White South African landlords likewise often rented to blacks in areas where only whites were legally allowed to live.
The cost of discrimination to the discriminators is crucial for understanding such behavior. Employers who are spending other people’s money – government agencies or non-profit organizations, for example – are much less affected by the cost of discrimination. In countries around the world, discrimination by government has been greater than discrimination by businesses operating in private, competitive markets. Understanding the basic economics of discrimination makes it easier to understand why blacks were starring on Broadway in the 1920s, at a time when they were not permitted to enlist in the U.S. Navy and were kept out of many civilian government jobs as well. Broadway producers were not about to lose big money that they could make by hiring black entertainers who could attract big audiences, but the costs of government discrimination were paid by the taxpayers, whether they realized it or not.
(via Cafe Hayek)