Similar to changes that occurred during the Nadir, for the decades since the 1973–1975 recession, African American – White wage and family income inequality has remained stagnant, despite unambiguous progress in the average quantity and quality of African American education relative to White Americans. This progress was due do African American self-help, school desegregation, and increase in the years of free education. But, the Black–White college degree gap has increased since the demise of Jim Crow; this increase is explained by racial wealth differences.

The labor market progress of African Americans men and women has been concentrated in the South: 1974–1989 was a period of weekly wage decline for males, especially African Americans. For men and women, racial wage and employment inequality increased consistently during 1974–1989 and 2008–2019.

Structural racism arose with European exploration, enslavement and colonization of Africans, triangular trade, and the historical development of capitalism as a world system. Structural racism consists of public policies and institutional practices with persistently racially disparate outcomes, cultural representations that continuously encourage invidious comparisons across racial groups, and norms of social interactions that encourage the reproduction of racialized social identities. Structural racism then is distinct from personal racial prejudice, that is, racially biased decisions, and from personal racial bigotry, that is, racially hostile actions or values based on irrational opposition towards those perceived as different. Structural racism allows “privileges associated with ‘Whiteness’ and disadvantages associated with ‘color’ to endure and adapt over time. … (Aspen Institute, 2004).” In addition to the formation of racial identity as a social norm, wealth inequality, involuntary unemployment, and the exploitation of labor are economic mechanisms that create the conditions for permanent structural racism. Racial differences in wealth, initially created by chattel and servitude capitalisms, reproduce racial disparities in economic, political, and social outcomes. These disparities embed a disproportionately large fraction of Whites in positions of power and authority within hiring institutions.

The mean African American family wealth is 6–8 percent of mean White family wealth. About 1 of every 3 African American families are bankrupt. Both numbers were unchanged during 1984–2017. The African American savings rate is at least as high as the White savings rate for families with the same level of earnings (income). Racial differences in inheritances and in vivo transfers explain the greatest portion of racial wealth disparity.

Racial discrimination explains a large proportion of the racial differences in wages and employment. Native-born Non-Latinx African American men have a 20 percent weekly wage penalty and 9 percentage point employment penalty relative to native-born Non-Latinx White men; other groups of Black men have similar outcomes. Non-Latinx African American women have a 2 percent weekly wage penalty and 2 percentage point employment penalty relative to native-born Non-Latinx White women; other groups of Black women have similar outcomes.

This manuscript includes a historically complex economic analysis of structural racism and its transformations across alternative periods of US political economic development. Exclusion is a central quality of Black life in the US political economy. During the era of chattel capitalism, Africans were commodities, wholly excluded from ownership of their own life, time, and activities, standing before the law, representation in the political system, or ownership of productive assets. Under chattel capitalism, Africans were not citizens, workers, consumers, or even people; they were commodities, that is, fixed capital inputs into the production process whose utilization and mobility were wholly determined by capitalist agricultural producers. From 1619 to 1865, the wealth produced by African commodities was appropriated by Whites.

A reading of the literature on cognitive hierarchies leaves the impression that a subject’s type is predetermined before she comes into the lab so that the distribution of types is exogenous and immutable across games. In this chapter we view the choice of a person’s cognitive level as endogenous and explain it by focusing on subject’s ’expectations about the cognitive levels endogenously chosen by others. We run a set of experiments using the two-thirds guessing game where subjects receive public advice offered by a set of advisors. We discover that certain types of public advice, those that are commonly interpreted as meaningful, are capable of shifting the distribution of observed cognitive types, indicating that the distribution is endogenous.

This chapter asks and attempts to answer a set of questions we have not dealt with previously. More precisely, in all of our previous chapters (except for Chapter 9 on social learning), people had no choice as to what information they received before they made a decision. They just received advice. We now ask whether there are other types of information they might prefer. We have also never asked whether people have preferences over who gives them advice. Are there types of people that are perceived as good advisors and other types that are perceived as unreliable? If so, who are those “good advisors” and what characteristics do they share? The ... first question is important because it asks how important advice is to decision makers. If people consider advice only when they have no other source of information, then its influence will be diminished when they are given access to alternatives. However, if advice has an inordinate sway over people, if they seek it out, then we need to understand why advice is so desirable or persuasive. The second question is also important because, if certain types of people are considered good advisors, then this perception may confer rents on them which may or may not be warranted. To answer these questions, we set up a market for advice and advisors. In general, we find that subjects bid significantly more for data than they do for advice, i.e., they prefer information that they can use to make their own decision rather than having an advisor offer them advice. We also ... find some evidence for “perception rents” for economics majors, whose price is elevated in the market, and a certain amount of support for what we call the ”chauvinistic bias,” meaning that subjects tended to bid more for advice from people sharing the same major as themselves than for people of other majors.

While the mechanisms that economists design are typically static, one-shot games, in the real world, mechanisms are used repeatedly by generations of agents who engage in them for a short period of time and then pass on advice to their successors. Hence, behavior evolves via social learning and may diverge dramatically from that envisioned by the designer. We demonstrate that this is true of school matching mechanisms – even those for which truth-telling is a dominant strategy. Our results indicate that experience with an incentive-compatible mechanism may not foster truthful revelation if that experience is achieved via social learning.

Since advice is central to what we are discussing here, it might be worthwhile to spend some time simply thinking about what advice is, what are the different types of advice we might come upon in our daily lives, and how advice is treated by different academic disciplines. That is what we do here. We ... first define what advice is, then categorize advice into some common-sense categories without expecting our categories to be either exhaustive or mutually exclusive. Finally, we discuss the way advice is treated in the economics and psychology literature, and contrast their approaches to the topic. In our next chapter, we turn our attention to conventions of behavior and the intergenerational games determining them.

When new generations arrive in the world, they look around and many times remark about what a lousy job their predecessors (parents) have done. The world we leave our children we hope is better than the one we inherited, but that is many times not the case. The question then arises of how, after we have made a mess of things, we can rectify the situation. The answer is to teach our children to do better. Leave them advice that basically says “don’t do as we did, but do as we say or advise you to do”. This chapter investigates how easy this is to do. The central question is how to break out of unsatisfactory equilibria when they occur. What we find is that intergenerational advice can be beneficial in such situations but only if the advice offered is common knowledge. More precisely, it is hard to act in a risky strategic situation (like the one we place our subjects in) if you know that your opponents have been given advice as to what to do but you do not know what that advice is. In such situations, if a safe action exists, it is probably best to choose it unless you are sure that everyone else has been instructed to act responsibly and you expect them to follow that advice. It is at this juncture that common knowledge of advice matters and this is what we investigate in this chapter.