The false economics of critical race theory
The false economics of critical race theory

By Dennis L. Weissman

A competitive market is efficient in consumption and production. It produces the goods and services that consumers demand, and no more, at the lowest possible cost. Nonetheless, the forces of supply and demand do not necessarily produce an equitable allocation of goods and services — an equal distribution of the economy’s output. These distributional disparities arise primarily because individual abilities, skills, and effort levels can differ widely across the population.

Critical race theory offers an alternative explanation for the unequal distribution of income: systemic discrimination and the exercise of “white privilege.” This is the rationale behind promoting “social equity” rather than equal opportunity.

The financial returns that workers realize are positively correlated with their skills, education, and ability and negatively correlated with discrimination. The contention that discrimination is the sole cause of unequal achievement is fallacious, and policies based on this premise threaten the foundations of a market economy.

Moral hazard is the undoing of socialist economies. Income redistribution means that the financial gains from skills acquisition and effort are not fully retained by those who make such investments. Workers eventually figure out that attempts to “get ahead” are futile and give up. Socialism has repeatedly failed because it dulls incentives to acquire skills and exert effort that increases the likelihood of greater financial returns for workers and higher productivity growth for the economy.

The framers understood the need for the government to protect the rights of citizens to acquire property in accordance with their skills and abilities. To wit, writing in Federalist 10, James Madison observed:The diversity in the faculties of men, from which the rights of property originate, is not less an insuperable obstacle to a uniformity of interests. The protection of these faculties is the first object of government. From the protection of different and unequal faculties of acquiring property, the possession of different degrees and kinds of property immediately results; and from the influence of these on the sentiments and views of the respective proprietors ensues a division of the society into different interests and parties.

It is not the proper function of government in a market economy to correct for any disparities in the distribution of income, irrespective of origin. Critical race theory proponents argue that it should because the disparities are caused by vestiges of slavery, still deeply entrenched in America’s institutions. The implication is that the country has yet to pay a sufficiently high price for slavery.

This is a debatable proposition. That slavery was a barbaric institution that Americans paid dearly to abolish is not in dispute. President Abraham Lincoln waged war against his fellow citizens rather than allow slavery to expand into the new western territories. One study finds that almost 2.5% of the U.S. population perished in the Civil War. Union troop deaths exceeded 400,000, with an additional 282,000 injured. With 4 million slaves in the U.S., this equates to one Union soldier killed for every 10 slaves freed.

The fact that racial parity in earnings remains elusive has led to a multitude of programs that seek to correct for this imbalance, including affirmative action, set-aside contracts for minority-owned businesses, and racial preferences in college admissions. This is a zero-sum game; an economic advantage for one group is an economic disadvantage for another. The longer these programs remain in place, the less compelling the argument that discrimination and white privilege alone explain the disparities.

A market economy is driven by private incentives to realize financial returns commensurate with ability, effort, and skills. These incentives are weakened when the goal of equal opportunity is replaced with social equity — because any disparities in the distribution of income are reflexively deemed to be the product of discrimination and white privilege that can only be remedied through redistribution. The price the country pays for this type of social equity is the breakdown of its market economy.

Dennis Weisman is professor of economics emeritus at Kansas State University.

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