Gary Becker's "tastes and preferences" approach to labor market discrimination, articulated in The Economics of Discrimination ( 1971), has been the dominant theory of discrimination within mainstream economics. Neoclassical economists have tended to treat Becker's construct as a general theory, a timeless model that can be applied to various forms of discrimination. Becker himself encouraged this interpretation. Instead, we provide an institutional analysis of Becker's work on discrimination that locates his theory within the social, economic, and political context of the mid 1950s, the period in which he wrote. In particular, Becker's focus on a desire for social and psychological distance as the basis for discrimination and his emphasis on job segregation as the critical outcome reflect the way civil rights issues were framed during this period.
Our deconstruction of Becker's theory relies on the assumption, defended in our previous work, that the implicit wage theories guiding economic actors and policy makers interact with the development of academic economic theory (Figart, Mutari, and Power 2002). Similarly, Michael Omi and Howard Winant, in their seminal study of racial formation in the United States, maintained that "[r]acial theory is shaped by actually existing race relations in any given historical period" (1994, 11). The development of race theory in the social sciences is part of the process of racial formation. Science and politics, according to Omi and Winant, are among the historically situated projects (or social practices) through which "racial categories are created, inhabited, transformed, and destroyed" (55). Rereading Becker, therefore, exemplifies the need to think about why certain theories arise within a particular time, space, and place.
There have been many criticisms of Becker's work (see Marshall 1974 for a summary). Our analysis does not comment on the strengths and weaknesses of these critiques unless they echo concerns raised by our contextualized reading. Rather than cataloging all of the strengths and weaknesses of Becker's view of discrimination, we focus on demonstrating the limits of his definition of discrimination. We conclude that the quest to develop a universal model is inferior to an institutionalist methodology. An institutional approach focuses on the diverse manifestations of discrimination in particular social, economic, and political contexts.
General Theory or Race Theory? Becker's Mixed Signals
Becker's pioneering work on discrimination began as a doctoral dissertation completed at the University of Chicago in 1955. He defined discrimination in monetary terms. (1) A person (either an employer, coworker, or consumer) is said to have a "taste for discrimination," just like a [dis]taste for strawberries, if he or she would pay to maintain social or psychological distance from members of a particular group. (Nepotism represents a sacrifice of income to maintain proximity to members of a particular group.) Reflecting on the concept in 2002, Becker succinctly argued that "[d]iscrimination comes from prejudice, and I translate that into a monetary amount--how much you are willing to pay" (Clement 2002). One actually discriminates, as opposed to merely having a taste for discrimination, when one forfeits income in order to indulge this preference. Thus, discrimination is never profitable for the employer, by definition. While Becker claimed to leave the motivation behind such tastes to the province of sociologists and psychologists and to focus solely on the economic consequences of discriminatory preferences, he was clear that he considered the motivation to be nonpecuniary.
The strength of discriminatory preferences can be measured by the amount of income an employer (or co-worker or customer) is willing to sacrifice to maintain distance, which Becker has referred to as a "discrimination coefficient." For an employer with a taste for discrimination, the effective wage (including both nominal and psychic costs) for hiring a member of an undesired group is w(1 + d). The discrimination coefficient (d) is a number between 0 and 1, based on the intensity of the disutility experienced by the individual discriminator. There are no psychic costs to hiring from the desired group, so their effective wage is the market wage (w). Discriminating employers would employ members of the undesirable group only if their market wage is sufficiently lower than that of the desired group to compensate for the discrimination coefficient.
The initial effect is to lower the market wage and employment level of the undesired group. In Becker's scenario, however, this would mean that the employer who hires only desirable workers pays relatively higher wages. The employer is content to do this, since Becker has defined discrimination as a willingness to pay to maintain distance. But the market is less forgiving. With higher wages, the costs of production increase and diminish profits. Conversely, the "nondiscriminating" employer who hires workers from the undesirable group can pay them their market wage, which is actually less than their marginal revenue product. Uninhibited market forces should punish discriminators, according to Becker, since nondiscriminating firms with lower costs would be more profitable. If the industry is not competitive, however, employer discrimination may be able to persist for a longer time period.
Customer discrimination, in contrast, is not subject to the same market discipline. A customer's preference to patronize a business with an all-white workforce is no different from a preference for designer jeans. So long as the customer is satisfied with paying more to indulge his or her taste, the status quo can continue. Employees' taste for discrimination manifests as a desire for higher wages to compensate for working alongside the undesired group. To avoid such costs, employers can segregate jobs. The range of possible economic consequences of discrimination therefore includes wage differentials and job segregation.
At the outset, it appears that Becker clearly contextualized his work on discrimination both historically and demographically. The opening sentence of the "Introduction to the First Edition" notes that "[o]ne might venture the generalization that no single domestic issue has occupied more space in our newspapers in the postwar period than discrimination against minorities, and especially against Negroes" ( 1971, 9). Becker continued by referencing the "momentous decision" in the 1954 Brown v. Topeka, Kansas, Board of Education lawsuit regarding segregation in public schools. Decisions about the allocation of places in public schools and the allocation of resources among schools are not subject to market forces and seemingly bear little connection to the topics that occupied Becker's focus. He observed that discrimination in nonmarket activities such as "church and school attendance and voting" had been the primary focus of public discourse. Nevertheless, he argued that discrimination occurring in markets for employment, housing, and transportation had both "direct economic consequences" and the potential to impact discrimination in nonmarket areas. Therefore, he viewed his work as contributing to public policy debates of the late 1950s and early 1960s. (2)
Yet, in the second paragraph of the "Introduction to the First Edition," Becker quickly shifted from contemporary context to universal generalizations. He observed that "the extent of discrimination in the market place in this country is probably much less than in almost every other country in the world." After a world tour through South African apartheid, English discrimination against "colored people" throughout the Commonwealth, discrimination against women and untouchables in "undeveloped" countries, class discrimination throughout Europe, and discrimination against "persons with capitalistic backgrounds" in communist countries, Becker asserted that therefore "a study of the economic consequences of discrimination is applicable not only to the United States but to almost every country in the world" ( 1971, 9-10). Beyond this assertion, he claimed his major contribution was to "develop a theory of non-pecuniary motivation"; discrimination is merely one possible application of the theory (11).
These two paragraphs in the introduction capture a tension that is visible throughout this landmark work. The Economics of Discrimination was presented as a general theory of the consequences of nonpecuniary motivations in market activities, especially labor market discrimination. Following the conventions of neoclassical methodology, Becker sought to uncover universal laws of economic nature. At the same time, he implicitly and explicitly framed his inquiry with references to relations between "whites" and "non-whites" (or, alternatively throughout the book, "Negroes"). The last three chapters of The Economics of Discrimination provide empirical tests of his theory with respect to racial discrimination. To what degree was Becker's "universal" theory influenced by this empirical focus?
Contextualizing Becker's Approach
Despite sending mixed signals, Becker's theoretical concerns and definitions reflected the prevailing social discourse about race relations. Becker's three scenarios of discrimination--employer, customer, and employee--are all predicated on his particular definition of discrimination as acting on a desire for social or psychological distance. In other words, the Beckerian "taste for discrimination" is based upon the concept of exclusion. Randy Albelda, Robert Drago, and Steven Shulman defined exclusion as "physical or social isolation of a group to diminish their roles and opportunities" (2001, 132). Becker might dispute the assertion of intention in their definition; however, he would concur with their conclusion that exclusion is fundamentally characteristic of race relations.
Several of Becker's critics and even his admirers have questioned his starting point in defining this taste for discrimination. Impersonal entities such as corporations do not have a desire for distance; even in smaller firms, those who do the hiring may not have direct contact with production workers (Marshall 1974; Arrow 1998). The physically intimate association between African Americans or other women of color in domestic service and their white employers--and even with the white children left in their charge--is difficult to reconcile with a desire for distance. According to economic historian William Sundstrom (1994, 388), "Indeed, even in the South most whites felt that blacks had a proper role to play in society and the economy so long as they didn't cross the line. Blacks and whites could, under appropriate conditions, work together and shop together; thus the premise that discrimination took the form of customers or workers avoiding any and all interracial contact--with the implication of fairly strict segregation in economic activities--is factually inaccurate." The focus on distance also makes it difficult to explain the cultural association of specific occupations as appropriate for African Americans, women, and other disadvantaged groups (Marshall 1974, 860).
Further, several critical readers of Becker's work have argued that his definition has even less relevance in describing the basis for sex discrimination. Ray Marshall avowed that "physical phenomenon surely cannot be applied to sexual discrimination" (1974, 859). Claudia Goldin, summarizing her "pollution theory of discrimination" in an interview, drew this distinction:
Various economists, and in particular Gary Becker, have interpreted discrimination as a distaste of one group for another, meaning a desire for distance. This interpretation may be correct for discrimination between races, religions and ethnicities.... But it didn't seem to be an accurate description of discrimination by men against women, or vice versa. Sex and maybe other groups are different because there doesn't seem to be a desire for distance. Men and women marry and they have children together. Every man has a mother and many have sisters and daughters. There doesn't appear to be a desire for distance, so how could there be a distaste for women by men? It has to be something else. (Clement 2004)
Goldin, echoing Marshall (1974) and other authors, relied upon status considerations as the motivation, hypothesizing the "something else" is that "they feel that the entry of women into their occupations would pollute their prestige or status in that occupation." (3)
Despite his identification of a discrimination coefficient defined in monetary terms, the discriminatory act, for Becker, lay in the refusal to employ certain categories of workers. As described by Barbara Bergmann, "the villain is the entrepreneur who will not hire Negroes, perhaps on behalf of or under pressure from his white workers. The entrepreneur who does hire Negroes acts toward them the way he is presumed to act toward any other factor of production: He pays them the price for which he can get them. The fact that the price for Negro labor is lower than he need pay white workers is attributable not to the entrepreneur who hires Negroes, but to the entrepreneur who refuses to do so" (1971, 310). In Becker's model, wage differentials are an economic consequence of discrimination, not discriminatory themselves. Wage discrimination, defined as a situation where "individuals with the same economic characteristics receive different wages and the differences are systematically correlated with certain noneconomic (racial, religious) characteristics of the individual" (Stiglitz 1973), is thus defined out of the scope of Becker's framework. (4)
Becker was writing precisely at a moment when issues of racial separation and social distance--segregated schools and buses and proscriptions on social mingling--were defining the terrain of political engagement. (5) The Eyes on the Prize Civil Rights Reader (Carson et al. 1991) dates the upsurge in civil rights activism to 1954, with the Supreme Court desegregation ruling. Emmett Till, a Chicago teenager, was brutally murdered in Mississippi the following year, ostensibly for whistling at a white woman. A few months later, Rosa Parks, Martin Luther King Jr., and other activists launched the Montgomery bus boycott. Racial discrimination was gaining social significance, but the issue was being framed in a particular way.
With respect to labor markets, racial discrimination was defined as a lack of access to particular jobs: those paying a breadwinner wage. Historically, as noted by Evelyn Nakano Glenn, "[w]hite workingmen and their organizations deployed cultural constructs--such as white manhood, the responsibilities of breadwinning, and citizenship--to claim their 'right' to the best jobs" (2002, 81). Segmentation of the labor market was the result. Since African American families were assumed to be composed of two workers, neither worker was construed as "deserving" a family-sustaining job (Mutari 2004).
Equal employment opportunity was defined as the quintessential problem of racial discrimination, while wage discrimination was equated with sex discrimination. An early study of forms of racial discrimination using 1940 census data (Turner 1952) indicated that the primary form of discrimination against nonwhite males was employment discrimination. Few occupations were open to nonwhite men regardless of educational qualifications; higher unemployment rates were a consequence of job segregation. (In contrast, nonwhite women faced barriers in obtaining any form of employment.) These findings have been confirmed in more recent studies (see Sundstrom 1994). According to Arrow (1998, 93), in referring to the period before civil rights legislation, "[B]lack and white wages for the same job very frequently differed but little. Discrimination mainly took the form of limiting the range of jobs in which blacks were hired at all. The form which racial discrimination took was the same as in residential segregation. It was not that blacks were charged higher rents for the same residence but that they were excluded from certain (most) areas."
Kim Blankenship (1993) argued that the primary raison d'etre of equal employment opportunity was to break down occupational barriers so black men could assume their role as head of household. Racial discrimination was considered a black male problem and sex discrimination a white female problem; African American women's specific issues were lost in the cracks. The language of legislative proposals from the 1940s through the 1960s is telling. Franklin D. Roosevelt's 1941 Executive Order banning discrimination by the federal government and defense contractors focused on "race, creed, color, or national origin" (Burstein 1985). These categories informed most policy debates on employment opportunity. "Sex" was added to protected classes in Title VII of the Civil Rights Act of 1964 at the last minute. (6)
In contrast, sex discrimination was defined in terms of equal pay for comparable (or, as a compromise, equal) work. The Equal Pay Act, also introduced in the 1940s, only addressed wage discrimination based upon sex. It was silent on discrimination based upon race. Thus, racial-ethnic and sex discrimination were the provenance of separate equality legislation passed in sequential years: the Equal Pay Act of 1963 and the Civil Rights Act of 1964. Not surprisingly, wage discrimination plays a lesser role in Becker's theory and became more prominent in economic theories of discrimination only when the women's movement gained strength.
Becker's theoretical approach clearly draws upon the prevailing discourse about racial discrimination in the 1950s United States. His emphasis on the desire not to associate with members of a specific group and consequent emphasis on employment rather than wage discrimination is rooted in the dynamics of racial discrimination. Segregation--in public accommodations, schools, and residences, as well as jobs--appeared as the defining issue of the time. Future research in this area might examine how economists have re-interpreted Becker's original theory in response to changing institutional contexts and how other discrimination theories have reflected changing circumstances. For example, it has been suggested that theories of statistical discrimination, posited in the era following the advent of antidiscrimination laws, reflect the more subtle forms of discrimination that arise when blatant forms of bias are censored (see Loury 1998).
Rereading Becker is more than an academic exercise designed to explicate the historical development of a particular theory. While Becker's framework has remained influential, the limitations of his definition of discrimination have led scholars to search for broader or better alternatives. The quest for a better general theory, however, is not our objective. By demonstrating the historical embeddedness of this landmark work, our objective is to challenge the notion that an ahistorical model can fit all forms of discrimination in various contexts. An institutionalist perspective, skeptical about grand generalizations and committed to embedding economic analysis in historical context, can better illuminate the varying forms of discrimination occurring in specific times, places, and spaces.
(1.) Gary Becker's analysis based on an analog' with international trade theory has received far less attention in the literature (see Bergmann 1971) and therefore will not be discussed here.
(2.) In fact, in a later interview with The Region, a publication of the Minneapolis Federal Reserve Bank, Becker indicated that what led him from mathematics to economics as an undergraduate at Princeton was that "I began to see then that one could use rigorous mathematics m economics to study important social problems that I wanted to deal with" (Clement 2002).
(3.) Such status considerations incorporate pecuniary as well as nonpecuniary motivations. Entry by lower status groups into integrating occupations is anticipated to lower the wages of the dominant group. Barbara Bergmann (1971), for example, argued that discrimination is motivated by white employees' "fears of economic loss" and empirically estimated the possible extent of such losses for different groups.
(4.) The advent of human capital theory (another theoretical development in which Becker played a key role) led economists of varying perspectives to scrutinize the legitimate and illegitimate (discriminatory) bases for wage differentials by race-ethnicity, sex, and other demographic characteristics (for summaries, see Darity and Mason 1998; Figart and Mutari 2004).
(5.) In the introduction to the second edition of his book, Becker noted that his work was initially of little interest to economists, though sociologists and other social scientists immediately engaged in the issues he raised. Sales of the book, according to the author, did not pick up until after 1962 (Becker  1971). While one could speculate that this was merely an intellectual lag that came from being ahead of his time, it is plausible that the wave of civil rights activism that culminated in the Civil Rights Act of 1964 contributed to academic interest in his work.
(6.) Many scholars argue that the amendment mandating equal treatment by sex was an attempt by conservatives to sink the legislation. The proposal to include sex discrimination was made by Representative Howard Smith of Virginia, an opponent of civil rights legislation, and was met with laughter. Women's advocates, some of whom had planned to seriously propose such an amendment, seized upon the opportunity" (Robinson 1979, 514-19; Giddings 1984, 299-300; Burstein 1985, 22-23).
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The authors are, respectively, Dean of Graduate Studies and Associate Professor of General Studies, The Richard Stockton College of New Jersey, Pomona, USA. This paper was presented at the Association for Evolutionary Economics annual meetings in Philadelphia January 7-9, 2005.…