{
  "title": "The Limits of Meritocracy",
  "publication": "IMF Working Papers, November 1, 2018",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2018/11/01/the-limits-of-meritocracy-46298",
  "canonical": "https://www.imf.org/en/publications/wp/issues/2018/11/01/the-limits-of-meritocracy-46298",
  "overlayPath": "/en/publications/wp/issues/2018/11/01/the-limits-of-meritocracy-46298/index.md",
  "summary": "We show that too much meritocracy, modeled as accuracy of performance ranking in contests, can be a bad thing: in contests with homogeneous agents, it reduces output and is Pareto inefficient.",
  "sections": [
    {
      "heading": "Summary findings",
      "content": "- Too much meritocracy, modeled as accuracy of performance ranking in contests, can be harmful.\n- In contests with homogeneous agents:\n  - Increased accuracy of performance ranking reduces output.\n  - Outcomes can be Pareto inefficient.\n- In contests with sufficiently heterogeneous agents:\n  - Discouragement and complacency effects further reduce the benefits of meritocracy.\n- Perfect meritocracy may be optimal only for intermediate levels of heterogeneity."
    },
    {
      "heading": "Analytical themes and mechanisms",
      "content": "- Meritocracy is modeled through the accuracy of performance ranking in contests.\n- Key mechanisms identified:\n  - Competition effect: how ranking accuracy changes incentives to exert effort.\n  - Discouragement effect: high-ability agents demotivate lower-ability agents when rankings are accurate.\n  - Complacency effect: low marginal returns to effort for top-ranked agents when rankings reliably identify ability.\n- Equilibrium behavior of agents under different levels of heterogeneity drives aggregate output and efficiency."
    },
    {
      "heading": "Policy implications and considerations",
      "content": "- Design of contest/prize schedules and participation prizes should account for agent heterogeneity when choosing how accurately to rank performance.\n- Organizers should recognize that maximizing ranking accuracy (perfect meritocracy) is not always welfare-improving:\n  - For homogeneous populations, reducing ranking precision may raise aggregate output and improve Pareto outcomes.\n  - For highly heterogeneous populations, mitigating discouragement and complacency effects is important to preserve the benefits of merit-based incentives.\n- Optimal contest design may require intermediate levels of meritocratic accuracy tailored to the distribution of agent abilities."
    },
    {
      "heading": "Subject classification and keywords",
      "content": "- Subject: Budget planning and preparation; Competition; Financial markets; Income inequality; National accounts; Public financial management (PFM)\n- Keywords: aggregate output; Budget planning and preparation; Competition; competition effect; contest organizer; Efficiency; equilibrium behavior; Income inequality; Level Playing Field; Meritocracy; output measure; participation prize; prize schedule; study contest design; WP\n\n---\n\n Content in this bundle\n\n- The Limits of Meritocracy, WP/18/231, November 2018\n  - The Limits of Meritocracy, WP/18/231, November 2018 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - The Limits of Meritocracy, WP/18/231, November 2018 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2018/11/01/the-limits-of-meritocracy-46298"
    }
  ],
  "bullets": [
    "[Markdown version](/en/publications/wp/issues/2018/11/01/the-limits-of-meritocracy-46298/index.md)",
    "[Structured JSON version](/en/publications/wp/issues/2018/11/01/the-limits-of-meritocracy-46298/index.json)",
    "[Bundle manifest](/en/publications/wp/issues/2018/11/01/the-limits-of-meritocracy-46298/bundle-manifest.json)",
    "Authors: John Morgan, Justin Tumlinson, Felix J Vardy",
    "Published: November 1, 2018",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781484381175.001",
    "Too much meritocracy, modeled as accuracy of performance ranking in contests, can be harmful.",
    "In contests with homogeneous agents:",
    "In contests with sufficiently heterogeneous agents:",
    "Perfect meritocracy may be optimal only for intermediate levels of heterogeneity.",
    "Meritocracy is modeled through the accuracy of performance ranking in contests.",
    "Key mechanisms identified:",
    "Equilibrium behavior of agents under different levels of heterogeneity drives aggregate output and efficiency.",
    "Design of contest/prize schedules and participation prizes should account for agent heterogeneity when choosing how accurately to rank performance.",
    "Organizers should recognize that maximizing ranking accuracy (perfect meritocracy) is not always welfare-improving:",
    "Optimal contest design may require intermediate levels of meritocratic accuracy tailored to the distribution of agent abilities.",
    "Subject: Budget planning and preparation; Competition; Financial markets; Income inequality; National accounts; Public financial management (PFM)",
    "Keywords: aggregate output; Budget planning and preparation; Competition; competition effect; contest organizer; Efficiency; equilibrium behavior; Income inequality; Level Playing Field; Meritocracy; output measure; participation prize; prize schedule; study contest design; WP",
    "**The Limits of Meritocracy, WP/18/231, November 2018**"
  ],
  "related": [
    {
      "title": "The Limits of Meritocracy, WP/18/231, November 2018",
      "role": "document",
      "sourceUrl": "https://www.imf.org/-/media/files/publications/wp/2018/wp18231.pdf",
      "summary": {
        "path": "/-/media/files/publications/wp/2018/wp18231.pdf.md",
        "mime": "text/markdown"
      },
      "binary": {
        "path": "/-/media/files/publications/wp/2018/wp18231.pdf",
        "mime": "application/pdf"
      }
    }
  ],
  "alternates": {
    "markdown": "/en/publications/wp/issues/2018/11/01/the-limits-of-meritocracy-46298/index.md",
    "json": "/en/publications/wp/issues/2018/11/01/the-limits-of-meritocracy-46298/index.json",
    "bundleManifest": "/en/publications/wp/issues/2018/11/01/the-limits-of-meritocracy-46298/bundle-manifest.json"
  },
  "generatedAtUtc": "2026-09-18T14:16:32.623Z"
}