The Public Interest

How to mend affirmative action

Glenn C. Loury

Spring 1997

MY scholarly work on the problem of race relations began with a general inquiry into the theory of economic inequality. Specifically, my 1981 paper, “Intergenerational Transfers and the Distribution of Earnings,” which appeared in the journal Econometrica, introduced a model of economic achievement in which a person’s earnings depended on a random endowment of innate ability and on skills acquired from formal training. The key feature of this theory was that individuals had to rely on their families to pay for their training. In this way, a person’s economic opportunities were influenced by his inherited social position. I showed how, under these circumstances, the distribution of income in each generation could be determined by an examination of what had been obtained by the previous generation.  My objective with the model was to illustrate how, in the long run, when people depend on resources available within families to finance their acquisition of skills, economic inequality comes to reflect the inherited advantages of birth. A disparity among persons in economic attainment would bear no necessary connection to differences in their innate abilities. 

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