More on Merit: Reply to Dalmia
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:
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
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.