Jones on IQ and productivity

The June edition of the Asian Development Review has an article by Garett Jones titled National IQ and National Productivity: The Hive Mind Across Asia (pdf). The abstract is as follows:

A recent line of research demonstrates that cognitive skills—intelligence quotient scores, math skills, and the like—have only a modest influence on individual wages, but are strongly correlated with national outcomes. Is this largely due to human capital spillovers? This paper argues that the answer is yes. It presents four different channels through which intelligence may matter more for nations than for individuals: (i) intelligence is associated with patience and hence higher savings rates; (ii) intelligence causes cooperation; (iii) higher group intelligence opens the door to using fragile, high-value production technologies; and (iv) intelligence is associated with supporting market-oriented policies. Abundant evidence from across ADB member countries demonstrates that environmental improvements can raise cognitive skills is reviewed.

The article deals nicely with many of the standard objections to the argument that IQ is relevant to national income, including whether IQ tests measure anything meaningful, cultural bias and the direction of causation.

In relation to the four channels suggested by Jones, I generally take the first two as given. I am unsure of the importance of the fourth as a direct causative factor, although I do not doubt there is a correlation and support for these policies through self-interest. The channel that I find most interesting at the moment is channel (iii), which is based on Michael Kremer’s paper The O-Ring Theory of Economic Development and Jones’s later paper The O-Ring Sector and the Foolproof Sector: An explanation for cross-country income differences (pdf). If production is conducted through a series of steps, with IQ associated with the rate of error at each stage, small changes in IQ can be responsible for significant differences in productivity.

I’ll post on Kremer’s and Jones’s papers in the future, but I appreciate this deeper examination of how IQ affects productivity and economic growth. While the correlation between IQ and national income is clear and the case for causation strong, an understanding of the reasons for the causation is important for policy. For example, the O-Ring theory suggests there will be significant issues with attempting to promote high-IQ country production processes in a low-IQ country.

Policy would also be enlightened by an understanding of how the distribution of IQ in a population is relevant. Do two populations with identical mean IQ but different distributions have different levels of productivity? Can a small proportion of the population with very high IQ carry a large base of low-IQ people? The O-Ring theory would suggest that this is difficult as the human resources available create problems in the production processes. Conversely, a theory based on the productivity and creativity of an elite that can effectively use the low-IQ human resources available might suggest that such a distribution could be productive.

Moving beyond IQ, this deeper analysis is relevant for traits such as conscientiousness and agreeableness. What proportion of low conscientiousness people would undermine the general existence of trust is a society? What prevalence of psychopaths or violent people can undermine the trust created by a high-IQ population?

**As a side note, I am finally off the road and back in Perth. Posting will be more regular than it has been over the last few weeks on the road. However, as my return to Perth means a resumption of my day job, I’ll probably be posting around three times a week compared to the four or five posts per week I was writing in Zurich.

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