Previous literature on statistical discrimination explained stereotypes based on the existence of... more Previous literature on statistical discrimination explained stereotypes based on the existence of multiple equilibria, in which principals have different self-confirming beliefs about different social groups (Arrow, 1973; Coate and Loury, 1993). However, the literature has not provided an account of where the principals' prior beliefs come from. Moreover, the static models dominating the literature do not offer relevant information about the dynamic paths that lead to each equilibrium. This paper develops a dynamic version of statistical discrimination in which economic players' forward-looking behaviors determine the dynamic paths to each equilibrium. Defining ``Group Reputation'' as the objective information shared by principals regarding the average characteristics of agents belonging to each group, this study identifies groups as advantaged or disadvantaged, based on their initial reputation states, and provides conditions by which a group can switch from one rep...
We advance a novel choice-theoretic model of “identity” based on the notions of categories and na... more We advance a novel choice-theoretic model of “identity” based on the notions of categories and narratives. Identity is conceived as a matter of “reflexive perception” — how people understand themselves. Choosing an identity is equivalent to making a generalization about one’s past that highlights the most salient aspects of experience. When many individuals make a common choice in this regard, they embrace a collective identity which is dysfunctional if it is Pareto dominated by an alternative self-classificatory schema. Using a simple multi-stage risk sharing game, we explore conditions under which dysfunctional collective identities might be expected to emerge.
We extend a model of ‘stereotyping’ by allowing agents to exert control over their perceived iden... more We extend a model of ‘stereotyping’ by allowing agents to exert control over their perceived identities. The logic of individuals’ identity choices induces a positive selection of the more talented individuals into a group with a superior reputation. Thus, the inequality deriving from the stereotyping of endogenously constructed groups is at least as great as the inequality that can emerge when perceived identity is not malleable. Among the human behaviors illuminated by this theory are: (1) the selective outmigration from a stigmatized group and (2) the production of the indices of differentiation by better-off members of the negatively stereotyped group.
Nearly a century and a half after the destruction of the institution of slavery, and a half-centu... more Nearly a century and a half after the destruction of the institution of slavery, and a half-century past the dawn of the civil rights movement, social life in the United States continues to be characterized by significant racial stratification. Numerous indices of well-being—wages, unemployment rates, income and wealth levels, ability test scores, prison enrollment and crime victimization rates, health and mortality statistics—all reveal substantial racial disparities. . . . So we have a problem; it will be with us for a while; and it behooves us to think hard about what can and should be done.
1. In this essay, I reflect on the interconnections between economic marginalisation and racial d... more 1. In this essay, I reflect on the interconnections between economic marginalisation and racial discrimination in the United States, focusing on the case of African Americans. My concerns are normative (seeking to evaluate the public morality of alternative policy responses to the scourge of racial inequality) and conceptual (seeking to clarify our understanding of the subtle processes that create and sustain durable racial inequality.) I do not here review statistical data, or take up empirical questions concerning the size of the income or wealth gap between racial groups in the United States (this I have done elsewhere, see references below). Rather, I am interested in the overarching philosophical commitments that inform and structure thinking about this problem, especially in the industrial democracies of Europe and North America. Specifically, I want to question the adequacy of liberal individualism as a philosophical paradigm for addressing questions of racial justice, in the...
This paper presents a conceptual framework for understanding the consequences of the widespread a... more This paper presents a conceptual framework for understanding the consequences of the widespread adoption of “race-neutral alternatives” to conventional racial affirmative action policies in college admissions. A simple model of applicant competition with endogenous effort is utilized to show that, in comparison to color-conscious affirmative action, these color-blind alternatives can significantly lower the efficiency of the student selection process in equilibrium. We examine data on matriculates at several selective colleges and universities to estimate the magnitudes involved. It is shown that the short-run efficiency losses of implementing color-blind affirmative action (in our sample) are four to five times as high as color-conscious affirmative action. ∗We are grateful to Lawrence Katz, Kevin Lang, Steven Levitt, and Debraj Ray for helpful comments and suggestions. We also thank seminar participants at Boston University, Cornell, MacArthur’s Social Interactions and Inequality ...
Affirmative action policies are practiced around the world. This paper explores the welfare econo... more Affirmative action policies are practiced around the world. This paper explores the welfare economics of such policies. A model is proposed where heterogeneous agents, distinguished by skill level and social identity, compete for access to scarce positions. The problem of designing an efficient policy to raise the success rate in this competition of a disadvantaged identity group is considered. We show that: (i) when agent identity is fully visible and contractible (sightedness), efficient policy grants preferred access to positions, but offers no direct assistance for acquiring skills; and, (ii) when identity is not contractible (blindness), efficient policy lowers productivity requirements across the board, randomly rations access to positions and, under plausible conditions, entails a universal skills subsidy. ∗We are grateful to Pierre-Andre Chiappori, Edward Glaeser, Jerry Green, Bart Lipman, Bernard Salanie, and two anonymous referees for helpful comments and suggestions. We a...
For a society in transition from group-based hierarchical organization to a regime of equal oppor... more For a society in transition from group-based hierarchical organization to a regime of equal opportunity one may ask whether group inequality engendered by past discrimination will eventually disappear. The answer is not obvious when ongoing social segregation leads different groups to benefit unequally from human capital spillovers. We identify conditions under which group differences in economic success persist across generations in the absence of either discrimination or group differences in ability, provided that social segregation is sufficient. Moreover, the relationship between long run group inequality and social segregation is characterized by an important discontinuity: there is a threshold level of integration above which group inequality cannot be sustained.
We explore the combined effect of segregation in social networks, peer effects, and the relative ... more We explore the combined effect of segregation in social networks, peer effects, and the relative size of a historically disadvantaged group on the incentives to invest in market-rewarded skills and the dynamics of inequality between social groups. We identify conditions under which group inequality will persist in the absence of differences in ability, credit constraints, or labor market discrimination. Under these conditions, group inequality may be amplified even if initial group differences are negligible. Increases in social integration may destabilize an unequal state and make group equality possible, but the distributional and human capital effects of this depend on the demographic composition of the population. When the size of the initially disadvantaged group is sufficiently small, integration can lower the long-run costs of human capital investment in both groups and result in an increase the aggregate skill share. In contrast, when the initially disadvantaged group is lar...
Glenn Lowry is a Professor of Social Science and Economics at Brown University. Hear what Glenn L... more Glenn Lowry is a Professor of Social Science and Economics at Brown University. Hear what Glenn Loury has to say about the role of universities in this matter. Listen to the Policy@McCombs podcast to learn more about the data shaping public policy and the data that should be. Subscribe to our YouTube Channel to watch video versions of the podcasts.
Previous literature on statistical discrimination explained stereotypes based on the existence of... more Previous literature on statistical discrimination explained stereotypes based on the existence of multiple equilibria, in which principals have different self-confirming beliefs about different social groups (Arrow, 1973; Coate and Loury, 1993). However, the literature has not provided an account of where the principals' prior beliefs come from. Moreover, the static models dominating the literature do not offer relevant information about the dynamic paths that lead to each equilibrium. This paper develops a dynamic version of statistical discrimination in which economic players' forward-looking behaviors determine the dynamic paths to each equilibrium. Defining ``Group Reputation'' as the objective information shared by principals regarding the average characteristics of agents belonging to each group, this study identifies groups as advantaged or disadvantaged, based on their initial reputation states, and provides conditions by which a group can switch from one rep...
We advance a novel choice-theoretic model of “identity” based on the notions of categories and na... more We advance a novel choice-theoretic model of “identity” based on the notions of categories and narratives. Identity is conceived as a matter of “reflexive perception” — how people understand themselves. Choosing an identity is equivalent to making a generalization about one’s past that highlights the most salient aspects of experience. When many individuals make a common choice in this regard, they embrace a collective identity which is dysfunctional if it is Pareto dominated by an alternative self-classificatory schema. Using a simple multi-stage risk sharing game, we explore conditions under which dysfunctional collective identities might be expected to emerge.
We extend a model of ‘stereotyping’ by allowing agents to exert control over their perceived iden... more We extend a model of ‘stereotyping’ by allowing agents to exert control over their perceived identities. The logic of individuals’ identity choices induces a positive selection of the more talented individuals into a group with a superior reputation. Thus, the inequality deriving from the stereotyping of endogenously constructed groups is at least as great as the inequality that can emerge when perceived identity is not malleable. Among the human behaviors illuminated by this theory are: (1) the selective outmigration from a stigmatized group and (2) the production of the indices of differentiation by better-off members of the negatively stereotyped group.
Nearly a century and a half after the destruction of the institution of slavery, and a half-centu... more Nearly a century and a half after the destruction of the institution of slavery, and a half-century past the dawn of the civil rights movement, social life in the United States continues to be characterized by significant racial stratification. Numerous indices of well-being—wages, unemployment rates, income and wealth levels, ability test scores, prison enrollment and crime victimization rates, health and mortality statistics—all reveal substantial racial disparities. . . . So we have a problem; it will be with us for a while; and it behooves us to think hard about what can and should be done.
1. In this essay, I reflect on the interconnections between economic marginalisation and racial d... more 1. In this essay, I reflect on the interconnections between economic marginalisation and racial discrimination in the United States, focusing on the case of African Americans. My concerns are normative (seeking to evaluate the public morality of alternative policy responses to the scourge of racial inequality) and conceptual (seeking to clarify our understanding of the subtle processes that create and sustain durable racial inequality.) I do not here review statistical data, or take up empirical questions concerning the size of the income or wealth gap between racial groups in the United States (this I have done elsewhere, see references below). Rather, I am interested in the overarching philosophical commitments that inform and structure thinking about this problem, especially in the industrial democracies of Europe and North America. Specifically, I want to question the adequacy of liberal individualism as a philosophical paradigm for addressing questions of racial justice, in the...
This paper presents a conceptual framework for understanding the consequences of the widespread a... more This paper presents a conceptual framework for understanding the consequences of the widespread adoption of “race-neutral alternatives” to conventional racial affirmative action policies in college admissions. A simple model of applicant competition with endogenous effort is utilized to show that, in comparison to color-conscious affirmative action, these color-blind alternatives can significantly lower the efficiency of the student selection process in equilibrium. We examine data on matriculates at several selective colleges and universities to estimate the magnitudes involved. It is shown that the short-run efficiency losses of implementing color-blind affirmative action (in our sample) are four to five times as high as color-conscious affirmative action. ∗We are grateful to Lawrence Katz, Kevin Lang, Steven Levitt, and Debraj Ray for helpful comments and suggestions. We also thank seminar participants at Boston University, Cornell, MacArthur’s Social Interactions and Inequality ...
Affirmative action policies are practiced around the world. This paper explores the welfare econo... more Affirmative action policies are practiced around the world. This paper explores the welfare economics of such policies. A model is proposed where heterogeneous agents, distinguished by skill level and social identity, compete for access to scarce positions. The problem of designing an efficient policy to raise the success rate in this competition of a disadvantaged identity group is considered. We show that: (i) when agent identity is fully visible and contractible (sightedness), efficient policy grants preferred access to positions, but offers no direct assistance for acquiring skills; and, (ii) when identity is not contractible (blindness), efficient policy lowers productivity requirements across the board, randomly rations access to positions and, under plausible conditions, entails a universal skills subsidy. ∗We are grateful to Pierre-Andre Chiappori, Edward Glaeser, Jerry Green, Bart Lipman, Bernard Salanie, and two anonymous referees for helpful comments and suggestions. We a...
For a society in transition from group-based hierarchical organization to a regime of equal oppor... more For a society in transition from group-based hierarchical organization to a regime of equal opportunity one may ask whether group inequality engendered by past discrimination will eventually disappear. The answer is not obvious when ongoing social segregation leads different groups to benefit unequally from human capital spillovers. We identify conditions under which group differences in economic success persist across generations in the absence of either discrimination or group differences in ability, provided that social segregation is sufficient. Moreover, the relationship between long run group inequality and social segregation is characterized by an important discontinuity: there is a threshold level of integration above which group inequality cannot be sustained.
We explore the combined effect of segregation in social networks, peer effects, and the relative ... more We explore the combined effect of segregation in social networks, peer effects, and the relative size of a historically disadvantaged group on the incentives to invest in market-rewarded skills and the dynamics of inequality between social groups. We identify conditions under which group inequality will persist in the absence of differences in ability, credit constraints, or labor market discrimination. Under these conditions, group inequality may be amplified even if initial group differences are negligible. Increases in social integration may destabilize an unequal state and make group equality possible, but the distributional and human capital effects of this depend on the demographic composition of the population. When the size of the initially disadvantaged group is sufficiently small, integration can lower the long-run costs of human capital investment in both groups and result in an increase the aggregate skill share. In contrast, when the initially disadvantaged group is lar...
Glenn Lowry is a Professor of Social Science and Economics at Brown University. Hear what Glenn L... more Glenn Lowry is a Professor of Social Science and Economics at Brown University. Hear what Glenn Loury has to say about the role of universities in this matter. Listen to the Policy@McCombs podcast to learn more about the data shaping public policy and the data that should be. Subscribe to our YouTube Channel to watch video versions of the podcasts.
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