What Has Economics to Say About Racial Discrimination?

Racial discrimination pervades every aspect of a society in which it is found. It is found above all in attitudes of both races, but also in social relations, in intermarriage, in residential location, and, frequently, in legal barriers. It is also found in levels of economic accomplishment; that is, income, wages, prices paid, and credit extended. This economic dimension hardly appears in general treatments of economics, outside of the specialized literature devoted to it. Nevertheless, it is important not only in itself but as a test of standard theories. There is no way of separating completely the study of racial discrimination (or indeed many other aspects of economics) fi"om moral feelings. There are many modern varieties of liberalism, which draw the boundaries between social and individual action in different places, but all agree in rejecting racial discrimination, by which is meant allowing racial identification to have a place in an individual's life chances. It is, of course, important to be analytic; moral feelings without analysis can easily lead to unconstructive policies. It is natural to suppose that economic analysis can cast light on the economic effects of racial discrimination. But its pervasiveness must give us pause. Can a phenomenon whose manifestations are everywhere in the social world really be understood, even in only one aspect, by the tools of a single discipline? I want to explore here the scope and limits of ordinary economic analysis for understanding racial discrimination even in markets.