Bryan Caplan  

More on Merit: Reply to Dalmia

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Raise the Age... Question for David...
Shikha Dalmia's reply on merit tacitly concedes most of my objections to her original piece.  She began by defending the strong position that, "Markets don't reward merit; they reward value--two very different things."  I replied that, "On the free market, value and merit are highly correlated, so markets reward merit after all."  Dalmia's response grants my main point:
[It is a safe bet that there will always be brain-powered industries in any economy so that smart people will always do well.
She then emphasize that the correlation is less than perfect:
The rewards that brains or any kind of meritorious quality reaps in the market are a contingent - not a necessary -- thing. To claim that brains will always win out over everything else in the market requires either omniscience or some quasi-religious belief that markets are an agent for certain preordained ends of distributive justice...
I wish Dalmia would stop attacking the extreme position that I explicitly disavowed.  But in terms of substance - market success and merit are highly though not perfect correlated - we now seem to be in basic agreement.  I would however like to object to two new points in her reply.

1. Dalmia writes:
To put it another way - the market rewards brilliant ideas, not brilliant people. And these ideas can come from anywhere. Markets are a completely non-ad hominem institution - they care only about the idea and its value to others, not its source - which is why they are inherently anti-elitist.
Reply: While brilliant ideas can come from anywhere, the vast majority come from brilliant people.  And contrary to Dalmia, due to the power of reputation, markets care a lot about the source of an idea.  An innovator with a strong track record gets a lot more attention than a random guy with a good idea.  You could object that reputation undermines the meritocracy of the market, but remember: market reputation is largely a measure of long-term merit.

2. Dalmia approvingly quotes Hayek:
"It is probably a misfortune that, especially in the USA, popular writers like Samuel Smiles and Horatio Alger, and later the sociologist W.G. Sumner, have defended free enterprise on the ground that it regularly rewards the deserving, and it bodes ill for the defence of it which is understood by the general public. That it has largely become the basis of the self-esteem of the businessman often gives him an air of self-righteousness which does not make him more popular."
I'm not convinced.  Whenever any other group in society feels disrespected - whether it's women, gays, blacks, immigrants, nerds, or whatever - we advise them to stand up for themselves.  We tell them to demand that their fellow citiziens give them the respect they deserve.  Why shouldn't businesspeople and high-earners follow the same strategy?  Yes, in the short-run, this might be, in Dalmia's words, "off-putting."  In the long-run, though, pride movements are pretty effective.

Imagine a world where people feel as uncomfortable publicly criticizing "the rich" as they now feel about lashing out at blacks or gays.  Imagine a world where politicians nervously fumble, "I'm not complaining about the rich, merely certain aspects of rich culture, because of course rich people make many great contributions to our society..."  It won't be easy, but contra Hayek, this is exactly the direction free-market advocates should be pushing in.


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COMMENTS (13 to date)
Kurbla writes:

Sure, correlation between merit and success exists - but the claim is not strong: some correlation existed in almost all political systems - from US slavery to Albanian "socialism;" better doctors are almost always rewarded better than worse doctors etc.

Furthermore, isn't it easy to make success in capitalism better correlated with merit: ban things like lottery or inheritance.


Eric H writes:

Yikes:

"I'm not convinced. Whenever any other group in society feels disrespected - whether it's women, gays, blacks, immigrants, nerds, or whatever - we advise them to stand up for themselves. We tell them to demand that their fellow citiziens give them the respect they deserve. Why shouldn't businesspeople and high-earners follow the same strategy?"

Free-market libertarian, meet 21st century identity politics. Is the dominant paradigm here: if you can't beat them, join them?

None of the groups you mention--blacks, gays, nerds-- deserve respect qua blacks, gays, nerds. They deserve respect because they are human beings. Its sad to think businesspeople--black, gay, or nerdy, or whatever--should feel they must join yet another group in order to get respect.

Freedom is great because it gets people like Bryan to serve us without us first having to praise him for being Bryan. Likewise, we don't have to shower praise on Walmart's brainiacs for streamlining logistics before we take advantage of its low prices, or Boeing's brilliant engineers for designing safe and efficient planes before we use them to fly coast-to-coast. Feudal lords, dictators, and politicians depend on praise and "respect."

Chris Koresko writes:

@Bryan,

I don't mean to pile on here, but I second Eric's "Yikes!" and the reasons for it.

It seems to me that the way to make the public more sympathetic to businessmen ought to be very closely connected to the REASON you want to do that.

I presume the reason has to do with the idea that a free market is at worst a morally neutral abstraction and at best a morally uplifting system of relationships. Is the argument not that capitalism enables strangers and even enemies to cooperate for their mutual benefit? That tends to reward virtuous behavior (defined as work toward the benefit of others)? That is the only known way for a poor society to become a prosperous one, with all the good things that entails?

Even without such cosiderations, it seems to me that identity politics is a losing game when the mass media and a lot (most?) of the intelligensia are opposed.

Nicolaie Ionut writes:

I must admit that every time I read a Bryan Caplan piece my first instinct is to close the browser and wash my hands. That being said: there is no correlation between value and merit and success in the market. Usually merit is attributed to a person after success, mostly a huge success, and it is the result of an (un)intentional PR campaign (not necessary initiated by the person who becomes the hero). But one could argue that there is a big correlation between success and envy.
The market does not reward anything; actually it is a quite cruel master.

MernaMoose writes:

Dalmia says

To put it another way - the market rewards brilliant ideas, not brilliant people.

She further implies in her original article that you're just as likely to strike it rich by being a drunk idiot, as you are getting a PhD in say electrical engineering. She further says that intelligence is "arguably inherited".

All of which concedes one of the Left's big attacks, that those who are wealthy (and/or productive) don't deserve it anyway. So why not take what they have and redistribute to others?

If we continue to follow Dalmia down this road, we are left with no arguments against socialism.

Perhaps one day she'll get her arms around the fact that this is what so many are reacting to in her article. Or maybe she already knows and, as some have suggested, she'll soon see the light and become a socialist herself.

It may seem to some economists that the issue of how-when-why-where the actor deserves the product of his labor, is irrelevant. But in moral terms it's anything but irrelevant, and (as libertarians know) it's hard maintaining social support for a system that seems immoral, or at best amoral.

It's a good bet that on average, the market will reward the application of intelligence and hard work that is aimed at producing value. It's true that here and there you may find exceptions to what is a very good general rule.

What's complicated about this, Dalmia?

Bryan's counter is right on.

While brilliant ideas can come from anywhere, the vast majority come from brilliant people. And contrary to Dalmia, due to the power of reputation, markets care a lot about the source of an idea.

How true.

Dalmia is walking on mistaken and dangerous ground for anyone interested in preserving free markets.

mark writes:

The third commenter above writes:
"there is no correlation between value and merit and success in the market." This proposition is clearly false. As any proposition of such generality would be false. One needs only to interview readers of Consumer Reports, for example, to confirm the falsity of this proposition. I suspect the defense of the proposition would simply be the strawman tactic, which Dalmia employs, to misrepresent the opposing argument as an argument that a perfect correlation exists and then to prove that such an extreme argument is false. That of course is not the argument.

In general though, I find these arguments are pitched at too high a level of generality and abstraction to be very worthwhile. One source of disagreement appears to be over the meaning of the terms being employed in the argument such as "value", "merit" and "brilliance" and I would even question whether a generalization like "the market" is useful in this context.

mobile writes:

Yikes again.

I can already think of a few worlds where people are quite uncomfortable criticizing the rich -- authoritarian and repressive regimes where "the rich" are the government. This surely isn't what Bryan meant by his comment, but let's be careful what we wish for.

And of course, not all pride movements are successful. There are countless "white pride" movements of varying degrees of seriousness that have gotten no traction. And are pedophiles really any better off after years of the tireless efforts of NAMBLA? Bryan would do well to dig a little deeper and find the elements that distinguish the successful pride movements from the rest.

hacs writes:

"It is a safe bet that there will always be brain-powered industries in any economy so that smart people will always do well."

That is faith in a kind of "generic intelligence" instead of comparative advantage. It is quotidian people who are competent in some tasks and completely inept in others. "Generic smartness" is something really rare and any institution based on it is fated to irrelevance. Besides, it is an idea based on a language trick which synthetically express a myriad of traits selected for specific functions (they have a resemblance to comparative advantage) which were needed in specific former habitats (wide sense) and, by chance, they are well suited for the present: the idea of fit.

"The rewards that brains or any kind of meritorious quality reaps in the market are a contingent ..."

Contingent or not it is an idea of merit strongly attached to marketable ideas, something undeniably good for business (maybe for the economy), but it is very restrictive for humans, who have a wider range of goods than firms. This concept of merit would be indifferent to unmarketable ideas, nullifying, along the time, any favorable incentive to them. Such incomplete merit notion could give rise to a society full of dehumanized human beings, struggling to fit this concept of merit, neglecting any other value which could be an obstruction/distraction to their effort.

"To put it another way - the market rewards brilliant ideas, not brilliant people. And these ideas can come from anywhere. Markets are a completely non-ad hominem institution..."

Yes, it is non-ad hominem and non-ad humanitas also.

alex s. writes:

I've said in an earlier thread that I think Dalmia's point is mainly rhetorical, but I wonder if you're not both missing something with the "brilliant ideas/brilliant people" arguments*.

The market rewards a lot more than just brilliant ideas. Invent the light bulb, and you win a big prize, but the market also rewards the company that finds a way to make the light bulb last 5% longer, or pursues the mundane acts of quality that mean that 99% of the bulbs work the first time instead of just 90%. People don't shop at Wal-Mart because their products are brilliant (though you could argue that there is brilliance in their supply chain logistics). Moreover, there are a lot of markets that don't compete on brilliance by any normal definition. Just imagine the lastest hit in [insert pop music genre you don't like].

* It bears pointing out that the "brilliant ideas come from brilliant people" argument is a little tautological. I mean, that's how we know they're brilliant people, right?

Current writes:

The invention of light bulbs is a good example. The principle by which light bulbs work was known for many years before, but no one could find a suitable material for the filament. The materials tried would all burn out. It was difficult to make a good enough vacuum to prevent the filament catching fire.

These problems were solved independently by Joesph Swan and a team of researchers led by Thomas Edison.

The invention of the light-bulb was itself an application of progressive improvement. It required a great deal of hard work and brains from those involved.

Current writes:

Hayek wrote:

"It is probably a misfortune that, especially in the USA, popular writers like Samuel Smiles and Horatio Alger, and later the sociologist W.G. Sumner, have defended free enterprise on the ground that it regularly rewards the deserving, and it bodes ill for the defence of it which is understood by the general public. That it has largely become the basis of the self-esteem of the businessman often gives him an air of self-righteousness which does not make him more popular."

The businessman should defend the proposition that free enterprise rewards the deserving, because it's true. However, the businessman should not assume that he is deserving just because he has succeeded. It's the difference between the general and individual situation that causes the problem.

What justifiably irritates the general public is that businessmen presume that their own success isn't luck, when it may be.

That said in my experience the general public hate success. At least where I'm from in Britain the successful are derided and put-down due, I think, to envy.

guthrie writes:

Sorry to have to add to the 'Yikes' in this discussion, but Bryan is forgetting or ignoring a very basic trait of human nature. Those who are lower status will always want to see those in higher levels brought lower, and those on lower levels raised, even if only (and sometimes especially) symbolically by means of insult or derision to bring down, or 'pride' movements to raise up.

The groups he mentions are all marginalized, low-status groups, while the well-to-do (by merit or luck or birth or whatever), are by definition high-status. Whatever abuse or derision 'high earners' might feel comes as a natural result of their rise or place in status-strata.

Plus using the word 'feel' is dismissive itself. Women, blacks, gays, et.al., don't 'feel' disrespected, they ARE, in fact, disrespected in tangible, definable ways. The 'pride' movements and insults of the well-to-do are a means of maintaining sanity in the face of legitimate pressure.

D Spencer writes:

As my old buddy Solsvig says,

"Napoleon may have said that he'd rather have a lucky general than a smart general. But it's a lot easier to be smart twice than it is to be lucky twice."

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