Indeed, though it's a very small sample, I would say that since Mankiw seems like an unusually nice guy, and Krugman seems like a complete pill, but they both seem very smart and both have high incomes, that smarts seems to be the big determinant of income. These leaves unexplained why my income is not much higher than it is, but this is, as I said, a very small sample. The explanation I prefer is Posner's taste for wealth idea (probably not original to him) that, for example, as much as I like wealth (a lot!) there are other things I like even more (such as the free time to do such things as write this post), so that when forced to choose, as inevitably I am by the fiercely competitive market, I opt for things other than great wealth. It is also very inexpensive to keep telling yourself that.
I think questions such as "do we live in a meritocracy," are actually rather meaningless. The only question worth asking is, compared to what? The Krugman logic leads (I would predict) thusly -- we are not a meritocracy, therefore we need to spend more money on public schools, to pay our teachers, who we should not be able to fire even if they are dumb as bricks and terrible teachers, so kids get poorly educated even if they are smart.
Markets are meritocratic, at least if you compare them to what, say, the State of California has cooked up. And I wonder if Krugman would support school choice for the poor African American kids trapped in the nightmare of DC public schools? I doubt it, fond as he is of unions. If Democrats wanted to help kids they could do it tomorrow by breaking the teachers' unions. We all know they will never do that. Kids don't vote and they don't make campaign contributions.