I think it's interesting that the author writes extensively here about the relationship between hierarchical rank and income without mentioning the actual trait that most reliably predicts the ascension of hierarchies: ambition.
I've written about this trait before (1) and was expecting it to be explored with the mention of "trait" in the title (which typically refers to temperament or personality). More ambitious people consistently pursue roles that beget status, authority, and income opportunity. Ambition, which is a combination of traits in itself, reliably predicts actual outcomes like educational achievement, the pursuit of more prestigious occupations, career advancement, work output (per the author's mention of working full time vs part time), etc. While the research on ambition is admittedly fragmentary, it's safe to say there is more than purely an economic angle to this conversation.
I've seen ambitious people that are also competent, and I have seen ambitious people that are are not very competent. It is hard to work with the latter kind. It's usually a lot easier to work with grumpy but competent people who actually have some realism. If they say something, it's worth listening.
In a working meritocratic organization, competence is recognized and rewarded. Competent people have a lot of projects that they can choose from. Competent people want to work in meritocratic organizations. They can switch jobs until they find one. Organizations with a lot of competence tend to do well. Owning stock for example then becomes quite profitable.
So maybe it's not all about ambition or climbing the ladder...
I am painfully technical and throughout in what I do and this has me pushed up the ladder usually against my will. My company wild prime me without telling :)
I hate management (and am bomber about that) so I always had a tiny tell and was happy to oblige of someone in said y'all wanted to make and go that path (two successfully did)
I am now an SVP in a very large European company and remind everyone that there is supposed to be a "technical ladder" for people that "lack ambition in management" (said my teenage son about me, he just does not understand how I can mis such opportunities).
Ambition for me is to coach people and always understand what they are saying. Or help to promote the good ones, or help some to realize that management is a pain in the ass when I realize that they are like me (just 30 years younger).
Ambition is not always to get a better sounding title or be closer to the CEO.
Do you have any non-anecdotal information to support this theory?
It's definitely within reason to reframe ambition as "willingness to take risks to advance oneself." In which case your theory might be suffering from survivors bias. Given a number of people pursuing ambitious agendas the average and median results could be anywhere on the map but you would still have an outsized representation within "people who ascended hierarchies".
There is also a good amount of literature around "achievement motivation," which in many cases is a surrogate term for ambition in the research context although the argument can be made that they are not completely synonymous. However they generally reach the same conclusions. Also the underlying causal factors related to ambition - high conscientiousness and extraversion, low neuroticism, higher general mental ability, etc. - predict higher achievement outcomes in research as well.
1. That was a lot of solid foundation-building and buildup to get to "Nope, the real answer is hierarchical rank. Which is sort of ill-defined, sure, and there's not a lot of good data out there to support it, but, yep, hierarchical rank. Definitely"
2. Isn't hierarchical rank as the author appears to be defining it more of an effect with lots of potential causes than it is a usefully-defining trait in and of itself? It's not really news that people in high-level, high-paying jobs make the most money. This seems about as useful as saying there's a correlation between owning expensive exotic cars and high income. Sure, it's true, but so what?
> It's not really news that people in high-level, high-paying jobs make the most money. This seems about as useful as saying there's a correlation between owning expensive exotic cars and high income. Sure, it's true, but so what?
It looks similar to saying that it's not really news that women make less money than men, so what? The article answers this question by saying that women more often work part-time or make less per hour than men. Why they do that is another matter - but that at least answer the original question. Similarly, that people in high-level jobs make most money explains why they have more money. Why they are in high-level jobs is similarly different question, which, like why women make less per hour than men, could be outside of immediate focus of the article. The article is about pointing to that - perhaps trivial, but maybe still underappreciated - correlation between high position level and compensation.
> That was a lot of solid foundation-building
Author admits that there is not too much research in hierarchical dependencies with income. So at least we have solid foundation (it would perhaps be worse if the foundation would be shaky) and as good as we (author) can have the outcomes.
Your point 2 is spot on. Saying hierarchy affects income the most is bad analysis because hierarchy is obviously highly correlated with income. This would only be news if the author got the opposite result they did.
It would have been way more interesting to see an analysis on what hierarchies are net positive for society (i.e. competence hierarchies) and what hierarchies are net negative (probably coercive hierarchies where there is not enough competition so there is market power being exploited)
If I understand correctly, when the author say "hierarchical rank" he means that the rank (let's call it R) is larger for people at the top of deeper hierarchies, and that seems to be confirmed by the graphic in Figure 5.
Anyway, if we consider that deeper hierarchies are generally also larger overall and therefor produce more in economic terms, and that people in a hierarchy are considered to be responsible for the productivity of the levels below them, then R value is really a proxy for productivity, so the primary thesis of this whole essay, that R better correlates with income than productivity, doesn't make any sense because they are not independent. In the sense that matters to neoclassical economics the CEO of a big corporation is more "productive" than the CEO of a smaller company even if in practice the two do the same amount and quality of work, have the same education, etc.
Whether this should be so is another question, but if neoclassical economics defines productivity in this way (as I think it does), then income correlating to R is in no way contradictory.
Agreed, there are too many correlations to make hierarchal rank a useful metric for directly comparing to income.
I think the author would get more interesting results by looking at how much hierarchal rank is passed down through generations and comparing that against expected income.
1) the slowness of many society's willingness to update their ideas about geocentrism (or other astronomical phenomena) was not that they didn't like admitting they were wrong, but rather that it didn't matter much. Many societies had very accurate ideas about, say, the patterns of tides, or which plants were poisonous. It wasn't that they were so resistant to admitting they were wrong, it was that geocentrism mattered so little.
2) I have never read a single economist's take on inequality that says that "...all is fair with the distribution of income." Perhaps there is such an economist out there, but every economist (neoclassical or otherwise) that I have ever read on the subject, admits readily that all is not fair. They may in some cases think that the cure could be worse than the disease, but all major economists of whom I am aware admit that there are unfair aspects to inequality.
I have read the article - I just don't understand the article.
What do they mean "hierarchy"? If I take this not as an article but a long sarcastic rant, they seem to be saying "we found the thing that determines who gets paid the most - it's the people at the top of the hierarchy within the firm"
I might be being unfair with the sarcastic comment. I mean this is an accurate analysis.
It might also point to some alternative universe organisation where people at the top of the hierarchy are not paid most, they just need someone to sign the paperwork, the people paid the most are measured by productivity
I'm in the same boat. I don't see "position in hierarchy" as a "trait". The second biggest indicator seemed to be getting income from property (land, investments, etc.) vs. labor. Looking up the dictionary definition of trait seems to define it as one's distinguishing qualities, especially those of personal character. The author seems to have expanded this, and ends up with what is essentially a tautology. Being in a high-income role is the greatest predictor of income.
However, if we're going with the author's definition, then I'm saying the trait most associated with income is "unicorn startup founder".
> The reality is quite different. Income, I believe, is determined not by productivity, but instead largely by rank within a hierarchy. In other words, power begets income. The role of economics is to deny this uncomfortable reality. Economists reinforce hierarchies by denying their existence.
My first impression was that the author was referring to people who are "popular" or "well-connected" when he was talking about hierarchy. But it seems what he is really talking about, is the corporate ladder. Ie, people higher up the ladder get paid more on average. Which seems very non-controversial - people climb up the ladder by accumulating promotions, which comes attached with pay increases.
I haven't come across any economist who denies this. From a productivity perspective, an economist would argue that a firm's productivity is impacted more by a good (or bad) director/VP/SVP/CEO, as opposed to a single good individual contributor. Hence why people higher up the ladder get paid more. This sounds very reasonable to me, and I've yet to meet anyone who thinks that the average individual contributor has more impact than the average SVP.
What would be more interesting is determining the traits that most impact the corporate hierarchy. Is it IQ, EQ, and hard work? Or is it height, good looks, and family connections? Economic theory would predict that the former plays a bigger role, and I would wager that as well. If the author has data demonstrating that the latter actually plays a bigger role, that would be a more interesting topic of discussion.
It comes from combining traits. Power of course, if one were to lose power, for instance the power of one's testimony by being eg caught making false witness, it is much harder to keep ahold of money without that credibility. They basically have to be in balance, money and power. And note power isn't negative, many people say the whole "absolute power corrupts absolutely" which comes from Lord Acton, note he's a member of a nobility.
Power is necessary in order to do good, or to be righteous, it is not only over others, it is for others, to protect others as well.
And further, it is the combination of, in one case for me, being good-looking and technical, keeping my agent in business by providing tech help nobody else could give him, when I was a model, none of the other guys was technical and I was very technical. Or...I don't know, music and coding, to make the score for a video game. There's many.
So I'm not meaning to brag about being a model or technical, just matter-of-fact, it was a job like any other. In fact they alone cared nothing for gaps in my resume or bad GPA, just looks, very tolerant in that regard.
So what happened is the guy who scouted me, my agent, lived in the same neighborhood, and we'd bump into each other a lot. He started his own thing after getting fired, took models with him. But he was bad at tech, and had a really busted computer with a defective screen. So I had a really old VGA desktop CRT monitor lying around, brought it over and it worked great, he could use the laptop. Then, he had to get this "factoring" thing to work, like an advance on payments and value-added taxes, it's a whole thing in Chile, I don't know much about it. Well I knew enough at the time to like figure it out spinally, do intuitive stuff just by feel and based on idiosyncrasies of Chilean web apps...I got it to work, it was weird. He got the advance! And then he stayed in business, and he told me over and over he owed me a favor. He would have been screwed, he said so himself.
Doesn't define the notion of a 'trait'. Most of the variables included in this analysis aren't traits in the psycho-social sense as an individual difference that's stable over time and situations.
And no treatment of the correlation among the variables. For instance, cognitive and education are almost certainly highly correlated.
A bit sad not to see common traits that are said to effect income, like height, weight, and conformity to secondary sex characteristic. They mention weight as an example for statistics, but do not correlate that to income within the gender group.
So, I feel like their conclusion is somewhat obvious since they're studying firms as the basis of examining hierarchies. I think it's quite obvious to anyone that a CEO makes more than a VP and a VP makes more than a Senior Manager and a Senior Manager makes more than an intern within most corporate hierarchies (within the same firm), so in this way, of course the conclusion is correct.
But this completely fails to examine /why/ hierarchies are established, and how people end up at various rungs within that hierarchy. It has been my observation over a nearly 20 year career that there are people who want to be told what to do, there are people who want figure out what to do, and there are people who want to tell others what to do. When you combine these preferences, people who want to figure out what to do and then tell others what to do end up rising up the ranks, because the lower rungs of the hierarchies are dominated by people who want to be told what to do. The hierarchy creates stability, both social cohesion and economic stability for the firm, and it provides a clear pathway of progression for those who enter the firm anew with ambitions to rise.
It is is no surprise, then, that hierarchy has a large effect size on income. But stating such a thing isn't heretical as they author proposes, rather it's so blatantly obvious that nobody bothers to even consider it. After all, the realities of social hierarchy aren't that interesting, unless you're studying deeper to get to the why, how, and what for.
> Neoclassical economics preaches that all is fair with the distribution of income. Income differences, the theory claims, stem from differences in productivity. As long as markets are competitive, people earn their ‘marginal product’. And so there’s no reason to redistribute income.
Oh man. No economist says this. The fundamental theorem of welfare economics only says that the income distribution will be pareto optimal. (And that’s assuming perfect information, competitive markets, no externalities, etc.)
Pareto optimal means there’s no way to redistribute resources so that that everyone prefers the new distribution or is indifferent. But redistribution as it’s usually proposed is not attempting to make everyone better off, it’s trying to make the poor better off by transferring money from the rich to the poor. The assumption being that the poor benefit more from the transfer than the rich are harmed. As an example, I would barely notice if you deleted $50 from my bank account, but giving $50 to a homeless person might let them sleep in a hotel for a night instead of on the street. So a redistribution of $50 from me to a homeless person clearly benefits them much more than it harms me.
But people love to make up some insane belief that’s obviously wrong and then attribute it to economists. Another fun one you see often is “Economists assume everyone is perfectly rational, but look at me! I’ve never read a single book on economics and I’m assuming the whole field relies on a single, obviously false premise!”
I’m not really sure where this impulse comes from. I would much prefer people attribute some things to economists that they actually believe, like “immigrants are good for a country and the people in it” or “we should tax carbon emissions and tariff countries that don’t” or “we should pay people who get vaccinated against contagious disease” or “we need taxes to solve coordination problems when funding public goods like roads and defense” or “the mortgage interest deduction is distortionary and regressive and needs to go”.
Wouldn’t that be more interesting than endless articles debunking universally-held economist opinions like “everyone gets paid exactly for their merit and how rich your parents are has no effect on how rich you will be”?
> Take cognitive score (i.e. measured IQ). Americans love to believe that intelligence is rewarded, meaning they live in a meritocracy. Unfortunately, the evidence squashes this myth.
> Neoclassical economists will have none of this. The idea that hierarchical rank most strongly affects income, I’ve been told, is ‘foolish and absurd’. Why? Because it explicitly contradicts neoclassical scripture.
> I you’re a Marxist, this result should give you pause.
show that this is a political piece thinly veiled as science.
I think most "self-help" experts even from the 1800s would agree that one's iron will eventually turns into ambition, and that it is the most linked trait to both success and failure.
Galileo was set apart for a physician, but when compelled to study anatomy and physiology, he would hide his Euclid and Archimedes, and stealthily work out the abstruse problems.
When shortly imprisoned in his cell, he would even experiment with the straw laying around to make new discoveries.
I just don't agree with hierarchical rank at all. It's the most obvious trait to the common person. But it doesn't include the context of how people got to that level in the first place. Mostly because many of the famous stories of great breakthroughs in science, invention, wealth, etc come from stories of early adversity. There are plenty of stories of those who inherit their hierarchical rank and then lose their fortunes and place in society because they have no such ambition. Hierarchy is determined by ambition.
"The world always listens to a man with a will in him" - Orison Swett Marden
> Neoclassical economics preaches that all is fair with the distribution of income. Income differences, the theory claims, stem from differences in productivity.
I'm not an expert, but this sounds like a scientific idealization, like a frictionless surface, and not a genuine and absurd description of reality.
Without a criteria for hierarchy (a hierarchy of what?) it seems like an eliptical reference.
However, if "power is the highest good," and the hierarchy is just a political power hierarchy, then yes, the people closest to the source of cash flow (not production, and includes debt) will only distribute to others that amount which is strictly necessary to secure their position, and no more. That's essentially managerialism and not "capitalism." In business, we talk about this as being "close to the money," where if you are a software developer, you are well paid, but you probably have no idea what anything costs, how much money you make for them, or value you provide for the people who hire you. This is by design.
The dominant strategy in that environment is to leverage power's triad of "performance, credentials, and relationships" (via Pfeffer) according to their weighting in your given field. Tech tends to weight performance and relationships over credentials, but if you are raising money, relationships and credentials are weighted over performance - unless you have a track record. If you are in an institution or exec management relationships and credentials also often eat performance for breakfast.
Depending on your field, you can look at your opportunities in these areas and invest in them for yourself. Should you spend two years getting a master's degree (credential + some relationships) or just contribute to open source projects? (performance + some relationships) Should you deliver a technical conference talk (relationships + some performance and cred) or pivot into Product Management? (new credential + relationships)
Most people aren't going to make their money on risk and leverage, so if you are working for it, the article shows the smart objective is to climb the hierarchy regardless of what it is for its own sake. The way to climb is via power, and power is typically defined via the traid above, and weighted according to your given field. Have fun storming the castle.
Correlations aren't catered for, as far as I can see.
But I think it's still a worthwhile point he's making, one that people can see quite plainly at work: the boss makes a lot of money because he's the boss, not because being boss is hard or requires special skills.
People are social animals, and societies need leaders. Everyone appreciates that, but maybe we overvalue it a bit:
- Think about it, when have you ever lacked a leader of some sort? Someone always wants to do it, just so they can be leader. Whether it's running your local kids' sports club, the parish council, or a multinational, when was it ever the case that nobody signed up?
- There's always someone who is competent. This is a bit different but related. When a CEO is replaced, there's a song and dance about how hard it is to do his job, but any competent boss surrounds himself with competent lieutenants. When he goes there's always more than one that can do a reasonable job, save for one issue...
- Credibility. This is the political tool we use to create artificial scarcity, so that we can justify giving the chosen one his lion's share of the spoils. Live long enough in a hierarchical organization and you'll see this: X isn't old enough, Y doesn't have enough tenure, Z bungled this project. We narrow the choices arbitrarily, and if the wrong person is brought in, BS is made up to remove them.
- The boss always makes the most, except in special circumstances where it's very obvious and contracted that some lower level person should make more. Portfolio managers at hedge funds for instance might make more than the CEO, because they're promised some % of a number. Why does the boss make the most? Hierarchy says so.
- A boss might make 100x the average employee. If you had the choice, who would you make ill for a day? The boss or 100 employees? The boss, because his work is actually worth 100x but doesn't suffer from taking the day off? Ok so why don't you give him those days off and pay him less? If he makes the wrong decision, we'll lose 100 salaries? Ok so how are we going to know what would have happened in the alternative universe where he does the right thing? More arbitrary decision making coming. There's just no way to justify by productivity why there's this huge gap.
- There's also no way to justify it by incentive. Paying the boss 100x is not going to allow you to train-by-ambition someone who wants to be the future boss. Yes, people will want the job and the money. But they don't become 100x just because there's a carrot. What about the whole "if we don't pay him he'll go elsewhere" argument? Certainly if he has the choice he will, but often you don't want to win the auction.
This article makes no sense to me at all. How could hierarchy have more of an impact on income than occupation? Unless it's completely confounded with occupation to the point of basically being an alias for it, instead of an independent variable?
Why is it so difficult to abandon old myths? One reason is that these myths are used to rationalize social order. Take, as an example, the Earth’s orbit. It took the Catholic church nearly 400 years to admit that the Earth revolves around the sun. Why so long? Because the church’s power was at stake. The church tied its dogma — and hence its authority — to a geocentric view of the universe.
Faced with a challenge to its authority, the church acted predictably. After convicting the heliocentric proponent Galileo of heresy in 1633, the church banned heliocentric teachings for another two centuries (until 1822). It took another 170 years for the church to formally admit (in 1992) that Galileo was right. Think about that. Almost four centuries of denial for an idea that had no effect on daily life. All because it threatened the authority of those with power. The lesson here is simple. When ideas challenge authority, evidence will be ignored, denied and suppressed.
I've written about this trait before (1) and was expecting it to be explored with the mention of "trait" in the title (which typically refers to temperament or personality). More ambitious people consistently pursue roles that beget status, authority, and income opportunity. Ambition, which is a combination of traits in itself, reliably predicts actual outcomes like educational achievement, the pursuit of more prestigious occupations, career advancement, work output (per the author's mention of working full time vs part time), etc. While the research on ambition is admittedly fragmentary, it's safe to say there is more than purely an economic angle to this conversation.
(1) https://www.bringambition.com/post/what-is-ambition ; https://www.bringambition.com/post/history-of-ambition