July 22, 2006

An economist takes IQ seriously

Here's an op-ed economist Garett Jones of Southern Illinois wrote summarizing his 2005 paper on the usefulness of Lynn & Vanhanen's 2002 book IQ and the Wealth of Nations. (No mention if any newspaper dared publish it.)

“Test Scores”: the blue-state term for “IQ.”
By Garett Jones

Ten years after the firestorm over Murray and Herrnstein’s The Bell Curve--which showed conclusively that, for better or worse, IQ is a major factor in determining a person’s chances in life--the mainstream media has finally found a politically correct euphemism for IQ: “Test Scores.” The Wall Street Journal noted last Tuesday that U.S. “math scores” are among the lowest of any industrialized nation--below Korea, Japan, and Germany, just to name a few. It turns out that these three countries also happen to have higher average IQ’s than Americans, too--106,105, and 102, compared to the US average of 98. And that pattern isn’t just a coincidence--overall, about 2/3 of the difference in math scores around the world can be explained by differences in a nation’s average IQ.

How can I make such a bold claim? Because I’m using data from the new book IQ and the Wealth of Nations, written by leading psychologist Richard Lynn and political scientist Tatu Vanhanen (who, for what its worth, is the father of Finland’s prime minister). They assemble 186 IQ studies from 81 different countries, and find a very strong link between a nation’s average IQ and the productivity of that nation’s workers.

This is no surprise: Nobel Laureate economists like Gary Becker and Robert Lucas have written about the importance of “human capital,” the combination of problem-solving skills and practical knowledge that help workers to earn more and help countries to produce more. IQ is one decent measure of the problem-solving side of human capital. Though IQ is politically charged, it is still the single best predictor of a worker’s productivity you can find.

While Lynn and Vanhanen show that a nation’s average “test score”--excuse me, average IQ--has a strong statistical link to economic growth, their results raise a lot of reasonable questions. Had they controlled for all of the other factors that really matter for economic performance? What about the importance of the rule of law, capital investment, wars and coups, and free trade? Shouldn’t they have controlled for all of those factors? Maybe the link between a nation’s IQ and a nation’s productivity is just a side effect of these other factors.

The IQ-productivity link is not just a side effect. Working with psychologist W. Joel Schneider of Illinois State University, I tried out 1330 different statistical tests, controlling for 21 key factors that explain economic growth, including all the ones I just mentioned. IQ passed 99.8% of the tests--so it’s better than Ivory Soap.

What’s the take-away? First, when people run these “international student tests,” they’re mostly measuring differences in cross-country IQ. And IQ has a tremendously strong link to economic growth: ten extra IQ points--the difference between Argentina and South Korea--adds an extra 1.2% to the economy’s long-run annual growth rate.

Second, if you want to really raise living standards in poor countries, you need to focus on brain health. The World Bank’s initiative to raise the birth weight of children in poor countries is a great example. The brain is, in many ways, just another organ, and a healthy baby is much more likely to have a healthy brain and to achieve his or her full potential. Policies that promote good childhood nutrition, vitamin supplements, and a lead-free environment are examples of policies that can improve brain health, and with it, raise a nation’s IQ and its economic performance.

But finally, there’s a message here about how to talk about IQ in politically correct, blue-state America: Just say those magic words…..“test scores.”

Garett Jones, a former economic policy adviser to Senator Orrin Hatch, is assistant professor of economics and finance at Southern Illinois University Edwardsville.

And here's the earlier paper by Jones & Schneider that was the basis for the op-ed.

And here's the abstract of Jones's new paper that makes good use of the table I created in 2004 that lists the details of each of the 183 studies of IQ in 81 countries included in IQ and the Wealth of Nations.

IQ in the Ramsey Model: A Naïve Calibration
Garett Jones *
February 2006

Abstract: I show that in a conventional Ramsey model, between one-fourth and one-half of the global income distribution can be explained by a single factor: the effect of large, persistent differences in national average IQ on the private marginal product of labor. Thus, differences in national average IQ may be a driving force behind global income inequality. These persistent differences in cognitive ability--which are well-supported in the psychology literature--are likely to be somewhat malleable through better health care, better education, and especially better nutrition in the world’s poorest countries. A simple calibration exercise in the spirit of Bils and Klenow (2000) and Castro (2005) is conducted. I show that an IQ-augmented Ramsey model can explain more than half of the empirical relationship between national average IQ and GDP per worker. I provide evidence that little of the IQ-productivity relationship is likely to be due to reverse causality.

*Department of Economics and Finance, Southern Illinois

I'm glad to see my table has proven useful.

Now, over at GNXP, the boys have now put together a table of 544 IQ studies summarized in Lynn's latest book, Racial Differences in Intelligence. You have to join the YahooGroup GNXPforum to have access to it, but that's free and you can just choose "web access only" if you don't want to get emails of GNXP postings.

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

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