tag:blogger.com,1999:blog-582368152716771238.post7628857528306672713..comments2024-03-18T07:59:05.430-05:00Comments on The Grumpy Economist: MeritocracyJohn H. Cochranehttp://www.blogger.com/profile/04842601651429471525noreply@blogger.comBlogger37125tag:blogger.com,1999:blog-582368152716771238.post-63844792583948189832021-06-20T14:50:34.649-05:002021-06-20T14:50:34.649-05:00Mykel,
Another good example where marginal benefi...Mykel,<br /><br />Another good example where marginal benefit is not equal to marginal cost is any type of insurance program.<br /><br />The cost is recurring - for instance payments on an auto, home owner, life insurance policy in the private sector or contributions to Social Security, Medicare, etc. in the public sector.<br /><br />The benefits (other than peace of mind) are not realized until much later or perhaps never at all.FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-90954405330840020502021-06-20T08:55:36.171-05:002021-06-20T08:55:36.171-05:00Mykel,
"Yes, it may be tempting to fit every...Mykel,<br /><br />"Yes, it may be tempting to fit everything into that model. However, making decisions on the margins is pretty universal."<br /><br />I don't agree. For many things in life (construction of a building, obtaining a college degree for instance), the costs are recurring, but the benefits are not realized until after completion.<br /><br />It goes beyond narcissism. For any long term investment, the marginal benefit is going to be less than the marginal cost since the benefits are not going to be seen until most / all of the cost has been incurred.FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-9812597037068283482021-06-20T08:53:18.169-05:002021-06-20T08:53:18.169-05:00This comment has been removed by the author.FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-39153187107842701352021-06-19T07:05:24.693-05:002021-06-19T07:05:24.693-05:00Fr,
Yes, it may be tempting to fit everything int...Fr,<br /><br />Yes, it may be tempting to fit everything into that model. However, making decisions on the margins is pretty universal. Read "Thinking Fast and Slow" by Kahneman. Even thinking is economic in nature. His experiments on measuring pupil dilation while computing strange numerical sequences is fascinating. Point is, yes, decisions are often made on the narcissism, either with good data or really bad data and bias.<br /><br />When it comes to earning the benefits via meritocracy, this where North was right: institutions matter. Some people will try to be clever and game the system in a manner to minimize their marginal cost while maximizing their marginal benefit. The institution needs an enforcement mechanism to remove these violators so people can trust and have faith. Without it, it ends up being a corrupt system with two sets of rules. <br /><br />I don't believe Utopia is possible. But I think it's worthwhile trying to get as close as possible to it.<br /><br />Best,<br />M Mykel G. Larsonhttps://www.blogger.com/profile/17128735421035292909noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-64103958742052792282021-06-18T00:58:41.418-05:002021-06-18T00:58:41.418-05:00Mykel,
Regarding Marginal Cost (MC) = Marginal Be...Mykel,<br /><br />Regarding Marginal Cost (MC) = Marginal Benefit (MB).<br />I think that too many economists try to apply marginalism to situations that are not applicable.<br /><br />What is the marginal benefit of one semester of college education?<br />What is the marginal benefit of 3 stories of a 10 story building being constructed?<br /><br />There is a slang term in poker called being "pot committed". It basically means that a player has already put so much money into the pot that despite any new information gathered, he / she cannot simply fold the hand.FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-85990497433354658452021-06-17T20:55:24.568-05:002021-06-17T20:55:24.568-05:00I do not agree with John on this one. He argues th...I do not agree with John on this one. He argues that the number of East Asian authoritarian regimes (South Korea, Taiwan, probably somewhat Singapore) eventually became democracies, which is supposed to refute the idea that they were meritocratic and prosperous. I think this argument is backwards. As societies become wealthy and prosperous, they are more likely to become democracies. So, if anything, cases of South Korea, Taiwan, Chile are big successes of authoritarian regimes.<br /><br />Being able to quiet or simply ignore entrenched rent-seekers and special interest groups is a major advantage of authoritarian regimes. Ability to dismantle or reset army of bureaucrats is another one. I am somewhat puzzled that John does not get it. Over the recent 45 years, can we name a single example of a country in North America or Western Europe, which undertook massive deregulation and rolled back a number of important rules, protecting rent-seekers?Aaronnhttps://www.blogger.com/profile/01189519641965510630noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-51096123439434844752021-06-17T11:09:11.530-05:002021-06-17T11:09:11.530-05:00What about the anti- meritocracy actions of compan...What about the anti- meritocracy actions of companies; when they squeeze out competitors, or collude with government to undermine competition, this limits the growth of future leaders/companies. The anti-meritocracy is not only practiced by politicians, but others trying to protect their power. Afraponafra Bsidehttps://www.blogger.com/profile/15444570047246545277noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-6891693179506143062021-06-17T08:44:06.117-05:002021-06-17T08:44:06.117-05:00Also,
"To the extent that Social Security be...Also,<br /><br />"To the extent that Social Security benefits are paid based upon one's past employment history and employment compensation..."<br /><br />The realized returns on "investing" in the Social Security program are based on not only your past employment history but also how you live your life both during your working days and after you retire. If you spend your days smoking like a freight train and in a drunken stupor, your return on "investment" into Social Security isn't going to be that great.<br /><br />The point I am trying to make is that the Social Security system incentivizes working and maintaining a healthy life style. Generic, run of the mill, interest paying government bonds do not.<br /><br />But trying telling that to any right leaning economist (aka someone being paid by the private banking / insurance industry) and they bemoan a program like Social Security while nary saying a word about government bonds.FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-52388903992212756212021-06-17T07:58:37.862-05:002021-06-17T07:58:37.862-05:00Old Eagle Eye,
"If you can afford to pay for...Old Eagle Eye,<br /><br />"If you can afford to pay for the government bond in the first instance, in order to obtain the interest, then, yes, interest payments on government bonds are based upon merit."<br /><br />Government bonds as an asset (unlike social security benefits) are transferable from one generation to the next. And so how is inheritance a meritorious award?<br /><br />Also, if I can pay enough to a college recruiter to accept me (or my son / daughter) irregardless of high school performance, then either me or my son / daughter has been accepted to college based upon the "merit" of my payment to the recruiter.<br /><br />The whole point of meritorious award is to level the playing field regardless of wealth or status.<br /><br />You seem to disagree.FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-70401770521458592932021-06-16T19:05:58.678-05:002021-06-16T19:05:58.678-05:00This is just a variation on the common confusion a...This is just a variation on the common confusion among self-styled thinkers that we should be prepared to sacrifice a little freedom in order to obtain a bit more efficiency. Unfortunately, the reality is that we invariably end up with less of both.Cokerhttps://www.blogger.com/profile/02631288439451432057noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-51197459985684690302021-06-16T18:04:31.945-05:002021-06-16T18:04:31.945-05:00One major problem with meritocracies is that anyon...One major problem with meritocracies is that anyone on the bottom has to accept that they are a failure because they deserve to be a failure. In a non-meritocracy someone can always claim that their own personal failure was really the result of their belonging to the wrong gender, class, race, etc. Another problem with meritocracies in primitive societies is that the supply of (potentially) meritorious people vastly exceeds the actual demand. Someone who is told that they are going to be a peasant digging in the dirt with a stick trying to grow food to survive just because they only received 99.96% on their final exam; while their twin brother who received 99.97% of the same exam gets to be part of the elite isn't likely to willingly accept that outcome.IanShttps://www.blogger.com/profile/01163624903207823801noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-55728074086581543162021-06-16T17:35:26.496-05:002021-06-16T17:35:26.496-05:00"Are Social Security benefits based upon meri..."Are Social Security benefits based upon merit?"<br /><br />To the extent that Social Security benefits are paid based upon one's past employment history and employment compensation, then it can be said that those payments are based upon 'merit'.<br /><br />If you can afford to pay for the government bond in the first instance, in order to obtain the interest, then, yes, interest payments on government bonds are based upon 'merit'.Old Eagle Eyehttps://www.blogger.com/profile/05270080708077871311noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-19398435549579138722021-06-16T14:45:30.053-05:002021-06-16T14:45:30.053-05:00Fr,
I would say in its current form that meritocr...Fr,<br /><br />I would say in its current form that meritocracy's incentive structure is warped, for where is the merit in cheating, hmm? <br /><br />It's the perception of meritocracy that matters. Just as institutions matter so do their perceptions. Otherwise, what's the point of incurring a cost if the benefit doesn't get right up to the point where MC = MB? Why play by the rules if the benefit could be had for less? That's the problem with the incentive structure and enforcement with this regime. There are two sets of "rules."<br /><br />The trick is not assigning a probability to getting caught- it has to a be a certainty, a matter of time. Enforcement matters. Ha. Or, maybe the real benefits just aren't as "valuable" as they need to be. <br /><br />You bring up good points. Mykel G. Larsonhttps://www.blogger.com/profile/17128735421035292909noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-12828305716993989212021-06-16T02:15:20.058-05:002021-06-16T02:15:20.058-05:00Anonymous,
It's not that meritocracy is a bad...Anonymous,<br /><br />It's not that meritocracy is a bad thing, it's the "winner take all" incentives that drive individuals to do anything to reach the top (lie, cheat, steal or at worst resort to violence).<br /><br />https://en.wikipedia.org/wiki/Three_sided_football<br />FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-76584467711777586032021-06-16T02:05:15.017-05:002021-06-16T02:05:15.017-05:00I got to this one late. The arc of Venetian histor...I got to this one late. The arc of Venetian history is not as Woolridge described it. The Republic of Venice began in 697 and ended in 1797: 1100 years later. By way of comparison, the Roman Republic lasted for 482 years (509 BCE to 27 BCE) and the American republic is a mere pup of 245 years.<br /><br />The Republic of Venice was not democratic and had no ideology of democracy. And, they were not woke in any way. Venice had many overseas possessions like Crete, and treated the locals abysmally. What it was devoted to was the rule of law. It took official corruption in its far flung possessions very seriously and went to great lengths to weed it out.<br /><br />La Serenissima came to an end, not by internal strife and civil war like Rome, but by being conquered by Napoleon. But, for that it might have continued on until the current day.<br /><br />Its fatal flaw at the end was that the Ottoman Empire drove it out of the Black Sea and Eastern Mediterranean and it lost the trade from Asia and Africa that had made it wealthy to the Atlantic kingdoms that learned how to sail around Africa and opened the New World.Fat Manhttps://www.blogger.com/profile/09554029467445000453noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-26589896546634718972021-06-16T01:46:19.530-05:002021-06-16T01:46:19.530-05:00Mykel,
The article also mentions the recent colle...Mykel,<br /><br />The article also mentions the recent college recruiting scandal.<br /><br />"The intense and widespread fury generated by the college-admissions scandal early this year tapped into a deep and broad well of resentment. This anger is warranted but also distorting. Outrage at nepotism and other disgraceful forms of elite advantage-taking implicitly valorizes meritocratic ideals. Yet meritocracy itself is the bigger problem, and it is crippling the American dream."<br /><br />I don't agree with the last sentence. The incentive to cheat, lie, steal rises as the risk / reward ratio falls. And so, to change the balance, you need to either increase the risks (stiffer penalties) or lower the rewards.<br /><br />The rewards would still be based upon merit, but would not be so generous (relative to the risks) that they incentivize cheating.FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-49299691902738586792021-06-16T01:31:24.681-05:002021-06-16T01:31:24.681-05:00Mykel,
The article describes the costs / benefits...Mykel,<br /><br />The article describes the costs / benefits of the race to the top.<br />For instance:<br /><br />"Wealthy students show higher rates of drug and alcohol abuse than poor students do. They also suffer depression and anxiety at rates as much as triple those of their age peers throughout the country."<br /><br />"A recent study of a Silicon Valley high school found that 54 percent of students displayed moderate to severe symptoms of depression and 80 percent displayed moderate to severe symptoms of anxiety."<br /><br />And so I think that cost / benefit analysis must be continuously analyzed by each individual - are the benefits worth the toll?FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-40303050886213017362021-06-15T13:46:31.898-05:002021-06-15T13:46:31.898-05:00If meritocracy is such a bad thing, do we not have...If meritocracy is such a bad thing, do we not have to do something about professional sports?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-37973597324617736932021-06-15T08:35:33.560-05:002021-06-15T08:35:33.560-05:00Here's an alternate view on meritocracy that h...Here's an alternate view on meritocracy that hints at how it endangers how institutions are sustained and maintained.<br /><br />https://www.theatlantic.com/magazine/archive/2019/09/meritocracys-miserable-winners/594760/<br /><br />There's also psychological and social harmony externalities to deal with. Measuring them however is tricky. No econometric model to tease out concretely the economic cost of these externalities. Mykel G. Larsonhttps://www.blogger.com/profile/17128735421035292909noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-13035470475046280662021-06-15T00:19:46.422-05:002021-06-15T00:19:46.422-05:00Absolutely agreed! When a person is preoccupied wi...Absolutely agreed! When a person is preoccupied with the concept of equality of outcomes, the person is unlikely to understand the key point about meritocracy above.DKinghttps://www.blogger.com/profile/12319526572424835559noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-84746306077902851452021-06-14T23:50:55.787-05:002021-06-14T23:50:55.787-05:00Are Social Security benefits based upon merit?
Ho...Are Social Security benefits based upon merit?<br /><br />How about interest payments on government debt?FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-54398341361908770032021-06-14T21:31:34.565-05:002021-06-14T21:31:34.565-05:00Isn't nepotism a form of meritorious award sys...Isn't nepotism a form of meritorious award system - the prior achievements / merits of the father / mother are rewarded through heirs?FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-89639105842252557522021-06-14T20:54:37.481-05:002021-06-14T20:54:37.481-05:00John,
Where do prior accomplishments / failures f...John,<br /><br />Where do prior accomplishments / failures fall in judging the merit of an individual?<br /><br />The classic example I can give is the story of Colonel Sanders whose businesses failed numerous times and yet regardless of the lack of merit Sanders obtained in prior endeavors was able to build a successful fast food chain.<br /><br />The definition of merit (according to Webster's) is this:<br /><br />"...the quality of being particularly good or worthy, especially so as to deserve praise or reward."<br /><br />I think what is missing from judging a person by merit (meaning looking at past performance) is that it ignores effort and a willingness to learn from prior mistakes.<br /><br />https://en.wikipedia.org/wiki/Colonel_Sanders<br /><br />"After a while, Sanders began to practice law in Little Rock, which he did for three years, earning enough in fees for his family to move with him. His legal career ended after a courtroom brawl with his own client destroyed his reputation. This period represented a real low point for Sanders. As his biographer John Ed Pearce wrote, Sanders had encountered repeated failure largely through bullheadedness, a lack of self-control, impatience, and a self-righteous lack of diplomacy."FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-49127907923500994522021-06-14T20:54:31.654-05:002021-06-14T20:54:31.654-05:00This comment has been removed by the author.FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-19159849936425066512021-06-14T20:35:23.805-05:002021-06-14T20:35:23.805-05:00So the author concludes that "meritocracy&quo...So the author concludes that "meritocracy" falls from the sky. Really?! It has nothing to do with free markets! Jesus Christ...<br /><br />If I were writing a book that mentioned the Scandinavian countries, I would *at least* learn that these countries became rich via free markets, and have been lagging since they started with their transfer programs. Besides, current taxation in scandinavia is equivalent to the US but their markets are less regulated. Yet, they compare to the poorest states in the US, despite Norway's oil.<br /><br />"Meritocracy" *only* happens via free markets. Democracy has nothing to do with it. Democracy is simply mob rule. But this is not new at all.<br /><br />This obsession at sounding "independent" in the discussion about free markets against planed economies just makes me doubt the author's entire arguments as fallacious.Anonymousnoreply@blogger.com