The injustice of talent

Sep 4 JDN 2459827

Consider the following two principles of distributive justice.

A: People deserve to be rewarded in proportion to what they accomplish.

B: People deserve to be rewarded in proportion to the effort they put in.

Both principles sound pretty reasonable, don’t they? They both seem like sensible notions of fairness, and I think most people would broadly agree with both them.

This is a problem, because they are mutually contradictory. We cannot possibly follow them both.

For, as much as our society would like to pretend otherwise—and I think this contradiction is precisely why our society would like to pretend otherwise—what you accomplish is not simply a function of the effort you put in.

Don’t get me wrong; it is partly a function of the effort you put in. Hard work does contribute to success. But it is neither sufficient, nor strictly necessary.

Rather, success is a function of three factors: Effort, Environment, and Talent.

Effort is the work you yourself put in, and basically everyone agrees you deserve to be rewarded for that.

Environment includes all the outside factors that affect you—including both natural and social environment. Inheritance, illness, and just plain luck are all in here, and there is general, if not universal, agreement that society should make at least some efforts to minimize inequality created by such causes.

And then, there is talent. Talent includes whatever capacities you innately have. It could be strictly genetic, or it could be acquired in childhood or even in the womb. But by the time you are an adult and responsible for your own life, these factors are largely fixed and immutable. This includes things like intelligence, disability, even height. The trillion-dollar question is: How much should we reward talent?

For talent clearly does matter. I will never swim like Michael Phelps, run like Usain Bolt, or shoot hoops like Steph Curry. It doesn’t matter how much effort I put in, how many hours I spend training—I will never reach their level of capability. Never. It’s impossible. I could certainly improve from my current condition; perhaps it would even be good for me to do so. But there are certain hard fundamental constraints imposed by biology that give them more potential in these skills than I will ever have.

Conversely, there are likely things I can do that they will never be able to do, though this is less obvious. Could Michael Phelps never be as good a programmer or as skilled a mathematician as I am? He certainly isn’t now. Maybe, with enough time, enough training, he could be; I honestly don’t know. But I can tell you this: I’m sure it would be harder for him than it was for me. He couldn’t breeze through college-level courses in differential equations and quantum mechanics the way I did. There is something I have that he doesn’t, and I’m pretty sure I was born with it. Call it spatial working memory, or mathematical intuition, or just plain IQ. Whatever it is, math comes easy to me in not so different a way from how swimming comes easy to Michael Phelps. I have talent for math; he has talent for swimming.

Moreover, these are not small differences. It’s not like we all come with basically the same capabilities with a little bit of variation that can be easily washed out by effort. We’d like to believe that—we have all sorts of cultural tropes that try to inculcate that belief in us—but it’s obviously not true. The vast majority of quantum physicists are people born with high IQ. The vast majority of pro athletes are people born with physical prowess. The vast majority of movie stars are people born with pretty faces. For many types of jobs, the determining factor seems to be talent.

This isn’t too surprising, actually—even if effort matters a lot, we would still expect talent to show up as the determining factor much of the time.

Let’s go back to that contest function model I used to analyze the job market awhile back (the one that suggests we spend way too much time and money in the hiring process). This time let’s focus on the perspective of the employees themselves.

Each employee has a level of talent, h. Employee X has talent hx and exerts effort x, producing output of a quality that is the product of these: hx x. Similarly, employee Z has talent hz and exerts effort z, producing output hz z.

Then, there’s a certain amount of luck that factors in. The most successful output isn’t necessarily the best, or maybe what should have been the best wasn’t because some random circumstance prevailed. But we’ll say that the probability an individual succeeds is proportional to the quality of their output.

So the probability that employee X succeeds is: hx x / ( hx x + hz z)

I’ll skip the algebra this time (if you’re interested you can look back at that previous post), but to make a long story short, in Nash equilibrium the two employees will exert exactly the same amount of effort.

Then, which one succeeds will be entirely determined by talent; because x = z, the probability that X succeeds is hx / ( hx + hz).

It’s not that effort doesn’t matter—it absolutely does matter, and in fact in this model, with zero effort you get zero output (which isn’t necessarily the case in real life). It’s that in equilibrium, everyone is exerting the same amount of effort; so what determines who wins is innate talent. And I gotta say, that sounds an awful lot like how professional sports works. It’s less clear whether it applies to quantum physicists.

But maybe we don’t really exert the same amount of effort! This is true. Indeed, it seems like actually effort is easier for people with higher talent—that the same hour spent running on a track is easier for Usain Bolt than for me, and the same hour studying calculus is easier for me than it would be for Usain Bolt. So in the end our equilibrium effort isn’t the same—but rather than compensating, this effect only serves to exaggerate the difference in innate talent between us.

It’s simple enough to generalize the model to allow for such a thing. For instance, I could say that the cost of producing a unit of effort is inversely proportional to your talent; then instead of hx / ( hx + hz ), in equilibrium the probability of X succeeding would become hx2 / ( hx2 + hz2). The equilibrium effort would also be different, with x > z if hx > hz.

Once we acknowledge that talent is genuinely important, we face an ethical problem. Do we want to reward people for their accomplishment (A), or for their effort (B)? There are good cases to be made for each.

Rewarding for accomplishment, which we might call meritocracy,will tend to, well, maximize accomplishment. We’ll get the best basketball players playing basketball, the best surgeons doing surgery. Moreover, accomplishment is often quite easy to measure, even when effort isn’t.

Rewarding for effort, which we might call egalitarianism, will give people the most control over their lives, and might well feel the most fair. Those who succeed will be precisely those who work hard, even if they do things they are objectively bad at. Even people who are born with very little talent will still be able to make a living by working hard. And it will ensure that people do work hard, which meritocracy can actually fail at: If you are extremely talented, you don’t really need to work hard because you just automatically succeed.

Capitalism, as an economic system, is very good at rewarding accomplishment. I think part of what makes socialism appealing to so many people is that it tries to reward effort instead. (Is it very good at that? Not so clear.)

The more extreme differences are actually in terms of disability. There’s a certain baseline level of activities that most people are capable of, which we think of as “normal”: most people can talk; most people can run, if not necessarily very fast; most people can throw a ball, if not pitch a proper curveball. But some people can’t throw. Some people can’t run. Some people can’t even talk. It’s not that they are bad at it; it’s that they are literally not capable of it. No amount of effort could have made Stephen Hawking into a baseball player—not even a bad one.

It’s these cases when I think egalitarianism becomes most appealing: It just seems deeply unfair that people with severe disabilities should have to suffer in poverty. Even if they really can’t do much productive work on their own, it just seems wrong not to help them, at least enough that they can get by. But capitalism by itself absolutely would not do that—if you aren’t making a profit for the company, they’re not going to keep you employed. So we need some kind of social safety net to help such people. And it turns out that such people are quite numerous, and our current system is really not adequate to help them.

But meritocracy has its pull as well. Especially when the job is really important—like surgery, not so much basketball—we really want the highest quality work. It’s not so important whether the neurosurgeon who removes your tumor worked really hard at it or found it a breeze; what we care about is getting that tumor out.

Where does this leave us?

I think we have no choice but to compromise, on both principles. We will reward both effort and accomplishment, to greater or lesser degree—perhaps varying based on circumstances. We will never be able to entirely reward accomplishment or entirely reward effort.

This is more or less what we already do in practice, so why worry about it? Well, because we don’t like to admit that it’s what we do in practice, and a lot of problems seem to stem from that.

We have people acting like billionaires are such brilliant, hard-working people just because they’re rich—because our society rewards effort, right? So they couldn’t be so successful if they didn’t work so hard, right? Right?

Conversely, we have people who denigrate the poor as lazy and stupid just because they are poor. Because it couldn’t possibly be that their circumstances were worse than yours? Or hey, even if they are genuinely less talented than you—do less talented people deserve to be homeless and starving?

We tell kids from a young age, “You can be whatever you want to be”, and “Work hard and you’ll succeed”; and these things simply aren’t true. There are limitations on what you can achieve through effort—limitations imposed by your environment, and limitations imposed by your innate talents.

I’m not saying we should crush children’s dreams; I’m saying we should help them to build more realistic dreams, dreams that can actually be achieved in the real world. And then, when they grow up, they either will actually succeed, or when they don’t, at least they won’t hate themselves for failing to live up to what you told them they’d be able to do.

If you were wondering why Millennials are so depressed, that’s clearly a big part of it: We were told we could be and do whatever we wanted if we worked hard enough, and then that didn’t happen; and we had so internalized what we were told that we thought it had to be our fault that we failed. We didn’t try hard enough. We weren’t good enough. I have spent years feeling this way—on some level I do still feel this way—and it was not because adults tried to crush my dreams when I was a child, but on the contrary because they didn’t do anything to temper them. They never told me that life is hard, and people fail, and that I would probably fail at my most ambitious goals—and it wouldn’t be my fault, and it would still turn out okay.

That’s really it, I think: They never told me that it’s okay not to be wildly successful. They never told me that I’d still be good enough even if I never had any great world-class accomplishments. Instead, they kept feeding me the lie that I would have great world-class accomplishments; and then, when I didn’t, I felt like a failure and I hated myself. I think my own experience may be particularly extreme in this regard, but I know a lot of other people in my generation who had similar experiences, especially those who were also considered “gifted” as children. And we are all now suffering from depression, anxiety, and Impostor Syndrome.

All because nobody wanted to admit that talent, effort, and success are not the same thing.

What meritocracy trap?

Nov 1 JDN 2459155

So I just finished reading The Meritocracy Trap by David Markovits.

The basic thesis of the book is that America’s rising inequality is not due to a defect in our meritocratic ideals, but is in fact their ultimate fruition. Markovits implores us to reject the very concept of meritocracy, and replace it with… well, something, and he’s never very clear about exactly what.

The most frustrating thing about reading this book is trying to figure out where Markovits draws the line for “elite”. He rapidly jumps between talking about the upper quartile, the upper decile, the top 1%, and even the top 0.1% or top 0.01% while weaving his narrative. The upper quartile of the US contains 75 million people; the top 0.01% contains only 300,000. The former is the size of Germany, the latter the size of Iceland (which has fewer people than Long Beach). Inequality which concentrates wealth in the top quartile of Americans is a much less serious problem than inequality which concentrates wealth in the top 0.01%. It could still be a problem—those lower three quartiles are people too—but it is definitely not nearly as bad.

I think it’s particularly frustrating to me personally, because I am an economist, which means both that such quantitative distinctions are important to me, and also that whether or not I myself am in this “elite” depends upon which line you are drawing. Do I have a post-graduate education? Yes. Was I born into the upper quartile? Not quite, but nearly. Was I raised by married parents in a stable home? Certainly. Am I in the upper decile and working as a high-paid professional? Hopefully I will be soon. Will I enter the top 1%? Maybe, maybe not. Will I join the top 0.1%? Probably not. Will I ever be in the top 0.01% and a captain of industry? Almost certainly not.

So, am I one of the middle class who are suffering alienation and stagnation, or one of the elite who are devouring themselves with cutthroat competition? Based on BLS statistics for economists and job offers I’ve been applying to, my long-term household income is likely to be about 20-50% higher than my parents’; this seems like neither the painful stagnation he attributes to the middle class nor the unsustainable skyrocketing of elite incomes. (Even 50% in 30 years is only 1.4% per year, about our average rate of real GDP growth.) Marxists would no doubt call me petit bourgeoisie; but isn’t that sort of the goal? We want as many people as possible to live comfortable upper-middle class lives in white-collar careers?

Markovits characterizes—dare I say caricatures—the habits of the middle-class versus the elite, and once again I and most people I know cross-cut them: I spend more time with friends than family (elite), but I cook familiar foods, not fancy dinners (middle); I exercise fairly regularly and don’t watch much television (elite) but play a lot of video games and sleep a lot as well (middle). My web searches involve technology and travel (elite), but also chronic illness (middle). I am a donor to Amnesty International (elite) but also play tabletop role-playing games (middle). I have a functional, inexpensive car (middle) but a top-of-the-line computer (elite)—then again that computer is a few years old now (middle). Most of the people I hang out with are well-educated (elite) but struggling financially (middle), civically engaged (elite) but pessimistic (middle). I rent my apartment and have a lot of student debt (middle) but own stocks (elite). (The latter seemed like a risky decision before the pandemic, but as stock prices have risen and student loan interest was put on moratorium, it now seems positively prescient.) So which class am I, again?

I went to public school (middle) but have a graduate degree (elite). I grew up in Ann Arbor (middle) but moved to Irvine (elite). Then again my bachelor’s was at a top-10 institution (elite) but my PhD will be at only a top-50 (middle). The beautiful irony there is that the top-10 institution is the University of Michigan and the top-50 institution is the University of California, Irvine. So I can’t even tell which class each of those events is supposed to represent! Did my experience of Ann Arbor suddenly shift from middle class to elite when I graduated from public school and started attending the University of Michigan—even though about a third of my high school cohort did exactly that? Was coming to UCI an elite act because it’s a PhD in Orange County, or a middle-class act because it’s only a top-50 university?

If the gap between these two classes is such a wide chasm, how am I straddling it? I honestly feel quite confident in characterizing myself as precisely the upwardly-mobile upper-middle class that Markovits claims no longer exists. Perhaps we’re rarer than we used to be; perhaps our status is more precarious; but we plainly aren’t gone.

Markovits keeps talking about “radical differences” “not merely in degree but in kind” between “subordinate” middle-class workers and “superordinate” elite workers, but if the differences are really that stark, why is it so hard to tell which group I’m in? From what I can see, the truth seems less like a sharp divide between middle-class and upper-class, and more like an increasingly steep slope from middle-class to upper-middle class to upper-class to rich to truly super-rich. If I had to put numbers on this, I’d say annual household incomes of about $50,000, $100,000, $200,000, $400,000, $1 million, and $10 million respectively. (And yet perhaps I should add more categories: Even someone who makes $10 million a year has only pocket change next to Elon Musk or Jeff Bezos.) The slope has gotten steeper over time, but it hasn’t (yet?) turned into a sharp cliff the way Markovits describes. America’s Lorenz curve is clearly too steep, but it doesn’t have a discontinuity as far as I can tell.

Some of the inequalities Markovits discusses are genuine, but don’t seem to be particularly related to meritocracy. The fact that students from richer families go to better schools indeed seems unjust, but the problem is clearly not that the rich schools are too good (except maybe at the very top, where truly elite schools seem a bit excessive—five-figure preschool tuition?), but that the poor schools are not good enough. So it absolutely makes sense to increase funding for poor schools and implement various reforms, but this is hardly a radical notion—nor is it in any way anti-meritocratic. Providing more equal opportunities for the poor to raise their own station is what meritocracy is all about.

Other inequalities he objects to seem, if not inevitable, far too costly to remove: Educated people are better parents, who raise their children in ways that make them healthier, happier, and smarter? No one is going to apologize for being a good parent, much less stop doing so because you’re concerned about what it does to inequality. If you have some ideas for how we might make other people into better parents, by all means let’s hear them. But I believe I speak for the entire upper-middle class when I say: when I have kids of my own, I’m going to read to them, I’m not going to spank them, and there’s not a damn thing you can do to change my mind on either front. Quite frankly, this seems like a heavy-handed satire of egalitarianism, right out of Harrison Bergeron: Let’s make society equal by forcing rich people to neglect and abuse their kids as much as poor people do! My apologies to Vonnegut: I thought you were ridiculously exaggerating, but apparently some people actually think like this.

This is closely tied with the deepest flaw in the argument: The meritocratic elite are actually more qualified. It’s easy to argue that someone like Donald Trump shouldn’t rule the world; he’s a deceitful, narcissistic, psychopathic, incompetent buffoon. (The only baffling part is that 40% of American voters apparently disagree.) But it’s a lot harder to see why someone like Bill Gates shouldn’t be in charge of things: He’s actually an extremely intelligent, dedicated, conscientious, hard-working, ethical, and competent individual. Does he deserve $100 billion? No, for reasons I’ve talked about before. But even he knows that! He’s giving most of it away to highly cost-effective charities! Bill Gates alone has saved several million lives by his philanthropy.

Markovits tries to argue that the merits of the meritocratic elite are arbitrary and contextual, like the alleged virtues of the aristocratic class: “The meritocratic virtues, that is, are artifacts of economic inequality in just the fashion in which the pitching virtues are artifacts of baseball.” (p. 264) “The meritocratic achievement commonly celebrated today, no less than the aristocratic virtue acclaimed in the ancien regime, is a sham.” (p. 268)

But it’s pretty hard for me to see how things like literacy, knowledge of history and science, and mathematical skill are purely arbitrary. Even the highly specialized skills of a quantum physicist, software engineer, or geneticist are clearly not arbitrary. Not everyone needs to know how to solve the Schrodinger equation or how to run a polymerase chain reaction, but our civilization greatly benefits from the fact that someone does. Software engineers aren’t super-productive because of high inequality; they are super-productive because they speak the secret language of the thinking machines. I suppose some of the skills involved in finance, consulting, and law are arbitrary and contextual; but he makes it sound like the only purpose graduate school serves is in teaching us table manners.

Precisely by attacking meritocracy, Markovits renders his own position absurd. So you want less competent people in charge? You want people assigned to jobs they’re not good at? You think businesses should go out of their way to hire employees who will do their jobs worse? Had he instead set out to show how American society fails at achieving its meritocratic ideals—indeed, failing to provide equality of opportunity for the poor is probably the clearest example of this—he might have succeeded. But instead he tries to attack the ideals themselves, and fails miserably.

Markovits avoids the error that David Graeber made: Graeber sees that there are many useless jobs but doesn’t seem to have a clue why these jobs exist (and turns to quite foolish Marxian conspiracy theories to explain it). Markovits understands that these jobs are profitable for the firms that employ them, but unproductive for society as a whole. He is right; this is precisely what virtually the entire fields of finance, sales, advertising, and corporate law consist of. Most people in our elite work very hard with great skill and competence, and produce great profits for the corporations that employ them, all while producing very little of genuine societal value. But I don’t see how this is a flaw in meritocracy per se.

Nor does Markovits stop at accusing employment of being rent-seeking; he takes aim at education as well: “when the rich make exceptional investments in schooling, this does reduce the value of ordinary, middle-class training and degrees. […] Meritocratic education inexorably engenders a wasteful and destructive arms educational arms race, which ultimately benefits no one, not even the victors.” (p.153) I don’t doubt that education is in part such a rent-seeking arms race, and it’s worthwhile to try to minimize that. But education is not entirely rent-seeking! At the very least, is there not genuine value in teaching children to read and write and do arithmetic? Perhaps by the time we get to calculus or quantum physics or psychopathology we have reached diminishing returns for most students (though clearly at least some people get genuine value out of such things!), but education is not entirely comprised of signaling or rent-seeking (and nor do “sheepskin effects” prove otherwise).

My PhD may be less valuable to me than it would be to someone in my place 40 years ago, simply because there are more people with PhDs now and thus I face steeper competition. Then again, perhaps not, as the wage premium for college and postgraduate education has been increasing, not decreasing, over that time period. (How much of that wage premium is genuine social benefit and how much is rent-seeking is difficult to say.) In any case it’s definitely still valuable. I have acquired many genuine skills, and will in fact be able to be genuinely more productive as well as compete better in the labor market than I would have without it. Some parts of it have felt like a game where I’m just trying to stay ahead of everyone else, but it hasn’t all been that. A world where nobody had PhDs would be a world with far fewer good scientists and far slower technological advancement.

Abandoning meritocracy entirely would mean that we no longer train people to be more productive or match people to the jobs they are most qualified to do. Do you want a world where surgery is not done by the best surgeons, where airplanes are not flown by the best pilots? This necessarily means less efficient production and an overall lower level of prosperity for society as a whole. The most efficient way may not be the best way, but it’s still worth noting that it’s the most efficient way.

Really, is meritocracy the problem, or is it something else?

Markovits is clearly right that something is going wrong with American society: Our inequality is much too high, and our job market is much too cutthroat. I can’t even relate to his description of what the job market was like in the 1960s (“Old Economy Steve” has it right): “Even applicants for white-collar jobs received startlingly little scrutiny. For most midcentury workers, getting a job did not involve any application at all, in the competitive sense of the term.” (p.203)

In fact, if anything he seems to understate the difference across time, perhaps because it lets him overstate the difference across class (p. 203):

Today, by contrast, the workplace is methodically arranged around gradations of skill. Firms screen job candidates intensively at hiring, and they then sort elite and non-elite workers into separate physical spaces.

Only the very lowest-wage employers, seeking unskilled workers, hire casually. Middle-class employers screen using formal cognitive tests and lengthy interviews. And elite employers screen with urgent intensity, recruiting from only a select pool and spending millions of dollars to probe applicants over several rounds of interviews, lasting entire days.

Today, not even the lowest-wage employers hire casually! Have you ever applied to work at Target? There is a personality test you have to complete, which I presume is designed to test your reliability as an obedient corporate drone. Never in my life have I gotten a job that didn’t involve either a lengthy application process or some form of personal connection—and I hate to admit it, but usually the latter. It is literally now harder to get a job as a cashier at Target than it was to get a job as an engineer at Ford 60 years ago.

But I still can’t shake the feeling that meritocracy is not exactly what’s wrong here. The problem with the sky-high compensation packages at top financial firms isn’t that they are paid to people who are really good at their jobs; it’s that those jobs don’t actually accomplish anything beneficial for society. Where elite talent and even elite compensation is combined with genuine productivity, such as in science and engineering, it seems unproblematic (and I note that Markovits barely even touches on these industries, perhaps because he sees they would undermine his argument). The reason our economic growth seems to have slowed as our inequality has massively surged isn’t that we are doing too good a job of rewarding people for being productive.

Indeed, it seems like the problem may be much simpler: Labor supply exceeds labor demand.

Take a look at this graph from the Federal Reserve Bank of San Francisco:

[Beveridge_curve_data.png]

This graph shows the relationship over time between unemployment and job vacancies. As you can see, they are generally inversely related: More vacancies means less unemployment. I have drawn in a green line which indicates the cutoff between having more vacancies than unemployment—upper left—and having more unemployment than vacancies—lower right. We have almost always been in the state of having more unemployment than we have vacancies; notably, the mid-1960s were one of the few periods in which we had significantly more vacancies than unemployment.

For decades we’ve been instituting policies to try to give people “incentives to work”; but there is no shortage of labor in this country. We seem to have plenty of incentives to work—what we need are incentives to hire people and pay them well.

Indeed, perhaps we need incentives not to work—like a basic income or an expanded social welfare system. Thanks to automation, productivity is now astonishingly high, and yet we work ourselves to death instead of enjoying leisure.

And of course there are various other policy changes that have made our inequality worse—chiefly the dramatic drops in income tax rates at the top brackets that occurred under Reagan.

In fact, many of the specific suggestions Markovits makes—which, much to my chagrin, he waits nearly 300 pages to even mention—are quite reasonable, or even banal: He wants to end tax deductions for alumni donations to universities and require universities to enroll more people from lower income brackets; I could support that. He wants to regulate finance more stringently, eliminate most kinds of complex derivatives, harmonize capital gains tax rates to ordinary income rates, and remove the arbitrary cap on payroll taxes; I’ve been arguing for all of those things for years. What about any of these policies is anti-meritocratic? I don’t see it.

More controversially, he wants to try to re-organize production to provide more opportunities for mid-skill labor. In some industries I’m not sure that’s possible: The 10X programmer is a real phenomenon, and even mediocre programmers and engineers can make software and machines that are a hundred times as productive as doing the work by hand would be. But some of his suggestions make sense, such as policies favoring nurse practitioners over specialist doctors and legal secretaries instead of bar-certified lawyers. (And please, please reform the medical residency system! People die from the overwork caused by our medical residency system.)

But I really don’t see how not educating people or assigning people to jobs they aren’t good at would help matters—which means that meritocracy, as I understand the concept, is not to blame after all.