The extremely sharp center-right economist Ricardo Hausmann comes from Venezuela, and has been trying to understand the roots of the collapse of the social contract there. The great fear is that Venezuela is, for us, the canary in the coal mine. His argument is strong, and I think that I have heard his argument before, in Plutarch's understanding of the downward spiral of the last days of the Roman Republic:
Plutarch: _ Life of Tiberius Gracchus_: "This is said to have been the first sedition at Rome, since the abolition of royal power, to end in bloodshed and the death of citizens; the rest though neither trifling nor raised for trifling objects, were settled by mutual concessions, the nobles yielding from fear of the multitude, and the people out of respect for the senate...":
Ricardo Hausmann: How the Failure of “Prestige Markets” Fuels Populism: "Given the requirements of today’s technology, dismissing expertise as privilege is dangerous. That's why a well-functioning prestige market is essential to reconciling technological progress and the maintenance of a healthy polity.... Henrich suggests... prestige is payment for the generosity with which the prestigious share their knowledge.... A model of human behavior proposed by George Akerlof and Rachel Kranton.... Rising wage differentials may destroy the equilibrium proposed by Henrich. If the prestigious are already very well paid, and are not perceived as being generous with their knowledge, prestige may collapse. This may be another instance of the incompatibility between homo economicus and community morality emphasized by Samuel Bowles.... The collapse in the prestige equilibrium can do enormous damage to a society, because it may break the implicit contract whereby society uses critical skills. To see why and how, look no further than what has happened in Venezuela...