Abstract
Simple models are used to describe three kinds of racism: (1) irrational racism, bigotry which hurts both parties; (2) 'economically rational irra tional racism', where a stable, non-optimal, racist equilibrium exists in a community where no one is an irrational racist; and (3) 'fully rational racism', where past injustices have led to present inequalities between the races, and neither the 'rationality' of profit maximization nor of Ameri can political principles can avoid racist results. Examples from housing, education, and militant groups are given to illustrate the paradox of fully rational racism for the policy maker. Locating racism solely in the irrational neglects the more fundamental problem of institutionalized racism.
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