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Source link: http://archive.mises.org/12033/the-market-against-race-and-sex-discrimination/

The Market Against Race and Sex Discrimination

March 6, 2010 by

Libertarians with conservative backgrounds might grumble at this news: Responding to reports that diversity at big law firms is on the decline, a group of big corporations such as American Airlines, DuPont, and General Mills has just agreed to spend $30 million to hire minority- and women-owned law firms as outside counsel.

At first glance, this might seem like out-of-control political correctness or unseemly race consciousness. Why shouldn’t they just hire the best counsel, without regard to race or sex?

But as this National Law Journal article points out (free registration required), businesses aren’t doing this out of altruism or even just for the PR value. They’re doing it because the smaller minority- and female-run firms can do the work more efficiently, for less money than big white-male-dominated firms, which matters a lot in a tough economy.

This is exactly what free-market economists would predict. If minorities and women are insufficiently valued by some employers, they’ll go compete with those employers and win.

And if that holds true in the legal field, where personal characteristics and relationships matter far more than usual, that should make us all the more confident that it works most everywhere else, too — and that anti-discrimination laws aren’t as necessary as we’ve been led to believe.

Incidentally, Jeffrey Tucker has nicely summarized some of the problems caused by employment-discrimination laws in this review of Richard Epstein’s important book on the subject, Forbidden Grounds.

{ 9 comments }

Huebert March 6, 2010 at 1:15 pm

Before someone else makes the comment, I should acknowledge that many of these big corporations are not purely “market” institutions, and neither are law firms, which are part of the state-imposed legal cartel. But such organizations can still be used, as here, to illustrate some ways in which the market works.

Kerem Tibuk March 6, 2010 at 1:33 pm

“But as this National Law Journal article points out (free registration required), businesses aren’t doing this out of altruism or even just for the PR value.”

PR is a legitimate market function so even if they did it just for PR reasons it would still show the power of thefree market.

J.H. Huebert March 6, 2010 at 1:42 pm

I agree. But if it were only about PR, one could argue that they only need the PR because of a government-encouraged atmosphere of political correctness. (I don’t know how much merit that argument would have, but one could make it.)

In this case, though, we can see how they have an incentive that is clearly about the bottom line. And I’m sure they appreciate the PR, too — which probably explains why they would set aside the money specifically for women and minorities instead of just shopping on price in some other manner. Nothing wrong with that.

Learner March 6, 2010 at 4:16 pm

There’s something about the semantics of “a group of big corporations [...] has just agreed to spend $30 million to hire minority” that reminds me of affirmative action. And why have they decided to “collectively” invest in this initiative (see original article)?

Floyd Looney March 6, 2010 at 10:19 pm

Odd that there are no efficient small white-owned firms. Maybe because they were so good at what they do they became large firms?

Matt March 7, 2010 at 12:25 am

Actually, Floyd, all the Jewish people who were not allowed to join white firms banded together to start their own small firms, which have now become the big firms dominating the market. These things take time. Women and minorities make up a very small percentage of lawyers who have been in practice long enough to have developed prowess in both lawyering and law firm management, because it wasn’t a viable career option (especially for women) two or three decades ago. Huebert was trying to highlight that companies are finally starting to wise up and see what kind of talent is out there, and there is a lot of it. Unfortunately, the legal industry still relies on outdated models and artificial barriers to entry, otherwise this would not have taken so long. So your insinuation that whites are somehow “better” at lawyering is misplaced and unwelcome in a libertarian forum.

Mitchell Powell March 7, 2010 at 1:23 am

Let the market be as politically correct as it likes, and let the market sort out those who are racist and those who hire the best value in labor regardless. I suspect in this case the economic results will vindicate the airliners.

Scott V March 7, 2010 at 6:27 am

Please forgive me for being rude and making a joke, but a lesbian-left-handed-eskimo-midgit-albino/lawyer would make soooooo much money!

HL March 7, 2010 at 1:24 pm

Scott V – they do. Shopping for quality legal representation is extremely difficult. Even the most sophisticated consumer of legal services has a terribly hard time quantifying marginal benefit to this or that action and, especially, this or that scribe or litigator. Add to this that “even a blid pig will find a truffle now and then,” and you have a market that is perfect for race-based discrimination.

Prior to the 1970′s it was discrimination in favor of melanin disadvantaged people; after the 1970′s it was discrimination against the melanin deprived. The ABA works tirelessly to assure that every law school in this country admits enough challenged applicants to ensure at least 10% of each graduating class is completely and totally incapable of performing at the bare-minimum level of competence. Even governmental employers will admit, in hushed voices after many drinks, that the sight of melanin is almost a guaranty this attorney will be trouble.

I will say this, though, now is truly a glorious time to be a “minority.” If you are even remotely talented and can look good in a suit, possibilities are unlimited.

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