Intellectual Competence and the Circulation of Elites: The Crisis of the Late Twentieth Century

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NOT FOR QUOTATION WITHOET PERMISSIOK OF THE AUTHOR

INTELLEWAL

COJ6PETEXCE AND THE CIRCULnTION OF ELITES:

THE CRISIS OF THE LATE

TWEWI'IEIX CENTURY

Stephen P. Dresch

February 1984 WP-84-12

W o r k i n g Fupers a r e interim reports on work of t h e International Institute for Applied Systems Analysis a n d have received only limited review. Views or opinions expressed herein do n o t necessarily r e p r e s e n t those of t h e Institute or of i t s National Member Organizations.

INTERNATIONAL INSTITUTE FOR APPLIED SYSTEMS ANALYSIS 2361 Laxenburg, Austria

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STEPHEN P. DRESCH is a r e s e a r c h s c h o l a r a t t h e International I n s t i t u t e for Applied Systems Analysis a n d c h a i r m a n of t h e Institute for Demo- graphic a n d Economic Studies, New Haven, Connecticut.

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FORWARD

Within t h e broader framework of the IIASA project "Comparative Analysis of Economic S t r u c t u r e and Growth" a series of studies concerned with contemporary labor market developments in advanced economies and of labor force consequences of and implications for s t r u c t u r a l economic change has been undertaken. These studies a r e motivated especially by t h e observation t h a t , despite significant differences in m a n y dimensions, advanced economies confront a number of similar realities. Perhaps one of t h e most fundamental of t h e s e common realities is t h a t , almost without exception, these economies have entered or a r e entering periods of very low r a t e s of labor force growth. Especially in light of t h e preceding period of relatively rapid growth, this transition t o lower growth c r e a t e s t h e possibility of major disequilibria. The p r e s e n t paper provides an overview of postwar labor market developments and of future prospects. Subsequent papers will provide more detailed analyses of particular facets of t h e s e developments and prospects.

Anatoli Smyshlyaev Project Leader

Comparative Analysis of Economic S t r u c t u r e and Growth

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PREFACE

This paper constitutes a draft, introductory chapter of a planned monograph on labor m a r k e t developments in advanced economies in the last half of the Twentieth Century. As such, it provides only an interpretive overview of developments in a highly stylized manner. A number of cru- cial arguments a r e only suggested or briefly outlined, only limited evidence is presented or referenced, and no a t t e m p t is made to "prove"

important hypotheses. In particular, this general portrayal will not apply equally t o developments in all countries, and even when the general characterization applies, differences in intensity and timing may well be significant. These nuances and qualifications will be more fully developed in t h e detailed chapters of the monograph.

The conceptual origins of this analysis deserve a t least brief reference.

Vilfredo Pareto's n a m e , clearly, is securely enshrined in contemporary neoclassical economics. However, since first reading those works of Pareto's available in English two decades ago, I have felt t h a t , notwith- standing t h e significance of "Pareto optimality," coequal prominence should be awarded t o t h e Paretian concept of the "circulation of elites."

Moreover, although Paretian economics is rarely considered to be related in any functional way t o Joseph Schumpeter's economic dynam- ics, a n d especially t o t h e Schumpeterian concept of "creative destruction," I immediately felt t h a t t h e two in fact were concerned with closely related facets of t h e s a m e process. While t h a t relationship is only suggested in this paper. i t provided t h e conceptual core t o t h e formulation developed here. The forthcoming monograph will develop t h e relationship between "creative destruction" and the "circulation of elites" more explicitly.

Stephen P. Dresch Laxenburg, Austria

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My appreciation of t h e significant similarities which

I

perceive in developments in both East and West originated a t a February 1983 conference on "Higher Education and Employment in t h e USSR and the Federal Republic of Germany," and

I

a m particularly indebted to Ulrich Teichler, director of t h e Wissenschaftliches Zentrum fiir Berufs- und Hochschul€orschung of t h e Gesamthochschule Kassel, sponsor (with t h e International Institute for Educational Planning, UNESCO, paris) of t h e conference, who made possible my attendance. The appreciation of East-West similarities was reinforced in t h e course of a December 1983 Task Force Meeting on Strategic and Long-Term Planning in Innovation Management, held in Budapest, Hungary, and cosponsored by t h e IIASA project on innovation management, t h e Hungarian Committee for Applied Systems Analysis and t h e Ganz Electric Works, and I m u s t ack- nowledge m y appreciation t o Vadim Goncharov and Tibor Asboth for their invitation t o this meeting.

My earliest thinking along t h e lines developed in this paper benefited from t h e encouragement and criticism of Dietrich Goldschmidt of t h e Max Planck Institut fiir Bildungsforschung, Berlin. Further stimulus was provided by Adair L. Waldenberg over a decade of close association. W.

Lewis Hyde and t h e late Derek de Solla Price provided a constant source of invaluable advice and criticism, influencing my thinking in ways t h a t even

I

do n o t fully appreciate.

The development and refinement of this analysis has benefited greatly from conversations with a number of IIASA colleages, especially Wolfgang Schopp, Marian Lescinsky, Anatoli Smyshlyaev, Erno Zalai and John Til- ton. IIASA may well be unique in providing, simultaneously. access to t h e breadth of experience necessary t o provisionally test hypotheses of t h e type developed h e r e and t h e freedom t o pursue such exploratory analyses.

S.P.D.

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INTELLEmAL COMPEXENCE AND THE CIRCULATION OF EUTES:

THE

CRISIS OF

THE

LATE TWENTJETH CENTURY

Stephen P. Dresch

In virtually all societies positions occupied by individuals differ in t h e authority a n d responsibility exercised a n d in rewards received. Ranked according t o t h e i r associated degrees of authority, responsibility a n d reward, positions in any regime (system, organization o r order) consti- t u t e a de j u r e o r de f a c t o hierarchy. With reference to t h e s e hierarchies, two cardinal developments characterize t h e period from t h e second world war t h r o u g h , roughly, 1970. First, instrumental, meritocratic cri- t e r i a for e n t r y into a n d advancement within significant hierarchies progressively displaced (although may well not have eliminated) noninstru- m e n t a l social, cultural arid political criteria. Second, in most societies t h e deniand for persons t o fill positions in t h e upper tiers of t h e established hierarchies increased (temporarilly) a t r a t e s significantly g r e a t e r t h a n t h e r a t e of population and labor force growth.

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The f i r s t of t h e s e developments, t h e movement from nonmeritocratic t o m e r i t o c r a t i c criteria, was the result primarily of the growing importance of i n s t r u m e n t a l capabilities (ability, knowledge and exper- tise) in ever wider spheres of social a n d economic activity, arid, t o a lesser extent, of t h e necessity of legitimating differences in social s t a t u s (as reflected in differential authority, responsibility and rewards) in the face of a n increasingly egalitarian, democratic social and political ethos.' However, this development also h a d t h e consequence of greatly increasing t h e proportion of t h e population for which meritocratic achievement was a significant individual objective, a m e a s u r e of self- worth and source of selfjustification. Concomitantly, i t c r e a t e d the expectation t h a t meritocratic achievement would be a n d wouLd c o n t i n u e

t o

be recognized a n d rewarded by society. 2

'While increased reliance on meritocratic criteria for t h e assignment of individuals t o positions of high authority, responsibility and reward represented in part a response to an egalitarian social ethos, t h e r e was also a significant elemenr of conflict between t h e meritocratic and t h e egalitarian ethos. This conflict had several sources, among t h e most important of which were (1) an egalitarian belief that differentials in authority, responsibility and re- wards were essentially unjustified p e t se (a view characteristic of "populist" movements in t h e United States), and (2) recognition t h a t , a t least in t h e "short run" (possibly measured in generations), meritocracy would preserve existing differences in s t a t u s associated with, e.g., r a c e and class, simply because of differences i n t h e rate and efficiency of parental investments in t h e capabilities of children. While t h e first was reflected i n (generally frustrat- ed) a t t e m p t s t o e r a d i c a t e or deny differences in authority, responsibility and reward (as, e.g., in t h e "cultural revolution" i n China), t h e second was reflected (a) in the provision of differential access of persons from specific class backgrounds (e.g., peasants, workers, racial minorities) t o noniamily investments in meritocratically-rewarded capabilities (education and training) a n d (b) in compensatory, reparatory recognition of such factors a s class and race in t h e application of meritocratic criteria. hterestingly, however, a t least in the Unit- ed States, while reparatory nonmeritocratic (actually, extrameritocratic, in that the ulti- mate legitimacy of meritocratic criteria was not rejected) criteria were frequently utilized and accepted wi-h reference t o access t o lower-level positions (and the acquisition of t h e competencies required for these), intrusions on meritocratic selection w e r ~ c o m m o n l y rejected with reference t o high level positions. This difference i n t h e perceived acceptability of nonmeritocratic criteria is clearly indicated in t h e U.S. Supreme Court's decisions in t h e Weber and Bakke cases, the first of which involved preferential access of blacks t o a joint company-union training program, t h e second similarly preferential access to a state medical school. These cases, and their implications, a r e discussed in Stephen P. Dresch, "Race 'Reparations': The Upper Classes Win Again" (originally entitled "Bakke c o n f m Weber: Social glass and Racial Policy"), ~ t i u n a i e n c e Monitor (November 6, 18'79).

The degree t o which belief in m e r i t w r a t i c selection and cornrnitment to rneritocratic achievernent was universalized clearly differed from society t o society. Also, belief t h a t selection would be meritocratic did not necessarily imply a commitment to meritocratic achievernent, or vice versa. Thus, nonmeritocratic, affective (e.g., social, political, racial)

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The s e c o n d d e v e l o p m e n t , t h e r a p i d expansion of d e m a n d for person- n e l at t h e u p p e r t i e r s of t h e significant social h i e r a r c h i e s , r e f l e c t e d s u c h f a c t o r s a s t h e postwar a c c e l e r a t i o n of technological a n d e c o n o m i c development, t h e r e a l i z a t i o n of which h a d been r e t a r d e d o v e r t h e p r e c e e d i n g period of d e p r e s s i o n a n d war, a n d c o n s e q u e n c e s of t h e war a n d of p r e - a n d post-war political d e v e l o p m e n t s which s e r v e d t o d e c i m a t e t h e s t o c k s of highly c a p a b l e labor i n h e r i t e d f r o m t h e p a s t a n d effectively available in t h e p r e s e n t . 3 The r e s u l t a n t s u r g e i n d e m a n d for t e c h n i c a l l y highly-qualified l a b o r c r e a t e d a n e n v i r o n m e n t within which m e r i t o c r a t i c e x p e c t a t i o n s , initially, c o u l d be fulfilled. Thus, in t h e e a r l y p h a s e t h e shift toward m e r i t o c r a t i c c r i t e r i a m a y h a v e outweighed t h e effect of t h e criteria continued to play more or less important roles in all societies, while values other than meritocratic achievement (e.g., class identification) influenced individual behavior.

For present purposes, however, it is simply argued that in both dimensions the meritocratic tpfluence became significantly greater in the postwar period.

In fact, three very different phenomena were operative in the expansion of demand for persons to occupy the upper tiers of the various social hierarchies. First, and most important- ly, those hierarchies which had traditionally been characterized by a large number of high relative to low status positions expanded relative to those hierarchies characterized by relatively narrow upper tiers; in the case of the US., and measuring t h e relative size of the upper tier by the proportion of a sector's labor force which is highly educated, this is demonstrated in Stephen P. Dresch, "Demography, Technology and Higher Education: To- ward a Formal Model of Educational Adaptation," Journal of Aliticcrl Economy (May 1975), i n which it is shown t h a t over 70 percent of the increase in the highly educated share of the labor force which occurred between 1929 and 1960 can be accounted for by shifts from sectors in which the highly educated had been relatively wirepresented into those in which the highly educated had been heavily represented, with the bulk of these shifts occurring between 1048 and 1969. Second, the upper tiers of most hierarchies expanded relative to the lower tiers, reflecting technological developments; in t h e U.S. this accounts for about 30 percent of the 1929-1068 increase in the highly educated share of t h e labor force and was entirely concentrated in the post-1948 period. Parenthetically, it should be noted that the war itself may well have contributed quite directly to the postwar technological surge, in that war-time exigencies greatly accelerated the rate of technological advance and also that these exigencies created conditions under which resistance t o innovation and its diffusion were greatly reduced; thus, the i m m e d a t e postwar period not only witnessed the realization of one to two decades of delayed prewar development but may also have experienced developrnents which would have occurred o.nly slowly over the postwar period had the war not forced the process of development. Third, as noted, the war, pre- and post-war political developrnents and associated international migrations had served, for a number of countries, t o greatly erode the stock of incumbents in high level positions or to create extremely high rates of attrition (voluntary and/or involuntary), while the latter (high attrition) would have occurred in any event a s a result of relatively low pre-war growth of most of these hierarchies, reflecting low or negative rates of economic, labor-force and/or population growth over much of t h e inter-war period, resulting in age distributions in which the relatively old (and rapidly disappearing) were disproportionately represented.

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disproportionate growth of demand for persons to fill high-level positions, with the result t h a t relative competence a t all levels of these hierarchies actually increased as less capable premeritocratic incumbents were replaced by meritocratically selected successors.

However, with t h e continued expansion of these hierarchies, and especially of their upper tiers, at r a t e s greater than those a t which the number of persons competing for these positions increased, t h e level of competence a n d ability required to reach any level in any hierarchy declined markedly. as did the ages of incumbents a t each level.* The most able and competent young e n t r a n t s quickly reached very high levels, but even t h e relatively incompetent were able t o advance to positions significantly higher than those which they would have been able t o secure h a d t h e number of high-level positions expanded only a t t h e rate a t which t h e cohort of aspirants expanded.5 Thus, over much of this 20 to 4 ~ h e critical point here is that, for any group (e.g., age cohort), competence and ability are not uniform across members of the group. By implication, if selection is meritocratic, then a n increase in the proportion selected must necessarily result in a decline in competence and ability of the marginal (last) individual selected. With reference t o the decline in age, a somewhat more complex argument is imbedded. Specifically, it is assumed t h a t the competencies and abilities valued in positions of authority and responsibility require not only

"innate" (predetermined, but not necessarily genetically predetermined) capabilities but also those capabilities acquired through investment (e.g., in education and training) and that efficiency in human capital investment activities is a positive function of innate capabilities. Two consequences follow. First, a s innate capabilities decline (at the margin), it will not be efficient t o fully compensate by increasing human capital investment. Second, because the return to such investment will depend upon the expected duration of labor force participation, the level of investment which is optimal for a younger individual will exceed that which is optimal for a n equally innately able older individual. Thus, as competencies of younger individuals decline, this may lead t o increased levels of investment in older individuals, but the marginal younger individual at any hierarchical level will always be less able and will embody greater investment than the marginal older individual a t that level. A s a result, while the rapid growth of demand for persons to occupy the upper tiers of the various social hierarchies may have led to increased recruitment of older individuals.

the predominant source was provided by the relatively young, notwithstmding t h e decline competence a t the margin.

%he differential between the very high rate of growth of demand for persons to occupy hight-level positions and the rate of growth of supply of younger labor force ent.rants was severely exacerbated by the very low and frequently negative rate of growth of the entrant cohort, reflecting fertility declines and related phenomena (e.g., restrictions on immigra- tion) in the inter-war period. Thus, for example, the 18 year-old cohort in t h e United States contracted a t a rate of about 0.5 percent per year between 1840 and 1960.

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30 y e a r period o c c u p a n t s of high-level positions b e c a m e both younger and less able a n d c o m p e t e n t .

While t h e declines in t h e abilities a n d competencies of persons in high-level positions m i g h t well be considered a c o s t of this p a t t e r n of development, c h a r a c t e r i z e d by t h e rapid expansion of t h e upper t i e r s of i m p o r t a n t social hierarchies, t h i s c o s t was a t l e a s t partially offset by t h e c o n c o m i t a n t shift t o m o r e m e r i t o c r a t i c selection. Moreover, for established o r d e r s t h e rapid growth of high-level positions a n d increasing m e r i t o c r a c y i n selection t o g e t h e r h a d t h e compensatory benefit of offer- ing expanding opportunities t o t h o s e of high a n d even mediocre ability.

This f a c t h a d i m p o r t a n t stability implications. The efforts of even margi- nally t a l e n t e d , capable individuals were fully absorbed within established (often newly-established) orders, insuring t h a t t h e s e kalents and capabilities would n o t be utilized in opposition t o or to u n d e r m i n e t h e established order. Thus, i t c a n be argued t h a t , if declines in levels of ability a n d c o m p e t e n c e a t progressively h i g h e r levels r e d u c e d t h e efficiency of t h e s e systems, t h e s e declines in efficiency were probably m o r e t h a n offset, for purposes of preserving t h e s t a t u s q u o , by t h e reductions in instability r e s u l t i n g from (and/or in r e s o u r c e s n e c e s s a r y t o neutralize the covert or o v e r t opposition of) t a l e n t e d individuals deprived of opportunities within existing hierarchies.

Parenthetically, it c a n be observed t h a t , while t h i s p a t t e r n of development m a y have involved n e t benefits f r o m t h e vantage point of existing r e g i m e s , i t m a y well have entailed n e t costs from a broader social vantage point. Although society m a y also benefit from t h e increased stability of significant h i e r a r c h i e s B 6 th e capacity of existing ' ~ i v e n established institutional arrangements, the degree to which society benefits will depend heavily on the. resources available to existing hierarchies to defend themselves

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hierarchies to absorb t a l e n t may also serve to constrain t h e expression of t h a t talent. Thus, major innovations, which a r e frequently ( a n d argu- ably necessarily) inconsistent with the perpetuation of an unchanged i n t e r n a l and external s t r u c t u r e of existing hierarchies, may be r e t a r d e d or foreclosed if large fractions of the abilities and competencies required for innovation a r e instead fully devoted to t h e m a i n t e n a n c e of t h e existing order. Stated somewhat differently, to t h e degree t o which advances involve a Schumpeterian process of "creative destruction," t h e r a t e of advance will be r e t a r d e d by t h e capacity of t h r e a t e n e d institutions to absorb (and coopt) potentially disruptive talent. ⁷

This adverse impact of t h e rapid expansion of demand for t a l e n t was magnified by i t s very uneven incidence. Thus, declines i n competence were n o t experienced uniformly in all spheres and sectors of activity.

Three exceptions deserve particular note. First, historically protected occupations enjoying monopoly privileges (e.g., medicine in t h e United States), to which access h a d traditionally been rationed to a significant e x t e n t on nonmeritocratic grounds (i.e., on grounds of wealth and class), shifted quickly t o meritocratic rationing on grounds of ability and effective competence. Responding t o social changes which, while n o t elim- inating monopoly privileges, dictated t h a t t h e s e be distributed on against external (from the vantage point of the hierarchies) threats, in t h a t this will largely determine the degree to which the activities of "disenfranchised" talent are d e ~ o t e d to so- cially noncreative (as opposed t o creative) destruction, as will be discussed. The degree of perceived social benefit will also depend upon the weights attached to the values of various qarties in society.

The adverse consequences of t h e increasingly exhaustive absorption of talent within existing hierarchies for t h e rate of innovation and dynamic advance may well be mitigated or mqnified by the nature of t h e relationships between different social hierarchies. Thus, direct or indirect competition between "coequal" hierarchies may induce an internal organization and orientation conducive t o innovation, simply in the interest of the preservation or strengthening of the hierarchy vis- a-wis its competitors.

In

contrast, noncompeting, mutually supporting and reinforcing hierarchies may be especially prone to the internal neutralization and sterilization of talent and minimization of innovation.

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socially noninvidious, "egalitarian" bases, this development served t o siphon increasing proportions of t h e very highly capable away from o t h e r (generally more productive) s e c t o r s and activities. ⁸

Second, those activities directly financed by a n d of high priority t o t h e s t a t e were able t o bid t h e highly competent away from o t h e r sectors.

In addition to direct g o v e r n m e n t employment (civilian a n d military), t h i s was especially t h e c a s e in a r e a s of science d e e m e d to be critical t o national security. Thus, international political developments, specifically, t h e c o m m e n c e m e n t of t h e Cold War, c o n t r i b u t e d in a particularly destabilizing m a n n e r , exacerbating shortages of highly c o m p e t e n t labor which would have o c c u r r e d in any event. Whether t h e effect of this channeling of a rising fraction of t h e highly t a l e n t e d i n t o scientific a n d technological activities which c o n t r i b u t e d t o military capabilities was adverse from a nonmilitary perspective is, of course, open to question.

On t h e one hand, a s in t h e case of World War 11, military considerations m a y have a c c e l e r a t e d technological developments with significant civilian applications, in effect mobilizing t a l e n t which would otherwise h a v e been relatively unexploited (or, a t least, less effectively exploited).g On

B ~ o a significant extent the embracing of meritocratic criteria for access t o monopoly privileges in t h e protected professions represented only a nominal development, undertaken t o conform only in appearance and ideology to the social demand for egalitarian access and t o preserve monopoly protections. Thus, the need to adequately "reward" ostensibly necessary high-level talent in professions such as medicine justified their monopoly status, when nonrneritocratic criteria for entry might well have resulted in a societal decision to elim- inate monopoly protections. Moreover, given the capacity of the affluent t o invest differen- tially in t h e capabilities of their children, the actual class (althoughd probably not individual) identities of persons granted access may have been effectively unaltered by t h e shift t o meritocratic selection. To the degree to which individual identities were affected, this prob- ab!y represented an inefficient rechanneling of the most able into the protected professions, when, in the absence of meritocratic selection, the most able would have had a comparative 8dvmtage (over their duller class peers) in nonprotected spheres.

One might even eo so far as t o argue t h a t the absence of Cold War motivations for t h e development of military technology would have reinforced the developing separation of "science" and "technology" (discussed below), resulting in an even greater neutralization of science (and of increasingly scientific "technology") than in fact occurred. At t h e least, militarilly-oriented scientific activity served t o partially limit the relative scope of the in-

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the o t h e r hand, it is c l e a r t h a t whatever civilian benefits derived from militarilly-driven technological developments could have been achieved more efficiently ( a t lesser resource cost) had they been obtained directly r a t h e r t h a n as a n indirect spin-off of militarilly-oriented technology (although t h e r e d u c e d resources required for directly civilian technological development might not have been forthcoming). 10

Third, a n d related t o t h e first two in t h a t it relied both on monopoly protections a n d on direct subvention by t h e state, t h e academic estab- lishment was capable initially of bidding increasing proportions of the highly capable away from o t h e r spheres of activity. Enjoying extremely strong demand for i t s teaching functions, precisely because of t h e pre- vailing excess d e m a n d f o r intellectually competent labor." a n d accounting for a large s h a r e of t h e more fundamental r e s e a r c h deemed critical to national security, earnings and other perquisites of academic employment irnproved dramatically in t h e postwar period, increasing t h e relative attractiveness of academic employment. 12

In short, while m a n y s e c t o r s experienced severe shortages of intellectually c o m p e t e n t labor and, t h u s , declines in competence a t all levels, t h e proportion of t h e highly capable a t t r a c t e d into what were, generally, economically "nonproductive" activities (professions enjoying protected

~beasingly internally-oriented academic science monopoly.

In effect, military considerations served t o "internalize" benefits of tec,hological development (at the governmental level) which, in t h e absence of a direct governmental interest, would have been largely external ( t o potentially initiating corporations and enter- prises).

'In the face of an excess demand for highly educated labor t h e position of t h e academic sector is comparable t o t h a t of t h e physical capital goods sector confronting an increase in investment demand, i.e., an accelerator effect operates. Of course, a failure of demand t o c ntinue t o expand also produces a magnified depressive effect, a s will be indicated.

l h e s e and subsequent developments in t h e U.S. academic labor market are documented in Stephen P , Dreuch, "The Weakening of t h e Academic Labor Market and the Politicization of Academe," PS (Bulletin of t h e American Political Science Association) (Summer 1983).

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monopoly privileges, civilian and military government e m p l o y m e n t , rnilitary-related r e s e a r c h , and, progressively, t h e academic s e c t o r ) rose significantly.13 However, even in t h e s e favored s e c t o r s t h e c o m p e t e n c e of marginal e n t r a n t s probably declined significantly, a t l e a s t in t h e l a t t e r p a r t of t h e expansionary period.

At this stage one can only speculate concerning the consequences of this progressively more effective postwar "sterilization" of highly com- p e t e n t labor within t h e p r o t e c t e d professions, government, "pure" science and academe. However, i t could only reinforce t h e generally "con- servative" tendencies associated with the all-embracing absorption of t a l e n t within established hierarchies. Thus, t h e siphoning of t a l e n t i n t o

"nonproductive sectors" r e s u l t e d in even more severe declines in corn- petence within t h e h i e r a r c h i e s of t h e "productive" s e c t o r s a n d in e v e n lesser residues of talent outside of established hierarchies.

Sirnultaneously, t h e academic and scientific e s t a b l i s h m e n t s b e c a m e effectively insulated f r o m productive spheres, an insulation made possible by t h e i r socially a n d politically favored positions (and h e n c e d i r e c t command over resources). l4 This insulation g r e a t l y r e d u c e d t h e i r 13'I'he t e r m "unproductive'' i s used h e r e quite loosely. Roughly speaking, i t includes those components of economic activity which are included in t h e Western concept of gross d o m e s - t i c product but a r e excluded in t h e socialist (Soviet and Eastern European) concept of n e t makerid prcduct. More substantively, i t rests on a conception of activities which would nominally be considered to b e of the form of nonmaterial investments, when these investments have extremely low (zero or negative) r e t . n n s of the margzn. Thus, for example, t h e late Derek de Solla Price h a s documented the very marginal contribution t o scientific knowledge made by t h e marginal scientist, while silbstantial evidence i s available concerning the very trivial contribution t o health made by physicians and other medical specialists.

Finally, t h e academic sector is "productive" only when the productivity of educated individuals exceeds t h e productivity of the uneducated ' ~ y a margin svfficient t o rationaiize t h e costs of education.

I4This insulation i s clearly indicated by changes in the sources of funding for academic research which took place in t h e U.S. over t h e 1850s and 1960s. 'I'hus, t h e industrial share of academic research funding declined from in excess of six percent in 1955 t o about 2.5 percent i n 1970, whle the Federal share increased from 40 percent t o 70 percent. S i m u l t a n e ously, the academic share of total national research and development activity increased from six to nine percent, while this aggregate increased in constant dollar by about 200 per-

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potential as a s o u r c e of innovation. 15

Thus, creative ( a n d creatively destructive) capacities bot>h within a n d outside t h e productive sectors were seriously eroded. In this con- t e x t it is c e r t a i n l y not preposterous to s u g g e s t t h a t t h e progressively m o r e effective sterilization of t a l e n t over t h e c o u r s e of the 1950s a n d

1960s m a y well have contributed significantly, with a lag, to t h e decline in r a t e s of innovation a n d of productivity growth which occured after t h e l a t e 1960s. 16

At s o m e point between t h e mid-1960s a n d t h e mid-1970s, however, t h e situation which h a d prevailed over t h e preceding postwar period ( c h a r a c t e r i z e d by t h e progressively m o r e exhaustive absorption of talent by existing h i e r a r c h i e s ) radically altered. First, t h e expansion of t h e upper t i e r s of t h e s e hierarchies c a m e t o a r a t h e r sudden halt.17 Second, t h e n u m b e r of competitors for t h e s e positions b e g a n t o expand m u c h cent. Data on U.S. research and development expenditure, including sources of funds and sectors of performance, are presented in U.S. Bureau of the Census, Satistical Abstract of

h i t e d Sates, [Yew] (Washington, D.C.: Government Printing Office, annual).

t h e United States t h e passage of the National Science Foundation Act in 1850 has particularly important real and symbolic significance in this context. First, i t marked the end of t h e World War I1 marriage between science and technology by granting primacy and in- dependence t o the former. Second, i t further eviscerated technology by including within its p e ~ e w engineering, converting t h a t field from a "technological" to a "scientific" discip

@

; i

s clearly should not be considered a "single-factor" explanation for the decline in prw ductivity growth, although other factors may have been directly or indirectly related to these developments. For example, increasing bureaucratization may well have contributed t o productivity decline but also resulted from declining relative competencies in the upper tiers of relevant hierarchies and from the protected, insulated s t a t e of these hierarchies.

Similarly, the increasing internal orientation of academic research and teac'ning, reflected in t h e "publish or perish" phenomenon, certainly is largely attributable t o insulated a ademic affluence.

"The reasons for this halt in expansion of the upper tiers cannot be fully discussed within the confines of this paper. To some degree it was a nscesscvy phenomenon, in that a com- ponent can only t e ~ p o r a r i l l y grow a t a rate greater than t h a t of the aggregate of which it is a part. Also, this was, to some degree, an accelerator-type process, as suggested above with reference to t h e growth of demand for academic personnel; as a result, a decline LTI the

"external" component of demand was reflected in a concomitant contraction in t h e internal, endogenous component of demand. Most generally, the progressively greater costs of the expansion of upper hierarchical tiers inevitably served to constrain continued growth.

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m o r e rapidly t h a n h a d been t h e case in t h e past.18 Thus, in c o n t r a s t to the first postwar period, in which t h e pool of potentially disruptive t a l e n t was effectively d r a i n e d in t h e process of fulfilling expanding demands for ability a n d c o m p e t e n c e , t h i s pool has subsequently been expanding rapidly. The problem h a s actually been e x a c e r b a t e d by t h e previous period of rapid growth of high-level positions: Because i n c u m b e n t s even a t t h e highest levels a r e relatively young (although aging rapidly), r a t e s of a t t r i t i o n (losses t o d e a t h and to t h e social, physical a n d intellectual infirmities of age) a r e extremely low. Thus, t h e r e is n e i t h e r a n expansionary n o r a r e p l a c e m e n t demand for persons of c o m p e t e n c e a n d ability within t h e established orders.

In s u m m a r y , established h i e r a r c h i e s a r e increasingly c h a r a c t e r i z e d by aging ( b u t not aged), atrophying i n c o m p e t e n t s occupying t h e i r higher tiers. In c o n t r a s t , increasingly f r u s t r a t e d c o n c e n t r a t i o n s of t a l e n t have a c c u m u l a t e d i n t h e lower t i e r s a n d entirely outside of existing orders.

Incompetence a t t h e higher levels of t h e s e h i e r a r c h i e s r e n d e r s relatively ineffective t h e i r a t t e m p t s t o control o r n e u t r a l i z e t h r e a t s from below a n d outside t h e s y s t e m , while t h e s e t h r e a t s (from within a n d without) become increasingly dangerous a n d potentially effective a s disenfran- c h i s e d t a l e n t a c c u m u l a t e s .

The socially destabilizing consequences of t h e s e developments a r e g r e a t l y magnified by t h e prior shift toward m e r i t o c r a t i c c r i t e r i a of selection. First, a s opportunities for advancement have c o n t r a c t e d , residual '%e expansion of t h e number of competitors reflected t h e postwar surge in births, pro- ducing significant growth in t h e number of labor market e n t r a n t s in t h e 1960s and 1970s, after one or two decades of relative stability or decline. Anticipating (incorrectly) a con- tinuation of an excess demand for t h e highly capable, these bloated cohorts were educated a t r a t e s which had previously been achieved.

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nonmeritocratic influences have become more pronounced (or a t least more visible). Second, the expectations g e n e r a t e d by m e r i t o c r a t i c opportunity, apparently justified by the experiences of past cohorts, a r e broadly shared, resulting in m o r e widespread frustration t h a n these developments would have engendered in t h e p r e m e r i t o c r a t i c period.

Third, the degree of faith in the application of meritocratic c r i t e r i a is f u r t h e r eroded by t h e evidence of s e c u r e , e n t r e n c h e d i n c o m p e t e n c e in high-level positions. Thus, what in t h e past would have been a relatively confined frustration has become endemic, a s the fraction of young labor force e n t r a n t s experiencing this foreclosure of opportunity h a s dramatically increased.

The most obvious evidence of t h e foreclosure of opportunity within the existing hierarchical s t r u c t u r e s , even for t h e highly talented, is t h e radical decline in the relative s t a t u s of younger m e m b e r s of t h e labor force which h a s occured over t h e l a s t t e n t o 15 years. In c o n t r a s t to t h e preceding period, in which t h e s t a t u s distributions of successive cohorts of labor force e n t r a n t s equaled o r exceeded those of their predecessors, and certainly exceeded those of t h e i r parents, t h e s t a t u s distributions of young e n t r a n t s have shifted downward rapidly. Large proportions even of the highly able a n d well-trained have been incapable of obtaining e n t r y into any established hierarchy, and comparable proportions of t h o s e who have obtained e n t r y e i t h e r have found themselves p e r m a n e n t l y frozen into t h e lower tiers of t h e system o r have occupied very precarious posi-

a cases tions, confronting foreclosed upward mobility and t h e risk (in somt- virtual certainty) of displacement by subsequent e n t r a n t s .

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In t h e United S t a t e s t h i s p a t t e r n of development is m o s t e v i d e n t in t h e declining i n c o m e s of t h o s e y o u n g e r m e m b e r s of t h e labor force who a r e m o s t capable a n d highly educated.'' Thus, for e x a m p l e , between 1972 a n d 1979 a n n u a l i n c o m e s of e m p l o ~ : d 33 year-old m a l e s with 17 o r m o r e y e a r s of schooling ( g e n e r a l l y implying p o s t b a c c a l a u r e a t e g r a d u a t e or professional t r a i n i n g ) d e c l i n e d (in c o n s t a n t 1972 dollars) f r o m $17,190 t o $12,876, f o r a c u m u l a t i v e d e c l i n e of 25 p e r c e n t i n just seven y e a r s . For p e r s o n s with 16 y e a r s of schooling (completion of a b a c c a l a u r e a t e degree), t h e d e c l i n e was f r o m $13,666 t o $12,121, o r by 11 p e r c e n t , indi- c a t i n g t h a t t h e c o n t r a c t i o n h a s b e e n g r e a t e s t for t h o s e who m i g h t h a v e e x p e c t e d t o o c c u p y t h e h i g h e s t positions. The l e s s e r i m p a c t for t h o s e aspiring t o ( a n d t r a i n e d f o r ) lower s t a t u s positions is c l e a r l y i n d i c a t e d by t h e e x p e r i e n c e s of p e r s o n s with only 12 y e a r s of schooling (high school g r a d u a t e s ) , for whom i n c o m e s w e r e virtually i n v a r i a n t over t h i s p e r i o d ($10,044 in 1972 v e r s u s $10,022 in 1979). That t h i s h a s b e e n an experi- e n c e only of t h e young a n d highly e d u c a t e d , a n d does n o t r e f l e c t a gen- e r a l decline i n levels of r e a l i n c o m e of persons with high levels of e d u c a - tion, i s i n d i c a t e d by t h e f a c t t h a t i n c o m e s of 45 year-olds with 1 7 y e a r s of schooling i n c r e a s e d f r o m $19,968 t o $22,001, o r by 10 p e r c e n t , between 1972 a n d 1979. And, while i n c o m e s of 45 year-olds with 1 6 y e a r s of

''The evidence presented in this paragraph is developed more thoroughly in Stephen P.

Dresch, "Education and Lifetime Earnings: The Census Bureau's Misguided Misrepresenta- tions," Review o f Public Data Use (December 1883), drawing on data published by the U.S.

Bureau of the Census, Current P o p u l a t i o n R e p o r t s , S4sries P-60, hb. 1 3 9 , f i f e t i m e h r n i n g s

& t i m d e s f o r Men a n d Women in th.e U n i f e d S a t e s : 1 9 7 9 (Washington, D.C.: Government Prinung Oftice, 1983), and C u r r e n t f i p u l a t i o n Reports, & n e s P-60, No. 92, Annual Mean h- c o m e , L4fetimo I n c o m e , and E i u c a t i o n a l A t t a i n m e n t of Men in t h s [mited S a t e s , f o r S l e c t - e d Y e a r s , I 9 5 6 to 1 9 7 2 (Washington, D.C.: Government Printing Office, 1974). More detailed evidence, covering t h e period from t h e mid 1960s through the early lQBOs and examining evidence on intra- and inter-occupational earnings differentials, is presented i n Stephen P.

Dresch, O c c u p a t i o n d E a r n i n g s , 1967- 1 9 8 1 ; R e t u r n s to C k c u p d i o n d Choice, S h o o l i n g a n d F h H c i m 4 e c i d i z d i o n (Greenwich, Connecticut: JAI Press, forthcoming 1884).

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schooling declined over t h i s period f r o m $19,042 t o $18,301, or by six p e r c e n t ( a b o u t one-half t h e relative decline experienced by 30 year- olds), 60 year-olds with 16 y e a r s of schooling enjoyed a n i n c r e a s e of 14 p e r c e n t (from $19,449 t o $22.096).

This p a t t e r n of development is becoming increasingly a p p a r e n t in a n u m b e r of o t h e r c o u n t r i e s as well. In t h e Federal Republic of Germany it is especially evident in rising r a t e s of unemployment of university gra- d u a t e s , in prolongation of nominal s t u d e n t s t a t u s , in downward shifts in t h e occupational distributions of g r a d u a t e s , a n d in rising proportions of g r a d u a t e s who do not enjoy conventional c o n t r a c t s of employment a n d h e n c e c o n s t i t u t e a "grey market" for labor services." Similarly, in t h e Soviet Union t h e r e is accumulating evidence of e n t e r p r i s e a c c u m u l a - t i o n s of "surplus stocks" of highly qualified personnel, while significant n u m b e r s of young specialists, confronted by progressively less desirable opportunities for professional employment (less desirable in t e r m s , e.g., of location, conditions of work a n d opportunities for advancement) have e l e c t e d t o p u r s u e nonprofessional c a r e e r s . 2 1

In b o t h t h e Soviet Union and West Germany, and also in t h e U.S., t h e previous p a t t e r n of rising educational aspirations a n d a t t a i n m e n t s on t h e p a r t of young people h a s given way t o one of stability or decline, a l t h o u g h t h i s development h a s been partially offset (or delayed) in t h e West by rising unemployment (with especially pronounced youth unem-

''These and related developments in West Germany are summarized i n U. Teichler and B.

Sanyal, Higher Eblucdion and the Lahour Market in the f i d a r d Republic of Germany (Paris:

y y ~ s c o , I 002).

The current Soviet situation i s summarized in D. Chuprunov, R. Avakov and 1':. Jiltsov, h h e r Eblucdion, h p l o y m e n f and l k c h n o l o g i c d P ' g r e s s in ths V S R (Paris: UNESCO, 1082).

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ployment) since t h e late 1970s. encouraging many individuals t o persist in school (and hence to receive educational subsidies which constitute de f a c t o unemployment compensation not contingent on prior work

experience) when they would not have elected to do so had opportunities for employment been available. Thus, t h e precise manifestations of this overall p a t t e r n of development may differ somewhat, but t h e broad consequences a r e strikingly, and surprisingly, similar despite major differences in socia! and economic institutions.

The foreclosure of opportunities for young labor force e n t r a n t s is most obvious in t h e more rigidly s t r u c t u r e d , hierarchical sectors, e.g., education and government. Thus, growing proportions of highly competent labor force e n t r a n t s have been drawn (or driven) into those sectors (generally t h e directly "productive" sectors) which had been relatively starved of talent in t h e first two or t h r e e postwar decades, with potentially highly significant positive consequences for t h e capacity for innovation within these sectors. This potential, however, may well be largely unrealized, in part because talent may be neutralized by t h e incapacity of existing s t r u c t u r e s t o adapt internally t o t h e requirements of innovation but also because i t is in these sectors t h a t t h e contrast between t h e relatively high levels of competence in t h e lower tiers of t h e hierarchy and e n t r e n c h e d incompetence a t higher levels is especially pronounced. While t h e t e n u r e of high-level (and relatively incompetent) incumbents in these sectors is less formally protected, organizational rigidities and inertias still serve t o greatly constrain t h e opportunities O F talented individuals a t lower levels.

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Thus, realization of t h e potential for innovation may well take place primarily outside of established organizations and hierarchies ( t o the degree t h a t t h i s potential is realized a t all). The significant question from a social perspective c o n c e r n s thy reactions which these pctential

"independent" innovative activities will confront.22 If this type of activity is fostered and encouraged (or even tolerated), t h e n it may well offer a socially constructive o u t l e t for creative talent and bring a signifi- c a n t acceleration of t h e r a t e of innovation i n its wake. To t h e degree to which it is resisted, t h e level of frustration will rise, a n d t h e prospect of socially noncreative destruction ( a t least initially noncreative) will become more likely.

The likelihood of severe instabilitity is particularly g r e a t for those sectors which expanded m o s t rapidly in the earlier postwar period.

These sectors a r e now dominated by persons of relatively low levels of ability and competence (by comparison t o t h e abilities and competencies of persons who could be r e c r u i t e d currently), and, although c u r r e n t l y exhibiting very low attrition rates, will experience exceptionally high r a t e s of attrition a s t h e "clot" in t h e age distribution c r e a t e d by rapid postwar expansion suddenly begins t o be eliminated. This characterization is especially descriptive of t h e academic and scientific establish- m e n t s and of many political elites a n d governmental bureaucracies, entities which c a m e into existence and/or expanded very rapidly in t h e .

'%'his is essentially a question of t h e access of "disenfranchised talent" to resources, espe- cially investment resources. In this regard, t h e role of existing institutional (e.g., cor- porate) hierarchies a s sources of investment in training and technological developmer~t which is t h e n realized i n new, independent entities initiated by talented individuals leaving t h e established prlrent institution is particularly significant. The developm.ent of capital market instruments, e.g., R&D limited partnerships, is also significant in this regard.

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first postwar decades. Even before these systems e n t e r the phase of rapid attrition of established personnel, stability is t h r e a t e n e d by t h e relative inability of these sectors to absorb younger talent. And, even t o the degr-e t o which entry-level opportunities a r e offered to highly capable m e m b e r s of younger cohorts, opportunities for i n t e r n a l upward mobility a r e virtually foreclosed by t h e relative youth and low attrition of the relatively less competent incumbents occupying positions higher i n these hierarchies and by the failure of these h i e r a r c h i e s to continue t o expand a t t h e r a t e s of t h e immediate postwar decades. This inability of provide for a "circulation of elites" (as i t was classically c h a r a c t e r i z e d by Vilfredo Pareto) results in a growing concentration of highly capable individuals in t h e lower tiers and outside of established power s t r u c t u r e s , creating the possibility of serious challenges to existing orders. Even if this t h r e a t is avoided initially, the surge in attrition as t h e early postwar cohorts pass from the scene will lead both to increasing pressures from outside t h e system and t o increasing i n t e r n a l flux a n d uncertainty. 23

2 3 ~ o t h external and internal sources of instability in the rapid turnover period are exacerbated by t h e likely refusal of the highly talented to enter even the accessible lower tiers of these hierarchies, a refusal based on the recognition of (a) the dominance of high-level incompetence and (b) the short- and intermediate-term foreclosure of upward mobility.