Meritocracy: John H Cochrane Blog

Adrian Woolridge wrote a thought-provoking essay titled "Meritocracy, Not Democracy, Is the Golden Ticket to Growth," advertising a forthcoming book.

Meritocracy, the secret sauce of growth?

To Woolridge, meritocracy is the secret sauce of prosperity:

The surest sign that a country will be economically successful is not the health of its democracy, as some liberals like to think, or the leanness of its government, as some free-marketers imagine, but its commitment to meritocracy. Singapore is a soft authoritarian power. But it has transformed itself in a few decades from a poverty-stricken swamp into one of the world’s most prosperous countries, with a higher standard of living and a longer life expectancy than its old colonial master, because it is perhaps the world’s leading practitioner of meritocracy. The Scandinavian countries have some of the world’s largest governments and most generous welfare states. But they retain their positions at the top of international league tables of prosperity and productivity in large part because they are committed to high-quality education, good government and, beneath their communitarian veneer, competition; in other words — meritocracy.

By contrast, countries that have resisted meritocracy have either stagnated or hit their growth limits. Greece, a byword for nepotism and “clientelism” (using public-sector jobs to reward partisan cronies), has struggled for decades. Italy, the homeland of nepotismo, enjoyed a postwar boom like France and Germany but has been stagnating since the mid-1990s....

Democracy alone does not lead to growth, and likewise growth does not swiftly lead to democracy. Look at China vs. India, and many democratic, at least in the sense of leaders chosen by fairly free elections, but poor countries around the world.

For a generation, political economists have been looking more deeply at institutions -- rule of law, property rights, etc. -- as a secret sauce. "Meritocracy" is a good buzzword for a different idea of what is centrally important.

...countries that favor recruiting professional managers through open competition have higher growth rates than those that favor recruiting amateur managers through personal connections. America has the highest overall management score, followed by Germany and Japan. Rich-world laggards such as Portugal and Greece, and big emerging-market countries such as India, have a long tail of un-meritocratic and therefore badly managed firms.

The essay goes on, condensing much more evidence.

It is plausible that meritocracy is especially important now, as businesses globalize and incorporate IT. The rising skill premium and larger reach of global corporations means that it is ever more important to match skilled people with the positions that require skill.

His bottom line

... The idea that there is a necessary relationship between democracy and growth rests on a false positive. The really robust relationship is between meritocracy and growth. ..

the evidence of economics is overwhelming: Meritocracy promotes prosperity, and dismantling meritocracy will reduce it. Those who support the current campaign against merit need to admit that they are opting for lower growth. I am not an expert on the huge political/economic literature on the correlates of growth. This sounds reasonable, but the Acemoglus, Barros, etc. of the world may have important things to say on the evidence. Still, it's a novel idea and let's follow it.

We should distinguish "leading country" growth that must come from innovation, and "catchup growth" that simply uses current ideas most efficiently. Woolridge, and the rest of this essay, is, I think, mostly about the latter. For almost all of the world's population, that's what matters. And in my view, the US is a good deal below the efficient frontier as well.

Non-meritocracy

Some evidence on the other side:

Another way to measure the prosperity-producing power of meritocracy is to look at what happens if you remove it. The City College of New York had a well-deserved reputation as the “Harvard of the proletariat,” taking thousands of poor adolescents, many of them the offspring of immigrants, and turning them into the successful citizens of a knowledge society — doctors, lawyers, academics and, in the case of 10 alumni, Nobel Prize winners. Then in 1970 the university introduced an open-access regime, admitting anyone who had graduated from the city’s high schools. The result was a simultaneous boom in student numbers and a collapse in academic standards. By 1978, 2 out of 3 students admitted to the college required remedial teaching in reading, writing and arithmetic. Dropout rates surged. Talented scholars left. A college that had once specialized in producing the rocket fuel of a successful society — talent — became synonymous with protests and sit-ins. In 1999, a task force led by former Yale president Benno Schmidt pronounced the larger City University system to be “in a spiral of decline.” The college only began to recover after it abandoned open admissions as a failed experiment.

This is nice as it illustrates where modern universities are going. It is however not obviously germane to the larger point. Maybe City College moved to an equally important role of providing remedial education to people ill-served by the city's disastrous public high schools. Maybe City College fed meritocratic middle managers, and left to Chicago the business of producing Nobel Prize winners. Really, that City College failed in this new role is the more trenchant criticism. But the decline of meritocracy in favor of other goals is indeed the post 1968 trend of modern universities.

Woolridge offers the story of Venice

...Venice is one of Italy’s least favored cities when it comes to natural resources. Yet in the early Middle Ages it was the richest city in Europe. Venetian sailors — there were some 36,000 of them in the 14th century — popped up as far away as China. Venetian merchants invented the prototype of today’s joint-stock companies, the commenda. The same merchants used the proceeds of ingenuity and dynamism to build some of the world’s most spectacular buildings and patronize some of its most glorious arts.

This Manhattan of the Middle Ages owed its success in large part to its unusual openness to talent: Rather than a hereditary ruler, the standard at the time, Venice had a doge who was selected by the ruling families; rather than a royal court, it had a council of wise men whose job it was to advise — and constrain — the doge. Social mobility was commonplace. Daron Acemoglu of MIT and James Robinson of the University of Chicago Pearson Institute calculate that in government documents in the years 960, 971 and 982, new names made up 69%, 81% and 65%, respectively, of those recorded. Institutions became more inclusive: From the late 12th century onward, a hundred new members were added every year to the Ducal Council, which kept the doge under tight control.

Yet from the late 12th and early 13th centuries, the most powerful families took to rigging the system in favor of their children. In 1315 they succeeded in locking their position at the top of society for good by publishing the “Book of Gold” (Libro D’Oro) — an official list of Venetian noble families that was intended to keep the social order exactly as it was. Venetians called this La Serrata: the closure.

La Serrata spelled the end of Venice as the world’s most successful city-state. A self-satisfied oligarchy used its power to hoard opportunities and strangle innovation...

It's a nice story, but I don't think we need to go back to the Middle Ages to see the pattern over and over. Societies in which people who make important decisions are chosen by skill, not connections, prosper. I hope the book will have a longer list of more recent examples. Military examples seem to me particularly useful. The tension between giving command decisions by political connections vs. meritocracy is always present, and both military disasters and successes often traced to the results.

China

On to the dragon in the room:

The West — and particularly the United States — is turning against the meritocratic idea precisely when the greatest geopolitical rival it has ever faced, China, is embracing meritocracy more tightly.

Though China's government is run by "the insider dealing of this rather grubby elite,"

The Chinese educational system is determinedly meritocratic: Children compete to get into the best nursery schools so that they can get into the best secondary schools and then into the best universities. Examinations — most important, the university entrance examination or gaokao that students take at 18 — regulate the race to get ahead. This examination system, which draws on the tradition of civil service examinations that were administered for more than a thousand years, is now more geared to produce scientists and engineers rather than Confucian officials.

The Chinese Communist Party claims that it is trying to create a system based on “political meritocracy,” ...routinely recruiting the brightest young students into its ranks. The party’s Organization Department acts as a giant human resources department keeping records on high-fliers across the country. Provincial governors and university presidents are evaluated on the basis of their success in hitting a number of targets.... the West should at least prepare itself for the possibility that, albeit messily, China is turning itself into a giant Singapore, determined to use meritocracy as a tool of growth and social progress.

Equity and opportunity

Here is the paradox. The US paternalistic/aristocratic elite is running away from meritocracy under the banner of "social justice" and "racial equity." Yet meritocracy throughout history has been a great equalizer, a great leveler, the main way that excluded out-groups could get ahead. US universities originally adopted standardized tests and dropped racial quotas e.g. against Jews, and discovered a wealth of talent that did not come from "holistic assessment" at the time, i.e. did you go to Andover and Exeter and come from "the right" families. Standardized tests, and the meritocracy they represent was and is one of the great equalizers of opportunity and gates of social and economic mobility, allowing people to prove themselves.

I would argue that the idea of merit is one of humanity’s most successful privilege-busting inventions.

And I would agree.

The abandonment of meritocracy

Woolridge is naturally worried about trends in the US and the West:

Meritocracy is under assault from all directions. For progressives, it is a tool of White male privilege...

... San Francisco’s Lowell School is one of the most successful schools in the country and has given thousands of poor immigrant children (among others) a chance of an elite education. The San Francisco Board of Education has now banned it from using admission tests and introduced a lottery system instead, with the school commissioner, Alison Collins, pronouncing that meritocracy is “racist” and “the antithesis of fair.” Elite schools in New York and Boston are also under threat. Programs for the gifted and talented are being dismantled across the country. Universities have been reducing the importance of standardized admissions tests, with some going so far as to make testing optional, and putting more emphasis on “holistic assessment” instead.

...Companies are introducing formal or informal quotas in the name of “equity” (which is increasingly taking the place of equality of opportunity as a measure of justice).

...Meritocracy is one of the great building blocks of modernity, along with democracy, capitalism and liberalism. ... Is it really the case that meritocracy is a tool of White male privilege? W.E.B. Du Bois and Ruth Bader Ginsburg might have something different to say. Are lotteries or holistic assessments really better ways of distributing educational opportunities than standardized tests? Most of us would hesitate before flying with a pilot who had been chosen by lottery. Do we really want a society in which group identities trump individual abilities? A glance at the history of India or the former Yugoslavia suggests that we should at least pause before taking this leap.

This is a deeper point. Many political systems, both democratic and autocratic, carve up power and benefits based on group markers -- class, ethnicity, religion, race, parentage, caste. Not many who do so are meritocratic, prosperous, or peaceful.

Politics

Woolridge moves on to the political implications. This is interesting, but here I disagree a bit.

As we now know, "Capitalism and Freedom" was not entirely right, that economic growth would quickly lead to political freedom.

In the 1980s and 1990s, Western intellectuals convinced themselves that they had discovered a firm link between economic growth and democracy. ...policy makers welcoming China and Russia into the global order on the grounds that they would inevitably evolve into liberal democracies, and a group of neoconservatives even arguing in favor of “regime change” in the Middle East on the theory that democracy and prosperity would naturally replace the toppled regimes.

Woolridge thinks that meritocratic autocracies (an oxymoron!) pose a threat, given our self-inflicted wounds.

A cohort of rising powers are trying a different approach: linking meritocracy with autocracy of various degrees of hardness. Lee Kuan Yew recognized that the best way to enjoy Western levels of prosperity was not to introduce one-person-one vote but to borrow Western mechanisms such as an elite civil service, recruited through open competition and dedicated to corruption-free government, and graft it onto older Mandarin traditions of the rule of the scholar-bureaucrat. Since then a growing number of countries, led by mighty China, have tried to imitate his model....Countries as diverse as Rwanda and the United Arab Emirates have chosen authoritarian modernization over democracy.

Here I disagree. Yes, meritocratic autocracies can prosper for a while, but not for long. The autocracy part always eventually takes over. The group in power wants to keep power, and wants to keep their children in power (even communism turns to hereditary monarchy, see North Korea). Yes, Singapore. But it's hard to think of a prosperous meritocratic autocracy that has lasted as such for several transitions of power.

And if democracy is not automatically meritocratic, using political power to reward interest groups, autocracy is definitely not automatically meritocratic! Overall, it's hard to make a case that autocracy is more likely to be meritocratic than democracy. Cuba, Venezuela, North Korea, Russia... So Woolridge must have in mind some other secret sauce that produces a stable, long-term meritocratic autocracy, that survives changes of power over generations. I have no idea what that might be.

Democracy is not great at producing technocratic efficiency. Democracy is not great at stemming the army of rent-seekers. Indeed, democracy's greater responsiveness to desires of organized groups often means responsiveness to the desires of rent-seeking groups demanding protection. But democracy is good at the main thing it is designed for: stopping tyranny; Kicking the bums out when they get too entrenched.

Autocracy is not automatically meritocracy! It is usually the opposite. Democracy here in the US was invented to resist an exclusionary, anti-meritocratic autocracy, King George's UK. At a minimum, when you get a bad King all you can do is wait 30 years for them to die.

We also forget that autocrats are often a good deal weaker than democracies. A democratic government at least has a measure of legitimacy. Autocrats worry about waking up the next morning, and have to please the interest groups that keep them in power. It is not obvious that autocracy is better at quieting rent-seekers than democracy. Indeed, the opposite seems to be the case. Quieting rent seekers, avoiding tyranny, and avoiding a bloodbath when power must eventually change hands are three main problems of government. It is not obvious that autocracy does better on any of the three, despite democracy's tumult. And despite the occasional benevolent autocrat who produces some meritocracy and prosperity, for as long as one lifetime.

Though our woke elite aristocracy is moving headlong away from meritocracy, it's not obvious the voters are going along with it. The last election was very close, and a surprisingly large number of the supposed beneficiaries of noblesse oblige voted Republican. The meritocratic ideal, equality of opportunity not statistical equity of various groups, runs deep in America and surfaces every four years.

Here also I think Woolridge confuses the argument somewhat. The "-cracy" part of the word means rule, as in aristocracy, bureaucracy, autocracy and so forth. Meritocracy, strictly speaking, is about merit and skill as the selector for positions of power in government. But much of what Woolridge talks about is the looser sense of meritocracy -- whether decision-making positions in private companies are awarded on merit or on family contacts, ethic group, or other trust mechanisms. Meritocracy in universities is not about who controls the government. One can have meritocratic institutions in an autocratic and un-meritocratic government and vice versa.

His real complaint is that institutions -- corporations, universities, etc. -- in the West are moving away from meritocracy. As an economist, that always smells to me of lack of competition. A society can only afford non-meritocratic institutions if those institutions do not have to compete. That is in part political -- politics offers protection from competition, often precisely to allow non-meritocratic private structures. But the surest solution is not to try for a cultural revival of meritocracy in government-protected uncompetitive industries and institutions (universities). The surest solution is more competition, so institutions have no choice but to be meritocratic.

Thus I also disagree with Woolridge's political musings,

The West has thrived materially over the past century or so in large part because it managed to fuse democracy with meritocracy. America’s Founders understood that the reason for embracing democracy was not that it made us rich, but that it gave ordinary people a say in how their country was governed. They also understood that democracy could actually destroy prosperity if it wasn’t diluted with a degree of meritocracy. They built meritocratic restraints into the Constitution by giving senators six-year terms and giving Supreme Court justices jobs for life. They also put limits on the power of the state to interfere in the wider economy. One reason meritocracy flourished was that the U.S. made it easy for companies to claim limited liability without declaring an explicit public purpose. Another was that the U.S.’s lax immigration laws and vast territories attracted tens of millions of ambitious and energetic people from more crowded and tradition-bound societies.

Other Western countries pursued a similar policy of fusing meritocracy with democracy: France and Britain competed to produce the world’s most elite civil services, and the European Union imposed even more restraints on democratic overreach than the United States did. During the golden years of the 1980s and 1990s this formula worked because the democratic part of the formula generated political legitimacy and the meritocratic part generated good government and economic growth.

In part, this depends on what one means by "democracy." I analyze the same facts by noting the US is not a "democracy," in the sense that each issue is decided by 50% + 1 votes. We are a representative democracy, with strong protections for electoral minorities. Or at least we were -- we are trending to much more 50% + 1 and much less protections in the form of limited government and personal rights. But to say these structures are a "fusing of democracy with meritocracy" seems to me profoundly to miss the point of property and other rights, limited government, and structures that requires more than a transient 50%+1 majority to make huge changes, including transferring money and who gets what job responsibility around.

The current attack on meritocracy is not just a threat to the prosperity of particular countries. It is a threat to the prosperity of the whole democratic world. Prosperity will increasingly be identified with top-down authoritarian regimes that make up for their failure to give their people a voice by giving them jobs and improving their welfare.

Here I disagree again. Authoritarian regimes that buy support by "giving" jobs and handing out money -- most of them -- are neither meritocratic nor prosperous. A few countries, South Korea before it became democratic, Singapore, China for a while, combined meritocratic economics institutions and lower-level government, and generated prosperity. For a while. South Korea became democratic, and China is facing the conundrum that meritocracy at the top means loss of power. In any case, these countries allowed their citizens to make themselves jobs and wealth, with a quid pro quo of stay quiet politically. For a while. While the West may be trying to shoot itself in the foot, it is not clear that autocracies will provide a durable attractive alternative -- to anyone but the autocrats!

Democratic countries in turn will be associated with economic stagnation, populist revolts and racial disharmony, as people try to get ahead in a low-growth environment by emphasizing their membership in defined groups rather than their individual merits.

This is indeed our danger. But those pesky peasants with pitchforks are darn meritocratic at bottom.

All in all though, it's a very provocative idea that meritocracy has been a building block of prosperity, one that many countries struggle to achieve, and that we are now deliberately throwing away.

Updates

In response to thoughtful comments below. Yes, meritocracy is about whether people are selected for positions of decision making or power based on skill, talent, and preparation. This is not about redistribution. One can have a very meritocratic society with lots of redistribution. The question is whether a society (and government) redistributes by handing out checks, by giving people high paying jobs of little consequence, or by allocating actual decision making powers based on considerations other than skill. Those who pursue the latter have a point. Social status and power in society are about more than money, and tokenism is pretty repugnant. A meritocratic redistributionist society must face the dilemma of keeping enough incentives for the talented to put in the hard work to acquire skills, and to match their talents with opportunities; and for the talented and skilled to put in the incredible hard work it takes to start, innovate and manage companies. But all that is for another day. This post and essay are not about redistribution.