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Merit and the market

There is an interesting debate going on at the Econlog blog about whether there is anything like a “meritocracy” in the market. (My short answer: it is a mixture of luck and merit, but I am not sure about the ratio between the two). Rather than me weigh in, I just wanted to point to what I consider to be Bryan Caplan’s insightful comments. I also liked the comments in the associated thread by a character with the name tag of “MernaMoose”.

It may not always be the case that the hardest working folk make the biggest bucks, but it generally operates that if people think it does, then the system as a whole generates a bigger pie in which many of those who have worked hard to maximise their talents do well. After all, fatalism (“why should I bother since it is all down to chance?”) tends to correlate, from what I can see, with a less prosperous society in general. Unfortunately, there will always be the hard cases where the supposedly worthless celebrity earns gazillions while the hard-grafting nurse gets paid a lot less. (Although in my experience, some of these celebs have worked incredibly hard to get where they are). But in a society based on voluntary exchange and where no central authority gets the potentially horrendous power to decide who has made the most use of their talents (assuming such talents can be known in advance), that situation is inevitable. Being philosophical about such things, such as watching a trust-fund brat sailing through life while someone else has to slog away for a relatively small income, is hard, I know.

9 comments to Merit and the market

  • Eddie Willers

    Lawrence Harrison makes the same point concerning ‘fatalism’ in his study of the Ibero-Catholic culture’s migrants in the USA. Seems that the ‘God’s will’ can excuse a multitude of slackness – I see it here in Mexico all the time.

  • RRS

    Not meaning to be too presumptious, but there may have been less attention given to the fact that “markets” (as in Tyler Cowen’s “Markets in Everything”) are the places where the widely dispersed information comes together on all sorts of related subject matter, and the fleeting evaluations thereof occur, resulting in prices which are also applied to the most nearly “correct” (or useful?) forms of evaluations. Those prices include the rewards to the evaluators.

    — as a beneficiary of Liberty Fund.

  • dunderheid

    Excellent post….but playing devils advocate doesn’t the fact that the market values someone who can have sex with a footballer more than a policeman point at a failure or more exactly an ineffeciency in the market itself?

  • Rich Rostrom

    “…a trust-fund brat sailing through life…”

    has nothing to do with the market. The brat’s income is not received by him in transactions, market or non-market, it is a gift from another private party who earned or stole it.

  • RRS

    Dunderhead -

    Deary me, I don’t like that expression, given this response:

    There is not “The” Market (sngl.) there are The MarketS, which are many and varied by the nature of the human interactions taking place.

    The market for Kindergarten Suppli8es does not cover the transactions for Escort Services.

  • RRS

    Hey Am I on some kind of smite watch?

  • “watching a trust-fund brat sailing through life while someone else has to slog away for a relatively small income, is hard”

    Yes, like “look at the big house, look at the little house”.

    Why? Maybe the brat has been raped by his uncle since he was six. Maybe the slogger likes slogging. If everyone is free, and you can’t know the background, what is the point of even having an opinion?

    For example, “the market values someone who can have sex with a footballer more than a policeman point at a failure or more exactly an inefficiency in the market itself?”

    Not if I am the football player or the sexually skilled person who makes him or herself available to me.

    And maybe not if I’m the police officer, if I’m not able or willing to make myself attractive and available.

    .

  • Simon C

    Another interesting discussion of this is in Malcolm Gladwell’s Outliers. He discusses how the agricultural history of the people influences their approach to work and consequently their success in Mathematics. He attributes the east Asian strength of school kids in maths to the ethic of hard work developed during rice cultivation, which apparently is much more work intensive and less influenced by chance than western agriculture.

  • kentuckyliz

    I live and work in Appalachia, doing a lot of career counseling. There is a lot of fatalism in the Appalachian mindset and it comes from the odd Calvinist mountain religion and the local history.

    “I don’t know why I should go to college/pursue x goal, because it’s all who you know.”

    I put up a poster in my office:

    “Only losers attribute success to luck.

    Successful people know better.”

    And another, a quote by Seneca:

    “Luck is preparation meeting opportunity.”

    And then I explain that attending college is like an extended job interview, and the opportunity to widen the circle of who you know…explained in detail in how that translates into opportunity.

    The only way to defeat nepotism is to become a better qualified and higher producing results oriented valuable employee than the nephew.

    Nothing Ibero about this area–it’s Brit in background. But fatalist nonetheless. The major obstacle for most people is their chip on the shoulder towards The Man. The way to win is to opt for coasting along on the social programs (British Fabian socialism and German Bismarck, anyone?) and let the suckers work and strive. My schoolteacher friends get really irked when children state their career goals as getting a government check…going on the draw.

    Hallmark of a declining civilization. The glory days are behind us.

    Especially when we have a POTUS who would like to spread that attitude universally. The US should become a southside Chicago tenement neighborhood. Yuck.