The theory presumes a reliable way of measuring "actual performance"; that is, the quantity against which the selection process is supposedly biased. That's a l

The theory presumes a reliable way of measuring "actual performance"; that is, the quantity against which the selection process is supposedly biased. That's a limitation, but I wouldn't say it makes the test "wrong". It does mean that maybe monetary earnings or anything else sensitive to later-round bias are not the thing to use to measure candidate performance, at least if you're doing this for the social utility. Of course, if you're only in it to make money, and you're only in charge of the first round... then you really do want just an unbiased evaluation of the (biased) future earnings prospects. So in that case using raw earnings would be correct...