09/09/2018

Hive Mind: How Your Nation’s IQ Matters So Much More Than Your Own. Interview with Garett Jones

Per Martí Jiménez

Outside of a few countries with abundant natural resources, the most important productive asset in each nation is the human mind. Economist Garett Jones explores the role of national IQ in fostering economic prosperity and institutional quality. We recently had the chance to sat down with him in Barcelona to discuss how exactly a country’s cognitive firepower translates into a more competitive economy and what we can do about it, if anything. In his book Hive Mind, Jones argues that while standardized tests can’t tell us everything about how productive our mind is, they do reveal quite a lot about a country’s overall performance. The cognitive skills that these scores roughly index predict financial prudence, social cohesion and political integrity, all significant components to a nation’s overall prosperity.

Garett Jones is a senior scholar and BB&T Professor for the Study of Capitalism at The Mercatus Center, and associate professor of Economics at the Center for Study of Public Choice at George Mason University. He has worked on Capitol Hill, and has contributed to C-Span’s Washington Journal, the Washington Post, The Wall Street Journal, Bloomberg Business Week, Fox Business, Forbes and the New York Times. He holds a BA from Brigham Young University, a MPA in Public Affairs from Cornell University, a MA in Political Science from UC-Berkeley, and a PhD in Economics from UC-San Diego. He is author of Hive Mind: How Your Nation’s IQ Matters So Much More Than Your Own, published by Stanford University Press. Twitter: @GarettJones

 

 

In your book you identify an interesting paradox: knowing someone’s IQ doesn’t tell you a lot about how much money he earns. Yet nations with very high test scores are far more prosperous than those with low test scores. 1 IQ point appears to cause about 1% higher wages for individuals but 6% higher GDP for nations (Jones 2008). Why?

Indeed, that’s what I call the Paradox of IQ. There appears to be a social multiplier: being around smart people helps you being more productive. Over a decade ago, when I began my research into how IQ matters for nations, I soon found that the strong link between average IQ and national productivity couldn’t be explained with just the conventional finding that IQ predicts higher wages. IQ apparently mattered far more for nations than for individuals. Being smart does help you at work but the real benefits of human intelligence seem to be group benefits. That puzzle, that paradox of IQ, is what set me on my intellectual journey. I lay out in my book what I call the five channels of the hive mind for how IQ can pay off more for nations than for you as an individual.

1. High-scoring people tend to be more patient and save more (Al-Ubaydli et al. 2010). Some of that savings stay in their home country rather than going to foreign nations to find their highest rate of return. If you live in a country with high IQ citizens who tend to be more patient and save more, you will be able to use some of their capital. More savings mean more machines, more computers and more technology to work with, which in turn help make everyone in the nation more productive.
2. High-scoring groups tend to be more cooperative (Jones 2008) and cooperation is a key ingredient for building higher-quality governments and more productive businesses. It turns out that experimental evidence shows that high IQ individuals tend to be nicer in cooperation games. Even in experiments performed in top universities from the Ivy League such as Harvard or Stanford, when you place two high-scoring individuals playing the prisoner dilemma they cooperate much more often than if the same experiment is performed with two students with a lower IQ. There seems to be something that makes smarter groups to behave in a more cooperative manner. I call this kind of phenomena Coasian intelligence, after the Nobel laureate Ronald Coase. Coase showed that if the parties to a dispute are allowed to bargain with each other, they can achieve a win-win outcome regardless of who starts off with more power in the negotiation. Since people who do well on IQ tests also tend to do well on emotional intelligence tests, there’s yet more reason to think that smarter people are better at holding relationships together.
3. High-scoring groups are more likely to support market-oriented policies, a key to national prosperity (Caplan 2010).
4. High-scoring groups will tend to be more successful at using highly productive team-based technologies such as computer chips, summer blockbuster films, cooperative mega-mergers. With these technologies, one misstep can destroy the product’s value, so getting high-quality workers together is crucial (Jones 2008).
5. The human tendency to conform, at least a little, creates a fifth channel that multiplies the effect of the other four: the imitation channel, the peer effect channel. Even a small tendency to conform, to act just a little bit like those around us, too try to fit in, tends to quietly shape our behavior. If you have cooperative, patient, well-informed neighbors, that probably makes you a bit more cooperative, patient, and well-informed.

 

Figure 1. Relationship between average cognitive ability estimated in 2009 from earlier PISA, TIMSS, and PIRLS international exams and estimated 2005 GDP per person. Sources: The Hive Mind. Based on Rindermann, Sailer, and Thompson, “The Impact of Smart Fractions,” and Penn World Tables 7.1.

In his study of IQ tests scores for different populations over the past sixty years, James R. Flynn discovered that IQ scores increased from one generation to the next for all of the countries for which data existed (Flynn, 1994). This interesting phenomenon has been called “the Flynn Effect”. Can then the Flynn effect explain much of the economic growth of the last few decades? If not, why is IQ so good at predicting between country income differences but not overall growth?

As you just mentioned, the Flynn effect explains the long term rise in IQ scores, which has been well documented around the world. Nevertheless, there is something that psychologists are still wrestling around with and that is whether IQ gains are more kind of inflationary gains or real gains. Flynn himself doesn’t think that the Flynn effect reflects a real rise in intelligence. It is not something purely inflationary, like reporting prices in pesos rather than in dollars. He thinks instead that it is more likely that people have shifted the way of using their brains: we used to memorize lots of little random facts whereas now we systematize our knowledge. As an economist I suspect that what makes us more productive, compared to our ancestors, centuries ago, is our scientific, rational, systematic way of thinking. But there is still no real good evidence on that, so this is actually my most speculative chapter. The Flynn effect shows how scores have increased but psychologists have not come up with an equivalent of a consumer price index for the brain. We do know that, within a country, individuals with higher test scores outperform, in real life, people with lower test scores. Across time, however, we don’t know what would happen in a competition on a broad set of mental games between an average IQ person from 2018 in Spain and an average IQ person from 1950 in Spain. If there were a Nobel Prize for psychology, Flynn would already have won it and the person who explains the Flynn effect would definitely win another one.

Why did you decide to study IQ specifically, and not some other personality trait such as agreeableness or conscientiousness?

That’s a great question. These are well documented structured personality traits and both economists and psychologists have both found that they have some predictive power for real life outcomes including performance in the labor market. So the reason I went with IQ is because there was already an enormous body of data there in advance suggesting me it would be a useful variable to study the economic impact of human psychology. Paraphrasing the professor of educational psychology Linda S. Gottfredson, IQ is not simply a measure of intelligence, it is among the most accurate, reliable and robust construct of all psychological. If I am going to look in gains from trade between economics and psychology I am going to grab the most robust ideas than I can from psychology and import them into economics. What I hope is that some enterprising graduate student will build his or her career around trying to find a Hive Mind effect for conscientiousness for instance. I believe there is room for that but there is not enough available data yet. The second reason is that IQ for itself could be a more important predictor for life outcomes than agreeableness or conscientiousness.

You have specifically studied the institutional effect of the ‘Hive Mind’, the idea that human capital is a key ingredient for building good institutions. Do more intelligent nations have lower corruption, more competent governments and more competitive markets?

Yes, just as a raw matter of correlation there seems to be a strong, robust relationship between cognitive test scores and institutional quality (Jones 2013) This includes low corruption but even in the sort of libertarian or neoliberal range of traits such as free markets, the enforcement of property rights, the rule of law…, high test scores predict that as well. I have good reasons to think that this relationship is causal; I am only disappointed that there hasn’t been more research across political science and political economy for understanding how important human capital actually is for institutional quality. It is really an underappreciated topic. The American Founding Fathers took it for granted that an educated populace was important for building a good nation, but somehow this message has been lost during the development of our institutions.

Figure 2. Relationship between average IQ and government effectiveness/efficiency. Source: Kalonda-Kanyama et al ‎2012

These are all policies that are easier to get when the ones ruling have in average higher cognitive skills. I was wondering if the economic performance of a nation might not be so much dependent on the average population cognitive skills but on the IQ of the ruling class?

Yes, this is what the German psychologist Heiner Rindermann calls the Cognitive Class. He states knowing the test scores of the top five per cent is more important than knowing the test scores of the average person in the country. The evidence does back him up but these test scores are so highly cross-correlated across countries it is really hard to tell if that high performance is a coincidence or if it is a really robust relationship. They are basically studying a few countries and a couple of them are Gulf States, such as Qatar or the United Arab Emirates, which are not democracies. So if you ask me what I genuinely believe, which is something I explain through the end of my book, I would say that in democracies the skills of the average voter are going to matter more, whereas in non-democratic countries the skills of the elites will have a higher weight. And I prefer to believe most people in rich countries still want to live in democracies.

If our level of debt, our degree of frugality as consumers and our efforts to become prosperous are all shaped by our environment, this sounds to me as quite a good reason to make sure the ones around me are as intelligent as possible, isn’t it?

Yes! If your neighbors are shaping you it is important to have great neighbors. According to the evidence in the behavioral genetics field that my colleague Bryan Caplan points out in his excellent book Selfish reasons to have more kids, your kids’ peers do not matter that much. However, that is a neighborhood by neighborhood change we are talking about: are you living in this side of town or that side of town? But the broader culture that children grow up in, the national culture, does seem to have a big effect on you. We know that, most obviously, it has an effect on what language we speak, but it also seems to shape our level of patience, our shopping habits and our attitude towards trust.

When reading your book the concept of innovation clusters came to my mind. Clusters have been recognized for their importance in contributing to economic development through job creation, access to resources and increased speed of product development. For instance Barcelona is now claimed to be a new kind of Silicon Valley in the fields of IT and biotechnology. How can the research on IQ contribute to a better understanding of the birth of tech clusters?

It does appear that the most exciting products that have been invented in the last few decades or even going back to the Industrial Revolution are things that have been created by clusters of intelligent people that were communicating with each other and competing against each other. Therefore the intuition of an innovation cluster is absolutely an important idea for anyone thinking on economic growth. Both my IQ-type research and traditional urban economics research both give us good reasons to think that having a lot of skilled, well-educated people around each other is crucial for innovation. In this regard I would recommend policy makers trying to build tech clusters in their regions to focus on test scores rather than college degrees as, while we know there is a diploma inflation, it is easy to predict that nations, states or cities with high average scores in IQ or any other standardized cognitive tests will likely become big leaders in the future.

Also, one implication of your O-ring theory of teams is that we should see high income differences between countries but not within countries. If IQ is becoming an increasingly important factor (due to higher returns to the technology of the O-ring sector) shouldn’t we see increasing income inequality between countries and lower income inequality within countries? The evidence seems to point to the opposite direction.

That’s a great question. As I highlight in the introduction of my book, my goal is not to explain everything but to explain half of everything. We do know that inequality has been increasing but the return on IQ has not noticeably risen. So whatever the increase has been, it is not due to IQ differences. What I can tell you though, just based from what I know from the inequality research, is that it turns out that most inequality increases are interfirm and not intrafirm (between companies and not within companies), even between firms in the same industry. So we seem to be living in a world where there are a few market leaders which dominate the field and the rest of the companies following them («Winner takes it all»). Both kinds of companies were probably founded and managed by people with very similar test scores and elite college backgrounds. There seems to be a mixture of pure randomness and some local entrepreneurial excellence which ends determining which firm wins and which firm loses. IQ is not most of the reason.

Some experts believe that as the economy becomes more automated, cognitive skills, especially those related to fluid intelligence (ability to connect ideas and solve complex problems), will gain influence in respect with crystallized, factual intelligence or routinized skills. Will this IQ premium be increasingly relevant as a driver of economic prosperity over time?

No, this is something where I disagree with the excellent Charles Murray, who has written important work in this area. When you look at the data on the link between a person’s test score and his or her wages over time, what you find is that the return of IQ is not rising over time (Bowles et al 2001 and Strenze 2007). Between the 1960s and the 1990s there has been no change in the IQ premium. People have a vague sense though that automation is somehow going to put mundane workers out of business. However, The Invisible Hand seems to have the power to find something for low-skilled people to do that gives them reasonable pay compared to high IQ citizens. There is a say in science that «nature abhors a vacuum», something always rushes in. In free markets as well, free markets abhor unemployed resources. The real world facts and this intuition in the Invisible Hand both tell us that there is not a big individual return to individual IQ. If it has not changed in the past, I don’t see that changing in the future.

Your work suggests improving human capital drives economic growth. But before delving into policy, how do we know your estimates are causal estimates? What identification strategy, if possible, is there to rule out reverse causality? High IQ might cause more economic development, but more economic development might also cause higher IQ.

I definitely think there is some reverse causation because, especially in the world’s poorest countries, if you can make their environment healthier you would rise their IQ scores significantly. The same kind of public help improvements that make us taller than our ancestors also give us better functioning and larger brains than the ones of our ancestors. So I am proud of the reverse causation angle here. The question is if that is hundred per cent of the story and it is obviously not. I believe we would agree on the fact it is easier to build an economy with people that are not malnourished or exposed to terrible environments. Another extra reason for which I think the relationship between IQ and economic development is causal is that in the lab it is causal! If I ask the subjects in the lab to run experiments where money is on the line, whether they take one dollar now versus ten dollars next year, higher IQ people are more likely to wait for that future gain (Al-Ubaydli et al. 2010). That is real causation right there.

What policies do actually increase human capital, the national average IQ? Boosting years of education, early childhood interventions, better maternal nutrition and breastfeeding? Deworming programs and fighting against child malnutrition? High skilled immigration? Genome editing?

Public health interventions have always been important but my Hive Mind theory gives us an extra reason to take this kind of policies seriously in order to increase human capital. One of my hopes when writing the book was that I would get economists to think about public health interventions as relevant instruments for economic development. Policies such as early childhood interventions or better maternal nutrition are even more important than we thought before. There is a second thing which I believe is still underappreciated and maybe more controversial. Flynn’s work suggests that what we did in the modern rich countries is that we learned to systematize much more than our ancestors did. Having an education system which, in an early age, teaches that kind of systematic thinking is probably important and definitely worth exploring.

One implication for countries that want more growth is to get higher-IQ immigrants. Do you suggest an immigration policy such as the one of Canada which seems to put a higher weight on IQ indirectly?

I believe there is a lot of room for countries to embrace a Canadian-style skills-focused immigration system, yes. There is a strong reason for thinking that the benefits won’t just be for the firm or even the industry that receives these high-skilled workers, but also from bringing in folks with a lot of knowledge that they will share with the rest of society. They will be peers who will be models for their neighbors. The mixture of individual skills and peer-effects means we have more reasons to at least experiment with these immigration policies. I think this is not only relevant for the rich countries but for the poor countries as well: designing instruments to bring in high-skilled immigrants or people from high-scoring test countries. The case of both Singapore and some Sub-Saharan African countries, encouraging high-skilled immigration from China and China, is worth examining.

Don’t you think self-selection would take care of the problem: maybe the people who come here, even without a government selection device, self-select and so maybe we end up with higher IQ people anyway?

That’s a good question and it could be a possibility. There is an analogy in international trade literature, which is that firms that decide to export are firms that tend to be more productive already. So it could be that, as you mention, people that decide to self-export (emigrate) are already skilled. There is a good case to be made for that. But remember what price theory tells us: if there are positive externalities for a trade it would probably still be undersupplied and so, those of us who believe in the basics of macroeconomic theory will at least keep in mind that, even if there is a positive selection for migrants, perhaps government policy can help select for skilled migrants even more. Because these will have benefits for everyone around them, not only for the firms they work for.

To conclude, the evidence suggests that economic development is affected by traits that have been transmitted across generations over the very long run. For instance, low-trust individuals demand more government regulation and control over the economy. The work developed by authors such as Acemoglu and Robinson, Douglass North…, however, tries to debunk the role of culture as a relevant driver of institutional quality. What are your takes on that?

There clearly are some institutional changes that do not have to do with long standing preexistent cultural traits, take for example the case of North versus South Korea. But I think this is not the entire story. I believe my fellow economists have been good at both collecting data and using data from other fields which show how traits like trust have been transmitted through generations over the very long run. In my essay Do Immigrants Import Their Economic Destiny?  I go through some systematic evidence on how the past predicts the present, focusing on the measurement and estimation of the effects of historical variables on contemporary income by explicitly taking into account the ancestral composition of current populations. Algan & Cahuc 2010 show that inherited trust of descendants of US immigrants is significantly influenced by the country of origin and the timing of arrival of their forebears. We can predict the trust levels of Americans who are Swedish descendent versus Americans of Italian descent by looking at the current levels of trust in Sweden and Italy. Trust is thus a trait which can be transmitted across multiple generations.

To sum up, over the extremely long run, a good predictor of your nation’s current economic behavior is your nation’s ancestors’ past behavior. Spolaore et al. 2013  provides a framework to discuss different channels through which intergenerationally transmitted characteristics may impact economic development, biologically (via genetic or epigenetic transmission) and culturally (via behavioral or symbolic transmission). I hope you find ways of raising trust levels up to the levels of Scandinavia but the best bet is that future behavior is going to be a lot like past behavior and that the impact of cultural transmission mechanisms in institutional quality deserve much more attention than what social scientists have given them.

REFRENCES

Algan, Yann, and Pierre Cahuc (2010). Inherited Trust and Growth. American Economic Review, 100 (5): 2060-92.

Al-Ubaydli, O., Jones, G., & Weel, J. (2014). Average player traits as predictors of cooperation in a repeated prisoner’s dilemma.

Bowles, S., Gintis, H., & Osborne, M. (2001). The Determinants of Earnings A Behavioural Approach. Journal of Economic Literature, 39, 1137-1176.

Caplan, B., & Miller, S. C. (2010). Intelligence makes people think like economists: Evidence from the General Social Survey. Intelligence, 38(6), 636-647.

Flynn JR (1994). IQ gains over time. In: Sternberg RJ, editor. The encyclopedia of human intelligence. New York: Macmillan; pp. 617–623.

Jones, G. (2008). Are smarter groups more cooperative? Evidence from prisoner’s dilemma experiments, 1959-2003. Journal of Economic Behavior & Organization, 68(3), 489-497.

Jones, G. (2009). The O-ring sector and the foolproof sector: An explanation for cross-country income differences. Working paper in economics 09–04. George Mason University.

Jones, G. (2013). Human Capital and National Institutional Quality: Are TIMSS,. PISA, and national average IQ robust predictors? Intelligence, 46, 148-155.

Kremer, M. (1993). The O-ring theory of economic development. The Quarterly Journal of Economics, 551-575.

Spolaore, E. (2013). How Deep Are the Roots of Economic Development? Journal of Economic Literature, 51 (2): 325-69.

Strenze, T. (2007). Intelligence and socioeconomic success: A meta- analytic review of longitudinal research. Intelligence, 35, 401–426.