Lecture VII: The economics of discrimination: the 'Chicago School' approach
LECTURE VII The economics of discrimination: the “Chicago School” approach Economists have long invoked analogies to the economic theory of commodity markets when examining the consequences of labor market discrimination. This theory of the market, as has been shown above, is constructed upon several important assumptions. Of speciﬁc interest to the issue of discrimination, the theory of the “perfectly competitive” market explicitly rejects the notion that distinctions of theoretical or practical consequence can be made between diﬀerent commodities. Arguing from this premise, the “Neoclassical” or “Chicago School” approach to the study of discrimination has long been drawn upon to demonstrate that the “free market” can be relied upon to resolve the eﬀects and thereby the legacies of discrimination (cf. Friedman, 1962, ch. 7; Becker, 1968, 1971; Sowell, 1981a, 1981b). Crucial to this “vision” are several assumptions concerning adjustment processes. Less clearly defended is the idea that these several assumptions are plausible characteristics of markets as they exist in the real world. If we are to understand the strengths and the weaknesses of the Chicago School approach to the economics of discrimination, readers must remain cognizant of these underlying assumptions. The reason is that they are essential to the construction of the theory, its conclusions, and the policy proposals that follow from it. In short, it is these assumptions that ultimately determine what, from the “Chicago School” perspective, may be taken to be plausible or implausible policies for undermining the consequences and possible persistence of labor market discrimination....
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