10 ms·

In a free-market system, merit is defined by your peers. If you can add unique subjective value to them, they will give you money in return for that unique subj

In a free-market system, merit is defined by your peers. If you can add unique subjective value to them, they will give you money in return for that unique subjective value add. That's by and large a great thing, because it means that the people getting the richest are largely the same people who are providing the most value to others, and so it aligns incentives with useful production and useful work in a decentralized way. We can zoom into examples to understand better. Why is George Clooney so rich? Because he added a little bit of value (say, $3 worth) to the lives of millions via his acting skills, and he got a slice of all that value add. This is not to say it's perfect, and I could go on about why it's not, but the central point is that "merit" (i.e. income/profits) is defined by one's peers opinions about your unique value add to them.

Klinky 5y ago
More money might also mean you're just really good at colluding, anti-competing, price fixing/gouging, arbitraging, exploiting, socializing expenses and negative outcomes, or monopolizing. It's extremely flawed and naive to think a positive balance sheet means a positive outcome for society occurred in the process of obtaining it.
- fighterpilot 5y ago
  That's why I said I could go on about why it's not perfect. I admit there's downsides, but I still view it as a great thing on net, due to the general tendency to align incentives with value provision.
  - Klinky 5y ago
    It's not just "not perfect", it's extremely flawed. You didn't "go on" at all about its flaws or failures at measuring merit, and only provided a toy example of a superfluous mega-rich celebrity deserving his wealth while ignoring Hollywood's underhanded exploitation and accounting issues.
    - TameAntelope 5y ago
      Because something is "not perfect" or "extremely flawed" doesn't mean there is a better thing out there. Something can be "extremely flawed" and also be the best option available, such as in this case.
      - sudosysgen 5y ago
        You have to make a case for it that isn't circular first. The idea that there should not be any democratic input on the economy seems quite unsupported so far.
      - laserlight 5y ago
        How do you know there’s no better alternative out there? I don’t see anyone trying to find one.
  - colordrops 5y ago
    The system is heavily corrupt. The premise that it is mostly working with some flaws itself is heavily flawed.
nemothekid 5y ago
The George Clooney example doesn't seem apt. 1. George Clooney didn't get rich from acting. He got rich from selling Tequila. Regardless, his children will likely remain wealthy despite never having been on a movie screen, much like the Waltons are among the top 20 richest people despite never having a job at Walmart. 2. Every year, fewer and fewer people get rich from having built something (labor), and more are just rich from being already rich (capital). If in a free-market system, if you let the people with most wealth concentrate power, after n-years you are just left with a monarchy with a couple extra steps.
- jimmydorry 5y ago
  Counter point: It's a self correcting problem (on a long enough time horizon). If his children can't manage their money by providing value to society (albeit not in the way that most can appreciate), they will quickly draw down that fortune and be unable to pass it on to their own children. Investing that money, or otherwise allocating that money to companies who can better use it provides value to society at large, and in return, the person investing will receive a return on investment to live off.
  - nemothekid 5y ago
    >Counter point: It's a self correcting problem (on a long enough time horizon). To point to someone who has done the research, 'Capital in the Twenty-First Century', states that its not a self-correcting problem. Furthermore, I'd argue that index investing make it incredibly difficult for his heirs to lose their money. Anything short of a collapse American global hegemonic power means their wealth will be relatively safe. Furthermore, investing is not means of wealth redistribution. I can invest billions in Wal-Mart, but that will not motivate them to pay their cashiers a cent more. The compounding effect of the wealthy owning most of the industry through the stock market means their share of the ownership grows, leading to headlines like we see.
- chrismcb 5y ago
  Clooney got rich from acting, and got richer from selling his tequila business. And is #2 really true?
mahogany 5y ago
It sounds to me like you're saying that all societal or economic value is directly linked to money. As an example, do you think stay-at-home parents add no value to society (or if you want, let's say "the economy") because they are not paid directly for their services? Are charity workers or volunteers "merit-less"?
- ModernMech 5y ago
  You don’t have to go back to the 40s for an example. Plenty of unpaid work that benefits society is done today by Americans, including raising children, caring for the elderly, volunteering at a soup kitchen, and even getting an education. Honestly it always surprises me to hear this on HN, the idea that work isn’t being done unless it’s generating dollar value for someone. What is open source coding then? Not work because it’s not done under the purview of an employer for a salary? Not valuable because no one gave you a dollar for it?
  - mahogany 5y ago
    That's a great point. I've edited to re-word that reference, because obviously these roles still flourish today.
- imtringued 5y ago
  That's obviously a foolish interpretation of money. The economy is a system that lets people trade their time for other people's time. Without an economy you would have to do everything yourself. However, an ideal economy doesn't give more back than you put in. Therefore what the economy offers is the ability to specialize. You get to decide how much work you want to do yourself and how much work you let others do. From this perspective, the accumulation of money is merely the interruption of this specialization process. The idea of ascribing value to an interruption of a system that is otherwise trying to be balanced gives the impression that somebody is too lazy to figure out what they really want out of their life and they simply enjoy having the option even if it means that the other side is waiting for you to act. It gets especially perverse during recessions where everyone is trying to acquire money for the sake of safety and security when all it really means is that you order people to stop working for the very reason that motivated you to save money, the fear of unemployment.
rapind 5y ago
I agree in principal, but there are a couple big problems with this argument. 1) This only works if everyone starts at the same line. Obviously not the case while there's a huge variance in inheritance, education, influence, opportunity. If a 100m race has some people starting on the 50m line while others are on the 0m line, it's not a race based solely on merit. Some of the starters on the 50m will still lose to the 0m starters, but statistically they have a much better chance. 2) We don't live in a free market society. "Free market" is just an ideal (like communism or utopia is an ideal) that doesn't truly exist outside of a vacuum. Most societies (the US included) are a combination of free market, socialism, capitalism, cronyism, etc. I'm not arguing for a different system than capitalism here, but if you're going to argue for our existing system, then you shouldn't conflate it with free market or meritocracy which simply doesn't exist outside of a lab. Saying free market is a great system, is practically the same as saying unicorns are cool. For sure they are, but how is that relevant?
mrow84 5y ago
How could you falsify this claim? How could you identify, in the context of your definition of merit, whether the richest are really the most meritorious? It seems entirely circular to me.
imtringued 5y ago
https://www.taxresearch.org.uk/Blog/2021/10/17/why-we-need-action-to-tackle-wealth-inequality-2/ https://www.taxresearch.org.uk/Blog/2021/10/17/why-we-need-a... >However, I include Worstall’s argument for a reason. It is true that some are more productive than others in an economy and it is true that this has always meant, and is likely now to mean, that those who are more productive do earn higher rewards than those who are less productive. In principle I have little argument with this idea: I have no difficulty with there being some differential in earnings within any society and think them inevitable subject to their being a safety net to ensure that all can have access to the resources they need to fully engage in the society in which they live (which means much more than having a basic material standard of living). Importantly though, what Worstall’s suggestion implies is that there are very obvious limits to wealth differentials, because the fact is that however clever someone might be the differences in productivity we humans have to offer is not that big. I repeat, the differences in productivity we humans have to offer are not that big.

Klinky 5y ago

More money might also mean you're just really good at colluding, anti-competing, price fixing/gouging, arbitraging, exploiting, socializing expenses and negative outcomes, or monopolizing. It's extremely flawed and naive to think a positive balance sheet means a positive outcome for society occurred in the process of obtaining it.

fighterpilot 5y ago
That's why I said I could go on about why it's not perfect. I admit there's downsides, but I still view it as a great thing on net, due to the general tendency to align incentives with value provision.
- Klinky 5y ago
  It's not just "not perfect", it's extremely flawed. You didn't "go on" at all about its flaws or failures at measuring merit, and only provided a toy example of a superfluous mega-rich celebrity deserving his wealth while ignoring Hollywood's underhanded exploitation and accounting issues.
  - TameAntelope 5y ago
    Because something is "not perfect" or "extremely flawed" doesn't mean there is a better thing out there. Something can be "extremely flawed" and also be the best option available, such as in this case.
    - sudosysgen 5y ago
      You have to make a case for it that isn't circular first. The idea that there should not be any democratic input on the economy seems quite unsupported so far.
    - laserlight 5y ago
      How do you know there’s no better alternative out there? I don’t see anyone trying to find one.
- colordrops 5y ago
  The system is heavily corrupt. The premise that it is mostly working with some flaws itself is heavily flawed.

nemothekid 5y ago

The George Clooney example doesn't seem apt. 1. George Clooney didn't get rich from acting. He got rich from selling Tequila. Regardless, his children will likely remain wealthy despite never having been on a movie screen, much like the Waltons are among the top 20 richest people despite never having a job at Walmart. 2. Every year, fewer and fewer people get rich from having built something (labor), and more are just rich from being already rich (capital). If in a free-market system, if you let the people with most wealth concentrate power, after n-years you are just left with a monarchy with a couple extra steps.

jimmydorry 5y ago
Counter point: It's a self correcting problem (on a long enough time horizon). If his children can't manage their money by providing value to society (albeit not in the way that most can appreciate), they will quickly draw down that fortune and be unable to pass it on to their own children. Investing that money, or otherwise allocating that money to companies who can better use it provides value to society at large, and in return, the person investing will receive a return on investment to live off.
- nemothekid 5y ago
  >Counter point: It's a self correcting problem (on a long enough time horizon). To point to someone who has done the research, 'Capital in the Twenty-First Century', states that its not a self-correcting problem. Furthermore, I'd argue that index investing make it incredibly difficult for his heirs to lose their money. Anything short of a collapse American global hegemonic power means their wealth will be relatively safe. Furthermore, investing is not means of wealth redistribution. I can invest billions in Wal-Mart, but that will not motivate them to pay their cashiers a cent more. The compounding effect of the wealthy owning most of the industry through the stock market means their share of the ownership grows, leading to headlines like we see.
chrismcb 5y ago
Clooney got rich from acting, and got richer from selling his tequila business. And is #2 really true?

mahogany 5y ago

It sounds to me like you're saying that all societal or economic value is directly linked to money. As an example, do you think stay-at-home parents add no value to society (or if you want, let's say "the economy") because they are not paid directly for their services? Are charity workers or volunteers "merit-less"?

ModernMech 5y ago
You don’t have to go back to the 40s for an example. Plenty of unpaid work that benefits society is done today by Americans, including raising children, caring for the elderly, volunteering at a soup kitchen, and even getting an education. Honestly it always surprises me to hear this on HN, the idea that work isn’t being done unless it’s generating dollar value for someone. What is open source coding then? Not work because it’s not done under the purview of an employer for a salary? Not valuable because no one gave you a dollar for it?
- mahogany 5y ago
  That's a great point. I've edited to re-word that reference, because obviously these roles still flourish today.
imtringued 5y ago
That's obviously a foolish interpretation of money. The economy is a system that lets people trade their time for other people's time. Without an economy you would have to do everything yourself. However, an ideal economy doesn't give more back than you put in. Therefore what the economy offers is the ability to specialize. You get to decide how much work you want to do yourself and how much work you let others do. From this perspective, the accumulation of money is merely the interruption of this specialization process. The idea of ascribing value to an interruption of a system that is otherwise trying to be balanced gives the impression that somebody is too lazy to figure out what they really want out of their life and they simply enjoy having the option even if it means that the other side is waiting for you to act. It gets especially perverse during recessions where everyone is trying to acquire money for the sake of safety and security when all it really means is that you order people to stop working for the very reason that motivated you to save money, the fear of unemployment.

rapind 5y ago

I agree in principal, but there are a couple big problems with this argument. 1) This only works if everyone starts at the same line. Obviously not the case while there's a huge variance in inheritance, education, influence, opportunity. If a 100m race has some people starting on the 50m line while others are on the 0m line, it's not a race based solely on merit. Some of the starters on the 50m will still lose to the 0m starters, but statistically they have a much better chance. 2) We don't live in a free market society. "Free market" is just an ideal (like communism or utopia is an ideal) that doesn't truly exist outside of a vacuum. Most societies (the US included) are a combination of free market, socialism, capitalism, cronyism, etc. I'm not arguing for a different system than capitalism here, but if you're going to argue for our existing system, then you shouldn't conflate it with free market or meritocracy which simply doesn't exist outside of a lab. Saying free market is a great system, is practically the same as saying unicorns are cool. For sure they are, but how is that relevant?

mrow84 5y ago

How could you falsify this claim? How could you identify, in the context of your definition of merit, whether the richest are really the most meritorious? It seems entirely circular to me.

imtringued 5y ago

https://www.taxresearch.org.uk/Blog/2021/10/17/why-we-need-action-to-tackle-wealth-inequality-2/ https://www.taxresearch.org.uk/Blog/2021/10/17/why-we-need-a... >However, I include Worstall’s argument for a reason. It is true that some are more productive than others in an economy and it is true that this has always meant, and is likely now to mean, that those who are more productive do earn higher rewards than those who are less productive. In principle I have little argument with this idea: I have no difficulty with there being some differential in earnings within any society and think them inevitable subject to their being a safety net to ensure that all can have access to the resources they need to fully engage in the society in which they live (which means much more than having a basic material standard of living). Importantly though, what Worstall’s suggestion implies is that there are very obvious limits to wealth differentials, because the fact is that however clever someone might be the differences in productivity we humans have to offer is not that big. I repeat, the differences in productivity we humans have to offer are not that big.