Development and Underdevelopment in the History of Economic Thought

Covert Racism in the Economic Models of Discrimination

Komlos John, University of Munich, Emeritus

We should no longer teach either the Beckerian or the statistical model of discrimination, conceived in the twilight of the Jim Crow era, an era in which future Nobelist George Stigler could write about the “Negro in America”, that they are “inferior workers and the “problem is that on average he lacks a desire to improve himself, and lacks a willingness to discipline himself to this end” (Stigler, 1965). The models prevalent in the most popular textbooks continue to trivialize the injustices associated with discrimination are worse than anachronistic. In the era of the BLM movement, they are in bad taste and should be seen as providing scholarly support for systemic racism. Ever since Gary Becker’s 1955 dissertation, the economic theories of discrimination fail woefully to appreciate the deep ethical nature of the problem and skirt its devastating impact on minorities. Becker’s coldblooded reference to discrimination as a “non-pecuniary element” in transactions or as a “disutility caused by contact with some individuals” are typical of the pretense at objectivity of this literature (Becker, 1971, p. 13). His framing of the issue nonchalantly as a “taste for discrimination” makes it appear legitimate: essentially equating it with our taste for a consumption good (Charles and Guryan, 2009). The “taste for discrimination” thereby became a component of the benign theory of free choice and part of the democratic liberal tradition of market exchange between equals. The theory also supposes that firms that discriminate will pay higher wages to whites which will lower their profits. Moreover, the blacks will be hired by non-discriminating firms which can, therefore, provide the product or service at a lower price. Supposedly, the higher profits of non-discriminating firms will attract other non-discriminating firms. Hence, the discriminating firm will be at a further disadvantage

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Keywords: Discrimination, Becker's model, statistical discrimination, racism