Jared Bernstein writes:

"Let me be, I hope, totally clear: for Brad, Alan, and any other economist, merit=marginal product. Thus, principle one is very simply arguing that while a central tenet of economics is that your income is equal to the marginal value you add to the economy, reality is otherwise. Your bargaining power—your ability to claim more than your marginal product or get stuck with less—is an ever-increasing determinant of economic outcomes."

But I am not a real economist! I am an interdisciplinary social science major who thought being a professor would be fun, and figured out that the history and political science job markets were totally cr----- out and that economics was booming! (And there was the fact that my freshman roommate Andrei had found this young charismatic MIT professor Larry--think of the MIT professor in "21" with hair, with youth, and without the evil.)
I don't want to identify "marginal product" with "merit" because once you do that all arguments about distribution are reduced to the elimination of wedges between factor rewards and marginal products. And marginal products themselves are overwhelmingly shaped by political and sociological power--politics and sociology determines factor supplies, and who gets what pieces of income substantially affects demand.
Perhaps what Jared wants to say is that a society in which income was distributed according to marginal product would be a better society than we have now, and one step at a time. But I would prefer to talk about the institutions of social democracy as insurance policies we all buy through our participation in the implicit social contract--about social insurance. And I would invoke Edmund Burke on the social contract as a great one between the dead, the living, and the unborn in which our shares are not simply determined by our usefulness of the moment in augmenting GDP.
After all, in the Bengal famine of 1942 the marginal product of several million landless farm laborers became effectively zero--the war that had cut off trade and so the market for the export crops they grew for the landlords. I don't think we should say that they then happened to "merit" their zero incomes, and mass death by famine...

<p>Let me join Alan Viard in beating up on Jared Bernstein for the undefined term "merit" in his first basic principle:</p>
<blockquote><p><a href="http://tpmcafe.talkingpointsmemo.com/2008/04/07/lets_talk_crunch/#more">TPMCafe | Talking Points Memo | Let's Talk "Crunch"</a>: Economic outcomes are generally thought to be fair, in the sense that market forces dole out rewards to those who merit them. But that&rsquo;s not always the case. Power, whether it&rsquo;s based on political clout, wealth, class, race, or gender, is also a key determinant of who gets what.</p></blockquote>
<p>"Merit" can, I think, mean three things:</p>
<ol><li>Marginal productivity--the amount by which, given who you are where you are with the resources you happen to own, total collective product would be reduced if you and your resources were to suddenly vanish from the scene.</li><li>Optimal incentives--because we want people to take local actions that advance our global goals, we have set up a system that provides people in the right place at the right time with the right skills with incentives that give them a better life--or at least more stuff--if they take actions that we regard as adding to the total pie.</li><li>From each according to his or her ability--what each would be able to add to the collective pie if he or she had and is the resources to fully realize his or her potential to the extent that that freedom for the one is compatible with that freedom for others.</li><li>To each according to his or her need--what each of us needs, understanding "need" to include not just bare necessities but also conveniences and luxuries, to the extent that provision of what we need to one is compatible with the provision of what they need to others.</li></ol>
<p>These four definitions of "merit" are very different and have very different implications. By definition #4, an individual with Down syndrome merits a great deal of support and resources. By definitions #1, #2, and #3, such an individual merits zero.</p>
<p>Jared doesn't hold with definition #1 or definition #2--that's the work that the "clout, wealth, class, race, or gender" phrase is doing in the latter part of his definition, to shift us down at least to definition #3. Alan, by contrast, wants to use "merit" as meaning what it means in definition #2--in large part, I think, because the world is not as rich as we would like it to be, and getting incentives right to make the pie bigger seems to him a way more conducive to enhancing social welfare and hence more meritorious than highlighting the gaps between what we each can do and thus get and what we each would get if we had been allowed to develop our ability or get others to recognize our need.</p>
<p>Jared wants to take the word "merit" and use it for definition #3 or #4; Alan wants to take the word "merit" and use it for definition #2 (or #1?). American history and culture is, I think, on Alan's side--though I wish it were otherwise.</p>