February 19, 2008

Psychology for Economists

In the wake of his recent paper on the stagnating high school dropout rate, where the gaps between the races have barely budged since the early 1970s, Nobel Laureate economist and master statistician James Heckman is back with perhaps an even more important study. This one tries to get economists to pay attention to "The Economics and Psychology of Personality Traits" (It's co-written with Borghans, Duckworth, and ter Weel.)

There is ample evidence from economics and psychology that cognitive ability is a powerful predictor of economic and social outcomes. It is intuitively obvious that cognition is essential in processing information, learning, and in decision making. It is also intuitively obvious that other traits besides raw problem-solving ability matter for success in life. ...

The power of traits other than cognitive ability for success in life is vividly demonstrated by the Perry Preschool study. This experimental intervention enriched the early family environments of disadvantaged children with subnormal intelligence quotients (IQs). Both treatments and controls were followed into their 40s. As demonstrated in Figure 1, by age ten, treatment group mean IQs were the same as control group mean IQs. Yet on a variety of measures of socioeconomic achievement, over their life cycles, the treatment group was far more successful than the control group. Something besides IQ was changed by the intervention. Heckman et al. (2007) show that it is the personality and motivation of the participants. This paper examines the relevance of personality to economics and the relevance of economics to personality psychology. ...

Our focus is pragmatic. Personality psychologists have developed measurement systems for personality traits which economists have begun to use. Most prominent is the “Big Five” personality inventory. There is value in understanding this system and related systems before tackling the deeper question of the origins of the traits that are measured by them. The lack of familiarity of economists with these personality measures is one reason for their omission from most economic studies. ...

Most economists are unaware of the evidence that certain personality traits are more malleable than cognitive ability over the life cycle and are more sensitive to investment by parents and to other sources of environmental influences at later ages than are cognitive traits. Social policy designed to remediate deficits in achievement can be effective by operating outside of purely cognitive channels. ...

We summarize evidence that both cognitive ability and personality traits predict important outcomes, including schooling, wages, crime, teenage pregnancy, and longevity. For many outcomes, certain personality traits (that is, traits associated with Big Five Conscientiousness and Emotional Stability) are more predictive than others (that is, traits associated with Agreeableness, Openness to Experience, and Extraversion). Tasks in social and economic life vary in terms of the weight placed on the cognitive and personality traits required to predict outcomes. The relative importance of a trait varies by the task studied. Cognitive traits are predictive of performance in a greater variety of tasks. Personality traits are important in explaining performance in specific tasks, although different personality traits are predictive in different tasks. ... [Via Arnold Kling.]

I suspect some of the evolution of Heckman's line of thinking in this regard goes back to his widely cited angry 1995 review of The Bell Curve in Reason entitled "Cracked Bell." This strikes many people who read it only once as a definitive debunking of Herrnstein and Murray. After all, here is this very, very smart statistician and, while it's hard to figure out exactly what he's so upset with the book about, he's clearly upset.

What people didn't realize -- and I think it's reasonable to bring this up now that the topic is personality -- is that Heckman is almost always upset. That's his personality. In a Medieval Big Four Humours model, he'd be The Man of Choler.

Years ago, I was participating in an email discussion with Heckman, who made all of his contributions to the conversation IN ALL CAPS.

As I recall, I privately emailed him to suggest -- diplomatically, I hoped -- that if he didn't find the shift key convenient, he could just eschew upper case altogether and type using only lower case, like e.e. cummings. You see, I explained, using all caps gives other readers the impression that you are shouting.

"I AM SHOUTING!" he emailed back.

Heckman's distinctive personality is one of the things that helps make him a great scientist. Heckman didn't want to silence Murray, like 99% of the critics of The Bell Curve did; he wanted to PROVE HIM WRONG. And that's how science progresses. (Of course, personality is a very tricky thing -- the other critic of The Bell Curve who has contributed much to our understanding of human nature, James Flynn, is genial and suave.)

Over the years, Heckman has made some progress toward that goal, but perhaps less than he had originally expected he would when he first attacked the book. That The Bell Curve has held up well is why it's so much more taboo now than it was 14 years ago (as the James Watson brouhaha showed).

So, perhaps Heckman has been trying to outflank Murray by admitting that while there isn't all that much the government can do to boost the intelligence of low IQ individuals, we can and should inculcate better character in young people. The funny thing is that the judicious and philosophical Murray would have told Heckman exactly that back in 1995, and probably illustrated it with a quote from Aristotle ... if Heckman had asked him and listened to him.

But what would have been the fun of that? A lot of old things you just have to figure out for yourself -- and in the process you discover a lot of new things as well.

By the way, back in December, I took a casual swipe at the IQ vs. character issue in my IQ FAQ:

Q. Isn't character more important than intelligence?

A. I believe so. Work ethic, honesty, conscientiousness, kindness, together they're more important than intelligence. (Of course, when it comes to making money, less endearing personality traits like aggressiveness also play a big role, but we'll leave that aside for now.)

Can I quantify that? Well, that's where things get tricky…

Q. So why not test for work ethic and the like instead of IQ?

A. We do test for it, in many different ways. Consider the process of applying to college. The two most important elements in the application are high school GPA and the SAT or ACT score. The SAT and ACT are more or less an IQ test, while high school GPA is driven by a combination of IQ and work ethic.

But demonstrating work ethic via GPA is a time-consuming prospect for the applicant … and even for the admissions committee. ...

Q. Couldn't somebody invent paper and pencil tests to measure character?

A. They have. They're pretty accurate … overall.

On the other hand, these tests haven't been all that popular, perhaps because they are liable to occasional catastrophic failures. The danger is that somebody with a high IQ but poor character would use his smarts to figure out what answers on the test would make him sound like the second coming of George Washington. And a high-IQ scoundrel is the last person you want to select.

You could call it the Ahmad Chalabi Problem. The Iraqi convicted embezzler with a Ph.D. in math from the U. of Chicago used his enormous brainpower to figure out how to dupe the neocons into believing that he literally was the George Washington of Iraq, so America should invade his homeland to make him president.

In contrast to character tests, the good news about IQ tests is that they are un-outsmartable. If you can use your brain to figure out what answers the test makers want, well, then you have a high IQ.

My published articles are archived at iSteve.com -- Steve Sailer

16 comments:

Svigor said...

"There is ample evidence from economics and psychology that cognitive ability is a powerful predictor of economic and social outcomes. It is intuitively obvious that cognition is essential in processing information, learning, and in decision making. It is also intuitively obvious that other traits besides raw problem-solving ability matter for success in life. .."

I've been proselytizing this for years with the race-realists, and preaching IQ-realism to the rubes at the same time. Lumped together, character's more important. Now let's talk about behavioral genetics...

:)

(btw this isn't moral preening; I'm preening over my good sense)

mq said...

Heckman did prove Murray wrong. That review was a definitive debunking -- not that it took Heckman to do it, the book was so flawed that it was easy to see what was wrong with it. Steve just has a semi-religious attachment to the book that is impervious to evidence.

However, the general question of the relationship between cognitive abilities and success in life has certainly not gone away. Heckman contributed significantly to that literature.

Qliphah said...

MY biggest problem with economists is (among other things) that they seem to confuse economic good (e.g. maximizing GDP) with good in a more general sense. Take inflation for example. Most people think that having the value of money steadily eroding is simply unfair to people who don't earn much. That a widespread sense of injustice makes people unhappy is sufficient reason to to not have a perpetually inflating currency, but you'll hear economists telling you that we should embrace inflation because it is "good for the economy". Whenever I hear that I usually think "so (*&(*& what?!?" Unless economists are willing to align their models to accord with what actually makes people happy, they will be nothing more than nuisances.

Sigmund Fraud said...

Other juicy bits from the Heckman et al. paper:

[begin quote]

Figure 3 shows that IQ surpasses any single Big Five personality factor in the prediction of the two academic outcomes, college grades (r = .45) and years of education (r = .55). Big Five conscientiousness is by far the best personality predictor of grades (r = .22) and, after openness to experience, the second-best personality predictor of years of education (r = .11).63 Conscientiousness is a slightly better predictor of longevity (r = .09) than is IQ (r = .06). Conscientiousness predicts leadership ratings (r = .20) slightly better than IQ does (r = .17). Conscientiousness predicts job performance (r = .13; corrected r = .22) better than does any other Big Five factor, but not as well as IQ does (r = .21; corrected r = .55). The importance of IQ increases with job complexity, defined as the information processing requirements of the job: cognitive skills are more important for professors, scientists, and senior managers than for semiskilled or unskilled laborers (Schmidt and Hunter 2004).64 In contrast, the importance of conscientiousness does not vary much with job complexity (Barrick and Mount 1991).

Contemporary psychologists (for example Chamorro-Premuzic and Furnham 2003;
Digman and Takemoto-Chock 1981; Duckworth and Seligman, 2005; Mischel, Shoda, and Peake 1988; Noftle and Robins 2007; Ones et al. 2007; Paunonen and Ashton 2001; Robbins et al. 2006; Salgado 1997; Shoda, Mischel, and Peake 1990; Wolfe and Johnson 1995) and earlier researchers (for example, Hull and Terman 1928; Harris 1940; Wechsler 1940; and Barton Dielman, and Cattell 1972) suggest that self-control, perseverance, and other aspects of conscientiousness as the major personality contributors to success in school and in life. (For a more detailed review of personality, IQ, and academic performance, see Chamorro-Premuzic and Furnham 2005.)65As noted previously, Big Five conscientiousness is conceptually related to risk aversion, leisure preference, and time preference. Aspects of Big Five neuroticism (more helpfully termed by its obverse, Big Five emotional stability) are next in importance. Nyhus and Pons (2005) have shown, for example that emotional stability predicts higher wages, and Salgado (1997) shows that emotional stability and conscientiousness are more predictive of job performance across professions than other Big Five dimensions. As described in more detail below, Heckman, Stixrud, and Urzua (2006) and Judge and Hurst (2007) show that among participants in the NLSY 1979 cohort, positive self-evaluations measured in young adulthood (with self-report questions of self-esteem, locus of control, and related traits) predict income in mid-life and, further, enhance the benefits of family socioeconomic status, and academic achievement on mid-life income. Hogan and Holland (2003) have also shown measures emotional stability to be potent and general predictors of job performance (inversely), with predictive validities corrected for range restriction and unreliability of r = .43.

[end quote]

Remember, the Five Factors of personality are:

O Openness
C Conscientiousness
E Extraversion
A Agreeableness
N Neuroticism

So it looks like IQ > C > N when it comes to predicting various life outcomes. I have also seen evidence that suggests Agreeableness is inversely associated with occupational success. (see Nettle in 2007). If nice guys don't finish last, they are evidently less likely to finish first.

Heckman et al. seem to take the position that these other non-IQ personality traits are more easily altered than IQ. I am less sanguine. Other evidence suggests that, like IQ, the Five Factors of personality are highly heritable. (see again Nettle in 2007). But then, how do we explain the difference between the experimental and control groups in the Perry Preschool study?

Udolpho said...

On the contrary, Heckman's "definitive debunking" is weak and most of it boils down to insane nitpicking. You should give it another read, it's certainly not the worst of the Bell Curve criticisms but it's an aggravating quibblefest which goes nowhere:
http://www.reason.com/news/show/29636.html

Anonymous said...

@MQ

What was wrong in the book? I didn't see the mistakes.

Please, enlighten me.

Simon Newman said...

mq - how about a short paragraph explaining exactly what Murray & Hernstein were wrong about?

KDeRosa said...

Heckman relies heavily on the findings from the Perry Preschool Project-- a one off small scale study that was not independent study that has proven to be unreplicatable, even by the original researchers.

Here's the best part, often unreported, when the developers of the Perry Preschool Project, High Scope, tried to scale-up their program to a K-3 program it failed miserably. They called it the cohnitive curriculum and it was tested on thousands of studenst in the 70's. It performed very poorly; below the performance of the control group. Here are the results.

It's all very embarrassing and even more embarrassing that Heckman is relying on it now as the foundation of his hypothesis.

Robert said...

I wonder if the quality of your school counts. I went to a high school in a very blue collar suburb of Chicago. The school had a huge industrial arts department, with top of the line equipment for welding, automotive, and drafting classes that was donated by local industries. The carpentry class built the consession stand/ storage building next to he football field when I was there. This school also had a small business department and so-so science and math departments. I had a friend that went to a high school in Chicago's North Shore that was one of the top high schools in the country. This school's emphasis was on business and science. It had top notch instructors in those fields and paid them much more than my high school. My friend cannot recall if this school even had an industrial arts department, but they did have a huge college fair each year with people from colleges nationwide there trying to woo kids from this high school. There was much more competition in this school to get a good GPA then in my school. My school, on the other hand also had a huge athletics department and the competition between the students seemed to focus on who could play the best football or baseball. There was no college fair at my school that I know of. My friend's school boasts alumni who have gone on to run fortune 500 companies, many top scientists and even many celebrities in show business. My school, on the other hand, boasts several alumni who have gone on to be a big deal in sports, such as Mike Shanahan, Head Coach of the Denver Broncos. The only people in my class that I know of who were successful generally were the people who went on to run their own auto body shop or went on to become head manager at a manufacturing company or other things like that. I think that there were many smart kids in my class, and most have good jobs now, but I also think that many of these kids could have gone on to better colleges and became even more succesful if the bar at my high scool had been set a little higher.

David Wilbur said...

I don't know where you get angry from the review Heckman did for reason. I thought it was measured and reasonable. it certainly did not exhibit the vitriolic histrionics that characterized so many other reviews. that being said - I think he was more critical of the methods and style than the results.

MensaRefugee said...

~Sigh~

To some, everything they dislike is 'flawed'

Anonymous said...

Oh boy, the Bell Curve. That wonderful piece of social science that looked at just 10 years of american social history, using almost entirely their own interpretations of the NLYS data as their backing, using only a handful of different variables to describe the backgrounds of their participaints.

Although most of the criticisms have just dug at the economic issue, there's a somewhat flawed, though largely concise and very devestating book by the name of "Inequality by Design" that took it headon. Here's one of my favorite excerpts:

"SOCIAL CHANGE VERSUS IQ CHANGE

Early in The Bell Curve its authors acknowledge that much of the social change in recent American history cannot be explained by IQ. The changes are just too large. The great increases in crime in the 1960s and in unwed motherhood in the 1970s, for example, have to be explained in some other way. And yet, by the middle of the book, Hernstein and Murray suggest that a modest shift in the average American IQ might cause great social change. For example, they calculate, based on their statistical models (which we have challenged here), that a decline of 3 points in the average IQ- a decline they fear diffrential breeding will bring- would add about 10% to the proportion of American children born out of wedlock and to the proportion of american men jailed.

If we accept for the moment the questionable logic of that excercise and accept their numbers, we can work the algebra backward: How much change in the average American IQ would have been needed to cause the roughly 100 percent increase in the percentage of men in prison during the 1980s? Answer: an IQ drop of about 25 points in ten years. How much change in the average American IQ would have been needed to cause the roughly 150 percent increase in the percentage of children born out of wedlock between 1970 and 1990? Answer: a drop of about 55 points in twenty years (from "very bright" to "very dull" in Hernstein and Murray's terms.) What change in the average American IQ would have been needed to create the roughly 50 percent decline in the overall poverty rate between 1960 and 1978 and then the roughly 25 percent increase in the poverty rate from 1978 to 1992? Answer: about a 25-point rise in the first eighteen years and a 7-point drop in the last fourteen years. And yet, the most changeability in IQ that Hernstein and Murray can claim is that the average IQ for the nation may move 3 points in a whole generation.

pg. 98"

Yep. I've read the reviews of this book by people like Lynn and Gottfredson too. They barely do damage to it. I could go on and on. IQ really has little to do with income and wealth. They're such profoundly complex, constantly flucuating variables that it's absurd to pin it so heavily down to one variable.

And yes, I'd say this Heckman paper actually does do damage to H&M, considering how.... well, they never, ever took personaltiy traits into consideration.

Unless you think those are heavily linked to IQ, like crime, which is one of the most idiotic ideas I've ever heard of to come out of behavior genetics. I could go on about that too.

Sigmund Fraud, do you have email? I'd like to ask you a few things.

BTW- I know about Murray's followup to the BC in 98. He also replied to the Inequality book, but just a handful of parts. I don't know much about it to comment on it yet, but hey, in face of everything else that others have dug up on Murray, it doesn't look too stable.

Steve Sailer said...

Yes, absolutely, and may I also add that The Bell Curve doesn't explain who was really behind the kidnapping of Lindbergh's baby. So what use is it?

Anonymous said...

Uh, yeah, that's why I was talking about how it focused on IQ related issues. Can't you try for a better copout?

Steve Sailer said...

Here's a simple analogy: Average number of slam dunks per game in professional basketball increased by 1000% between 1955 and 1980, but average height grew by only 5%, so therefore, we can see, that height has almost nothing to do with slam dunking.

Steve Sailer said...

Or, average home runs per baseball game increased, say, 300% between 1918 and 1928, but average weight of baseball players increased only 10%. Therefore, weight isn't related to home run hitting.