Should you hire the best-qualified candidate for a job? The answer is: not necessarily, as a new paper points out.
The reason for this is simple.It's to do with induced reciprocity.If you hire a duffer, he'll feel grateful to you and will exert more effort or honesty. The best-qualified candidate, by contrast, will feel entitled to the job and so might not try so hard.And it's possible that what you gain from his greater ability you lose from his lesser diligence. The authors show that, under experimental conditions, a big minority (30%) of principals choose a mediocre agent for just this reason.
I suspect this is a classic case of economists seeing something in practice and wondering how it can happen in theory. We've all seen second-rate people get jobs because the boss trusts them; we might even have been that second-rater ourselves.
This is not the only reason why rational bosses might hire lacklustre people. Marko Tervio has shown that, when talent can only be revealed by working with expensive assets, bosses will prefer a known mediocrity to potentially better but unknown workers.And Dan Bernhardt, Edward Kutsoati and Eric Hughson have shown how managers prefer to hire people like themselves whose skills they can more easily evaluate.
Hayek, then, was correct when he said that "the return to people’s efforts do not correspond to recognizable merit."
The point here is related to one Will makes. Meritocracy, at least as normally understood, does not exist and probably cannot exist in a free market with rational people.You cannot therefore justify inequalities by claiming that they reflect differences in ability - though there are, of course, less bad justifications.
The claim that successful people often lack talent is not just envy-tinted casual empiricism. It is entirely consistent with economic theory.