The Right Way

Fred Randall: “I'll enter the same calculations using what we like to call The Right Way.”

—RocketMan (1997) Harlan Williams as Fred Z. Randall

That’s from a very funny movie about an astronaut who was as far from the prototypical crewcut, athletic, military pilot as one can imagine but who happened to be the right person for the job. The Right Way was Fred explaining programing to an astronaut. Where his competitors who fit the mold were unable to keep themselves from going crazy in and isolation chamber, Fred was able to entertain himself with sock puppets. In a sense, this was NASA hiring on merit, not on prejudice toward military test pilots as President Eisenhower had originally decreed. It wasn’t because of Diversity, Equity and Inclusion, (DEI) and that’s a good thing.

In economics, Gary Becker originally published his theory of discrimination in his 1955 PhD thesis and popularized it in a 2014 book called The Economics of Discrimination. Becker believed that discrimination could not persist in a market economy. Rational individuals, particularly employers, could not afford not to hire the most qualified person. It didn’t depend on whether they were black or white, male or female, young or old because if they didn’t hire the most qualified person, their competition would. Sooner or later, their competitors would be able to outcompete on quality or price. So, discrimination has consequences for both the employee and the employer. Becker didn’t see markets as completely curing racism. For example, he thought that some people would pay higher prices to avoid dealing with black employees.

In 1966, economist Harvey Leibenstein might have explained discrimination through a concept he called “X-Efficiency.” This theory hypothesized that in industries with less competition, e.g., monopolies, there would be less incentive to control costs which would result in less than optimal production. When firms were making more than competitive profits due to reduced competition, they could afford to have luxury offices, expensive company cars and afford to discriminate (X-Efficiency was hotly contested by economist George Stigler in an article entitled, “The Xistence of X-Efficiency).

Whatever the reason for discrimination, it makes markets less efficient than they could be if people are not hiring based on merit. But it is also true that if hiring is based on quota’s, it is also inefficient. Merit means that the person best qualified produces the best product at the lowest cost. In fact, we are diverse and that is a wonderful thing. Some are poets and some are painters. I can write but I can’t even draw a stick figure. In fact, we have “considerable genetic differences” between individuals—and those differences are mostly within each racial category. The problem is finding the right person for the right job. 

The same is true for countries, some are better at producing sweaters while others are better at producing cheese. When this is true, it makes sense for them to produce what they are best at and then exchange goods in a market – sweaters for cheese. That theory, comparative advantage, was originally formulated by David Ricardo in 1817.  It explains why most economists generally favor free trade between countries.

Today, we are engaged in a “fierce debate” over DEI with 35 bills to ban DEI in state university systems and K-12 schools. It’s certainly not hard to imagine that legislation including Title VII of the Civil Rights Act of 1964, the Equal Pay Act of 1963, and the Age Discrimination in Employment Act of 1967 have not proven to have some benefits where market forces failed or in the public sector where market forces don’t apply. But there may also be costs to DEI, particularly in jobs where less qualified people are hired. For example, some medical schools are “creating social justice-informed medical curricula” to ensure that schools include students based on race, color, ethnicity, sex, age or disability. They may be putting patients at risk as a result.

I was exposed to a theory very much like DEI in the 1990s at FDA when a diversity class instructor told us that it didn’t matter who we hired, including their training, that anyone could be trained to do any FDA jobs at current standards. I remember that most of the scientists in the room were highly skeptical of this theory. 

From a public health perspective, particularly from airline pilots to physicians, DEI is rolling the dice. Battling discrimination isn’t easy, but if we begin by getting K thru 12 right and ensuring that colleges maintain standards while giving all applicants an equal shot at attending, competition will certainly help to match candidates to jobs for which they are qualified. We must also hold public sector managers accountable for results as we do in the private sector.  

None of this is easy but we should do it “The Right Way.”