The Economics of Race in the United States, by Brendan O'Flaherty.National Journal

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The Economics of Race in the United States

by Brendan O'Flaherty

Harvard University Press, June 2015

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The Economics of Race in the United States, by Brendan O'Flaherty.
WHAT IT'S ABOUT
There are observable racial disparities in economic life; are they the results of a racist past or of current discrimination? That's the question O'Flaherty, a Columbia professor, sets out to answer in his thoroughly researched look at the numerous factors that contribute to the economic gap between whites and nonwhites in the United States. O'Flaherty turns a broad review of academic literature — from disciplines including economics, sociology, and public policy — into a compelling narrative on the intersection of race and economic achievement, and in doing so he finds a pattern: Race continues to be a barrier to economic advancement today, influencing outcomes in diverse realms, including education, employment, health care, and the real-estate market. 

At one point, O'Flaherty tries to diagram all the factors that affect economic achievement among racial minorities in the United States. The result looks something like a spider web, with a range of public and private institutions in tension with one another. "Causation is mutual, not unidirectional," O'Flaherty writes. In other words: Mitigating the effects of racial discrimination through policy is a very complex task. Ultimately, changing the economics of race will depend heavily on two factors, O'Flaherty argues: building trust on both sides and providing market incentives for fairer outcomes. 

TARGET D.C. AUDIENCE Economists; health-policy wonks; the White House Council of Economic Advisers; immigration and civil rights activists; fans of John Maynard Keynes and Frederick Douglass.

BEST LINE "Appearances can be deceiving: some racial disparities have no racial content, and some apparently race-neutral policies have a lot."

TO BE SURE Many of the policies that O'Flaherty proposes would require greater public spending. He argues that the investment would be worthwhile and might even net gains for the economy in the long term; fiscal hawks and libertarian-minded economists would likely disagree.

ONE LEVEL DEEPER Those looking to defend affirmative action as a way to help minority students gain ground — and those who oppose it because they believe it unfairly penalizes white and Asian-American students — may want to flip through Chapter 7, in which O'Flaherty makes a case for the policy under certain circumstances. He cites three studies — one from 1995, one from 2002, and one from 2011 — which suggest that affirmative action boosts black students' lifetime earnings but does not have a commensurately harmful effect on the earnings of white students. "Their implicit answer is that the direct effects of affirmative action are positive on the net, since the black student moving up [to a more elite college] gains more than the white student moving down loses," O'Flaherty writes.

THE BIG TAKEAWAY Race influences outcomes in most every realm linked to economic success but not necessarily in the ways conventional wisdom dictates.

This article is from the archive of our partner National Journal.

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