Markets-and-Communities Carvalho-2021
The paper by Jean‑Paul Carvalho (May 2021) argues that the prevailing meritocratic system—centered on education‑based screening—creates a previously overlooked social cost. By developing a formal "sorting‑separation‑externalities" (SSE) mechanism, the author shows how economic mobility sorts individuals by traits (modeled as present‑bias time preferences), separates them into high‑ and low‑income classes, and generates class‑specific social externalities. The model yields three key results: (i) class‑level polarization in unhealthy behaviors (the high‑class engages in less, the low‑class more), (ii) when externalities are convex (σ > 1) the aggregate social harm exceeds the no‑sorting benchmark, and (iii) intergenerational transmission of traits causes the initial burst of mobility to vanish, leaving a static, caste‑like structure. Standard policy tools (education subsidies, cost reductions, taxation) cannot simultaneously preserve mobility and improve outcomes. The paper then proposes an alternative "experimental society" inspired by Austrian economics and cultural‑evolutionary theory, where success depends on risk‑taking, luck, and distributed knowledge rather than on traits linked to unhealthy behavior. This framework is argued to mitigate the SSE mechanism, reduce stigma, and better accommodate technological change. The work situates its contribution within a broad literature on meritocracy, social mobility, deaths of despair, and institutional economics, and suggests that the observed rise in mortality among less‑educated Americans may be partially driven by the SSE mechanism.
Topics
The Sorting‑Separation‑Externalities (SSE) Mechanism
Conceptual framework linking economic mobility, class separation, and class‑specific social externalities.