The merit system is arguably older than humanity itself. Observed in many types of animals, this system has its roots in the very advanced nature of social interaction itself. Merit is a precursor to complete obedience, and therefore it must be handled carefully, so as not to create a system of willing slaves.

Before discussing merit, one must consider how this fantastic system could possibly come about. Primarily, it is a more just system than the current "wealth=merit" system, since there are innumerable ways to make money without using our better qualities. As people realize this, they will slowly come around to it, since there is more social security in the merit system than there is with money. In case you haven't realized it yet, the merit system replaces the money system. As large organized groups of people learn how to take more and more money for themselves, they will master the art, and their greed will destroy them. Since there is no amount of money that can satiate true greed, there is also no limit to the lengths that a truly greedy person will go to. This will eventually lead to wealthy people finding the merit system, and implementing it.

Since basic goods and services for living are free, all that extra money goes straight to the top when it is no longer needed. Farming will soon become a zero labor industry, and goods required for farming will either be produced on site, or they will become free for trade. With everyone eating for free, a diet stabilization system must be implemented in order to keep everyone healthy. The public health will truly become a public matter, with all unhealthy people being organized into various treatment facilities.

Once eating is free, time becomes free. You no longer have to work to keep your stomach full. Everyone in the world may now pursue their ultimate dreams and goals in earnest. Now, you might ask, what is stopping everyone from just sitting back and relaxing? The answer to that is simple. Even though you have to work for a living, you are bombarded by all kinds of ways to be lazy and unhealthy, and that is why you are so lazy and unhealthy. Once the system no longer has money to motivate you to work, it will clean up its act, and no longer tempt you with such things. You will be healthy, full of energy, and interested in fulfilling your dreams, and that is what the system will be trying to sell you.

Here is where the merit system comes in. Lets verify that we understand the basics. There is no money, eating is free, and the system helps you stay healthy. There are certain things that you will still want, and they will be restricted from you, just like in the days of money. There are also certain things that the system agrees is good, like working at a job, and it wants to reward you for it, but there is no money. The answer to this is the merit system. With merit, you may earn points, and get restricted things that you want. Don't be fooled though, merit is different from money.

In a money system, you must earn x amount of money, which enables you to buy goods totaling x amount of money. In a merit system, you earn x amount of merit, but you keep your merit. Also, if you work at a job, you don't steadily earn more and more merit, as you would earn money. Merit is earned by purity of character and good old fashioned workplace efficiency. Goofing off is no longer tolerated, it is punished with a bad character score, and factored in to your overall efficiency rating, which affects your merit score. Additionally, low efficiency is not punished, it is simply considered to be your ability level. If there is anything  that the merit system helps solve, it is using statistical analysis to determine what you are best at, and slowly helps you to reach your peak.

Of course, greed will still exist, and although it is considered a bad trait, it has some motivating factors that can prove useful, but instead of being greedy for money, people will be constantly trying to find the most efficient way to do their job, and the best character traits to use to get enough merit points for that big screen TV. Also, most of the side effects of greed will be eliminated, and here's why. In a money system, things still have value after you get them, but in a merit system, things have no value after you get them. Since merit points don't transfer to goods and services, those goods and services have no value, and therefore, there is less motivation to steal them. Sure, it will look cool in your house, but once you have it, you can't do anything dishonest with it. Also, the person you took it from won't be sad about it, since they will report their TV stolen, and get a new one. Meanwhile, you will be in big trouble, because that modern TV plugs into the internet and tells everyone who you are.

An additional side effect of the merit system is that its very existence in your life will motivate you to educate yourself and improve yourself, and there will be nothing in your way to stop you. Education will be free, and since efficiency equates to merit, teachers will be constantly researching the best methods to teach, and the best teachers will have enough merit to get the best teaching aids, and they will share them with the other teachers at the schools. Also, practices that improve their merit score will be shared, and improve the merit scores of everyone else there, and eventually the world.

Who is in charge of giving out merit? Simply speaking, the same people who had money in the old system, everyone. You will have limits and quotas on how much merit you may give out, and there will be many ways to determine when merit is given without any reason. For instance, parents can give merit points to their children, which will allow them to get x amount of candy at any candy store, or that bicycle, or that R/C race car set, or that young scientist set, or that backyard astronomy set, etc. Parents will be given a standard quota of merit to give out, and someone may come around to determine whether they are abusing their authority.

There are also multiple merit calculation segments in your merit score that are easily looked up on the internet. Each segment has the amount earned, and the possible maximum, which is based on the subject. A part time job will not have as much maximum merit as a full time job, and so on. A child may have a segment for parental merit, school merit, extra curricular merit, job merit, and more. An adult may earn job merit, community merit, relationship merit, and more. There is also locked merit. When you get something, some of your merit is locked for a period of time. This prevents you from getting a ton of things all at once, and creating some clandestine money scheme to undermine the merit system. Some things may lock some of your merit for as long as you have them, for instance, a space ship captain may have so much merit, he can simply get a new ship every year. To prevent this, the space ship will have to lock his merit until it is destroyed or becomes useless.

It is also possible to pool merit points. Managers of large corporations may pool their merit points in order to get some special equipment for the efficiency and luxury of the workplace. This brings up the nature of merit pooling. It must be completely voluntary and non-contractual. Large corporations must never be allowed to take tons of merit points from every employee by force, in order to rule the world, or some such unthinkable action. The pooling of merit points has the impact of allowing insignificant people to voluntarily do greater things than were ever dreamed possible. For instance, merit point pooling could be used to create a space station, or it could be used to overthrow the current leaders.

PS:

Who decides how much everything costs? Economists and politicians, of course. The merit system isn't a completely alien concept, it is simply an evolution of the money system.