TheMarketForIdeas

The compatibility between the moral and the practical has always been a key issue for many philosophies and schools of thought. When it comes to Economics, advocates of certain systems have, more often than not, tried to argue that it isn’t only their primary interest in said system that makes it superior to all the others, but also the secondary ones. For instance, economists who advocate for a free-market economy will not only tell you that Capitalism is economically more efficient than its alternatives, but that it is morally superior, too. Alternatively, it is not unusual for someone whose moral outlook on life makes him prefer a certain system to also end up believing that that system is also the likeliest to lead to material prosperity.

While many intellectuals of various philosophical, social, political, and economic orientations have successfully put forward long lists of arguments in favour of their views throughout time, there always seem to be equally well articulated counterarguments from the opposing sides. Marxists claim that economic freedom paradoxically leads to exploitation and inequality, while Liberals will point out, and rightfully so, the fact that Socialism has the exact same results, if only in a marginally different fashion (and to a much higher degree). Then the ultimate solution appears to be a compromise in the form of a mixed economy, but here again we have people suggesting that it is an unwise idea, since the middle way is always at risk of borrowing the worst elements from both extremes.

The debate appears to have no end in sight and, even though both the Left and the Right have proven to be more than competent at pointing out each other’s flaws, none of them have come with universally acclaimed solutions and, therefore, the conflict between them remains far from over. In this article, I shall try and explain this absence of a common ground and the lack of hope for reconciliation between Marxists and free marketers (and everyone in between), as well as partially share my opinion regarding what I consider to be a more appropriate economic framework for organizing society. 

Past attempts – Postmodern thought and the temporary abandonment of conventional logic 

For some, Postmodern Deconstructionism appears to have held some answers to this apparently never-ending contrarianism. The Deconstructionist will tell you that any line of logical argumentation is somewhat futile from the get-go since, just like in the case of a narrative, its goal is arbitrarily preset. Therefore, while the arguments themselves may be correct and successful in leading towards that predetermined goal, they tend to ignore all the other possible goals and issues which already exist or which arise along the way.

Take Libertarianism for example. While it is easy to see how Voluntaryism or Anarcho-Capitalism are the only systems fully devoid of authorized coercion and thus, in light of the idea that coercion is the root of all evil, the only morally valid political systems, the equally easily observable problems which this line of thinking generates unfortunately go unaddressed. Under uncompromising Libertarianism, there can be no such things as guaranteed intellectual property rights, children’s rights, animal rights, free speech, freedom of circulation, internet neutrality and many other societal elements that we take for granted today and which are, ironically enough, usually advocated for by right wingers. Moreover, some advocates of this system might claim that the lack of those rights is not even a problem in the first place because they are incompatible with “true” Capitalism (enforcing them would be a violation of the so-called Non-Aggression Principle). As we can observe, while the desired goal of Libertarian rhetoric has been achieved – that of proving in a logically coherent manner that Market Anarchy is the only inherently aggression-free political system, the many undesirable aspects that surfaced along the way have gone unattended or even had their validity denied. Alternatively, for someone who would see, for instance, intellectual property rights as the measure of all things, the issue of the coercive nature of enforcing them becomes the unattended one.

The reason why I would not personally subscribe, however, to the Deconstructionist method (or to any form of Postmodernism, for that matter) is, simply put, not every unpleasant aspect of a system can be defined as problematic. After all, one of the main purposes of philosophy is precisely that – determining what qualifies as a problem. Furthermore, stacking problems, as identified by different systems, on top of each other and claiming they are equally valid may lead to serious inconsistencies. Imagine the case of a private sector employee in a mixed economy. According to Socialists, it is reprehensible of his boss to take the so-called surplus value of his labour from him, since that act is exploitative in nature. At the same time, the Libertarian will claim that it is morally despicable for the State to confiscate part of that worker’s wage through taxation. Agreeing to both viewpoints simultaneously leads to the conclusion that, for such an employee, life is doubly unfair, since both his employer and the State have their hands in his pockets. While there is truth to that in a purely practical sense, defining either one of them as a thief would implicitly label the other as a hero, since the private and public sectors function as opposites in this particular context. As such, while it is oftentimes understandable for a wage worker to dislike both the IRS and his boss, he can only see one of them as the villain. 

Towards a new meaning of Meritocracy 

There is no doubt that if one were to find the formula for an economic system in which every single individual ended up living the life that he truly deserved, few (if any) people would object to the morality or practicality behind it. The major problem in conceptualizing such a system is that there seems to be no concrete definition of merit which is unanimously accepted by everyone. Marxists define it through the lens of what an individual needs. From each according to his ability, to each according to his needs, the saying goes. Since need is directly tied to merit, it is enough for one to prove that he necessitates something in order to claim that he also deserves it. This definition, however, falls flat when met with proper counterarguments. After all, if I only have to prove that I need one of your belongings more than you do in order to justify taking it from you, there is no limit to the potential for thievery that would exist in such a society. Also, why would anyone work to create the wealth they need when they could simply take the surplus from someone else? The list can go on, but I believe the picture is quite clear.

At the other end of the economic spectrum, we have full-blown unregulated Capitalism and, this time around, it is Socialists who came up with long series of “flaws” which they found about the market economy. Sadly, in my view, the Left hasn’t been able to build a proper critique against laissez-faire economics, because most of their attempts to do so have been based on implicit premises that are not readily striking as true and, therefore, could easily be interpreted as simple manifestations of envy. To be specific, they will attack Capitalism for leading to inequality, individualism, egoism, and competition, but without prior proof that equality, collectivism, altruism, and unconditional cooperation (which some would call servitude) are more desirable. Moreover, Marxists will oftentimes contradict themselves, by casually switching from a solidarity-based rhetoric to a self-centred one, through slogans and catchphrases such as “Wealth is entitled to all it creates!” or “I don’t need the boss, the boss needs me”.

In any case, the main moral flaw of Capitalism, in my view, is not its lack of compassion or egalitarianism, but, quite the opposite, that it is not as individualistic as an ideal system should be. Under a system based on property rights and free trade, merit can oftentimes only exist in a rudimentary form, the claim to ownership over something being justified by the simple argument that it was obtained peacefully. There is no objective standard for what anybody truly deserves. In fact, even famous Libertarians such as Milton Friedman (1980) have explicitly stated that. “Deserve is an impossible thing to decide. [...] Nobody deserves anything!” Perhaps the best example to illustrate this claim is the one put forward by Murray Rothbard in the second edition of his famous book For a New Liberty: The Libertarian Manifesto (1978). His moral argument against the taxation of inheritance is that, while it is true that the recipient may not objectively deserve it, the giver (and its former proprietor) has the right to transfer it to him. Furthermore, the recipient himself may even be a spoiled, rotten child, but still, his parents loved and valued him enough to give him his inheritance, so that is that.

Friedman’s and Rothbard’s views on the issue not only confirm my initial claim about the lack of a proper framework of reference regarding merit in a Capitalist society, but their takes (Rothbard’s in particular) also reveal that, no matter how straightforward the facts of reality may be, people will always value things subjectively. From an economic perspective, the subjectivity of value is a broadly accepted truth, but from the standpoint of moral philosophy, it may be a harder pill to swallow.

Consider, for instance, a gifted man who pursues the field of work he has a calling for. When this person begins his training, he has no way to predict with prefect accuracy what the market will look like by the time he is ready to enter the workforce. And yet, under the division of labour, the amount of money such a man would make is mostly determined by how competitive the market for his set of skills is and how well he fares against his competitors, as well as the demand which exists in society for said skills. As the Ricardian Law of Association shows, the ideal thing to do for an economic agent is to specialise in the field where his relative superiority is the highest (or at least where his relative inferiority is the lowest) to his competitors. But alas, the harsh truth is that talent takes neither the labour market nor economic theory into consideration and, even for people who exploit their potential to the best of their ability, the degree to which they will be able to prosper under Capitalism, as well as under any of the other economic systems which have been tried thus far, will be heavily influenced by things outside of their control. Because of that, merit becomes impossible to determine in an absolute sense.

Yet another logical flaw of Libertarianism is that it claims its main goal to be the pursuit of freedom, but I personally find such a claim to be a performative contradiction, since the advocacy for the idea that liberty should be the measure of all things makes the very point of advocating for anything non-existent. For example, in a hypothetical dispute between a radical Feminist woman and a Liberal man about whether catcalling should be illegal in public spaces, the two values being confronted with one another would be emotional safety and freedom of speech. Without becoming too normative on this issue, I think it is quite obvious to assume that most freedom advocates, while recognising both of them to be of great importance, would ultimately choose the latter to take priority over the former. And yet, a truly uncompromising Libertarian would claim this to be a false dichotomy and declare the absence of private property to be the real problem. After all, if the spaces in questions were privately owned by someone, said person/people would have the right to establish whatever rules they wanted and prioritise whatever values they chose to be the most important without owing anyone any explanation for their decisions, thus rendering this whole debate about “freedom versus safety” obsolete. Important questions about merit, like “Does one man deserve safety at the expense of another man’s freedom?” end up getting swiped under the rug.

There is also one notable category of Libertarians, namely the members of the Mises Institute, many of whom, apart from advocating for absolute self-ownership and private property rights, also consider market outcomes to be morally infallible. When you try to substitute economics for philosophy, it implicitly means you must automatically accept whatever outcome the market dictates as ethical. Therefore, in a so-called Private Law Society, non-Libertarian laws, assuming they were brought about by a market mechanism, would paradoxically be considered perfectly compatible with Libertarianism. Just ask yourself this simple question – Could a Libertarian truly put forward a statement such as “Taxations is theft!” in a society where most people are not, by principle, opposed to it (taxation, that is)? Could it be that the more extreme versions of Libertarianism, such as Voluntarism or Anarcho-Capitalism, are based on a circular logic, according to which the only victims in the absence of these systems are the Libertarians themselves, since everyone else either consents to the current one in place or advocates for something even worse (e.g.: Totalitarianism)? It seems that when Capitalism is applied on a Meta level – such as through creating a market for the laws themselves, rather than having the Law enable and protect the free market, not only does it become unclear what people truly deserve under that certain system, but it is also difficult to determine what system people truly deserve.

I hope to have made myself clear on the conclusions that (1) one of the central vectors of a proper economic system should be morality, with merit being one of its key components and (2) it is through Law that this system should be implemented and not the other way around. But now the question remains – how can Meritocracy be correctly implemented without abandoning the practical virtues of free market economics which made the societies that have practiced it so efficient and prosperous? In the final part of this article, I shall attempt to answer this question. 

Market-based competition, adjusted for common sense 

During the early days of Capitalism, there used to be a practice amongst entrepreneurs when they needed a quick way to hire an unskilled worker for factory labour, but had way too many contestants to choose from. They would create a reverse-auction of sorts, where those who wanted that job would bid against each other for the lowest wage. Whoever ended up willing to sell himself the lowest would win the auction and get hired. Naturally, this sort of practice is used by the Left (or by anyone who is not in favour of laissez-faire economics) as a perfect example to point at the supposedly obscene nature of Capitalism to justify State intervention through policies such as minimum wage laws, granting workers the right to go on strikes, business regulations which would prohibit these types of auctions and so on.

What few people, besides economists and free marketers, would be willing to admit is that, from a purely economic perspective, such a business practice made perfect sense for everybody involved. The businessman evaluates his resources (including the human resources) through a cost/benefit calculation. In the case of an unskilled labour job wanted by dozens of healthy males, it would be very difficult to judge who the best man for the job is based on productivity alone, since all the contestants should, in theory, be capable of doing said job. This leaves low costs as the only objective criteria for selection. And since in this context costs translate to paid wages, the least costly human resource is, therefore, the man willing to work for the lowest remuneration.

On top of that, a true Libertarian would also claim that any other method to decide who should get the job would end up being not only economically inefficient, but also morally flawed. For example, going for the Marxist solution of giving it to the man who needed it the most would prove problematic, since figuring out who that man is may be easier said than done. In the end, it would either incentivise people to lie about how much they need things, or deliberately make their life harder in the long run by engaging in irrational behaviours such as having too many children, taking on too much debt, applying for positions they are not qualified for and so on.

Alternatively, one could argue in favour of a minimum wage level being imposed by law. This would once again make the Libertarian exclaim with disapproval, since now you have no further way of knowing whom to pick from those who find that minimum wage acceptable (while in its absence, the auctioning practice would allow people to bid further, leaving only one definitive winner, whose competitive advantage has now been taken away by the very State which claimed to be on his side).

So, is there a solution to this issue? Can we find a moral way to stop these “morally abhorrent” (yet economically efficient) practices without making things worse both ethically and practically? Well, the reason why I chose to give this particular example is because I believe that it elegantly illustrates an aspect which is oftentimes overlooked by Libertarians in situations like this – the selection process they advocate for (the laissez-faire one) has nothing to do with merit or even with morality in general. All that the prior rhetoric has proven is that the attempts to improve things only made them worse, which leads to an already generally accepted conclusion – that, as an economic system, Capitalism is superior to Socialism (or, rather, the Market to the State). Still, there is no way to prove that the man who got employed is the one who deserved it the most. In competitions based purely on skill, effort, and perseverance, that may be the case, but not in contests where you are trying to identify the most frugal individual.

To argue against this logic would lead to absurd conclusions, such as, for instance, that a man who is willing to work for free (or maybe even worse, who is willing to pay his employer rather than the other way around) deserves, caeteris paribus, to be employed more than those who need a wage in order to make a living. Here, cases like voluntary work for the sake of gaining experience easily come to mind. Imposing some logistically understandable costs on your associates does not objectively make you deserve that association any less than those who do not, or at least not in extraordinary circumstances such as the one in the example above. My point is – merit, by its nature, cannot increase or decrease based on convenience, as perceived by those around you, because merit is not tied to things outside of your control.

And to answer the question from two paragraphs back – I believe that the measure which is currently in place, that of having a minimum wage law, could be a proper first step in the right direction, since while it may not solve the issue of ensuring that the right people get the right jobs, at least it guarantees that the “wrong” people (in this case meaning those with an absurd and/or non-meritocratic competitive edge such as willing to work for scraps) won’t automatically take their place. After all, there was a good reason (allegedly, of course) why the American Senate (1960) under former president John Fitzgerald Kennedy passed a bill which would gradually increase the minimum wage over the course of the next three years by a quarter (from $1/hour in 1961 to $1.25/hour by 1963) – to “protect” the more developed states in the North against the cheap labour coming from the South. Assuming that that was actually his true motive and given the reasons stated above, I personally consider JFK’s decision to have a decent enough potential to be interpreted as a fair, meritocratic one, in its own way.

Obviously, it remains an economic imperative to have competition when it leads to an outcome which is both pragmatically and morally understandable. However, once we go past the limits of the basic standard for common sense (limits which tend to overlap for most people), it becomes very difficult to determine merit with full precision. As a matter of fact, when philosophical argumentation on a topic gets so fuzzy, it is perfectly normal that people should reject it, since it became too abstract to matter in the real world. I believe that this “Keep it reasonable!” mentality would help people answer a merit-related question which might sometimes give them a hard time – “Do I deserve the predicament I am in, is it the fault of the system or is this simply the way things are sometimes?” 

Recommendations and predictions 

Combining economics with moral philosophy in a way that pleases everyone is certainly an impossible task, but I hope that, by giving my two pennies on the subject at hand, I have at least managed to somewhat successfully defend an idea which I find crucial (and, thus far, devoid of enough attention) – that a proper economic system can and should provide plenty of room for merit. By pointing out some of the flaws found in the systems that have been tried out thus far and, also, by trying to recommend an economic and cultural adjustment to the way we perceive one of the main features of a market economy – competition, I hope to have brought a clear, even if marginal, contribution to the aggregate knowledge related to what an ideal system could and should look like.

While it is difficult to predict what changes, in terms of economic thinking and/or policies, a merit-based approach could further bring (to an abstract, laissez-faire model), I would briefly like to touch on three more potential ones which I considered:

First, a feature which already exists in today’s world, and which is rejected by the more uncompromising Libertarians, but which I find fully Meritocratic, is that of Intellectual Property (IP) Rights. While ideas themselves are not real finite material resources, but rather preconditions of human action (Wisniewski, 2020), they practically take on the object role of economic resources when put to use by the men who seek to make intellectual creations. Because of that reason, it becomes clear as to why the legal protection of the appropriation of ideas should be a right under a Meritocratic system. As a matter of fact, IP rights could even be seen as having a transcendental function and, instead of being considered mere property rights, they could be philosophically labelled as Meta-rights (and intellectual property as a form of Meta-property). After all, just like regular property rights protect the physical individual (legally – the natural person) by acknowledging his entitlement to his material belongings, intellectual property rights protect the human mind (economically – the most crucial means of production) by acknowledging its entitlement to “that which it has brought into existence” (Rand, 1966).

Two aspects must be mentioned here. One, IP rights can only be applied to creations, not discoveries. Since the latter refers to an objective fact of reality, no matter how abstract (e.g. theoretical scientific/philosophical knowledge), then, should it become public, people cannot be demanded to pretend they don’t know it simply because they did not pay tribute (financial or otherwise) to its discoverer. Two, the creation which ends up being protected by the IP rights must consist in a permutation of ideas which is unique and complex enough so that its unauthorised reproduction could not be considered purely accidental. For instance, if an individual plagiarises another’s book, he is certainly at fault, since stealing such a complex intellectual product is not something which could possibly happen by mistake.

Second, the legal concept of wealth redistribution could be reworked from scratch in order to have merit and not much else at its centre. In Milton Friedman’s paper from 1955, titled “The Government’s Role in Education”, he argued that State support for education (in the form of wealth redistribution from taxpayers in general towards the educational institutions) could be justified on the basis of a so-called neighbourhood effect. Basically, what he meant was that educated people bring positive externalities towards society as a whole, but the members of society who passively enjoy those benefits (the free riders) do not pay for them. As a consequence, the government should step in and make them do it, by taxing them in order to subsidise education. If I were to speculate, I would say that his logic was based on the moral principle, shared by many of Capitalism’s advocates at the time, that trade is the proper means of interaction between men. Therefore, when a man makes a donation to another one in a somewhat involuntary fashion (here, “involuntary” is not synonymous with coercive, I am using it rather to emphasise the residual character of externalities), an intervention should take place in order to give this dynamic a more mutually beneficial touch. It is true that, by 2003, Friedman had abandoned his views regarding this issue, mostly because of the excessively politically correct turn taken by higher education. Still, he maintained his opinion about the validity of his logic regarding wealth redistribution and neighbourhood effects.

Of course, the case of education was just an example. Once you accept the argument, it could be considered valid for a wealth redistribution mechanism to be present in most situations where public goods create large societal benefits through positive externalities. Naturally, I am only advocating for this idea to be applied within the limits of common sense. It would be absurd to claim that seeing an attractive lady while walking down the street automatically gives you the obligation to pay her for the marginal aesthetic benefit she brought to your day, as Murray Rothbard (1970) would say in an attempt to argue against Friedman’s position. But the point is clear – One of the virtues which should exist in a Meritocratic system is that each individual should have, within reason, the ability to appropriate the benefits of his good decisions. Under Capitalism, this virtue does exist to a large extent, although externalities tend to remain a significant exception.

Last but not least, the level reached by the economies of scale of our time could potentially lead to a partial rethinking of the famous Neo-Lockean Homesteading Principle. That is because, according to it, initial appropriation takes place under the condition of combining one’s labour with an unclaimed resource. In a world like the one before the Industrial Revolution, where craftsmen and peasants had to do a higher, more concentrated amount of work for each individual unit (although with obvious exceptions), the pattern of appropriation may have been hard to argue against. However, technological advances brought about by human progress made it so that this correlation between human inputs and final outputs becomes visibly weakened. Also, future automation may weaken it even further.

As labour gets more and more automated, appropriation also becomes, all other things being equal, more difficult to justify. In fact, part of the reason why Marxism insists so much on the proletariat’s appropriation of the means of production is precisely because a logical framework based on being able to claim something by combining it with your labour gives plenty of ammunition to such an ideology. Arguments like the legal ownership belonging to the employer or the employees’ formerly (and formally) given consent to work under their bosses seem fragile in comparison to the fundamental and central condition of material appropriation – that you should first put your work into it.

Of course, that is not to say Socialists are correct in their advocacy for their preferred system. It is the entrepreneur, after all, who risks his capital and that alone is enough to grant him the ultimate right to property. I am merely claiming that, under a Meritocratic system, the Homesteading Principle should be adapted to the current economic landscape and factor in the difference in the potential for appropriation made by the economies of scale and automation, as well as by the residually and collaterally produced surplus value under them. 

Closing remarks 

Successfully implementing Meritocratic elements in any pure economic system, be it either in a laissez-faire or in a Socialist one, will require some serious compromises and alterations which would certainly make most of that system’s initial advocates raise their eyebrows with scepticism. On top of that, it seems like the application of some of Capitalism’s virtues from an intra-systemic level to a Meta one may sometimes lead to desirable outcomes from a Meritocratic standpoint (such as in the case of IP rights), but other times not so much (like in the case of having a market for laws), which complicates things even further. Finding an immutable principle of Economics which could tell us when Meritocratic interventionism becomes justified and when it ends up doing more harm than good is certainly a tough challenge and, unfortunately, one which does not seem to take priority for many.

That being said, I hope that, through this article, I managed to at least begin the outlining of a pattern which could shift the framework of both Economics and the moral philosophy surrounding it into a more Meritocratic direction, if only marginally. Some Meritocratic elements, such as IP rights, have fortunately already been implemented and considered the norm for a long time, while others still require a more detailed theoretical postulation before reaching the surface of legality. The ideological threat of Postmodern Deconstructionism is being kept at bay for now, so there is still hope that new ideas on this subject will continue to be generated without the employment of pseudo-logical shenanigans.

In conclusion, the future of Meritocracy in our economic system appears quite blurred at the moment, since both good and bad signs can be found with regards to it. I see the implementation of more merit-based policies as potentially feasible and also necessary. True Meritocracy may be hard to achieve, but remaining in a never-ending clash between different economic ideologies with incomplete answers does not look like much of an alternative either. 

References 

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Leef, G. C., 2013 – Neighbourhood Effects or Culture Rot? Foundation for Economic Education [online]. Available at: https://fee.org/articles/neighborhood-effects-or-culture-rot/ [Accessed on June 10, 2023].

Liberty in Our Time, 2013 – On Milton Friedman | Murray N. Rothbard. [online video] Available at: https://www.youtube.com/watch?v=Q0bFP5WhYcQ [Accessed on June 9, 2023].

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