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Chapter 17 

Meritocracy / Innovation 

Does Excellence Get Its Due?
Is Progress an Important Product? 

Surely there never was such a fragile china-ware as that of which the millers of Coketown were made. Handle them ever so lightly, and they fell to pieces with such ease that you might suspect them of having been flawed before. They were ruined, when they were required to send labouring children to school; they were ruined, when inspectors were appointed to look into their works; they were ruined when such inspectors considered it doubtful whether they were quite justified in chopping people up with their machinery; they were utterly undone, when it was hinted that perhaps they need not always make quite so much smoke. Whenever a Coketowner felt he was ill-used – that is to say, whenever he was not left entirely alone, and it was proposed to hold him accountable for the consequences of any of his acts – he was sure to come out with the awful menace, that he would `sooner pitch his property into the Atlantic’. This had terrified the Home Secretary within an inch of his life, on several occasions.
— Charles Dickens


According to the dictionary, a meritocracy is “a system in which advancement is based on individual ability or achievement.” The virtue is that excellence gets its due. Is parecon meritocratic? Similarly, progress depends on incorporating new means of meeting needs and expanding potentials while also expanding gains bearing on less economic values. Does parecon enhance or somehow subvert the possibilities of progress? 



Of course, any system that rewards having a deed to property in one’s pocket but doing nothing or that rewards having lots of bargaining power but doing nothing is not a meritocracy. But what about genetic endowment, doesn’t that come under the rubric of individual ability? And what about contribution to output? Isn’t one person’s contribution (even if enhanced by better tools or the luck of producing something in greater rather than lesser need) part of individual achievement and merit? In our view, rewarding merit ought to mean rewarding us for what we’ve earned; but, as we’ve argued previously, good genes are no more earned than noble birth. Nevertheless, we must admit that in everyday language genes and contribution to output are considered part of merit. So if rewarding these can only mean remunerating them materially or with access to enhanced formal influence over decisions, then in that sense parecon is not a meritocracy. On the other hand if it were satisfactory to appreciate these contributions and to convey respect and thanks for them, but not to convey power or wealth for them, parecon would still qualify as a meritocracy. Since we are rebutting a criticism, we will assume the generally accepted definition of meritocracy, making the criticism correct. Is it damning? 

To feel this is a serious problem for parecon, you either have to feel that individual contribution to output should be rewarded in principle and on moral grounds—which we don’t, as we have argued—or that in not rewarding it, some other outcome will have a negative effect on your system so that excellence will not be sufficiently promoted by the economy and we will suffer its loss. 

Parecon is designed to maximize the motivating potential of non-material incentives. There is every reason to hope jobs designed by workers will be more enjoyable than ones designed by capitalists or coordinators. There is every reason to believe people will be more willing to carry out tasks that they themselves proposed and agreed to than assignments handed them by superiors. There is also every reason to believe people will be more willing to perform unpleasant duties conscientiously when they know the distribution of those duties as well as the rewards for people’s efforts are equitable. 

But all this is not to say that there are no material incentives in a parecon. One’s peers—who have every interest in seeing that those they work with fulfill their potentials—will rate one’s efforts. No one can manifest genetic endowment or utilize advantageous tools or training without exerting effort, and the incentive to exert effort is therefore also a material incentive to manifest these, even if not as large an incentive to do so as remunerating for output would be. 

It is true we do not recommend paying those with more training higher wages since we believe it would be inequitable to do so. But that does not mean people would not seek to enhance their productivity by becoming more knowledgeable. First of all, education and training would be public expenses, not private. So there are no material disincentives to pursuing education and training. Secondly, since a parecon is not an “acquisitive” society, respect, esteem, and social recognition would be based largely on “social serviceability” which is enhanced precisely by developing one’s most socially useful potentials through education and training. In a parecon you do not rise in the eyes of your neighbors or peers due to owning more, but for your personal qualities and achievements. And then there is of course the simple personal inclination to do what one can do well in order to express one’s greatest capacities, and enjoy the satisfactions that come from doing so. In other words, merit gets its due, appropriately. 



The same logic as evidenced above applies to innovation, which explains why we lump meritocracy and innovation in a single chapter. A parecon does not reward those who succeed in discovering productive innovations with vastly greater consumption rights than others who make equivalent personal sacrifices in work but discover nothing. Instead a parecon emphasizes direct social recognition of outstanding achievements for a variety of reasons. First, successful innovation is often the outcome of cumulative human creativity so that a single individual is rarely entirely responsible. Furthermore, an individual’s contribution is often the product of genius and luck as much as diligence, persistence, and personal sacrifice, all of which implies that recognizing innovation through social esteem rather than material reward is ethically superior. Second, underneath the protestations, there is really no reason to believe that with changed institutional relations social incentives will prove less powerful than material ones. It should be recognized that no economy ever has paid or ever could pay its greatest innovators the full social value of their innovations, which means that if material com- pensation is the only reward, innovation will be under-stimulated in any case. Moreover, too often material reward is merely an imperfect substitute for what is truly desired: social esteem. How else can one explain why those who already have more wealth than they can ever use continue to accumulate more? 

Nor do we see why critics believe there would be insufficient incentives for enterprises to seek and implement innovations, unless they measure a parecon against a mythical and misleading image of capitalism. Typically, in economic analyses of markets it is presumed that innovative capitalist enterprises capture the full benefits of their successes, while it is also assumed that innovations spread instantaneously to all enterprises in an industry. When made explicit, however, it is obvious that these assumptions are contradictory since in capitalism for a company to reap the full financial benefits of an innovation it must keep all rights to it, even secretly, yet for other companies to benefit they must have full access. Yet only if both assumptions hold can one conclude that capitalism provides maximum material stimulus to innovation and also achieves maximum technological efficiency throughout the economy. In reality, innovative capitalist enterprises temporarily capture “super profits” also called “technological rents” which are competed away more or less rapidly depending on a host of circumstances. This means that in reality there is a trade-off in market economies between stimulus to innovate and the efficient use of innovation, or a trade-off between dynamic and static efficiency. It can’t be that firms monopolize their innovations, on the one hand, and that all innovations are utilized as widely in the economy as is beneficial for output and operations, on the other hand. But the former needs to occur for maximum incentive and the latter for maximum efficiency, in a market system. 

In a parecon, however, workers also have a “material incentive,” if you will, to implement innovations that improve the quality of their work life. This means they have an incentive to implement changes that increase the social benefits of the outputs they produce or that reduce the social costs of the inputs they consume, since anything that increases an enterprise’s social-benefit-to-social-cost ratio will allow the workers to win approval for their proposal with less effort, or sacrifice, on their part. But adjustments will render any local advantage they achieve temporary. As the innovation spreads to other enterprises, indicative prices change, and work complexes are re-balanced across enterprises and industries, the full social benefits of their innovation will spread equitably to all workers and consumers. 

The faster these adjustments are made, the more efficient and equitable the outcome. On the other hand, the more rapidly the adjustments are made, the less the “material incentive” (other than that afforded to the effort/sacrifice involved) to innovate locally, and the greater the incentive to coast along on others’ innovations. While this is no different than under capitalism or any market arrangement, a parecon enjoys important advantages. Most important, direct recognition of social serviceability is a more powerful incentive in a participatory economy than a capitalist one, and this considerably reduces the magnitude of the trade-off. Second, a parecon is better suited to allocating resources efficiently to research and development because research and development is largely a public good which is predictably under-supplied in market economies but would not be in a parecon. Third, the only effective mechanism for providing material incentives for innovating enterprises in capitalism is to slow their spread at the expense of efficiency. This is true because the transaction costs of registering patents and negotiating licenses from patent holders are very high. Capitalist drug companies claim there is no incentive for them to develop new drugs unless they can reap vast profits by patenting their products. This may be true under market capitalism, but the patents that induce them to innovate also often keep the drugs out of the hands of those most in need, so this is hardly an efficient system. In a parecon, on the other hand, investment decisions are made democratically—so research and development will occur wherever there is a need, and no one has any incentive to keep innovations from being adopted by others—so there is maximum diffusion of new products and techniques. 

Of course, in a parecon, the rules of the game are subject to democratic adjustment. If it were determined that there was inadequate incentive to innovate—which we doubt—various policies could be tweaked. For example, the recalibration of the work complexes for innovating workplaces could be delayed (to allow those workplaces to capture more of the benefit of the innovation, or extra consumption allowances could be granted to innovators for a limited period of time. Such measures would be (in our view) a last resort, but would in any event depart from equity and efficiency far less than in other economic systems, and in no systematic recurring fashion. 

In general, much of what parades itself as scientific opinion about incentives is plagued by implicit and unwarranted assumptions predictable in an era of capitalist triumphalism. One should be neither as pessimistic about the motivational power of nonmaterial incentives in an appropriate environment as many people otherwise critical of injustice have become, nor should one see any obstacles to the deployment of limited material incentives specifically for innovation in a parecon should its members decide they are needed. In the end there is no reason to doubt the efficacy of a mixture of material and social incentives during the process of creating an equitable and humane economy, with the balance and mix chosen to further equity, diversity, solidarity, and self-management for all— rather than simply generating advantage for a few.