Significance and Problems
Ranks are assigned based on subjective dissimilarity, and do not fully reflect the gradational nature of variation within nature. In most cases, higher taxonomic groupings arise further back in time: not because the rate of diversification was higher in the past, but because each subsequent diversification event results in an increase of diversity and thus increases the taxonomic rank assigned by present-day taxonomists.
Of these many ranks, the most basic is species. However, this is not to say that a taxon at any other rank may not be sharply defined, or that any species is guaranteed to be sharply defined. It varies from case to case. Ideally, nowadays, a taxon is intended to represent a clade, that is, the phylogeny of the organisms under discussion, but this is not a requirement.
Classification, in which all taxa have formal ranks, cannot adequately reflect our knowledge about phylogeny; at the same time, if taxa names are dependent on ranks, rank-free taxa can't be supplied with names. This problem is dissolved in cladoendesis, where the specially elaborated rank-free nomenclatures are used.
Read more about this topic: Taxonomic Ranks
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