The merits of meritocracy

Most supporters of the desert approach to economic justice are attracted to it because it is entirely meritocratic. People get a share of social goods to the extent that they merit them (according to the relevant, though inevitably controversial, desert base chosen from those described in my previous blog).

Meritocracy appears to lend itself to the free market in some ways but not others. In common with pro-free-market entitlement theories of justice such as libertarianism, workers should get the product of their efforts. Taxes on labour are to be avoided and the free market in the field of production should be encouraged (or replicated if the economy is a command rather than market-based one).

However, in other areas desert theory is diametrically opposed to free-market entitlement theories. According to libertarianism people should be able to give away their resources to others without interference. However, recipients of gifts and inheritances have not done anything *and should not therefore receive this. Any resources not used by the deserving recipient should be returned to the social pot for distribution to the deserving.

Meritocracy is preferable to libertarianism because it links income to what the individual does rather than the vagaries of their family fortune. However, I would still question whether meritocracy is really that meritocratic. Family background could still play a role in a desert-based economy as some parents will be more nurturing than others. People also have different natural talents which they can utilise in the labour market to earn more than others, with the further issue that all sorts of pieces of good fortune can make a huge difference to people’s lifetime earnings. The person who gets a particular experience or opportunity might make the most of it, but the people who missed out on it would have made the most of it as well if they had the chance.

Economic desert bases

People who complain that society "gives x more than they deserve" and "gives y less than they deserve" presumably have some basis for making this judgment. We can take this question one step back and ask the underlying basis for this. We call this the desert base.

Essentially, a desert base is the underlying thing which determines what people deserve. For winning the best leading actor oscar the base is providing the most impressive acting performance in an eligible film. However, where it comes to economic desert agreement about the ideal base is lacking.

The three most commonly cited desert bases are:

·         Effort (people who work hard deserve more than the lazy)

·         Contribution/Productivity (people who make a larger contribution to society should get more)

·         Compensation (people who give up more should get more)

However, there are problems with each of these bases:

To reward people for the effort they make opens the question as to what activities should count as ones which efforts count. If I put a lot of effort into playing football with my friends this presumably doesn’t mean I deserve as much as someone who works hard as a paramedic. However, does this mean that the professional footballer is also undeserving? Presumably there would have to be a threshold at which point people’s activities become ‘work’ and thereby qualify them as deserving.

But this means that a particularly hard working lower division footballer is as deserving as a premier league one. Perhaps they are, but this raises further concerns about the incentives that such a system creates. If only your efforts determine your rewards then this reduces the pressure to increase productivity or for people to do work that they are more suited to—natural footballers would be better off playing rugby and vice versa so that both are putting in extra effort. Indeed people might find the work they would be best at easier and taking that work might make them worse off.

To reward people according to their contribution, on the other hand, would provide very good incentives for people. Someone who provides goods and services that are more valued by others (according to how much they are willing to pay for them) will receive more. One major concern with this is that it does not seem fair to reward people according to their productivity. Some people are more naturally talented than others and such people would be able to contribute more than others.

The third prominent approach could be seen as a solution to the two problems above. By providing people compensation for their activities in the name of the social product this would seem to take account of the effort that people put in but also allows for further sacrifices that people make that do not fall under the heading of effort. So someone who takes a particularly risky (though not otherwise taxing) job might be deserving of greater reward. It gets around the talent issue to a degree because people who find a job easier due to their talent would deserve less than their colleagues who find it difficult.

However, the compensation approach still shares a lot of the issues with the effort approach. People who suffer more for the economic produce because of their inefficiency would be more deserving than others. This again discourages people from doing work to which they are most suited and from making productivity gains.

Supporters of their preferred desert base can just bite the bullets presented above. However, specifying the potential underlying desert bases can draw out problems that might not occur to those who unreflectively adopt a desert-approach to economic justice.

In the next blog I will present a more fundamental reason to doubt the applicability of desert to economic justice. 

What is desert?

The topic of this series of blogs is the desert-based approach to economic justice. Put simply this approach says that economic resources should be distributed to individuals in accordance with the relevant facts about them.

One way to further distinguish desert-based theories is to say that they imply a notion of pre-institutional desert. After all, all approaches to economic justice will allow a judgment of whether a particular individual has received what they deserve. However, for these other theories the judgment about desert is a secondary one.

For institutional claims of desert the assertion that people deserve x is derived without reference to desert. In pre-institutional theories of desert, on the other hand, desert is itself the basis of the judgment of justice.

People can make use of the notion of desert in all sorts of situations, for example “the team who trained hardest deserved to win the tournament” or “the student who studied very diligently deserved to obtain the highest mark.” Where the institution defines the desert there is no controversy because the person deserves what the institutional rules say what each should obtain. Similarly, in cases where there is a clear basis for the activity—such as being able to play a piece of music accurately but expressively—then we can rank people’s deservingness of prizes in accordance with their performance.

If we have an underlying notion of desert that readily tells us what everyone in society should get then this would be a very strong basis for fairly distributing resources. Desert theory therefore needs to answer two questions a) what is the proper basis underlying economic desert claims? and b) how can this basis translate into a monetary amount? I will consider these issues in my next two blogs.

On desert (1/1)

I have long wanted to blog about economic desert and I am finally getting around to doing so. I would love to write an academic paper about this but a blog series should be less time-consuming and have a wider potential audience.

Sometimes people complain that they or others have not received what they deserve. It is a more common complaint from right-wingers, who sometimes claim that entrepreneurs and high-earners lose out on what they deserve due to taxation. On the other side, left-wingers will claim that working people do not get what they deserve for their time and efforts.

Not many political philosophers advocate a desert-based theory of economic justice for reasons I will describe in a later blog. However, some of those who do have a more sophisticated position than the unreflective cries of unfairness outlined above. David Miller is one such prominent thinker, and he advocates a form of market socialism whereby worker-owned firms would compete in a marketplace and the workers would get the benefits of the work they do.

In this series of blogs I will explain the desert-based approach to justice and outline why it is considered attractive and yet problematic. I will then suggest a new way of linking desert and the market that would, I believe, provide the most plausible theory of economic desert.  I will conclude by highlighting how this would fit very well with my CLIPH-rate tax proposals. 

What is wrong with markets?

In some of my recent blogs I have argued that market economies cannot obviously be wrong in themselves at least under the most obvious understanding of the purpose of the economic system. I of course believe that the most egalitarian market economy is the correct one and that fairness is a major problem for market economies that requires constant rectification.

I fully accept that market economies tend towards inequality and monopoly and that it is necessary to have strong mechanisms in place to counteract these. Robust regulation is required to guard against monopoly and other potential market failures Redistributive mechanisms are necessary to counteract the inequalities that markets generate, and my CLIPH-rate tax system is my proposal to achieve this.

This still leaves it open to argue that there is something (or many things) wrong with markets even if there isn’t a better economic system available. Some political philosophers have made some arguments along these lines in recent years and it is worth considering these.

Michael Sandel is one of the most widely known political philosophers and has been a strong critic of markets. He has argued, for example in his book What Money Can't Buy: The Moral Limits of Markets, that markets impose their own valuations which corrupt and crowd out other values. He has a few good examples in which introducing market solutions can be counter-effective because other values get crowded out.

He goes to great lengths to show that the issue is not just the unfairness engendered by allowing markets into more areas of life in unequal societies, but that rather other important values can be lost as a result. His proposed solution, unsurprisingly to those who know his other work, is that markets should be subordinated to the common will, as determined by democratic discussion.

I was not particularly impressed or convinced by Sandel’s book, despite its being as clearly written as you would expect. Although I would be keen to encourage deliberative democracy I felt the book didn’t add up to much more than a few examples which did not all seem to particularly indicate the need for his vague solution of discussing together whether markets should be disallowed in some cases.

A more philosophically satisfying book from the same year with a similar title was Deborah Satz’s Why Some Things Should Not Be for Sale: The Moral Limits of Markets. Satz proposes a method by which to judge when markets are inappropriate among four categories of harm. This allows her to consider whether markets in various goods (such as sex or kidneys) might be noxious. Those items with markets deemed noxious should either be regulated and restricted or even banned.

Satz makes a clear case for regulating or restricting markets on the basis of arguments that are quite reasonable and which do not depend upon controversial philosophical or political positions. I therefore found Satz’s approach much more useful than Sandel’s to judge whether certain types of goods should not be sold.

So while I am happy to accept that there can be a case for restricting the application of markets in some cases the case for allowing markets remains a strong default position in most cases. Does this mean there is nothing more to be said? Can markets really crowd out other goods as Sandel suggests in some cases he has found?

I am sceptical of the idea that very many people value things according to their market price rather than how the items helps them to in some way live their life better. The most obvious type of counter-example is where someone clearly wishes to show off that they have something which cost a lot of money. This is the familiar idea of a status symbol or conspicuous consumption. The expense of the item might indicate that the person values high quality or wants to show that they have good taste but it could equally be a sign that the person has a high disposable income such that they can afford to waste their resources on something of little or no obvious use value to them.

This perhaps fits in with Sandel’s concern about markets (or money) corrupting other values. Indeed, this goes back to socialists/communists, who talked about the reification of money (i.e. turning money into something that has value in itself).

Now, clearly those who think that the money value of an item has any bearing on the item itself and how we should judge it are clearly making some kind of mistake. In some areas of life, of course, people may view things in entirely money terms, like making abstract investments.* However, if someone does it in their personal life I would think that they are displaying a poor character trait.

Where people have this view it is a tragedy, firstly for them personally as they are probably victims of a misunderstanding about what matters in life. It is also a tragedy in the way it is likely to affect others. Status symbols are positional or hierarchical goods. These are a zero-sum game in that their aim is to create a hierarchy in which others will feel worse about their position. As Fred Hirsch pointed out, positional goods are inherently wasteful and inefficient.

Furthermore, using resources in this manner is going to leave fewer resources in society for people to use on their own lives. A society in which people are primarily concerned with showing off their position will be a tragic one in which everyone is actively trying to put others in a relatively worse position rather than in making the most of their own lives. Of course, if someone really wants to live their life in this way it is up to them—people are perfectly entitled to use their resources in ways that make others worse off. However, I fail to see why anyone would consciously choose a way of life that makes others—and almost certainly themselves—worse off. I would think it is more likely to be an unreflective choice.

Dedicating one’s life to ostentatiously wasting as much as possible is one approach to the good life, but it is a strange one to hold. It isn’t likely to bring about much happiness either since you have to alienate others while doing so rather than nurturing relationships with them. I doubt anyone really has such an approach to life, though sometimes people might fall foul of attempting to show off as if this was a good thing to do.

How should we respond to this concern that people are going to value items of property according to their money value rather than their usefulness? I think the answer is in education and regulation of certain markets. As part of their education children should learn that there are lots of approaches to life and that they have to choose one of these. They should also be given the philosophical tools to consider these.

Markets should only be regulated or restricted if there is a very good reason. The typical argument for regulation is to avoid harm to citizens through market failures and monopolistic behaviours. However, there may be some markets that should be regulated for paternalistic reasons to ensure that children and adults in vulnerable positions are not harmed. We may also want to design the education system and wider society to ensure that people have a good chance of making an active choice over the life they live rather than a passive one. This may, for example, require regulation of advertising.

My overall conclusion is that while I think some philosophers, such as Sandel, go too far in arguing against markets that this does not mean that regulation is a solely technical issue to be determined by economists. Satz provides a basis for determining markets that require further regulation and another basis is the liberal requirement of providing people with the conditions to make authentic choices.

*This may be deemed important by radicals who believe financial markets represent alienation and obscures class relations and exploitation. I will ignore arguments from this perspective because I am unconvinced by the labour value theory of economics and therefore do not see take alienation to be a specific economic issue. Perhaps a further advantage of these kinds of view, however, is that they challenge the type of mistake I characterise in this paragraph. 

New Blog at Manchester Policy

My latest blog for Manchester Policy summarises the ways that I believe IT technology allows governments to re-think the tax and benefits system.

I hope to write further blogs in the future highlighting technological innovations that point to more ways in which IT solutions are changing work, government administration and can be made to do so.

For example, I have seen this week that researchers at the University of New South Wales in Australia are developing a hat that can tell how hard its wearer is concentrating. This technology could have medical applications or be used by employers to monitor employee productivity (or both), Such developments can have utopian and dystopian implications.

What I look out for is ways that technology can make our economic system fairer as well as more productive.

Alternative purposes for the economic system

In my previous blog I discussed the problems with capitalism. I argued that if you want to make the very strong claim that capitalism is wrong it seems necessary to say that an economic system should have a particular purpose that capitalism cannot meet.

My proposed purpose for an economic system was to effectively provide people with the goods that they need and want, and capitalism seems to do this better than any proposed or attempted alternative.

So those who wish to argue that there is something wrong with capitalism presumably think that there are further purposes for the economic system that capitalism fails to meet. From my understanding, these tend to be sociologically inflected views. One holds that communistic social relations would be much better for people than capitalist ones as this would exalt higher goods.

Along these lines, but with the opposite conclusion, is the Randian view that capitalism engenders the highest goods. This is because capitalism requires people to act economically without direction from outside. This individualism is of course entirely imagined—capitalism is a system in which everyone works together, though it perhaps gives more scope for individuals to create new products than other proposed systems.

So does the presumed advantage of creating the right type of person (and/or economic relationship between persons) something that totally overrides other aims of the economic system? Or is this in addition to the job that most people (including myself) take to be the fundamental one of the system? To exclude the requirements for the creation of goods for the members of society seems perverse to me and I don’t think the economic prospects of either hyper-capitalism or communism are very good. 

Laissez-faire economic policy can be reasonably expected to generate huge inequalities. Libertarian utopians are either blind or indifferent to the terrible consequences of their utopia for those who find themselves without any property or the means to earn a high wage. As well as the patent unfairness involves, the instability and inequality will probably result in a less effective economy overall as well. However, Randian libertarianism is so objectively nonsensical I will focus on the left-wing anti-capitalist utopianisms.

On the other hand, communistic systems do not have a great record of success. The USSR had some economic growth but this tended to come at great expense to some members of society, including the repression (and sometimes deaths) of many. Many leftists of course will claim that the USSR did not live up to socialist let alone communist standards, or claim that the actions of Stalin etc. were necessary to fight against Western imperialism. But it seems that leftist proposals either focus on the massive decentralisation of economic decision-making to the local level or the total centralisation of decision-making.

To judge redistributive capitalism against some proposed utopia you would need to specify it and show that the proposed goods would arrive given the (potentially huge) costs of bringing about and maintaining that utopia. The paths to left-wing utopias seem extremely vague and optimistic to me. Those who propose them seem to ignore or downplay the possibility of all sorts of terrible alternatives to emerge. Who says that “smashing the liberal state” won’t bring about an autocracy or theocracy or fascist dictatorship or whatever else?

As you can tell I am very sceptical of judging economic systems on the basis of their alleged sociological effects. I would want to see a lot more evidence that capitalism really made people much more selfish than rival systems, for the utopia to be one that everyone could agree would be worth achieving and I would want to see a fool-proof plan to get from the current system to this utopia.

For example, I don’t see why a society with my Hourly-averaging proposal would any less lead to a communist utopia than a dictatorship of the proletariat. People wanting to increase their net income would have to work more hours irrespective of their position in society and so after a while people might internalise working longer and harder as being good things.