2013 July 28 Sunday
New Study On IQ And National Per Capita Income

German social scientist Heiner Rindermann boldly goes where Tatu Vanhanen and Richard Lynn have gone before: Yet another study of the relationship between IQ and national per capita income.

It’s not just how free the market is. Some economists are looking at another factor that determines how much a country’s economy flourishes: how smart its people are. For a study published in an upcoming issue of Psychological Science, a journal of the Association for Psychological Science, researchers analyzed test scores from 90 countries and found that the intelligence of the people, particularly the smartest 5 percent, made a big contribution to the strength of their economies.

Yes, smart people are crucial to the success of an economy. Worse yet for the vast majority of non-smart people: the economic value of non-smart people is dropping because it is much easier to automate the work of the non-smart than the work of the smart.

Human capital: all the qualities of the people who make up the work force.

In the last 50 years or so, economists have started taking an interest in the value of human capital. That means all of the qualities of the people who make up the workforce. Heiner Rindermann, of the Chemnitz University of Technology, wanted to look more closely at human capital, and particularly the factor that psychologists call cognitive ability. “In other words, it’s the ability of a person to solve a problem in the most efficient way—not with violence, but by thinking,” Rindermann says. He wrote the new study with James Thompson of University College London.

One can understand the appeal of studying whole countries because economic statistics get aggregated at the country level. So the research is easier to do at that level. But that makes for greatly different sizes of aggregated groups and sizes which are too large to look for the effects of large regional variations of wealth as seen in Italy (click thru and see the map) and the United States.

Even within individual American states the variations in wealth between counties is enormous. For example, the wealthiest county in California (Marin) has 3.2 times the per capita income of the poorest (Imperial). California has 9 counties with a per capita income under $20,000. Given that government aid is a substantial fraction of income among the poor the real earned differences in income are actually much larger.

Their reported effect from higher IQ seems too small. Compare with smart fraction theory and smart fraction theory II numbers. Surely a 10 point rise in average IQ is going boost per capita GDP by much more than $2290.

They found that intelligence made a difference in gross domestic product. For each one-point increase in a country’s average IQ, the per capita GDP was $229 higher. It made an even bigger difference if the smartest 5 percent of the population got smarter; for every additional IQ point in that group, a country’s per capita GDP was $468 higher.

One problem with this sort of study: How to control for confounding variables. For example, countries that spent a long time under communist rule are playing catch-up and their per capita incomes lower the measured benefit from higher IQ. The Hungarians, Poles, Czechs, and other Eastern Europeans did not choose communism. They just got run over by invading armies. Also, countries with high natural resources but lower IQ levels have higher per capita incomes due to their natural resources.

Another problem: selection among the existing IQ studies. Which ones used good methodologies for getting representative samples? Which had a sufficient number of study subjects and at good ages? IQ measured in 4 year olds has higher error rates than when measured in 25 year olds for example. One would need to be a specialist in the field to judge the quality of this latest study.

Share |      By Randall Parker at 2013 July 28 10:08 PM 

Zoink said at July 29, 2013 7:51 PM:

"the intelligence of the people, particularly the smartest 5 percent, made a big contribution to the strength of their economies"

The IQ of the top 5% is only going to be relevant in a heterogeneous society. Comparing homogenous Slovenia and Japan with one another, you can use the median or the top 5%, it won't matter.

The issue becomes relevant when you have "market dominant minorities" bringing the top 5% way above the median. The gap between the median and 95% is much larger in diverse countries like the USA, Brasil, and Indonesia.

As an American, I hope that the IQ of the 95th percentile is more important than the 50th. Our median is dropping like a rock due to dysgenic fertility and immigration. But our 95th is doing quite well due to high-level eugenic immigration policies (Brahmins, Parsi, Russian Jews, upper-class Hong Kongers/Taiwanese, ambitious Canadians, Israelis, Australians) and assortive mating among the elite.

Mike M said at July 30, 2013 11:25 PM:

Hi Randall - One problem I have with comparing per capita income is that it assumes that those living in an area with a high cost of living, such as California, are "better off" than those living in an area with a low cost of living. I am assuming that people doing the same work in a high cost of living area are compensated at a proportionately higher rate. I think a more useful metric would be productivity. In regards to the question of what it is that causes some nations to fail (economically) and others to prosper, are you falimiar with the work of Daron Acemoglu? I have included a link to his website: http://whynationsfail.com/summary/

PS - The Chinese aren't low on the IQ ladder, yet they were an economic disaster until their institutions began to change and if we compare them with their ethnic brothers in Hong Kong, the difference is clearly not a difference in IQ.


Mike M

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