Abstract
Can we justify top incomes earned on the market as the reward for desert and, thus, fully acceptable from a meritocratic standpoint? This is the main question addressed in the chapter. To this end, we first suggest a definition of meritocracy (both in its formal and substantive dimensions) and many of the term’s often underrated ambiguities are highlighted. Secondly, two meritocratic justifications of market distribution are sketched out, based on the so-called contributory perspective and the sporting context metaphor respectively. Thirdly, current top-earnings are assessed on the basis of these justifications. While acknowledging heterogeneity, the main conclusion is that today’s top incomes include an array of rents which appear wholly undeserved. Finally, certain limitations of the meritocratic justification of market distributions and of meritocracy itself are pointed out. In short, even if top incomes are found to be deserved, not only do markets promote a partial version of desert, with prices as benchmarks, but meritocracy represents a theory of justice that is insensitive both to consequences, in primis, distributive consequences, and the impacts of luck, in its many manifestations.
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Notes
- 1.
On the conception of ex ante as juxtaposed to ex post equality of opportunity, see Fleurbaey and Peragine (2013).
- 2.
This does not ignore extensions of the concept that also take into account motivations. For Hayek (1976), for example, a subject performing a deserving action is undeserving if the motivation is undeserving. Kagan (2012) upholds the same position. Also in the light of the difficulty/impossibility of observing motivations, we do, however, limit ourselves to the definition in terms of ability and effort. In this perspective, one can be moved by the best of motives, but if this doesn’t translate into appropriate performances, there are no grounds for a meritocratic reward (Miller 1999).
- 3.
For this reason, Zamagni (2012) suggests that meritocracy be limited to its original formulation, defining as meritorious, rather than meritocratic, market distributions where the more deserving get more. We have preferred to extend the term meritocracy, in compliance with what we feel is the prevalent use in the public debate.
- 4.
On the diffusion of meritocratic positions see, for example , Lanning and Lawton (2011). Marx too, before moving to communism, recommended that each receive according to the contribution provided.
- 5.
Every time the quotations are taken from books in foreign languages, the translation is ours.
- 6.
On this issue, see among others, Bénabou (1996).
- 7.
On the relationship with efficiency, see Chap. 4.
- 8.
For a different perspective, see Roemer (1998), according to whom the individuals who engage in the same relative effort (regardless of ability and other luck factors) should achieve the same results. This means adopting the ex post version of equal opportunity that is alternative to the ex ante one characterizing meritocracy. For it to be introduced would, among other things, require a constant review of market distributions in order to compensate for differences in ability.
- 9.
On the plurality of possible obstacles to substantive meritocracy, see Franzini (2013).
- 10.
Against simplistic juxtapositions between equal results and equal opportunities, the latter could, thus, require the achievement of results.
- 11.
Once again, there could be different positions regarding the level of inheritance taxation compatible with meritocracy. If one could, indeed, argue that inheritance grants an undeserved advantage to the person receiving it, one could equally oppose full taxation, on the grounds that it would impinge on the desert of those who have accumulated the most.
- 12.
For details on the different amount of hours spent on one’s progeny , see Gracia (2013).
- 13.
As argued by Satz (2007), the more one sets/defines possible priorities, the more the development of abilities becomes endogenous with respect of the priorities themselves, automatically rewarding the development of some skills over others.
- 14.
- 15.
This coefficient only identifies the extent of income inequality among the fathers that is transferred to the offspring. It, thus, doesn’t allow to distinguish the causes of inequalities considered acceptable from those that are not. On this issue, see Franzini (2013). A possible remedy, as detailed by Jencks and Tach (2005), is to search for additional information on equality opportunity policies that have actually been implemented (although even in this case, considerable problems can arise in terms of data availability and comparisons between different situations).
- 16.
Beauty too can be the result of effort (diet, daily workouts, etc…).
- 17.
Mankiw (2013) seems to defend also the connection between meritocracy and competition on the demand side.
- 18.
On the relationship between single price and freedom of entry, see Chap. 2. More specifically, rents due to increasing costs would depend on the fact that the reward claimed increases with the increase of effort, while the rent due to heterogeneous abilities depends on the fact that the more skilful require less effort compared to the less skilful. In both cases, however, the price is unique (given freedom of entry). This means that it remunerates in the same way the first unit of effort produced as well as the last (most costly one). The same applies to individuals with different skills. For an alternative position that doesn't justify as meritocratic even infra-marginal rents , see Dekker (2010), according to whom meritocracy should entail retributions based on average (rather than marginal) benefits.
- 19.
We have avoided here the more complicated cases involving inventions, even though even on this front, there are doubts regarding the justifiability of a linear relationship between the increase in the subjects benefitting from them and the increase in retribution. We will come back to this point in the last part of this chapter and in the discussion of the relationship between inequality and growth in the next chapter.
- 20.
On the rents and the frauds perpetrated by casino capitalism, see Stranger (1997).
- 21.
We should also recall the practice of using as a benchmark the companies’ total rather than relative returns, which could mean that the performance rewarded could be inferior to that of other companies.
- 22.
There’s clearly a difference with respect to incentive payments aiming at rewarding marginal effort.
- 23.
As it is well known, for experience goods the quality cannot be ascertained by the purchaser before the purchase, while for credence goods quality remains uncertain even after consumption.
- 24.
Even if other professionals entered the market, the consumers would not trust them and, therefore, entrance would not help to reduce the effective or perceived scarcity of competent professionals.
- 25.
As indicated in Chap. 2, these phenomena mainly concern the superstars who don’t have to confirm continuously their ability as sports champions.
- 26.
On both issues, see Stiglitz (2012).
- 27.
The taxation issue is addressed in so far as the reduction of progressivity for top incomes may have favoured the manager’s bargaining power and, as a result, higher remunerations. Alvaredo et al. (2013) provide support for this argument.
- 28.
For a detailed reconstruction of many of these actions, in particular in the United States, see, among others, Bartels (2008), Bonica et al. (2013) and Hacker (2011). On the impact of the top income’s capacity to “identify the best way of exploiting market powers and other market failures—and, in many cases find the best way of ensuring that politics works for them rather than for society as a whole”, see Stiglitz (2012, p. 41). On crony capitalism, see also Zingales (2012).
- 29.
- 30.
As noted by Reich (2008), in the two/three decades after World War II, American CEOs have, instead, tended to “imitate” the compressed retribution structure of the Public Administration, under the understanding that they were serving America, exactly like the major bureaucrats.
- 31.
If abilities are scarce owing to a lack of institutional conditions for their reproduction, the assessment could be different. On this issue, see, below, the considerations on substantive meritocracy.
- 32.
On the overall heterogeneity of retributions given equal academic qualifications, see Franzini and Raitano (2011). In short, in almost all European countries over 80 % of the inequalities among workers has nothing to do with the skill premium.
- 33.
- 34.
- 35.
Unlike what takes place with market failures, externalities would here concern the structure of the market itself rather than the single act of production or consumption.
- 36.
- 37.
- 38.
The phrase “corruption of values” is in Sandel (2013).
- 39.
See also Anderson (1990).
- 40.
Another sceptical position regarding meritocracy is the libertarian one. We will refer to it in the next chapter seeing as it opposes any actions aimed at reducing inequalities and not just meritocracy.
- 41.
In favour of this conclusion, see the large amount of evidence produced by experimental economics, according to which individuals tend to claim the entire amount of any reward achieved from the market, while they are more likely to accept redistribution of inheritances and gifts.
- 42.
On the conflicts between different types of pluralism , see also Granaglia (2012).
- 43.
This does not mean that liberal egalitarianism must take into account the consequences. Simply put, it may take them into account, as it is the case in most of the proposals put forward based on this perspective.
- 44.
Quote from the Hutton Review of Fair Pay (2010).
- 45.
- 46.
On this issue, once more see Hobhouse (1922).
- 47.
As argued by Lazonick and Mazzucato (2012), the highest remunerations rather than the innovators, have rewarded the subjects at the last stages of production who have exploited the relationship with finance, once the innovation had been realized (and, therefore, the risk was already curtailed).
- 48.
See Nisbet et al. (2012). On the weight of nurture, see also the “old” British Social Democrats, according to whom “some” equality in socio-economic conditions would make meritocracy acceptable, by considerably restricting differences in desert.
- 49.
- 50.
The reference is to the version that can be found at www.uclouvain.be/cps/ucl/doc/etes/documents/2009.Steiner.pdf.
- 51.
If this is the case, it seems fairly inconsistent to deal with equal opportunities only up until the starting gate and not during the course of life as well.
- 52.
Along the same lines, see Scheffler (2000), according to whom contemporary liberalism has gone too far in its attempts to compensate for bad luck.
- 53.
This argument has some affinity with what was said in Chap. 2 regarding the distinction between the mechanism of identification of the superstars by consumers and the determination of their remunerations, which should not take place according to monopolistic criteria.
- 54.
On the distinction between “before” and “after”, see the observations made at the beginning of this chapter.
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Franzini, M., Granaglia, E., Raitano, M. (2016). The Super-Rich: A Matter of Desert?. In: Extreme Inequalities in Contemporary Capitalism. Springer, Cham. https://doi.org/10.1007/978-3-319-28811-6_3
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