[anthony_james]

It's important that while we keep in mind the ethical considerations of minorities there is also an ethical consideration of marginalized users of financial capital, who are denied credit because banks are unable to afford them a lower rate due to lacking information.

This isn't a black-and-white choice between including peripheral information into credit lending. When banks and lenders make a deliberate decision to ignore information that could allow them to be more accurate with lending, those costs are passed down to users - and although it may not hurt the typical HN user, marginalized credit-seekers can literally have their hopes of home-ownership or education denied because of a bank's choice to be ignorant but considerate. Neither choice is completely without consequences.

[mcherm]

> It's important that while we keep in mind the ethical considerations of minorities there is also an ethical consideration of marginalized users of financial capital, who are denied credit because banks are unable to afford them a lower rate due to lacking information.

That's true. If we didn't give credit to more than a few outstanding black folks, then some poor whites could get credit cards at lower rates.

The most important thing to realize here is that DISCRIMINATION CAN WORK. If everyone agrees that redheads are no good, and everyone is extra careful about lending money to redheads and extra reluctant to hire redheads and extra-strict when deciding how to prosecute and sentence redheads, then network effects will make it a self-fulfilling prophecy. A redhead will be more likely to get caught up in criminal proceedings, will be more likely to get fired (or not hired in the first place), and therefore will be more likely to default on their loans.

For the most part, society has decided that this is either a moral outrage or a case of tragedy of the commons. From the moral point of view we say it's just not ethical to discriminate against people based on race, sex, family, and such. From a purely utilitarian point of view we can say that discrimination can benefit one party at a cost born by all of society. As is usual with tragedy of the commons situations, we can repair the problem with regulation. Regardless of whether you prefer the moral approach or the utilitarian one, there is a pretty strong case to be made that it is GOOD (on a society-wide basis) to give better deals to some (those marginal whites) than others (those marginal blacks) by prohibiting the use of certain information in granting credit.

[wfo]

It's true -- we also, however, ban firing based on race or sex. Purportedly, in the view of the managers who would wish to do so, their company would be more efficient if they were allowed to hire and fire whomever they wish (i.e. only employ white people, for example) -- perhaps they believe, in their racist world view, that having a company full of one race would create workplace unity, etc.

We could just let the market decide, and since we know the antiracist hypothesis is true, racist companies would miss on a huge amount of qualified labor and get beaten in a free market, forgetting for a moment that free markets are a myth and don't exist, and that the markets we do have aren't even close to efficient.

But we don't. We force companies to act a certain way even though they don't wish to because we are forcing ethical standards on them. This is, akin to your point at the expense of all of the workers not protected by the law. Every time we prevent a black person from being fired because he is black, it's at the expense of the white person who would take his job. The costs are passed down to white people. Neither choice is completely without consequences, yet we've made the one against racism.

[anthony_james]

I think this case is slightly more complicated because the demographics of marginalized credit-seekers tend to be minorities. So by catering to minority groups by keeping their ethnic or racial information private, we may hurt minority groups financially. In some of the situations you mention, we force ethical standards on businesses, but ideally they don't hurt other minority groups in the process.

In this situation, the question is between whether ensuring privacy is more ethical than ensuring access to capital - and this is almost entirely focused at minority groups. If we assume that banks can make more efficient and competitive lending transactions given more demographic information, then denying that information raises the ceiling on financial capital for those marginalized groups.

As of now, I don't have a definitive answer. Although I think it would be beneficial to examine how certain data impacts credit-lending and move from there. A lot of these concerns may be moot if the information in question isn't even relevant to credit lending.

[jxramos]

good pithy way to put it, "ignorant but considerate". I think our society entering into the whole data space will unveil more and more ACTUAL disparities and inequalities with such accuracy that economists may very well introduce concepts and notions such as the hidden costs to willful ignorance. Perhaps call it data omission costs, blacklist data costs, model error from black list data omission. Stuff like that. You hit the nail on the head, neither choice is without consequences.