The Merit Economy

16 Pages Posted: 16 Mar 2017 Last revised: 17 Mar 2017

Alexander Zatko


Date Written: March 14, 2017


A number of studies report, that remuneration - in addition to being a carrier of exchange value - has also signaling component, perceived by workers as a measure of their competence, social rank, or appreciation from society. Empirical and experimental evidence also suggests, that the signaling function is more reliable predictor of the workers’ economic performance, than its exchange value. The first claim of the presented paper is that decoupling the two functions into separate rewards can address certain problems associated with the existing remuneration mechanism, in particular distribution of exchange value, leading to income inequality. In the second claim, the common assumption concerning profit ownership is challenged, by pointing out that profit is not the result of a worker’s effort and therefore its exchange value should be shared in accordance with Rawls’s 2nd principle of justice. At the same time the motivationally salient signaling component of profit is not to be distributed, as it is measure of the rewarded worker’s intrinsic abilities. In the second part of the paper, framework of an economic system is proposed, based on these ideas.

Keywords: merit economy, self-determination theory, income inequality, distributive justice, neo

JEL Classification: P40, P49

Suggested Citation

Zatko, Alexander, The Merit Economy (March 14, 2017). Available at SSRN:

Alexander Zatko (Contact Author)

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