Neoclassical economic theory proposes that employment discrimination is inefficient. An employer who chooses employees on the basis of some trait, such as skin color, that is unrelated to productivity will be less successful than competitors who hire solely on the basis of productivity characteristics. A corollary to this argument is that affirmative action and other initiatives to address labor-market discrimination are at best unnecessary and at worst counterproductive. The article summarized below challenges this orthodox conclusion, points to extensive evidence of discrimination, and argues that neoclassical economics cannot be manipulated to produce a convincing story of why groups or individuals who differ ascriptively but who share similar productivity-linked attributes experience differential treatment in markets over time.
