Supply, Demand and the ‘Real World’
Chapter: Lecture VIII: The economics of discrmination: the 'structural' approach
LECTURE VIII The economics of discrimination: the “structural” approach The Chicago School theory of discrimination has been the dominant view of the economics profession since the late 1970s. As can be discerned from the previous chapter, it has also been at the foundation of virtually all discussions of how the United States should address its legacy of labor market discrimination. This is not too surprising as market-oriented approaches to social and economic problems have been in ascendance since the late 1970s. There has, nevertheless, been some dissent from this consensus. One point is related to the very meaning of discrimination. To review, the term means that an identiﬁable group of persons are, by virtue of their race, gender, religion, caste, sexual preference, or some other criteria unrelated to skill or job performance, systematically disadvantaged in some market or markets. The site of discrimination may be in the realm of production or consumption. For examples of discrimination in the sphere of consumption, consider “whites only” restaurants, real estate developments, schools, or country clubs. Discrimination, interpreted this way, denies the validity of an important assumption underlying the model presented in the previous lecture. There, “free entry and exit” was assumed to be operative in all output markets. Initially, it might appear to be obvious that expanding the size of the market would be in the interest of all producers. But, historically, the right to enjoy the services of every hotel, restaurant, or other “public accommodation” was not a spontaneous consequence of...
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