The Illusion of Merit and the Demons of Economic Meritocracy: Which are the Legitimate Expectations of the Market?

The Pelagius/Augustine debate, in fact, has had a great impact on the history of Western thought. The logic of merit has always been widespread because it was often linked to the concepts of virtue and reward. The Greek and Roman philosophers made significant use of the concept of merit and its cognates, as did non-Western religions such as Buddhism, Confucianism, and Judaism (it would be enough to consider the book of Job, centered on a critique of the “illusion” of merit). We chose Pelagius and Augustine because they are strictly connected to the economic developments of meritocratic discourse. A key period in the interconnectedness of theology and the economy is the Protestant Reformation and Catholic Controriforma in the sixteenth and seventeenth centuries. A millennium later, the revival of meritocracy was also a revival of Augustine’s polemic against Pelagius (Luther was an Augustinian monk), and the original spirit of capitalism was in reality generated by a radical critique of the theology of merit that Luther expressed. Paradoxically, even though it was initially rejected, this aspect has become the cornerstone of a new meritocratic, capitalistic logic that exists at the heart of the very countries built on the ancient anti-meritocratic protestant ethics. The idea of Augustinian salvation for sola gratia rather than based on merit was at the center of the Protestant Reformation; however, this notion eventually produced market societies that realized the exact opposite approach.

This is not to say that the young Rawls conceived of himself as an Augustinian author. He believed that Augustine, together with Aquinas, was responsible for the naturalization of Christian ethics, with which he strongly contrasted (See Weithman 2016).

In the market, the credit acquired through individual performance does not always correspond to the return the individual gets from a mutually beneficial transaction. Merit is also a backward-looking concept: what people deserve can depend on how they behaved in the past. But mutual benefit is defined in terms of people’s circumstances and beliefs at the time at which they trade. Whereas the logic of merit lies in the temporal dimensions of past and future, legitimate expectations of economic actors could be predicated only through the present tense or the conditional tense. This is because economic circumstances can change unpredictably, and thus efforts that were made with reasonable expectations of return may turn out not to be rewarded by the market. This proves once more that other logics rule market transactions together with the meritocratic one and that the object of merit is defined more by mutual benefit than by individual efforts. Given these premises, meritocracy should find very little space in the market.

Economics is all built on the idea of perfection—perfect competition, perfect rationality, perfect information. Every deviation from perfection has been classified as a failure of the market. Perfectionism seems well-suited for the meritocratic logic that, as we showed through Pelagius, was born as a discourse for the élite. Aristocracy, virtue, and rewards are all concepts intimately related to merit. Hence, could we assume that in circumstances of perfect concurrence the market is ruled by the logic of merit? Is it correct to argue that perfectly rational economic actors, endowed with perfect information, will get returns corresponding to the net-worth of their individual actions? The axioms of micro-economics prove how erroneous such inferences can be. Thus, when we affirm that meritocracy is not a market virtue, we mean that even in its perfect form the market is ruled by elements other than individual merits. Since we know that markets are not perfect and that neither are the individuals who every day produce and exchange goods and services, we should avoid looking for merits in a non-meritocratic domain.

From the microeconomic side, it emerges clearly that meritocracy—when merit becomes the only parameter to describe markets—is not only against equality, but it can lead also to inefficiency. A person who expects a return major than the benefits she provides to the trading party, that is, a person who refuses the notion that the trading party freely judges the value of the services they perform or the goods they need, creates barriers to the achievement of mutual benefit. The opportunity of mutual advantage, the incentive mechanism that the market spontaneously produces (Sugden 2018) to lead people where they can benefit and be benefitted most by each other, risks being distorted by individuals’ beliefs in the deserving nature of their actions.