasons such as many children, unemployment, or low income. See also Nickel, Gleichheit und Differenz in der vielfältigen Republik (1999) at 125-7, reporting discrimination by insurance companies based on ethnic origin prior to the enactment of a provision banning the practice in 1994 (sec. 81e of the Insurance Oversight Act). It seems unlikely to me that insurance companies would have engaged in such discrimination if they had not experienced a higher exposure.Google Scholar

24 Criminal activity is another area with strong correlations. The link between citizenship and crime rate is notorious, cf. Polizeiliche Kriminalstatistik 2000 (Official Crime Statistics for the Year 2000, available at www.bka.de), at 107 et seq. More striking is the connection between crime and sex: For all types of offenses, 76.9 % of all suspects are male. For intentional homicide and intentional physical injury, the respective shares raise to over 85 %, ibd., 85.Google Scholar

25 To see this, note that statistical discrimination is self-enforcing. There is no “need” for government intervention to sustain statistical discrimination yet in virtually all the great examples of political discrimination the majority undertook effort to enforce the discriminatory scheme.Google Scholar

26 This is especially so in Germany where proponents of an anti-discrimination statute find strong support in art. 1 para. 1 of the Basic Law (Grundgesetz), which in turn is a reaction to the crimes committed by the German people against Jews, Sinti and Roma, disabled persons, gays, and lesbians, cf. Winkler, Germ. L. J. 3 (2002), issue 6, § 6.Google Scholar

27 See generally Mueser, Discrimination, in: Eatwell et al., The New Palgrave Dictionary of Economics (1987) at 856, and Akerlof, Q. J. Econ. 90 (1976), 599 at 608 et seq.Google Scholar

28 Id.Google Scholar

29 Epstein, Forbidden Grounds (1992) at 91 et seq.Google Scholar

30 See Donohue III, Discrimination in Employment, in Newman, The New Palgrave Dictionary of Economics and the Law (1998) at 615.Google Scholar

31 Id.Google Scholar

32 See McAdams, , Harv. L. Rev. 108 (1995), 1005 at 1045 et seq.; E. Posner, Law and Social Norms (2000), at 133 et seq.; Mueser, Discrimination, in: Eatwell et al., The New Palgrave Dictionary of Economics (1987) at 856. But see also the critique by Epstein, Harv. L. Rev. 108 (1995), 1085 particularly at 1100-4.Google Scholar

33 See again Epstein, Forbidden Grounds (1992) at 91 et seq.Google Scholar

34 See Winkler (n. 26); Baer, ZRP 2002, 290 at 292.Google Scholar

35 See Eidenmüller (n. 9), particularly at 207 et seq.Google Scholar

36 But see n. 22.Google Scholar

37 See the seminal article on the “lemon market” by Akerlof, Q. J. Econ. 84 (1970) 488.Google Scholar

38 Where “affordable” refers to the difference in valuation of renting a nice apartment vis-à-vis renting a not-so-nice apartment. A good tenant from the discriminated group would be willing to bear any cost below that difference so long as it credibly conveys to landlords that she is a good type.Google Scholar

39 Otherwise, there would be no point for landlords in using statistical discrimination.Google Scholar

40 See Akerlof, Q. J. Econ. 90 (1976), 599 at 601 et seq. On statistical discrimination, see Schwab, Am. Econ. Rev. 76 (1986), 228. Yet even law and economics scholars sometimes seem to assume that “solving information problems” through screening, sorting, signaling, or similar designs is always efficiency-enhancing, cf. R. Posner, Penn. L. Rev. 136 (1987), 513 at 516.Google Scholar

41 As an example, consider university degrees as a signal for professional capabilities. It should be clear that applying this separation technology is more efficient than hiring with no regard to formal education.Google Scholar

42 See Arrow, The Theory of Discrimination, in: Ashenfelter/Rees, Discrimination in Labor Markets (1973) at 26 et seq.; Akerlof, Q. J. Econ. 90 (1976), 599 at 606-8; Moro/Norman, A General Equilibrium Model of Statistical Discrimination, SSRN Working Paper (2002).Google Scholar

43 See the most recent 10. Koordinierte Bevölkerungsvorausberechnung (10th Population Projection) of the Statistisches Bundesamt (Federal Statistical Office) at 28 et seq. available at http://www.destatis.de/presse/deutsch/pk/2003/Bevoelkerung_2050.pdf (in German). A press release on the report in English is available at http://www.destatis.de/presse/englisch/pm2003/p2300022.htm Google Scholar

44 See n. 5.Google Scholar

45 Cf. Neuner, JZ 2003, 57 at 62.Google Scholar

46 The reason simply is that women's longevity is unrelated to insurance premiums. Professor Sacksofsky, however, in an interview with the Süddeutsche Zeitung of March 8, 2003, p. 27, expresses the view that the government-subsidized retirement savings accounts (“Riester-Rente”) violated women's right to equal treatment (by the government) on the ground that women – because of their higher life expectancy – have to save more in order to be entitled to the same monthly pension.Google Scholar

47 Nonetheless, the EU Commission apparently contemplates a new directive banning different premiums according to sex, see Financial Times Deutschland of June 25, 2003, at 13.Google Scholar

48 Cf. Posner, R., The Economics of Justice (2 ed 1983) at 85.Google Scholar

49 See the text accompanying n. 33 supra.Google Scholar

50 Moro/Norman, A General Equilibrium Model of Statistical Discrimination, SSRN Working Paper (2002) passim and at 21 et seq.Google Scholar

51 Apparently, that was the main concern for the Churches to lobby against the old draft, cf. n. 2.Google Scholar

52 This is the gist of Epstein, Forbidden Grounds (1992), particularly at 60 et seq.Google Scholar