Some Thoughts on Economics and IQ

According to the controversial psychologist Richard Lynn, the secret to a successful capitalist economy is a population with a high IQ. However, maintaining a successful economy may also be about recognising and dealing with IQ weaknesses.

In IQ studies, Western countries tend to come out on top in measures of verbal intelligence. Conversely, people in East Asia tend to have higher non-verbal IQs. The verbal IQs of English speaking western countries like Britain and the United States are further boosted by an Ashkenazi Jewish population with an average verbal IQ (according to Philippe Rushton) of 107.5.

The IQ patterns of Western and East Asian countries seem to match their respective economic fortunes over the last few decades. After a period of industrial decline in the 1970s, the English speaking West has enjoyed a high rate of growth over the last 12-15 years, in part, by shifting from manufacturing into services, software and media products, ie, just the sort of economic output requiring a high verbal IQ.

In contrast, industrialisation benefits from a population with a high non-verbal IQ, and so it seems likely that China’s extraordinarily rapid rate of industrialisation is at least partly due to the high performance IQ of its population.

However, there is a danger in letting people fashion the economy in their own image without industrial planning. The English-speaking world seems to have forgotten the message that all wealth ultimately comes from production. In English-speaking western countries, there has been an explosion in jobs requiring a high verbal IQ that don’t really add to GDP. People such as real estate agents and public relations staff readily come to mind. Subsequently, productivity levels have stagnated while serious trade imbalances have built up with more industrialised Asian countries.

The Japanese seems to have the opposite problem. They have perhaps over-emphasised production and neglected their service economy. Even though Japan is highly efficient in manufacturing, its banking and distribution sectors are surprisingly antiquated. Subsequently, as manufacturing has peaked, the whole economy has stagnated. The Japanese have perhaps become too reliant on activities requiring a high performance IQ.

The IQ problem in developed countries is going to become more acute as their populations start aging. Hence it is important that western countries maximise opportunities for those with atypical IQ profiles.

In the West, it is important that workers with high performance IQs are lured into productive jobs and get the best available training and incentives. In New Zealand, it is absurd that maths teachers aren’t paid more than arts teachers, even though the former are in serious under-supply. Similarly, many of the countries best scientists are driven away by lack of government spending on scientific research.

Perhaps the most important thing in making the most of a nation’s intelligence, is good intelligence- acknowledging the importance of IQ in many life outcomes and taking steps to record it on a national level.