Perhaps more than at any time since its inception, affirmative action has been under attack-in the judiciary, in state governments, and through voter initiatives. While the United States Supreme Court recently upheld the constitutionality of the affirmative action program at the University of Michigan Law School,1 it declared the undergraduate affirmative action policy unconstitutional.2 Affirmative action policies for undergraduates were declared unconstitutional at the University of Texas3 and the University of Georgia.4 In 1995, the University of California Board of Regents decreed that race could not be a factor in university admissions.5 Proposition 209(6) in California and Initiative 200(7) in Washington prohibit the government from giving race-based preferential treatment in public employment or public education.8 Such actions should not be surprising given the lack of public support for affirmative action. In 1996, a large majority of Americans as a whole, including over a third of African-Americans and over seventy percent of Hispanic-Americans, opposed affirmative action.9
A primary driving force behind this opposition to affirmative action is the principle of "color blindness," that is, the idea that race is an irrelevant characteristic that should not affect the university one can attend or the job one can obtain. While color blindness has widespread support,10 in this paper I demonstrate that adherence to this principle impedes economic efficiency when there has been past discrimination based on color.11 This result holds even if the past discrimination occurred in prior generations and no one living has been the direct victim of discrimination. I do not claim that discrimination has been eliminated. Rather, my point is simply that even if discrimination has been entirely eliminated, one can still justify affirmative action as an optimal response to past discrimination.
Thus, the argument for affirmative action in this paper is quite different from standard arguments for affirmative action. It does not depend on any value associated with diversity. It is not based on any particular conception of fairness or justice. The argument in this paper is simply that past discrimination based on color creates inefficiencies in the economy that persist across generations, making race a relevant characteristic for firms and universities to consider when looking to hire or admit the best candidates. In fact, race is still relevant even if the firm or university is able to observe the economic status of the candidate. That is, even if one is only concerned about economic efficiency, affirmative action based on economic disadvantage does not eliminate the need for affirmative action based on race.
The primary purpose of this paper is to present the argument that affirmative action is necessary for efficiency, regardless of whether affirmative action is constitutional. Because universities cannot implement an efficient, non-discriminatory admissions policy without taking race into account, affirmative action becomes a state necessity. This paper argues that, while the efficiency of affirmative action derives from the effects of past discrimination, the justification for using affirmative action is its necessity to improve the quality of a firm's hires or a university's students.
II. LEGAL FOCUS V. ACTUAL JUSTIFICATIONS AND PRACTICE
Due primarily to Justice Powell's opinion in Bakke,12 universities have tried to justify their affirmative action programs on the grounds that they are necessary to promote diversity, with ethnic diversity as only one factor.13 While the diversity rationale may be necessary for affirmative action programs to overcome judicial scrutiny,14 concern for diversity is not the primary reason that universities actually practice affirmative action. For example, while the University of Georgia's admissions policy considered twelve different factors that might contribute to a diverse student body, race received more weight than any other factor other than SAT score. …