AEA Admits It Doesn’t Know the Literature

We recognize that we have only begun to understand racism and its impact on our profession and our discipline.

This is an astounding statement from the “officers and governance committees of the American Economic Association,” published June 5. Here’s the whole statement.

Like them, I don’t know much about racism’s impact on the economics profession or on the discipline. But unlike them, I have gone far beyond beginning to understand racism.

One of the earliest contributions to the understanding of racial discrimination was Gary Becker’s book The Economics of Discrimination, written in 1957 and based on his Ph.D. dissertation at the University of Chicago. One of Becker’s main contributions in that book was the idea that when an employer discriminates on a basis other than productivity, he misses out. Becker’s point was not that therefore employers would not discriminate but rather that the free market makes them pay a cost for discriminating.

In 1962, Armen Alchian and Reuben Kessel found, consistent with Becker’s model, that when governments regulate firms’ profits, as they do with utilities, the utilities have a diminished penalty for discriminating and, therefore, discriminate more.

Are these high-level people in the American Economic Association unfamiliar with this literature?

 

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