We return to market analysis. Costs are important in making decisions, not only market decisions but also decisions by public officials about how to allocate scarce resources. The cost of information is often central to a decision and there is a trade-off between cost and quality. Even rough information may be preferred if the cost is virtually nil and the price of better information is great. I will argue that black skin provides information at a bargain price and that blacks suffer as a consequence purely because of their group membership.

The reason black skin provides information is that it can allow rational actors to predict behavior, or at least make statistical predictions. Once again, it makes sense to act on statistics if more accurate information relevant to an individual's behavior would be costly. Social scientists are often naïve on this point. They say, “It makes no difference if we show that blacks on average are less prudent and self-disciplined than whites and tend more often to be criminal. Only a biased person will discriminate against people according to their group membership rather than judging them by their individual traits.”

Sophisticated social scientists know that this last assertion is demonstrably false.