How the Failure of “Prestige Markets” Fuels Populism

Prestige is in our genes. According to biological anthropologist Joseph Henrich, it evolved because we are a cultural species, in the sense that our individual survival depends on acquiring the knowledge that resides in the collective brain. We acquire it through imitation, but we need to decide whom to imitate. Numerous scientific studies have shown that we tend to imitate people who are perceived to have prestige, a sense that develops very early in childhood.

Henrich suggests that this is the outcome of an evolutionary game in which prestige is payment for the generosity with which the prestigious share their knowledge. We share alpha-male dominance with our primate cousins, but prestige – a form of “payment” that predates money, wages, and stock options – is quintessentially human.

While prestige solved a problem that has been with us throughout our evolution, it has had to interact with the technological changes of the past half-century. In particular, the rise of what economists call skill-biased technical change – the reliance of modern technologies on highly skilled workers – has led to growing wage differentials between skill levels.

In his new book The Future of CapitalismPaul Collier argues that this increased wage inequality has changed the self-perception of the highly skilled: their professional identity has gained greater salience than their sense of themselves mainly as members of the nation. Using a model of human behavior proposed by George Akerlof and Rachel Kranton, Collier argues persuasively that the satisfaction conferred by one identity relative to another – say, the profession over the nation – depends on the esteem with which others regard that identity.

As wage differentials grew, and the highly skilled shifted the focus of their identity from nationhood to profession, the value for all others of maintaining their national identity decreased. The low-skilled were trapped in a less valuable national identity.

This dynamic, according to Collier, explains the vote for Brexit in Britain and the rise in right-wing nationalism in other rich countries: it is concentrated among lower-skilled inhabitants of more rural, less ethnically mixed environments where traditional national identity is still dominant. It also explains declining trust in elites: because members of the elite identify primarily with their more global professional identity, they are perceived as caring less about their reciprocal obligations with the rest of the nation. Delegating choices to experts is passé, because experts no longer care about the rest of us.

Rising wage differentials may destroy the equilibrium proposed by Henrich. If the prestigious are already very well paid, and are not perceived as being generous with their knowledge, prestige may collapse. This may be another instance of the incompatibility between homo economicus and community morality emphasized by Samuel Bowles in his book The Moral Economy: the self-interested, transactional behavior that defines the market is not acceptable in the family or the community.

The collapse in the prestige equilibrium can do enormous damage to a society, because it may break the implicit contract whereby society uses critical skills. To see why and how, look no further than what has happened in Venezuela.

In 2002, then-President Hugo Chávez’s left-wing populist rhetoric targeted the national oil company PDVSA. The company was already a state-owned enterprise, so nationalization was not the issue. For Chávez, the problem was PDVSA’s meritocratic culture: to succeed in the company, political connections were of no use. What the company valued most was the knowledge needed to manage a complex organization.

Social barriers to entry at PDVSA were low, because Venezuela had a 50-year history of free university education and decades of generous scholarships to study abroad, especially in oil-related fields. But once in, advancement was merit-based. A similar culture developed in the power sector, the central bank, universities, and other entities that were critical for state capacity.

The populist revolt equated knowledge with privilege and threw it out the window. When the merit culture was threatened, the company went on strike, and more than 18,000 workers – over 40% of the company’s labor force and almost all of its senior management – were fired. As a result, there was a spectacular collapse in the performance of the oil industry and, eventually, in all the other institutions affected by the war on expertise, leading to the catastrophe that is Venezuela today.

The lesson is clear. Given the requirements of today’s technology, dismissing expertise as privilege is dangerous. But because gaining expertise takes time and effort, it is not freely accessible to “the people.” The only way to sustain it is through an implicit prestige market: the experts are supposed to be generous with their knowledge and committed to the nation. Society “pays” them back by according them a social status that makes their position desirable, even if wage differentials are compressed, as they often are in the public sector (and were in Venezuela at the time of the lethal attacks on expertise).

The alternative to populism is an arrangement whereby experts demonstrate authentic public spiritedness in exchange for society’s esteem, as often happens with military leaders, academics, and doctors. A well-functioning prestige market is essential to reconciling technological progress and the maintenance of a healthy polity.

George W. Bush is not the resistance. He’s part of what brought us Trump.

Don’t let one speech fool you into revisionist history.

But a more careful look at Trump and Bush’s records shouldn’t elevate Bush; it should remind us that the two presidents have more in common than they care publicly to admit.

For starters, just think about tax cuts for the extremely wealthysuppressing the black vote and Bush’s penchant for denigrating facts and expertise. Our country’s historical amnesia be damned; the roots of Trump’s reactionary agenda were planted in W.’s West Wing.

.. “Because of my position and my affection for the president and my belief and trust in he and his advisers, I gave them the benefit of the doubt,” McClellan said. “And looking back on it and reflecting on it now, I don’t think I should have.” McClellan faulted the Bush administration for never having shifted from campaign mode to governing mode, a failure that “almost guaranteed that the use of force would become the only feasible option [in Iraq].

Steve Bannon’s Book Club

If a novelist were imagining the Trump presidency, this book, a case study in what can go wrong from the outset of an administration ushered in by a change election in uncertain times, is precisely what Mr. Bannon would be reading.

.. But the implied irony was not that the advisers weren’t impressive men (always men, usually men who had attended Harvard). They were. Rather, Mr. Halberstam’s caustic title and the nearly 700 pages that follow indict the notion that society’s smartest are necessarily the ones best equipped to tackle society’s biggest problems.

.. President Kennedy chose his men based on general wits, rather than on specific knowledge. Perhaps the most famous example was Robert McNamara, an ingenious scientist of managerialism, a president of Ford Motor Company, who as secretary of defense, said Mr. Halberstam, “knew nothing about Asia, about poverty, about people, about American domestic politics.”

.. “The book speaks to a concern about having a government run by technocrats,”

.. He has also advocated “a very, very, very aggressive stance against radical Islam,

.. If “The Best and the Brightest” is a brief against the East Coast meritocracy, though, its proposed alternative is not pure ideology. It is expertise.

.. Time and again, in Mr. Halberstam’s telling, lower-level government officials who understood Vietnamese politics, sentiments and even geography assessed reality accurately and offered correct policy

.. “You’ve got these guys that are so brilliant, but they’re generalists,”

.. “There’s a distinction to be drawn, he concludes, between this abstract quickness, this verbal facility, and true wisdom, which he says was missing.”

.. an order that, according to reports, was written by Mr. Bannon and the Trump adviser Stephen Miller, neither of whom are counterterrorism experts (or lawyers).