Economics rests upon subjective value theory.  Once you take that theory seriously, how can you seriously believe that market outcomes are in any sense meritocratic?  I’ll tell you, in three easy steps.

1. Let’s start with the easiest case: meritocracy within an occupation.  Supply and demand determine the market price of what an occupation produces.  But this doesn’t mean that all workers are equally able or industrious.  In any occupation, differences in both are easy to see.  And as long as markets are functioning normally, competition pressures employers to reward abler and more industrious workers workers with higher wages. 

Of course, this process isn’t perfect.  But who can deny that abler and harder-working people tend to have higher income and status than the average member of their occupation?  (If you don’t believe me, try this self-experiment: Feign lower ability, slash your work effort, and see what happens).

2. At first glance, meritocracy within an occupation doesn’t get us very far.  After all, a modern economy has thousands – if not millions – of different occupations.  If each of us were randomly forced into one occupation – as in the caste system – intra-occupational meritocracy wouldn’t do much to make the economy meritocratic. 

Fortunately, that’s not the world we live in.  In modern market economies, people choose – and often change – their occupations.  Since some occupations require greater ability and effort than others, they pay more – and more deserving workers naturally gravitate in their direction.  Again, the process isn’t perfect, but it’s still impressive.  Talented, hard-working people dominate challenging, well-paid occupations – and ability and dedication at the top is often truly scary.

3. Doesn’t consumer demand ruin everything?  It would if consumers were utter fools.  (That’s why I’d deny that there’s much genuine meritocracy in politics; irrational voters primarily reward demagoguery, not wise policy-making).  For ordinary consumer products, though, the typical consumer has a fair share of common sense.  He easily sees that for most purposes, cars are better than horses, cell phones are better than carrier pigeons, and major motion pictures are better than street theater.  In fact, he notices and rewards many far subtler quality differences.

Of course, if you have an eccentric theory of merit – such as “meritorious people avoid commerce” – you could angrily attack the market on meritocratic grounds.  Even if you hold to a common-sense view of merit, the market’s not perfect.  In a true meritocracy, the Action Design would be a world-famous band.  Nevertheless, market and merit work well together – and the freer the market, the better the fit.