Merit, approbation and the evolution of social structure

Abstract

In this paper we study a society in which individuals gain utility from income and from social approbation. Income is correlated with class. Approbation is given to an unobservable trait, which must be signalled through the agent's social mobility, i.e. class change. Mobility is driven by a simple mechanism involving inheritance, effort and ability. Thus social structure (class composition) is affected by individuals' quest for approbation, and we study how that affects the emergence and multiplicity of long run social organizations, including hybrid forms of dynasties and meritocracies. Specifically we observe that even though social mobility is driven purely by a meritocratic mechanism, pure dynasties can emerge. We then introduce a feedback between the size of the upper class and its income value, so that effort levels and social structure are jointly endogenous. We derive results on equilibrium effort levels and stationary (when they exist) social structures. Social organization can converge to a unique steady state, multiple long run equilibria or cycles.