Idea of a fair society taken for a ride Australians aren't racist - and even if some people are, you and I certainly aren't. It's true, of course, that many of us are terribly stirred up about the arrival of so many uninvited boat people. And both sides of politics vie to be seen as harsher in their treatment of these interlopers. Then there's Julia Gillard's new-found concern about foreigners getting to the head of the jobs queue. But this has nothing to do with racism. Gillard reassured us in the 2010 election campaign that we should say what we feel in the asylum-seeker debate without being constrained by self-censorship or political correctness. For people to say they're anxious about border security doesn't make them intolerant. It certainly doesn't make them a racist," she said. It may surprise you that racial discrimination has long been a subject of study by economists - particularly American economists and particularly as people's "taste for discrimination" relates to the labour market. Two economists from the University of Queensland, Redzo Mujcic and Professor Paul Frijters, will publish the results of a natural field experiment on Thursday in which trained "testers" of different ethnic appearance got on buses in Brisbane, discovered their travel card wouldn't work, but then asked the driver to let them to make the trip anyway. Various testers did this more than 1500 times. Overall, the driver agreed in almost two-thirds of cases. But whereas the success rate for testers of white appearance was 72 per cent, for testers of black appearance it was just 36 per cent. Testers of Indian appearance were let on 51 per cent of the time, whereas those of Chinese, Japanese or Malaysian appearance were allowed to travel about as much as Caucasians were. On average, bus drivers were 6 percentage points more likely to favour someone of the same race. Black drivers tended to be the most generous, accepting in 72 per cent of cases, compared with 54 per cent by Indian drivers and 64 per cent by Asian and white bus drivers. If you think that's interesting, try this: to test the importance of how people were clothed, the testers were then dressed in business suits with briefcases. The success rate of whites rose by 21 percentage points and the combined rate for blacks and Indians rose to 75 per cent. Next, the testers were dressed in military clothes. The success rate of whites rose by 25 percentage points while the combined rate for blacks and Indians rose to 85 per cent. As a follow-up, the researchers then conducted a random survey of bus drivers at selected resting stations in Brisbane, presenting them with pictures of the same test subjects and asking the bus drivers whether they would let them on or not with an empty travel card. Some 80 per cent of the bus drivers at resting stations indicated they would give free rides to Indian and black test subjects, even though in reality less than 50 per cent were let on. Indeed, bus drivers said they would let on white subjects 5 percentage points less often than black subjects, whilst in reality white test subjects were favoured at least 40 percentage points more than black testers. The main reason given for not letting someone on was it was against the rules, while the main reason to let someone on was it was no burden to do so. It's all a bit disturbing - if not so surprising - but how do we make sense of it? And what's it got to do with economics? Frijters, perhaps Australia's leading exponent of "behavioural" economics, is developing an economic theory of groups: the different types of groups and how and why they form. All of us feel an affinity with a range of groups. Businesses and government agencies are groups, but there can be groups within those groups; working teams as well as sporting teams. Mixed in with all this are in-groups and out-groups - people we want to associate with and people we don't. Often we form groups so as to co-operate in achieving some goal. And groups often involve reciprocation - I do you a favour in the expectation that, when my need arises, you'll do me one. So Frijters explains the results of his experiment in terms of group behaviour. "People with Indian or black complexions are more likely to be treated as an out-group and less worthy of help compared to Caucasians and Asians," he says. The reason bus drivers were more reluctant to give black and Indian help-seekers a free ride was that they did not personally relate to them. When testers were sent to bus stops in military clothes this made them appear to be patriots, defending the same community as the bus driver. So the drivers' original out-group reaction could be overcome by in-group clothing. The more favourable treatment of testers in business dress suggests the "aspirational groups" of the bus drivers include people richer than themselves, people with more desirable visual characteristics. That is, people the drivers regard as part of their in-group. If all this sounds more sociological or to do with social psychology than with economics, it is. But that's the point of behavioural economics: to incorporate insights from other social sciences into economics. And what have groups got to do with economics? That's simple: the objective of many groups is to give their members greater control over economic resources. Frijter's new book, An Economic Theory of Greed, Love, Groups and Networks, written with Gigi Foster, will be published this month. Can't wait. Ross Gittins is economics editor.