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Saturday, October 07, 2006


The Economist has a survey on talent, "the world's most sought-after commodity":

This survey will argue that the talent war has to be taken seriously. It will try to avoid defining talent either too broadly or too narrowly but simply take it to mean brainpower... It will thus focus on what Peter Drucker, the late and great management guru, called “knowledge workers”. ... The survey will conclude by looking at the widening inequalities that will result from the competition for talent, and weighing up the risks of a backlash against the talent elite.

Here's one of the articles about the potential backlash:

Meritocracy and its discontents, The Economist: In “The Rise of the Meritocracy”, published in 1958, Michael Young ... conjured up an image of a society obsessed with talent. The date was 2034, and psychologists had perfected the art of IQ testing. But far from promoting social harmony, the preoccupation with talent had produced social breakdown. The losers in the talent wars were doubly unhappy, conscious not only that they were failures but that they deserved to be failures. Eventually they revolted against their masters.

The rise of the talent elite has bred resistance, which started on the right. ... But after the second world war the resistance spread leftward. Leftists argued that meritocracies were ... unjust. If “talent” owed more to nature than nurture, as many social scientists insisted, then rewarding people for talent was tantamount to rewarding them for having privileged parents.

This resistance has occasionally boiled over into outright rebellion. Young's book was an opening shot in a successful war against the 11-plus, a British school examination that divided children between a gifted elite destined for academic grammar schools and those consigned to run-of-the-mill secondary modern schools. The 1960s saw widespread student revolts against selection and elitism.

There are plenty of signs that another backlash is on the way... Much of this resentment focuses on growing inequalities. People complain that these are straining the bonds of society to breaking point: a new aristocracy of talent is retreating into golden ghettos and running the global economy in their own interests. ...

In some ways things are worse than they were when Young wrote his book. Inequalities are much wider ... and the talent elite has gone global. ... Samuel Huntington, a political scientist, argues that “ a major gap is growing in America between its increasingly denationalised elites and its ‘thank God for America' public.” On American television personalities such as Lou Dobbs and Bill O'Reilly beat the populist drum against those cosmopolitan elites. ... Across much of the developing world the targets of choice for rioters are rich ethnic minorities and foreigners.

But in other ways things have got much better. The number of winners now is much larger than it was in 1958. In Young's day, the meritocrats concentrated on spotting recruits for Oxbridge and the senior civil service. The rest were labelled failures. Since then, America and Europe have created a mass higher education system, and developing countries are determined to follow suit. ...

Moreover, some problems could prove self-correcting. ... The growing returns to education create incentives for people to get themselves educated, producing a better-trained workforce as well as upward mobility. ...

Above all, there is something appealing about the meritocratic ideal: most people are willing to accept wide inequalities if they are coupled with equality of opportunity. In America, where two-thirds of the population believe that everyone has an equal chance to get ahead, far fewer people favour income redistribution than in Europe.

Growing wealth also means that society can reward a wider range of talents. ... These days, sports stars and entertainers can make millions. There are also ample rewards for all sorts of specialised talents... Takeru “Tsunami” Kobayashi earns more than $200,000 a year as the world's hot-dog eating champion: he can eat more than 50 in 12 minutes.

The backlash is not inevitable, then. But it is sensible to take steps to prevent it. One popular answer is affirmative action, an idea that is making headway even in that last redoubt of old-fashioned meritocracy, the French establishment. However, experience in America—which introduced the practice in the 1970s—suggests that it raises a host of problems. ... The biggest problem with affirmative action ... is that it comes too late. The best way to boost the life-chances of poor people is to intervene much earlier in life—to set them on the right path in kindergarten and primary school and reinforce those lessons in secondary school.

Progressive taxation can help. For much of the post-war period most rich countries taxed talent too heavily, causing bright flight. But today, in America at least, the danger is the opposite...

The best way to head off a backlash is to give everybody a fair chance. This means investing in childhood nutrition and pre-school education. It also means repairing the lowest rungs of the educational ladder. Developing countries need to continue the march towards universal primary education: failure to do so will exacerbate skill shortages as well as widen inequalities...

The rise of a global meritocracy offers all sorts of benefits, from higher growth in productivity to faster scientific progress. It can boost social mobility and allow all sorts of weird and wonderful talents to bloom. The talent wars may be a source of trepidation for companies and countries. But they should also be a cause for celebration.

"In America, ... two-thirds of the population believe that everyone has an equal chance to get ahead."

Many of the arguments for redistribution to overcome growing inequality are based upon the idea that inequality arises, at least in part, from government policy giving unfair advantages to some groups (e.g. favoring firms over unions) or other factors (e.g. corporate governance and CEO pay, differences in educational opportunities). The counterargument has been that the income is not from government policy or other such factors, it is earned through hard work - it is a skill-based premium that is a reward for higher productivity - and hence it would be unfair to take it away. Above, one of the arguments is that the skill-based premium itself, or perhaps talent-based premium is a better word, is undeserved when it arises from genetic advantage rather than superior effort (nature not nurture) and hence these individuals do not deserve the high compensation they receive (If I were seven feet tall, I could play in the NBA too...). Should such "luck" be taxed away?

    Posted by on Saturday, October 7, 2006 at 12:51 PM in Economics, Income Distribution | Permalink  TrackBack (0)  Comments (46)


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