The Anatomy of Racial Inequality by Glenn C. Loury Harvard University Press, 160 pp., $22.95 AS A YOUNG professor at Harvard, Glenn Loury, the African-American economist, was an articulate exponent of the view that the persistence of racial inequality could no longer be blamed on white racism, that blacks could succeed within the American system, and that responsibility for their fate lay with blacks, individually and communally, themselves. Loury was embraced by the conservative movement; Commentary and the Public Interest published his articles, the American Enterprise Institute named him a fellow, and other think tanks and advocacy groups sought him out for lectures.But when Loury was nominated for a post in the Reagan administration, his troubled personal life emerged into public view. The pressures of holding such a prominent position at such a young age, the worry that he had gained this position more on account of race than merit, and the hostility he endured from other black intellectuals had taken their toll. A young mistress charged Loury with assault; soon after, he was arrested for cocaine and marijuana possession during one of his increasingly frequent trips to the inner city for drugs and sex. Loury sought help in religion, and was soon baptized as a born-again Christian. He joined a black congregation, returning thereby into a black community like that of his Chicago youth. His political affiliations began to evolve as well. Sensing a hypocrisy in his earlier demands for moral rectitude from people in difficult circumstances, Loury says he also discovered an indifference on the part of conservatives to the plight of those same people. His conservative allies, Loury claims, seemed less interested in the state of the urban ghettos than in using him as a cover against charges of racism. In his 1995 book, "One by One from the Inside Out," Loury chastised conservatives for a lack of "moral urgency." But he continued to criticize the civil rights establishment for its debilitating rhetoric of victimization and to emphasize black self-help and moral renewal. Since then, Loury has criticized the California Civil Rights Initiative's "color blind absolutism" and more recently initiated a public rapprochement with Jesse Jackson, Cornel West, Charles Ogletree, and other leftist black figures. In his new book, "The Anatomy of Racial Inequality," a look into "how 'race' operates so as to perpetuate inter-group status disparities," Loury, now director of the Institute on Race and Social Division at Boston University, systematically modifies or even repudiates much of what he's written over the past two decades. Loury demonstrates in "Anatomy" that he is now prepared to blame racism for the problems that beset American blacks, though he finds "racism" too imprecise, preferring "stereotype" and "stigma." And he insists that responsibility for eliminating racial inequalities lies with the entire nation, rather than the black community. IN THE FIRST sections of the book, Loury seeks an explanation for the enduring social and economic disparities between whites and blacks. Acknowledging the decline in overt racial animosity and formal "discrimination in contract," Loury seeks answers in the idea of "self-confirming stereotypes." On the one hand, he argues, the division of the human population into several races lacks a basis in genetics. On the other hand, race is most definitely a social fact, as races have become closely identified with certain traits. Loury argues that these identifications have persisted because of self-confirming stereotypes: "Observers, acting on a generalization, set in motion a sequence of events that have the effect of reinforcing their initial judgment." To make his case, Loury considers interactions between employers and young black trainees. Employers who believe blacks to be lazy and careless will view mistakes by a black trainee as confirmation. Hence, "Employers will, therefore, be less willing to extend the benefit of the doubt to blacks during the training period." Black trainees will perceive this and, "knowing they are more likely to be fired if they make a few mistakes . . . may find that exerting a high effort during the training period is, on net, a losing proposition for them." This is plausible, but the same logic becomes strained in a subsequent example. University officials wanting diversity in their student bodies, Loury reasons, lower admissions standards for black applications. Black students, knowing they face a relaxed standard, study less. This gives us two varying scenarios--one, a higher bar for blacks to hurdle, and two, a lower bar--that in Loury's mind yield the same result, inferior black performance. This is suspect. Loury then turns to what he considers an even more important concept--racial stigma. While stereotype involves mere "social information," Loury explains, stigma relates to "social meaning." Stigma "is not merely the drawing of a negative surmise about someone's productive attributes. It entails doubting the person's worthiness and consigning him or her to a social netherworld." At its worst, stigma means "being skeptical about whether the person can be assumed to have a common humanity with the observer." Loury traces stigma back to the "racial dishonor" of slavery. As evidence of the "social otherness" of blacks, Loury offers the segregation of blacks in urban ghettos, the very low rate at which white parents adopt black children, and political writings that reveal an unwitting "us and them" mentality. Yet Loury's concept of stigma remains vague. What does it mean, as Loury says, that stigma depends not on "individual attitudes" but on "social meanings"? Does Loury, the former critic of "white liberal guilt," really believe whites do not think blacks are human? Loury's reimmersion in academic scholarship and concepts and language of sociology does not seem to have worked to his benefit here. Having promised much, furthermore, Loury does little with the idea of stigma. One effect he does attribute to racial stigma is an absence of concern over the problems of black communities. Such ills as lower test scores and extremely high rates of incarceration, Loury believes, are seen by most Americans as reasonable and in accordance with their expectations. This is unfair. DOES LOURY not recall the decades of commissions, reports, "conversations," and policy innovations ranging from busing and compulsory desegregation, to community governance, to minority set-asides, to enterprise zones, up through welfare reform, school choice, and "faith-based initiatives"? And though these last approaches involve a scaling-back of governmental responsibility, this retrenchment followed the conclusion that many of the earlier efforts were not only unhelpful, but may have caused serious harm to blacks. This is a conclusion that the earlier writings of Glenn Loury, among others, helped us to reach. From here, Loury's discussion moves in a more promising direction, one that harks back to his early work on social capital. Loury argues that discrimination or "reward bias" is no longer the principal obstacle to black advancement. The incidence of discrimination has dramatically declined. Yet it can also be perceived that ending discrimination in market transactions will not lead automatically to economic parity. Loury believes that the more useful analytic category is "developmental bias"--"racial differences in the acquisition of productive skills necessary for success in America." All this is undoubtedly true, but the notion of "development" should be broadened to include not just productive skills but also attitudes, ambitions, and habits of mind and behavior. The problem facing ghetto inhabitants is not only a deficit of specific skills, such as the "digital divide" in computer literacy the Clintons liked to emphasize, but an absence of qualities such as discipline, willingness to defer gratification, and a desire to succeed within the American system. Then to decipher the enduring distress of black Americans, we must take account of the deeply unhealthy social circumstances of the inner cities. What could be more relevant to "developmental" inequality than the broken families into which so many black children are born, with parents absent or badly ill-equipped to play the parental role? For many children in the inner cities grow up neglected, unloved, and undisciplined. They have few role models in their communities, and academic achievement is devalued among their peers. The predominant cultural product is a musical style that celebrates promiscuity and violence. Finding a job and working hard for low pay is seen as selling out to the white man. LOURY DISMISSES the "culture argument" by repeatedly equating it with racial essentialism, but they are not the same, as any cursory reading of James Q. Wilson's work on adolescent criminal behavior, or Charles Murray's on the pernicious effects of welfare (leaving aside his writings on IQ), reveals. Loury is familiar with these writings, but in "Anatomy" he declines to address their arguments. Thus while he argues persuasively that we have learned that formal equality in the marketplace will not automatically result in the elimination of racial disparities, he misses the mechanism by which these disparities are reproduced. Far more powerful than his "vicious cycle" of "self-confirming stereotypes," or some diffuse "stigma," is the destructive legacy of broken families and malign cultural influences, passed from generation to generation. So what is do be done, and who is to do it? Loury insists that all Americans have a moral obligation to eliminate the misery of the black ghettos and strive for racial equality. He is convincing on this point. Given our country's history, an absolute standard of color blindness--a total indifference to the question of how poverty, crime, and other ills are distributed across racial groups--is inappropriate. Conservatives are guilty of some level of hypocrisy, or at least inconsistency, on this question. They call for an end to racial consciousness, yet insist that blacks "must solve their own problems." But what does it mean to say "blacks must do it themselves?" Individually? That seems a rather tough demand. But if through communal effort, why should blacks feel a special responsibility to aid each other, if racial loyalties are to be abandoned? Loury, in his conservative days, had managed this tension well. He was never an advocate of color blindness along the lines of Shelby Steele, but his self-help ethos did not shade into black nationalism. He called for blacks, particularly those in the middle class, to help other members of their race, but to do so as a step into the greater American community, whose national creed he embraced. Now Loury insists that self-help is insufficient, and that we must take up the instruments of public policy, though he offers no suggestions on what policy changes should be made, aside from extending affirmative action and reforming our punitive drug policy. But perhaps we should look again at Loury's older writings. In his 1985 essay from the Public Interest, "The Moral Quandary of the Black Community," Loury called for blacks to take special responsibility for their fellows not because blacks were morally at fault for their distressed condition, but because only they had the power to ameliorate that condition, by changing the values, social norms, and internal resources of their communities. Certain public policies might assist this work, but they could never be the main force. Because of our country's history of racism, no white man or woman "can talk about what other blacks 'should' do, think, value and expect to be sympathetically heard." Only black leaders, local and national, could effectively deliver the necessary messages of self-improvement. But most civil rights figures have failed at this task, reflexively blaming white racism for any and every problem in the black community. Mounting black crime rates were met with charges of police brutality, poor academic performance with accusations of biased tests and underfunded schools, and family instability with claims of job discrimination. The effect of this discourse was not only to preclude genuine investigation of the conditions in black communities and constructive efforts to improve them, but also systematically to discourage achievement. IT IS SAD to think that with his most recent book, Loury may be reinforcing this dynamic. He is clearly angry with conservatives for their triumphalism regarding liberal error and their apparent complacency while poor blacks continue to suffer. Angry too at white America for its desire, forty years after the civil rights movement, to "move on." He is insistent that we do something about black inequality, but he has little to propose about what to do. A man of Loury's intellect deserves our patience, but the vague ideas and broad accusations in this book, as well as his neglect of conservative work on race, seriously undermine his claim to be a guide on matters of race and public policy in America today. Elizabeth Arens is managing editor of the Public Interest.