Capitalisn’t: The Promise of Meritocracy

Adrian Wooldridge: If you go back to the golden age of meritocracy after the Second World War, what you had was an enormous amount of social mobility, because it was a concerted attempt by society to look for talent, wherever it is. And since then, you’ve had the elite capturing the notion of merit. So, I think we need to recapture the notion of merit from the elite.

Bethany: I’m Bethany McLean.

Phil Donahue: Did you ever have a moment of doubt about capitalism and whether greed’s a good idea?

Luigi: And I’m Luigi Zingales.

Bernie Sanders: We have socialism for the very rich, rugged individualism for the poor.

Bethany: And this is Capitalisn’t, a podcast about what is working in capitalism.

Milton Friedman: First of all, tell me, is there some society you know that doesn’t run on greed?

Luigi: And, most importantly, what isn’t.

Warren Buffett: We ought to do better by the people that get left behind. I don’t think we should kill the capitalist system in the process.

Luigi: The idea of meritocracy is very popular, even if it recently has been under attack. One of the fundamental questions is, what is meritorious? The capitalist system we live in is based on voluntary exchange. To allocate resources properly, a voluntary exchange system relies on carrots rather than sticks. In a control-and-command system, you order people around. In a market system, you induce them to do stuff.

Now, these carrots inevitably generate some inequalities. If we need more accountants than poets, but people prefer to be poets rather than accountants, the market will end up paying the accountants more to induce the would-be poets to learn the debit-credit system. Is the accountant more meritorious than the poet? What is the link between inequality, merit, and democracy?

To discuss this important topic, we decided to host, not one, but two people in two separate episodes. The first one, the pro side, will be played by Adrian Wooldridge, who just came out with a book, The Aristocracy of Talent. And next week, we’re going to have Michael Sandel, who is a philosophy professor at Harvard, who last year published a book called The Tyranny of Merit, and he will represent the cons.

Bethany: In his book, which I find fascinating, Wooldridge points out that this idea, the meritocratic idea, is coming under fire from, as he writes, “a formidable range of critics who roundly denounce our ruling ideology as an illusion, a trap, a tyranny, and an instrument of white oppression.”

We are certainly at a time in history where the idea of meritocracy is under fire. But he also points out, which I find fascinating, that this criticism has yet to shift to popular opinion, which still remains stubbornly loyal to the concept. And so, we thought it was a really important topic to discuss, given that it’s one that is so timely today.

Adrian Wooldridge: One of the interesting things about meritocracy is that it’s a self-correcting ideal. Let’s go back to the middle of the 19th century, when in Britain, let’s say, we introduced a system of open competition for jobs in the civil service and for fellowships of Oxford colleges and things like that. But then there were two constraints. One is that it was only for men, and, secondly, you didn’t have a mass system of education. But then meritocrats began to say, “What about women? How can you say that this is open competition when half of humanity is excluded?” And the very logic of meritocratic arguments led you to admit women into that process.

And there’s a marvelous story I tell in my book about a woman called Philippa Fawcett, who sat for the Cambridge Tripos in mathematics in 1892, and she came top. And so, the examiners ranked her above the Senior Wrangler. The Senior Wrangler is the person who comes top. They couldn’t give her the position of Senior Wrangler, because she wasn’t allowed by statutes to sit the examination, but she did better than all the others. So, she got these peculiar result above the Senior Wrangler. And that seems to demonstrate to me the way that meritocracy can morally impose itself on people who try to preserve distinction.

What you’ve seen in meritocracies, all these subaltern groups—women, ethnic minorities, working-class people—say, “Wait a minute, we demand to be judged by the standards of merit, and we demand the tools that allow us to be judged by the standards of merit.”

Meritocracy is almost always, by its nature, moving towards its own ideal status. In other words, you are shaming the people who claim to be running a meritocratic system to provide opportunity and to make that opportunity real. There’s always a sense in which we’re never quite attaining meritocracy, but if we look at the ideal of meritocracy, we can force the powers that be to reform in such a way that equality of opportunity is rendered more real.

Luigi: Being born in Padua, I cannot resist mentioning the fact that the first woman to get a philosophy degree was Elena Cornaro Piscopia, who got it in 1678 from the University of Padua. So, Oxford and Cambridge were behind the curve on that.

But more importantly, to our topic, you raise a very good point about the fact that people are shaming to fall in line with the meritocracy. But now the criticism is not that the meritocratic system is imperfect. It is that the notion of merit itself is biased and distorted. After all, in the world of the samurai, dealing with a sword was the most important thing, and people were selected on that basis.

If you look at admissions to Harvard, we had a podcast about the legal case against Harvard by Asian Americans, and you see that, basically, they have a criterion of a personality test. By every other criterion, the Asian Americans are doing better. If you were to use the other criteria, they would be discriminated against in their admission to Harvard. Then you have this criterion that is, as far as I know, based on nothing real, except the subjectivity of the people evaluating it. And by that standard, they are not doing better, and so there’s no discrimination. And you see even very prominent economists like David Card defending this idea that there is no discrimination in admission to Harvard against Asian Americans, because the notion of merit is redefined to include this personality test.

Adrian Wooldridge: Well, yes, gatekeepers can redefine merits at their own convenience, but I would say that we need to have a fairly tight definition of merit. Now, I would say the problem with Harvard is not the problem that somebody like Michael Sandel says, which is that it’s a meritocracy. I think the problem with Harvard is that it’s not a meritocracy, that it’s a system that rigs entry in all sorts of ways away from objective tests of academic ability.

I think that it’s the case that about 20 percent of Harvard students get there on the basis of academic ability, and the other 80 percent get there on the basis of various hooks. If their parents went there—extraordinary, but it’s true—that if your parents went there, you get a leg up in the whole system, or on the basis of running ability or on the basis of ability to play polo or to play the oboe. There are all sorts of hooks—what they call hooks—or if your parents teach at Harvard, all sorts of hooks which distort this. And I would say the problem with Harvard is that it’s not a meritocracy, and the way to improve it would be to make it a meritocracy. Let it be on the basis of objective tests, and then you will get a much more inclusive university.

Bethany: It seems to me that the critique of meritocracy contains a very unappealing concept in it as well. And what I mean by that is that in reading your book, going back to Rawls, the critique of meritocracy has been that, well, it’s not fair from the get-go, because people are born with different talents that they didn’t earn.

And yet, if you take that to its logical conclusion, then what that’s saying is that people aren’t created equal. In other words, the critique of it seems to me to be more dangerous and less appealing than perhaps the meritocratic ideal is. Does that make sense?

Adrian Wooldridge: It does make a lot of sense. Well, there were two very different critiques of meritocracy. One is Rawls’s position, which is that of an extreme, actually, genetic hereditarian. Rawls says you inherit your talents, and therefore you don’t deserve them, in any sense. And he even applies that to effort, to hard work. If some people work hard enough, that’s just because they’re genetically preprogrammed to work harder. The other critique is exactly the opposite of that: all of our abilities are socially determined, socially shaped. And if you have rich parents, you will tend to be clever and well-informed. If you have poor parents, you will be less able, because it’s all a result of the environment.

So, those are two completely opposite criticisms. I take a middle-of-the-road position, where I think that our abilities are determined by a mixture of genetics and environment. But the fact that we turn our abilities into achievements is a matter of hard work, putting your nose to the grindstone. And I think in any sensible society, in order to encourage and reward people’s efforts, you will have to have differential rewards.

Bethany: Why do you think it is that the critique of meritocracy is reaching such a crescendo today, or given that one of the things I liked the most about your book is that it is a history of meritocracy, not just the philosophy of it, is it reaching a crescendo today? Are there other times in history where the critique of meritocracy has been equally strident?

Adrian Wooldridge: Sure. The concept of meritocracy arrived as a critique of meritocracy. Michael Young, when he wrote his book, The Rise of the Meritocracy, in 1958 and invented the term, wasn’t saying, “Hey, this is a great thing, we love it.” He was saying, “This is a terrible thing.” It’s a system which gives power to the cleverest, the best, and the system which puts failures at the bottom of society. And you can no longer say that you haven’t succeeded because some aristocrat rigged the system. You have to accept that you’re stuck at the bottom of society just because you’re not as clever as those people at the top of society. So, he was saying that meritocracy is an intolerable ideal.

Criticism for meritocracy—it’s come from the left, sometimes it’s come from the right, and those periods tended to alternate. But now, it’s coming from everywhere. The populist right says that meritocracy is appalling because it gives power to this dreadful supercilious elite of liberals. The people on the left say it’s awful because it gives power to the existing ruling class. Black Lives Matter people say it’s all about white power and preserving white power.

And then, you have very sophisticated liberals like Markovits and Sandel saying it’s awful for lots of reasons. But I think that one of their basic reasons for thinking it is, R. H. Tawney says somewhere that we’re not all elbows—we’re not all just elbows. There’s more to life than just elbows. And I think they have the sense that the meritocratic society is all elbows. Everybody is elbowing each other all the time, and it creates an unpleasant world.

The criticism is much more widespread than it’s ever been before, but also, it’s beginning to have real consequences very, very quickly. Look at Lowell, I think it’s pronounced Lowell, High School in San Francisco, one of the best high schools in the country, which has always been an avenue for immigrant communities to succeed, is now replacing academic tests for admission with a lottery. Boston Latin is replacing academic tests with a lottery. Universities right across the country are downgrading SATs and introducing much more gameable systems like essays, systems that are much more socially biased.

And so, I think America is beginning to weaken in very significant ways its meritocratic apparatus at a time when it confronts a really serious rival, the most serious rival it’s ever confronted, which is China. And China is tightening its meritocratic apparatus and making it much more efficient. So, I think if America abandons or weakens meritocracy at a time when China is strengthening meritocracy, economic power and geopolitical power will inevitably shift towards China. It may sound pretentious, but I think that that getting rid of meritocracy would be an act of civilization suicide by the West. And in weakening it, we’re moving in very much the wrong direction.

Luigi: But you start from the assumption that a meritocratic rule is necessarily an efficient rule, even when it comes to running the government. I think that part of the reaction to meritocracy is the fact that the elites have failed. They failed to prevent the financial crisis, or even to vaguely anticipate it. They failed to understand the disruption—and I include myself, so it’s not pointing fingers, because I’m part of that—but failed to recognize the dramatic impact that the fast opening to China created in the Midwest United States and the social consequences of this. They have failed in running the country in a fairly objective way, because now it is becoming more and more that your admission to university is just a question of money and not of talent.

If you look at the way the country is run, it is not that efficient. And I think that there is a sense that the elites tend to be too much for themselves. And there is this phenomenon in social psychology called groupthink. We know that the elite, especially the elite that feel they are very superior to the rest, are prone to this mistake repeatedly. The Bay of Pigs is the prototypical example of a very talented elite failing miserably.

And so, I will challenge you with the statement by William Buckley, Jr., that said, “I prefer to be run by people randomly chosen in the phone book,” at the time where the phone book still existed, “rather than by the senate of Harvard University.”

There is this sense that maybe academic intelligence—which I certainly am a big fan of, because it’s part of my bread and butter—is not the only dimension. And by pushing too much in a one-dimensional system, we end up with enormous distortion. How do you react to that?

Adrian Wooldridge: I react to that by saying, that is a very powerful critique. And I think there is indeed a limitation to academic intelligence, and there is indeed a virtue to common sense. And I would not argue to move away from a system of democracy towards a system of political meritocracy. I think that it’s very important to have democracy. It gives power to people who see the world in a different way from the senate of Harvard University and more linked to common sense.

However, I think what’s happened over the last 40 years, a bit more, is that we’ve moved away from the golden age of meritocracy, which we had after the Second World War, towards a marriage between plutocracy and meritocracy, whereby the rich have discovered the importance of education and the meritocrats have discovered money and the joys of money. And these two groups have merged in a way. So, you have a corrupt version of meritocracy incarnating power.

If you look at the wealth of people going to Harvard, there are more people from the top 2 percent than from the bottom 50 percent of the income distribution. We know all of these sorts of figures. There’s a marriage between merit and money, but they’ve also become much more introspective in that the elite has separated itself, increasingly, from the rest of society. It only talks to itself and to other members of the elite, and indeed, it has made big mistakes, partly as a result of being too introverted.

And I would say that the way to cure this problem with pluto-meritocracy is more meritocracy, to go back to the ideal of meritocracy, which depends on social mobility. That the way to break the calcification of meritocracy is to have more academically selective schools searching the population relentlessly for academic talents, more use of objective tests to find that talent, and more use of universities’ huge endowments to make sure that they’re recruiting people from the whole of society, by looking as intently for the hidden Einsteins as they do for great football players.

And if you have pure meritocracy, you’d have many, many more people from diverse backgrounds, and you’d have many, many people from the elites not going to Harvard, becoming more downwardly mobile, say, or going to schools that were more suited to their abilities.

Bethany: It seems that maybe what you describe as the golden age of meritocracy in the post-World War II years was tied to economic growth. Can you have a golden age of meritocracy in a world of shrinking growth, or at least in a world where there’s the perception of shrinking opportunity? Or is that type of world always going to result in the privileged attempting to gain the system for the betterment of their own children, because they’re worried there won’t be enough?

Adrian Wooldridge: There’s truth in that, but I think that meritocracy can itself create growth. That if you have a system that works and does identify talent and allocates that talent well, then you will tend to have a higher-growth society. And the classic example of this is Singapore. Lee Kuan Yew made a decision, basically, in the early 1960s, that Singapore could remain a poor manufacturing country, or it could become a rich country on the basis of the one resource that it had, which was human brainpower.

And he created a system which identified brainpower, trained the brainpower, and allocated the brainpower to state jobs or company jobs as efficiently as he possibly could. He put all his money on this one thing. And it worked. Singapore has gone from being a country with a fraction of the wealth of Britain, its former colonial master, to a country with a higher living standard than Britain, longer life expectancy.

And so, I think if you have a functioning meritocracy, you actually do create more growth. And I think there are many reasons why America’s growth rate has slowed down, but one is, I think, that it’s not as meritocratic as it used to be. But also, I do think that America has allocated too much of its brainpower to financial transactions, management transactions, probably, and not enough to other elements of the economy. So, there are many complicated reasons.

Bethany: Why did that get so broken in America, do you think? In the sense that in a meritocratic system, the reward should go to those who produce value, but in America, essentially and more and more, the rewards have gone to those who produce financialization. And so, the rewards have not gone to those who produce a kind of value. How did that link get broken, and what do we do about that?

Adrian Wooldridge: Well, I think part of the answer is, it’s very easy to measure a lot of these things, these transactions. People are very attracted to money, and people’s ability to generate value can be much more easily measured in the financial sector than it can in other sectors of the economy. But there’s also a degree of self-dealing, a degree of corruption, and a degree of smoke and mirrors. I mean, I know you’ve written about Enron. Enron was smoke and mirrors, and yet you had all the brightest people from Harvard Business School and from McKinsey and the rest going into this world, because it had a certain fashionability or a certain charisma to it.

Luigi: Having more flexibility, the definition of merit in multidimensions, I think, is important, because at some level, one of the big advantages of the market system is that you have different ways of rewarding talents. You don’t necessarily need to be an engineer to succeed in life.

On the other hand, if you are in a more socialist country where you have a very top-down economy, somebody decides what is the right criterion, whether this is being best scholar in math versus the one who knows Marx better or the best engineer. But there’s only one dimension, and that’s imposed on everybody down the line.

My answer to Bethany’s question of what has changed, maybe what has changed is the degree of competition of the US economy. If you are in a very competitive economy, the reward to talent is more proportionate. So, if I invest in education, it is because that education gives me a return in the marketplace, which is related somewhat to the value added that I create in society. And that’s your point of a meritocracy creating growth and creating value.

In a moment in which we have noncompetitive sectors . . . so think about social media. The reason why Facebook is the top of social media has very little to do with Facebook being the best. It is a combination of factors that led to it. But the difference in returns between Facebook and Myspace is a trillion versus zero. It’s a gigantic difference in returns. And so, the people sitting in Facebook are, at the end of the day, enjoying a rent that really has little to do with their merit.

The competition coming from Harvard is not to produce real wealth that is going to add to the economy. It is to get to the top of the Facebook pyramid, a bit in the same way as the young British scholars were trying to get some of the spoils of the empire. And there was no competition. There was just rent seeking, and they were spending a huge amount of time learning ancient Greek and Latin. I think there is a lot of rent-seeking going on there in order to get the rents.

Adrian Wooldridge: Yeah. I absolutely agree with you. The monopolization of the American economy is quite extreme. I remember when I used to go to Silicon Valley a lot in the 1990s, everybody had this idea that what they wanted to do was to be the next great Bill Gates. They all wanted to create a company that would change the world. Now, they all want to create a company that they can sell to Mark Zuckerberg. They all want to cash out when they’re young and sell it off to the monopolist who controls the whole system. I think there is a lack of competition in the American economy, which is extremely worrying.

I would also say, to add to your point, that as societies become more sophisticated and as they become richer, they can reward a wider and wider range of abilities and talents. John Adams, who’s a great thinker about meritocracy, I think, he says at one point, “I study war and politics so that my children can study mathematics, so their children can study painting and tapestry and furniture making.” As society has become more sophisticated, there is a wider and wider range of skills that are rewarded by the marketplace, because people want a wider and wider range of products. That ought to be the case that more talents are recognized and rewarded as society becomes more sophisticated.

I’d also say in America that we’ve become obsessed by Harvard or by the University of Chicago, but there’s an enormous world out there that isn’t Harvard or the University of Chicago of good local colleges that are serving good local industries and doing a very, very good job of providing what the market wants.

Bethany: You had mentioned that democracy is in some ways in conflict with meritocracy. Are the two ideas in conflict, or are they both necessary for each other? Do they go hand in hand in an odd way as well?

Adrian Wooldridge: Well, they are in conflict in the purest sense, because meritocracy says that some people are better at ruling, I suppose. If you take the literal meaning of the term meritocracy, it means that the meritorious should rule, whereas democracy says everybody should have exactly the same vote. But I would say that at its very best the two things complement each other. Nobody wants to have a pure democracy. We have a representative democracy, so that filters democracy, the rule of the people, in one sense. We have rules, we have laws, we have rights, which limit the power of the demos of the Congress or parliament to trample on people’s rights. So, meritocracy and democracy ideally complement and reinforce each other.

Luigi: But I think that there is a tendency by the meritocratic class to emphasize that you need meritorious people to run the government and to transform the business of political decisions into technical decisions. And I think this, in my view, is the big mistake, because if you want to decide which is the best line of vaccine to bet your money on, you need a competent person. I don’t care whether he’s meritorious or not, as long as he’s competent. But then there is the decision of how much you want to open the schools versus the restaurants. That’s not a technical decision. There is a technical component, but at the end of the day, that is a political decision.

We are trying to take that away from the decision of the people. If you read the newspapers in America, everybody was saying, “This is a technical decision that should be made by experts, and how could you dare, governor of this state versus that state, to have a different opinion, because there is only one opinion, and it comes from Harvard with one particular blessing.”

Adrian Wooldridge: I think that’s absolutely right. We have lots of trade-offs here. Let me give you a different trade-off. Let’s think about the Iraq War. The Iraq War was something that most experts, most people in the State Department, most policy academics, well-informed journalists, said was probably a mistake. Be cautious. This is a very dangerous thing to do. But it was a great welling of opinion in the population as a whole, which said, “Go for it. We need to do this,” plus, which was of course manipulated by a bunch of neoconservative ideologues.

Luigi: Yeah. But I’m sorry, on the Iraq war, I completely disagree with you, because prominent people, experts were massively in favor, starting with the ultimate example of the expert elite person, which is your former prime minister, Tony Blair. He’s not clearly a man of the people, and I’m sure that Corbin was against the war, but Tony Blair was massively in favor of the war.

Adrian Wooldridge: Well, we could talk about this for a very long time, but there was a clique of people who were experts, Donald Rumsfeld being a classic example of that, who wanted the war, but they were a minority. And Blair only did what he did because he wanted to be in with Bush.

Luigi: Sorry, stop there. That’s exactly the problem of the experts. They want to be in, and they’re willing to compromise their expertise, their integrity, in order to be in. That’s exactly the problem.

I remember in the movie Thirteen Days about the missile crisis, there is this great line in which Adlai Stevenson says, “I am at the end of my career, so I’m going to make the case for peace, even if this is really something that destroys me.” And thank God he made the case for peace, because you and I would not be here today if Adlai Stevenson had not made a case for peace. So, that’s exactly the problem of excessive meritocracy, which is that these people feel they belong to a small club, and they want to go along, and in the process, they make the biggest mistake of all.

Adrian Wooldridge: Indeed. I mean, I think there’s a problem with ossification of the meritocratic class, but I also do argue in the book that we need to do more to force our educated elites to have more to do with the rest of society. In the mid-Victorian era, that was done through a notion of duty. When we introduced the notion of meritocracy and open competition, there was also a process of remoralization of society and the notion that people who happened to be born clever and happened to have the privilege of education owed a lot to the rest of society.

So, you have things like the settlement movement, with people moving when they left university and going and living in the cities, and things like that, and immersing themselves in the experience of people who are different from them. But definitely, we have a society now divided into cognitive bubbles, and definitely that is a big problem.

Luigi: And I have to say, I love many things in your book, but one in particular is the emphasis you put on the other side of education, which is the education on the character and the responsibility and the morality that came from Plato at the beginning, but it’s throughout all the educational system historically. And I think we have lost that a bit today.

I am in a fight at my school to say, we shouldn’t have a class on ethics, we should bring ethics into the classroom, because in every topic and every discussion, it should not be a separate topic, you wash your mouth after you’ve said it, it is something that should permeate all our discussions. But I had a lot of resistance, because they say, based on a technicality, we are not experts on that. And because we’re not experts on that, we’re silent. And because we’re silent, we basically let everything go, which I think is a huge mistake.

Adrian Wooldridge: Well, if you look at the great meritocratic revolution in Britain in the middle of the 19th century, it’s not just a technical revolution, saying it’s technically better if we open up the civil service to competition on the basis of examinations. It’s a moral revolution. It’s saying that the old system of nepotism and patronage is morally wrong and that it’s morally right to give positions on the basis of merit. But it’s also a system that says those people who get those jobs owe to society a public duty, and they must be extremely moral.

And so, Britain goes from being one of the most notoriously corrupt countries in the world in the 1830s to being an exemplary moral country in terms of its civil service. It’s a very uncorrupt civil service with a very clearly defined public-service ethic and no exchange of money and all of that sort of stuff. So, what happened to the original meritocratic revolution was a moral revolution against cronyism and corruption. And then, in the 20th century, you get a demoralization of the meritocratic idea.

And also, I think the whole woke revolution . . . I’m not a wokeist, but there is a sense that these woke people are saying, “Wait a minute, we need to reinject morality into public life.” It may not be the right morality, maybe too stridently expressed, but I think they’re right to say, issues of conduct, self-dealing, the links between the elite and the masses . . . Do they share? Do they know what the experiences are of the vast majority of people? These are the right questions to be asking. So, I think we do need to move in that direction.

Bethany: I don’t think he argued that the meritocracy was functioning perfectly. In fact, I thought that was one of the interesting things about the conversation that he doesn’t think it’s functioning. He thinks that one of the most dangerous things is the way in which American elites, or perhaps global elites, have figured out how to cling to power, namely, through influencing the educational system in order to provide their children with the best opportunities. As he writes, “This is nevertheless a meritocracy marinated in money.”

Luigi: You’re absolutely right that he’s critical of the distortions. But my impression is that if you push him on how to fix the problem, he’s going in the direction of, “Oh, we want better tests, more objective tests, and inevitably, aptitudinal tests, because knowledge tests are enormously influenced by environment.” An alternative route is, let’s go to knowledge tests, but let’s adjust for your advantage in life, a bit like golf, where you have a different handicap. That could be an alternative way to proceed.

Bethany: I agree with you. And I think that does go to one of the profound core critiques of meritocracy, which is that you don’t have a right to your talent. Even your ability to work hard is something that you were born with and gifted with, in a sense. And so, a meritocracy based on talent is still an incredibly unfair system.

That resonates with me on some level, but the argument Wooldridge made that I also found profound is, what’s the alternative? Because, as he points out in his book, the old aristocracy was based on where you were born. Or, if you think about India and the caste system in India, thinking of meritocracy or enabling meritocracy was an improvement over that. Even if it’s not perfect, it’s progress, perhaps in its purest form, although, I certainly agree with him that it has been hijacked in the last bunch of decades.

Luigi: Coming from a country where top surgeons are appointed based on political patronage and not necessarily skill, of course, I like merit. But I think there is a bit of a difference between the idea that you should select people on merit and the notion of meritocracy, which is you deserve what you get.

In the market system, you don’t necessarily deserve what you get. If there is a shortage of people who want to do accounting, and you pay a lot to accountants, they don’t deserve that, maybe they deserve it in the sense of what we call in economics a compensating differential, that it is so painful to do accounting, you are paid to do that job, and you’re not paid to write poems because it’s so enjoyable. So, in that sense, maybe you deserve it, but it’s a compensating differential. We don’t call it merit.

My view is the decentralized market system has a lot of ways to reward people, many of which I don’t necessarily agree with, because I don’t think it’s so valuable to do certain activities, but who am I to judge? I let the market choose, to some extent. Where there is a desperate need for a ranking is where there are rents and especially rents allocated centrally.

Bethany: Yeah. So, compensated differential versus merit, I can see why merit is a more appealing word, given that it’s two syllables versus what? Five, six. I’ll go with merit. And I was thinking, as you spoke, if we are going to distinguish between merit and meritocracy that, for instance, we want the surgeon who is operating on us to be the world’s best surgeon, we want her to be there because of merit. Then how do you distinguish between a world where you are where you are because of merit and a world of meritocracy, where you don’t deserve what you get?

For sure, today, I think it has gone wrong. I can’t imagine anybody who would argue—I guess, maybe some people do because they believe it—but I for sure would not argue that a hedge-fund manager deserves to make billions of dollars a year, whereas a teacher teaching my kids deserves to make $60,000. I, for sure, would not argue that the system works. I want to be very clear about that.

Luigi: I didn’t say how much more you pay the accountants. The question is, you’re paying the accountants more than you pay the poets. Is it because of merit? You need to have some talent to be an accountant. If you don’t know how to add and subtract, you’re out of luck. You also need a lot of talent, probably more talent, to be a poet, at least to be a poet of certain ability. So, I don’t know who’s more meritorious in an abstract sense. And your opinion and mine might differ, and so does the opinion of many other people. So, how do we reconcile this?

I think that the market system looks at, in my view, one principle, which is that we are trying to provide the services that are in demand at the lowest cost possible. If there is a huge demand for accountants, we need to induce would-be poets to become accountants. And probably we’re going to induce the ones who are less talented as a poet, so that reduces the loss in terms of poetry creation, and we end up paying the accountants more. I don’t see that the accountant should be seen as more valuable for society just because he or she makes more money. I think it is simply that we need more.

And things have changed over time. Once I heard Bill Gates say that “I was lucky to be born in a period of history where nerds like me are in demand.” I don’t think that he’s more meritorious to have been born now than in another time.

Putting that “deserve” component on top of it, I think is very appealing to the winners. Not only are we rich, but we deserve to be rich. That’s what basically every society has created, that rich people create an ideology that justify why they are rich.

In my view, one of the advantages of a market system is we don’t need to do that. We basically say, “Look, you’re rich because we needed your talent more in this moment, but you don’t deserve to be rich in any form or shape.”

Bethany: We agree 100 percent. Perhaps the problem, and one we touched on in other podcasts, is that our society has lost any semblance of humility. And so, this component to meritocracy that people who are making more money feel like they deserve to make money because they’re better, doesn’t necessarily have to be part of a meritocracy. It is part of the modern meritocracy.

But I think another thing that Adrian touched on that I think was interesting is how the global financial crisis was a real blow to the idea of meritocracy. And we touched on this a little bit with Martin Gurri as well. I like when these themes resonate through different podcasts, which is that it showed that the people in charge, the elites in charge, who were being paid all this money and paid all this money to stay solvent by the government, really didn’t know what they were doing. As I’ve thought about the global financial crisis more and more, it is less of a financial event than a social one and a giant rip and tear in our social fabric.

Luigi: The humility is the crucial point, because it also links nicely, in my view, to the problem of inefficiency, because one of the justifications for meritocracy, of course, is that you let the experts rule. And what is interesting is the experts, on average, on ordinary things tend to do better than nonexperts—that’s the reason why they are experts—but they also tend to be subject to some massive distortions that the social-psychology literature calls groupthink, but they are really very, very costly.

The example everybody uses, because it’s the key example, is the famous Bay of Pigs example, in which you have the best of the brightest in a room, and they arrive at a conclusion that probably a five-year-old kid would say, “Let’s do that,” but a good teenager would say, “This is crazy.” But nobody had the courage to dissent. Why? Because with merit and with “deserve,” there is also this implicit hierarchy that forces people to suck up to the more meritorious, the more valuable, the most intelligent, the most powerful, rather than stand up for their ideas.

Bethany: Yeah. I think you can go all the way back to, obviously, the Vietnam War, and David Halberstam’s The Best and the Brightest, in the story of Robert McNamara, to think through that and realize, back to Martin Gurri’s point, that thus it’s ever been. It’s just that when the elites had control of the narrative, we didn’t always realize that thus it had ever been.

I think the intersection of these two conversations, between the ability to control the narrative, such that those who supposedly deserve their place in the meritocracy couldn’t be challenged, and the breakdown of that order and the ability to challenge that elite point of view, it’s an interesting combination. But I think that notion of groupthink goes hand in hand with the loss of humility that comes from those who believe that their position at the top is because they deserve to be there, and therefore, nobody else is worthy.

Luigi: But also, what it suggests is the importance of having in the political process people who are not in this rat race of merit. Nobody, in my view, owns the truth. And the more you have a standard path for everybody, the more you miss out on fantastic opportunities.

I thought that it was very enlightening, the history of a bureaucracy in China. China was head and shoulders above the West in introducing meritocracy and in running an empire much more efficiently than anything that the West has done.

But they got entrenched in one type of exam that defined what it meant to be wise and educated in China at the time, and that was mostly to learn Confucius. And the West was much more ignorant, but it tried a different path. And there was space for people challenging the existing orthodoxy and going in different directions. And all the scientific revolution and the progress that we have seen since the 18th century in the West was due to the fact that there wasn’t a rigid merit system, that you could craft your own path.

And the United States used to be more like that. Universities were more on an equal footing. Yes, Harvard was a bit more prestigious than others, but there were plenty of people coming from nowhere succeeding. Today, it seems that if you want to be on the Supreme Court, you need to be from Yale or Harvard or no other alternative.

Bethany: I love that you highlighted that, because I thought that was one of the most fascinating parts of Wooldridge’s book. What I loved overall was that it was such a historical look at the concept of meritocracy. But also, I love that notion that even in one of the first meritocracies, the concept itself can harden and become a bureaucracy of meritocracy. How’s that?

Luigi: Yeah.

Bethany: Not an aristocracy of talent, but a bureaucracy of meritocracy, and it can harden and start to prevent the very kinds of innovation that we want to see in society. And it’s a really interesting comparison or thought that maybe that’s where we are in the US, with this very rigid system that we’ve had for getting into the top colleges that then starts producing a certain type of kid rather than a broadly diverse kid. Kids who are encouraged, for instance, by the time they get into junior high or high school to choose one thing at which they’re going to excel, rather than being good at three or four different things, because it’s that one thing at which you might excel that might get you into Harvard or Yale. And then that child may have been really good at something else, and they’re losing out on the chance to be that. And that’s just one narrow example of the way in which the concept can harden in a really dangerous way. So, yes, I love that.

Luigi: Especially if that one thing is playing lacrosse. As an Italian, I did not even know lacrosse was a sport.

Bethany: You know what? Luigi, this is one way in which growing up in Italy and growing up in Hibbing, Minnesota, is similar, because until I got to college, I didn’t know lacrosse was a sport either. We’ve just found perhaps the only similarity between Italy and northern Minnesota.