Tax, reward and the favours of fortune

I'm feeling a bit vindicated reading the report of this research. I've been saying in several posts over the last couple of years that we should be aware that the talk of rewarding the entrepreneurial is overblown by giving too much credit to their 'exceptional' ability (ie it's not normally that exceptional) and too little to circumstances and the formation by their society (if it takes a village to raise a child, it takes a nation to raise an entrepreneur). This study shows that we humans have a confirmation bias about this that needs challenging. Hey, -and it has a pedagogic dimension too!

 "Humans, however, often rely on the heuristic of learning from the most successful. Our research found that even though observers were given clear feedback and incentives to be accurate in their judgement of performers, 58% of them still assumed the most successful were the most skilled when they are clearly not, mistaking luck for skill. This assumption is likely lead to disappointment -- even if you can imitate everything Bill Gates did, you will not be able to replicate his initial fortune. This also implies that rewarding the highest performers can be detrimental or even dangerous because imitators are unlikely to achieve exceptional performance without luck unless they take excessive risk or cheat, which may partly explain the recurrent financial crises and scandals." Reward the second best, ignore the best:

 And because their success often is magnified or amplified by those good old dynamics to do with the first player in the field being able to set the parameters, make faster progress, accumulate critical economies of scale etc, we should consider a kind of windfall tax approach. I'ts like in the game Monopoly, the ones who get to the premium properties first and have a half decent strategy tend to win; it's not skill, it's luck plus, as I say, a half-decent strategy (but probably no better than most of the other players).

 The lucky few may be more skilful than others eventually, but the way they gain their superior skill can be due to strong rich-get-richer dynamics combined with the good fortune of being successful initially. This can justify a higher tax rate for the richest when their extreme fortune is accumulated in the fortunate fashion defined in this research.

And I thought it quite interesting to note that we need to try to work against the apparently counter-intuitivity about rewards in this kind of case:

policy-makers need to design 'nudges' to help people resist the temptation to reward or imitate the top performers.

Part of what needs to happen though, surely, is that we keep banging on about this research and we keep analysing and publishing and highlighting the luck and happenstance that has actually 'made' these so-called 'self-made men'. Society has helped make them; the rest of us are entitled to ask for a dividend for the investment we have made in their success. We are all shareholders in the common good; it's time to stop exempting those who impress us.