A study presented recently at the Brookings Papers on Economic Activity (PDF) shows (with somewhat confusing language) that the vast majority of the recent rise in income inequality is "permanent" rather than a result of increased year-to-year instability in earnings. Ned Resnikoff did a blog post linking these findings to recent political talk about opportunity and suggested on Twitter that these findings illustrate that America isn't really a meritocracy.
"Meritocracy" is a hazy subject, but as Tim Noah explained in a great Slate piece more than a decade ago, all this really goes to show is that the idea of meritocracy is overrated. If you take some field of endeavor where the concept of "merit" is pretty well-defined—professional golf, for example—what you see is an enormously inegalitarian distribution of income. Golfing ability is distributed very unevenly. The total set of people who golf is quite large, and most of them do it for negative wages. A tiny minority of people actually earn money golfing, and a much tinier subset of really good golfers dominate the tournament earnings. It's both very meritocratic and very inegalitarian. What's also true is that even as golf is a meritocracy where the best golfers win, it features major structural barriers to opportunity. Lots of kids don't have a chance to golf growing up. That could be because their parents don't have the money, or it could just be because their parents hate golf.
But if you removed those barriers to opportunity—by implementing, say, a well-funded universal golf education program—the end result would be even more inequality in earnings since the golfing market would only become more cutthroat and efficient.
The fact remains that if you tax rich golfers' income and give the money to poor people, you increase the sum total of felicity in the world. If you find a way to collect the same amount of money from rich golfers but do it primarily by taxing rich golfers' consumption, then you do an even better job. When you think about physical disabilities this becomes particularly clear. We try to help out people who are blind or who lost a leg in Iraq or who are born with a congenital heart weakness not because providing such assistance accords with a principle of merit, but precisely because people who lack "merit" in the field of seeing or walking or not dying as a child due to heart failure are the people who need help. But lots of people suffer from less visible problems, be it a genetic weakness for alcoholism or the below-average intelligence that afflicts exactly 50 percent of the population. Those people should have great lives, too. But a very egalitarian society in which everyone enjoys a high standard of living is almost certainly going to have become that way precisely because it doesn't strive to turn the remorseless meritocracy of the PGA tour into a model for society.
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