Meritocracy, elite overproduction, and a new ruling class

Uncredentialled people from outside the universities produce most of the world's innovation

Matt Ridley’s How Innovation Works starts with the story of Thomas Newcomen, he of the Newcomen Engine developed to pump water out of coal mines and ensure miners did not finish up in watery graves. Newcomen was an innovator, not an inventor, building on what had gone before: plans for steam engines have existed since Roman times.

It is significant, however, that the Romans used them to make toys or open, apparently by magic, giant bronze temple doors. When Roman coal mines flooded, drowning all hands, their owners simply bought more slave labour. The difference is important, and captures the extent to which the “infernal machines” of industrialisation saved lives rather than taking them while skewering the innumerate claim that chattel slavery generates economic growth.

However — and because he has a flair for narrative as well as exposition — Ridley’s stories of people who kicked against the pricks in one way or another and so contributed to human betterment do far more than charm or amuse. The extraordinary treatment of Thomas Newcomen after his death is a case in point.

Newcomen Engine held in the industrial revolution section, National Museum of Scotland

Historians did not want to believe a humble Devon ironmonger had developed the first practical device capable of converting heat into work. Elaborate conspiracy theories tried to take the credit from him and give it, by turns, to a French academician and then a Fellow of the Royal Society. Snobbery directed at those who work with their hands is not only the province of Extinction Rebellion and Just Stop Oil: it has ancient roots.

Much of the commentary on How Innovation Works since publication has turned on Ridley’s political views: his “lukewarmism”, technological optimism, and libertarian-ish sympathies. And yes, it’s true he argues innovation prospers in democratic countries where the state plays a minimal role. He suggests recent government support for innovation in the form of research and development is simply a function of the size of modern states. Innovation happened without state direction in the 19th century, and with it in the 20th, but the state also “went from spending 10 percent of national income to 40 per cent”.

In my view, foregrounding his politics in this way is to review the man and his previous books, not How Innovation Works. For mine, discovering how the nimblest solutions to age-old technical problems emerged before scientists understood them, and were often developed by unlettered or modestly educated people, was revelatory. In Britain, coal miners, blacksmiths, and nurses were prominent; in the US, France, and Australia, dairy farmers, stonemasons, and school teachers. In more recent times, engineers have come to the fore, much as they did in antiquity when unnamed Roman army engineers produced both concrete and cantilevers.

With relatively few exceptions, “official” knowledge factories (universities in particular) either did not contribute much at all or arrived with an explanation for what an innovator had achieved long after the fact. Steam engines led to our understanding of thermodynamics; it wasn’t the other way around. Except — and this is in my view a warning — in certain totalitarian states (Nazi Germany, the Soviet Union, Imperial Japan, the People’s Republic of China). There, the universities came first.

It is sobering to be reminded that Soviet and Nazi research — when not infected with Lysenkoism or “German Physics” or similar nonsense — often gave scientists in liberal democracies a run for their money. There is a reason the US pinched Nazi Germany’s rocket scientists after the Second World War. There is a reason Sputnik was first in space. Authoritarian states can produce excellent science.

It was only Communist failure to translate scientific advances into products enhancing quality of life for the masses that meant the US, France, and UK took the lead. It’s telling that Soviet authorities allowed the 1940 film Grapes of Wrath to be released in the country as a propaganda exercise. However, cinemagoers were amazed how in America people fled poverty in a car. In Soviet Russia, you hoofed it. The movie was withdrawn. While the USSR likely had the technical smarts to develop an iPhone, there’s no way it could bring it to market.

The fact that China can do that — it’s a genuine and successful example of what is probably best described as “authoritarian capitalism” — is a powerful counterclaim to Ridley’s “small state” argument, one that, to his credit, he tackles head-on. He accepts that China’s innovation and economic growth has killed off the Whiggish belief that economic freedom would lead ineluctably to political liberty. He then does his level best to explain how, and to sound a note of caution. Maybe Xi Jinping’s authoritarianism will kill the goose that laid the golden egg. And maybe it won’t.

James Watt & The Steam Engine (engraving based on a painting by Scottish artist James Eckford Lauder)

Ridley’s historical survey of innovation and its heavy dependence on tradespeople, industry, and the professions — not academics and scientists doing what is sometimes called “basic research” — is salutary. Maybe Tony Blair’s desire to send 50 percent of young people to university (achieved and then surpassed in 2019) is a fool’s errand in the original sense of the term.

That is, a newcomer to a group or job is given a nonsensical task by older or more experienced members or managers. Think naval recruits sent to empty the steam locker, or apprentices told to fetch a glass hammer. The joke, unfortunately, is on the young, forced to behave like crabs in a bucket and clamber over each other simply to survive, let alone succeed.

For decades, ever-expanding higher education was justified on the basis that it increased human capital for the individuals who attended, while graduates’ enhanced knowledge conferred a benefit on society as a whole. The fact that increased human capital appeared to lead to higher incomes for many was used to justify the introduction of tuition fees in the UK and Australia, and led to their dramatic increase in the US.

If the human capital argument + social benefit argument is true or even only partly true, free university education is really just a cash grab by the middle class — a means by which the poor and uneducated pay for the exam-passing-classes to go to university.

However — and especially as returns to a tertiary education have begun to go in reverse — the “human capital” plus what is often called “positive externalities” case has started to fall to bits. Research by economist Bryan Caplan in the US and political historian Stephen Davies in the UK makes a compelling case that increased university attendance and costs have not created a more skilled and productive workforce. Education’s role in the acquisition of human capital with its beneficial social spillovers peters out, for the most part, at GCSE. The idea that higher education fees reflect higher private returns to graduates is a mirage.

Both Caplan and Davies maintain the growth of higher education is instead about labour market regulation and signalling. It controls access to well-paid and (more importantly) high status occupations by making them dependent upon acquiring the certification of a degree (any degree). Degrees are costly signals of mostly pre-existent qualities and attributes that make the holder a good employment bet: clever, conscientious, and conformist.

Think of it like this: if education merely serves as a signal, society would be better off if we all got less. Caplan points out that a university degree puts one in the top third of the education distribution, so bosses after a top-third employee demand the credential. Now, imagine everyone had one fewer qualification. In those circumstances, employers in need of a top-third worker only require A-Levels. Employee quality would be signalled about as accurately as it is now, but without young people spending four years in student poverty, delaying gratification, and punting relationships and family-formation into the never-never.

In other words, degrees are an intellectual peacock’s tail and serve to signal a very specific kind of fitness. They also (like the peacock’s tail) habitually get in their owners’ way. One thing the recent contretemps about “woke” degrees in “grievance studies” has exposed is how hidebound many academics actually are — they’re the kind of people who haven’t had an original idea since primary school.

Tertiary education has thus become bitterly and unproductively entangled with the worst form of meritocracy.

Say “meritocracy” to most people, and those north of 45 will likely define it by reference to “the right person for the job”, and if that’s all it were, meritocracy would be a genuine social good. However, as Davies points out — in tandem with the expansion of higher education and almost certainly as a result of it — it’s now become something quite sinister. People under 35 are often open in their belief that it means some forms of work or certain occupations are intrinsically better than others.

This leads to a situation where certain people are seen as more worthwhile and valuable than others, and was captured most vividly during protests when footage emerged of BLM and Antifa activists berating US police officers for not going to college.

The young progressives teeing off like this really do believe the way to decide who gets “higher” jobs is on the basis of merit as identified by formal academic attainment. This privileges one kind of talent or ability over others and, more profoundly, means some kinds of position or role are demeaning and others elevated. Talent in the form of academic ability is used as a proxy for talent in general. This is little more than crediting Newcomen’s Engine to a Fellow of the Royal Society all over again, or telling your plumber to use the tradesman’s entrance.

Davies — unlike Caplan — accepts that a degree can be what economists call a “pure consumption good”. That is, it is valuable to the person who earns it even though it’s procured purely to satisfy current wants or needs, rather than to produce another good. This approach to higher education still exists in some countries: the Australian tradition of encouraging future lawyers to complete another degree — typically in the liberal arts — while reading law (lengthening the course to five or six years) is an example.

Few of the people who pursue classics or literature or history at the same time as learning how to draft a commercial lease or incorporate a company will get work as classicists or novelists or historians. The rationale — given at the time such dual degrees were introduced — was to ensure the members of an important profession were not “dreadful boors” (a jab directed their way by none other than D. H. Lawrence) at social functions.

There are exceptions to Caplan’s argument against human capital acquisition I’ve sketched out above, mainly in the professions (think medicine, law, engineering), but this is in large part because doing the actual job requires mastery of a large body of technical knowledge and how to apply it. Notably, this is the sort of human capital put to productive use that Ridley documents over and over again in How Innovation Works. Where an innovator did go to university, it was to enter a profession.

Even in education-factory countries like China this sometimes turns out to be true. Hon Lik, who developed the first portable electronic cigarette (patents and prototypes dating back to the 1960s were roughly the size and weight of early mobile phones), was a pharmacist by day and a garage tinkerer by night. The new device first rid him of his two packs a day smoking habit, then helped his family boot the cancer sticks, and finally made him a lot of money as his harm-reduction-based method of ingesting nicotine went global.

Relatedly, the professions are where universities must select and educate the genuinely intellectually able. It is not possible for modern societies to function with doctors who fail anatomy, lawyers who fail contract, and engineers who fail calculus. To my mind, the best argument against affirmative action in the US was the large number of academic duds it allowed into the professions.

Alexis de Tocqueville once wrote that a society could produce “a very polished, but a very dangerous” group of citizens by giving them “a sense of wants which their education would never teach them to supply”. De Tocqueville’s aphorism now goes by the name of “elite overproduction”, which puts numbers on the crabs-in-a-bucket phenomenon signalling and credentialism imposes on the young.

It amounts to a situation where too many people are chasing too few elite places in society, creating a large class of disgruntled elite-wannabes. Many of those graduates, under the impression they were joining society’s top tier, will never get there and instead be left disappointed and indebted. Worse, some have studied various activist-based subjects, which make unfalsifiable — even quasi-religious — assumptions about power and oppression. Unsurprisingly, this group in particular seek to create a new aristocracy of the spirit.

An aristocracy in the proper sense is based on the idea that people should have power because they have virtue — it’s “rule by the best”. Historically, it was tied to landowning and “a stake in the country”. But for people with no money and plenty of entitlement, the idea that moral virtue equals status — even an expectation that one’s views will be given weight in public policy — is seductive.

Relatedly, elite overproduction provides high-octane fuel for the culture war. Resentment of the way the meritocratic labour market works is, I suspect, the main factor behind our current political realignment and the rise of so-called populism. We’re all afflicted by credentialism that — given so much taxpayer money is wasted on signalling — sucks the life out of the economy.

How Innovation Works is a reminder of some simple truths. We should not be in the business of rewarding people materially or socially simply because they are clever. That — to pinch one of Adam Smith’s insights — is like holding people in high esteem simply because they’re wealthy. It buttresses the widespread belief that intelligence is deserved in some way and that people with one or another narrowly defined trait are better human beings as well.

Upholding the moral equality of persons and equality before the law is tricky at the best of times without introducing aristocracies of the spirit based on “learning” into the mix. The latter really does make prejudice against the “uneducated” the only acceptable discrimination and is dangerous for civil society, as the dreadful and fraught debate over Brexit disclosed.

Newcomen’s practical gifts and his ability to use them to deliver a genuine public good made any gains he accrued personally easier to justify. More broadly, people like him and the other historical cases Ridley discusses make inequality of outcomes acceptable and explicable, and perhaps even just.