The IQ red herring

These posts by Tim and Andrew raise a question: why are many defenders of free markets so interested in IQ?
Leftists would reply that there's an ideological motivation at work - the belief that inequalities of income are legitimate if they can be shown to result from natural differences in IQ.
But I can't believe that this is the reason, because this is a howling error.
First, the correlation between IQ and earnings is low. This review (pdf) of the literature estimated that a on standard deviation difference in cognitive skills is associated with only a 10% difference in wages.
Such a small effect surely accords with common sense. You only have to look at you boss to see that the link between IQ and success is weak. Even if we ignore rent-seeking, height, beauty, luck and incentive-enhancing preferences (pdf), lots of things make for high earnings: hard work, creativity, interpersonal skills. And these have little relationship with IQ.
But even if there were a tight correlation between IQ and earnings, this would do nothing at all to legitimate inequality.
Imagine a communist dictator were to allocate all jobs according to IQ scores at an early age. Earnings and IQ would then be perfectly correlated. But this society would be neither efficient nor just nor even legitimate.
The link between IQ and earnings therefore tells us nothing about the desirability of an economic system.
The reasons why right-libertarians are relaxed about inequality is that they believe either that it results from free transactions, or that it has beneficial consequences. The link between IQ and income - whatever it is - is irrelevant.
So why are so many people interested in it?

Comments

[bobvis]

I think I know this one.

It is because those who are *against* markets generally argue that markets are not fair because the children of the rich get all the spoils. Here is the progression of arguments:

For markets: Markets allow equality of opportunity.
Against: No they don't. The children of the rich become rich because of access to networks, better education, etc.
For markets: No, those are relatively minor reasons that can be easily overcome by a relatively poor person. A major reason children of the rich become rich themselves is because IQ is heritable.

[Tim Worstall]

I'm not all that sure that I am interested in IQ per se. That particular post simply came from having seen Brian Caplan's argument the day after the Sutton report came out. It's not so much that I endorse it, I thought it an interesting one to air.

When we talk about markets and unequal returns I don't tend to argue that they are justified by IQ: I know far to many not all that bright people who have made a lot of money. I do tend to think, as our host here does, that unequal returns are generated by an unequal distribution of talents: but IQ is most certainly not the most important of those.

[Trooper Thompson]

I'd say one of the fallacies of the left is to judge equality in purely materialistic terms - namely how much money you've got.

[kinglear]

There is actually - I believe - quite a high correlation between IQ and non-success. This may sound counterintuitive, but I know from experience that super-bright people seldom achieve that much - they are forever interested in the next thing and seldom finish off what they are doing. They get very easily distracted, hence bad behaviou by intelligent and bright pupils in class - they are bored by the mundane.Of course, there are some exceptions.
Perhaps an IQ in the region of about 125-135 is what is required for true success - not bright enough to be distracted, but clever enough to make it work and stick at it.

[dearieme]

I wonder whether the free-market right would be so interested if it weren't just another topic on which the anti-free market left tells whopping lies.

[Matthew]

I did wonder whether given Tim is reduced to runing a porn and spam operation for income that he should really bring up income = intelligence.

[Howard Snell]

Any help to you searchers after complicated truth? "I have never let my schooling interfere with my education." Mark Twain

[Minute]

Surely the question should be this: why are so few other people interested in the heritability of IQ?

You can't begin to talk about equality of opportunity without having a position on it.

[Bob B]

Does anyone seriously believe that the increasingly globalised markets in IT products and services approximate to the competitive paradigm envisaged in the fundamental theorems of welfare economics?
http://en.wikipedia.org/wiki/Fundamental_theorems_of_welfare_economics

For better or for worse, we can now look back and note that over 25 years, mostly unregulated competition in the relevant markets has led to the emergence of dominant technical standards, such the prevailing "Wintel" standard, and a series of dominant producers, like Microsoft, Intel and Google.

In entertainment markets - as well as (?) academia and journalism, the star system prevails. With universal media accessible through universal connectivity, if almost anyone can get to listen to recordings of Pavarotti and other leading opera stars, it becomes increasingly challenging for competent local opera singers to make any kind living with their art as they used to be able to. Top footballers in the premia league in Britain can now attract annual salaries of £1 million or more yet, by reports, most football clubs outside the premia league are run at a loss:
http://www.telegraph.co.uk/sport/main.jhtml?xml=/sport/2007/01/19/sfnbon19.xml

In today's press, we have topical commentary about "overpaid" movie stars:
http://entertainment.timesonline.co.uk/tol/arts_and_entertainment/film/article3056427.ece

Years ago, it was dubbed: The Winner-take-all Society:
http://www.amazon.co.uk/Winner-Take-All-Society-Much-More-Than/sim/0140259953/1

The world market in carbonated drinks is dominated by Coca Cola. How come when fizzy drinks are so easy to manufacture with well-known technologies?

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[Mike]

Chris,

Steve Sailer's FAQ will answer all your queries and quibbles:

http://www.vdare.com/sailer/071203_iq.htm

Here are a few extracts:

[Q. Is IQ really all that important in understanding how the world works?]

A. In an absolute sense, no. Human behavior is incredibly complicated, and no single factor explains more than a small fraction of it.

In a relative sense, yes. Compared to all the countless other factors that influence the human world, IQ ranks up near the top of the list.

[Q. Aren't IQ tests only good for predicting academic performance?]

A. Then why have the U.S. armed forces invested heavily in IQ testing all potential recruits since WWII? Because the military has found, over and over again, that IQ correlates with performance in a huge array of military duties. Over a time, a unit with an average IQ of 110 is going to repair jet engines faster and accidentally shoot themselves in the foot less often than a unit with an average IQ of 90.

[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. Is IQ hereditary?]

A. At the moment, we only have a vague idea of which genes affect IQ, but the data is pouring in. James Watson figures no more than 15 years until the main genes driving IQ scores are nailed down. It could be faster.

In the mean time, we have a lot of circumstantial evidence, such as twin and adoption studies. Almost all of it points toward IQ having a sizable genetic component.

[Q. What does it mean to say IQ has a genetic component?]

A. It means that identical twins tend to be more similar in intelligence than fraternal twins, who are more alike than first cousins, and so forth. That appears to be true.

[Q. Is IQ solely determined by genes?]

A. No. Consider, for example, the need for micronutrient supplementation. For example, here in America, manufacturers have been adding iodine to salt and iron to flour since before WWII to combat medical syndromes (such as cretinism) that lower IQ. In poor countries around the world, hundreds of millions of children still suffer cognitively from lack of iodine and iron. Of course, this relatively cheap step for raising the IQs of the poor in Third World countries is rarely discussed, because the whole topic of IQ is so fraught with the chance of getting Watsoned out of your job.

[Q. What's the real story behind the crushing of James Watson?]

A. The Establishment knows that evidence is piling up for the Bell Curve theory that they’ve denounced so vociferously for so long. So they are just trying to postpone the day of reckoning on which it becomes widely understood that they are fools, liars, and smear-artists by silencing anyone like Watson who speaks up. The frenzy will only increase as the genome data comes flooding in.

[Matt Munro]

The genetic component of IQ - the heritable element - means that somewhere between 40 and 80 % of intelligence is inherited. It's important to realise that this is potential, rather than actual IQ. Someone born with high potential will not realise it without the right stimulation. Measured IQ is a transactive (interractions over time) product of genes and environment. If you are born with low potential but have a very good education (e.g the Royal Family) you will never be a rocket scientist. Conversely, if you are born with high potential but have a crap education (the bright working class kid at the bog standard comp) you are probably heading for mediocrity. It follows that the middle classes do well not because of embedded inequalities or acess to networks but because they tend to marry each other and produce kids with high potential, who are then also educated well, the best of nature and nurture.
A final point - left wing psychologists (which is most of them) have been trying to prove for decades that you can be trained to acheive a high score in IQ test. And you can, with intensive coaching it's possible to raise your score significantly, but, the coached improvement does not correlate with acedemic sucess. High IQ is a symptom of intelligence, not a cause.

[Rob]

Because actually, most defenders of liassez faire have some kind of conservative desert-based theory, and the thought that IQ, which looks to them like some kind of merit, correlates with your place in the social heirarchy is therefore appealing to them. At least at the margins, and probably more centrally, this shades into outright racism, which is why you get the bell curve stuff.

[Bob B]

For all the rhetoric, I suspect that precious few actually subscribe to an all-encompassing commitment to laissez-faire regardless. Functioning and efficient markets crucially depend on complex infrastructures of laws, regulations, enforcement mechanisms and politically independent judicial systems. Scrap that and we tend to end up with bandit capitalism or, at least, pervasive political corruption. The politically productive argument is about how to tweak the inherited infrasture to achieve better economic performance providing, as best we can, that externalities (spill-overs) are internalised.

As the stagnation of Japan's economy post 1992 showed, we cannot on the evidence simply dismiss the possibility of capitalist economies stabilising at low levels of equilibrium with price levels declining on trend, the very combination that motivated Keynes to write his seminal book on: The General Theory of Employment, Interest and Money (1936):

"In particular, it is an outstanding characteristic of the economic system in which we live that, whilst it is subject to severe fluctuations in respect of output and employment, it is not violently unstable. Indeed it seems capable of remaining in a chronic condition of sub-normal activity for a considerable period without any marked tendency either towards recovery or towards complete collapse." [p.249]
http://ebooks.adelaide.edu.au/k/keynes/john_maynard/k44g/chapter18.html

However, the debate is still open about what combination of monetary and fiscal intervention by monetary authorities and governments is most appropriate for addressing such issues when they arise.

[Laban]

Rob - "most defenders of liassez faire have some kind of conservative desert-based theory"

Is that why the most conservative forms of Islam come out of Saudi Arabia ?

("Desert" ... oh well, please yourselves !)

[reason]

Mike...
your post read very well until the last non-sequitur. James Watson said some very stupid things which is what mainly got him into trouble. There are significant differences in AVERAGE IQ scores, but not sufficiently different to support racist ideology. Nor sufficient to entirely rule out environmental causes. And surely conservatives should be last to be IQ determinists. A true meritocracy is not in their interests, the tories being the "stupid party" and all.-) After all, it is desired outcome that "freedom of choice" means making sure the bright kids from the housing estates don't get a good education, as much as means that dumb upper class kids get connections.

[reason]

Don't get me wrong, I don't actually think Matt Munro is right. I think the evidence is that families make a lot more difference to educational outcome than the school does. I was being a little facetious in my last post. The school makes more difference to mediocre students than to the really clever (a lot of what they learn they learn in spite of their teachers).

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