Is Statistical Discrimination Efficient?

Neoclassical economists have advanced two general types of labor market discrimination models: taste discrimination models and statistical discrimination models. Taste models include in the utility functions of employers, fellow workers or customers a desire to avoid members of certain groups. (See Gary Becker, 1957). Under such an approach, discrimination cannot be characterized as either efficient or inefficient. One can compare the distribution of income and utility with an economy where people do not have a taste for discrimination. But until one decides the moral question of whether furthering the taste is acceptable, once cannot begin to ask whether society's resources are being placed in their most…