Nigel Farage wants to scrap a lot of discrimination laws. From one perspective, this isn't wholly outrageous.

In principle, there's a stronger barrier to discrimination than mere law - competition. As Kristian Niemietz says, channeling Gary Becker:

A competitive market economy provides us with strong incentives to keep our personal prejudices out of our business decisions. Even the most sexist/homophobic/racist employer can realise that by hiring only heterosexual men of Saxon descent, they limit the talent pool accessible to them, which is not smart business. Especially when talented applicants can go on and work for a competitor.

There's some truth in this. Competition explains why Ron Atkinson - a man later revealed to have racist attitudes - hired black players in the 1970s. And it explains why "politically incorrect" financial firms have more ethnic diversity than the "liberal" arts establishment.

I would rather racists who hire inferior Brits over talented foreigners go bankrupt and lose their life savings than merely get a slap on the wrist from law courts which feeds their martyr complex.

But. But. But. There's a question here which applies to many theories in the social sciences. Whilst Becker's theory that competition reduces discrimination is partly (pdf) true, just how true is it?

The wheels of competition just don't grind finely enough to entirely root out discrimination; the fact that there are ethnic (pdf) pay gaps (even controlling for qualifications) tells us this. And, I fear, this would remain the case even if measures were taken to increase competition; a perfectly competitive economy is a textbook ideal, and not something seen in the real world.

My doubts here are reinforced by an agency problem. Tesco's bosses (say) - and certainly their long-suffering shareholders - might well genuinely want to maximize profits and so hire the best people. But do the petty tyrants who run their stores really wholly share that aim? And wouldn't a few of them have sufficient wiggle room to indulge their own prejudices against the interests of their distant employers? There is a great deal of ruin in any large organization, and within that ruin there's room for discrimination to survive.

And to the extent that big local employers sometimes enjoy at least a modicum of monopsony power, I'm not sure it's good enough to claim that the victims of discrimination by the minority of racists would find equally rewarding work elsewhere.

Now, I am expressing all this in the form of doubts and scepticism for a reason. The question here is: on which side do we wish to err?

Let's say my doubts are ill-founded and discrimination laws are superfluous. Then nobody gains or loses from their removal - because firms would carry on hiring the best people anyway.

But what if my doubts have even a little validity? Then the winners from removing such laws are racists. And the losers are meritorious ethnic minorities. Do we really want to take the risk of helping the former and hurting the latter? And what does it say about Mr Farage that he is willing to do so?