# IQ and GDP

russ_watters said:
the key to American economic success: optomism. The American economy is strong because optomism is part of American culture.
Lynn and Vanhanen presented the alternative case that that variances between nations in economic success can be positively explained by variances between nations in:

1. National IQ
2. Economic liberality
and,
3. Political liberality
...in that order:

• We also measured the significance of economic and political systems using data on economic freedom ratings (1997) and an index of democratization (1998). The results of multiple correlation analyses show that these two additional variables explain 10-12 percentage points of the variation in the measures of per capita income independently from national IQs. Thus, when the three explanatory variables are taken together, the explained part of variation in the measures of per capita income increases to 52-65 percent and less than half of the variation remains unexplained. Our conclusion is that differences in national intelligence provide the most powerful and fundamental explanation for the gap between rich and poor economies.
(Richard Lynn and Tatu Vanhanen. IQ and the Wealth of Nations. p158.)

Lynn and Vanhanen presented the alternative case that that variances between nations in economic success can be positively explained by variances between nations in:

1. National IQ
2. Economic liberality
and,
3. Political liberality
...in that order:

• We also measured the significance of economic and political systems using data on economic freedom ratings (1997) and an index of democratization (1998). The results of multiple correlation analyses show that these two additional variables explain 10-12 percentage points of the variation in the measures of per capita income independently from national IQs. Thus, when the three explanatory variables are taken together, the explained part of variation in the measures of per capita income increases to 52-65 percent and less than half of the variation remains unexplained. Our conclusion is that differences in national intelligence provide the most powerful and fundamental explanation for the gap between rich and poor economies.
(Richard Lynn and Tatu Vanhanen. IQ and the Wealth of Nations. p158.)
That has been heavily criticized.
Recently Richard Lynn and Tatu Vanhanen have presented evidence that differences in national IQ account for the substantial variation in national per capita income and growth. This paper challenges these findings and claims that, firstly, they simply reflect inappropriate use and interpretations of statistical instruments. Secondly, it is argued that the models presented by Lynn and Vanhanen are under-complex and inadequately specified. More precisely the authors confuse IQ with human capital. The paper concludes that once control variables are introduced and the models are adequately specified, neither an impact of IQ on income nor on growth can be substantiated
http://www.suz.unizh.ch/volken/ThomasVolken/pdfs/IQWealthNation.pdf.

But there is at least one other paper claiming a link between IQ and wealth, assuming the national IQ data from the Lynn and Vanhanen study but with different statistics. But they do not claim that it accounts for more than 50% of the variation.
www.siue.edu/~garjone/JonesSchneApr.pdf[/URL]

The claims are in all cases dependent on that the IQ national data presented by Lynn and Vanhanen are correct. And also their methods for doing that has also been criticzed, for example for using small, old and unrepresentative samples from different times using different tests.

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russ_watters
Mentor
Tom McCurdy said:
Whose ecomony currently is the strongest in the world?
It depends on how you measure it (absolute or per capita, large vs fast growing), but the US is largest in absolute terms and Luxemburg is largest per capita. http://www.worldfactsandfigures.com/gdp_country_desc.php [Broken]

Growth rate is a good indicator of momentum and thus strength (though size is more often used), but can be clouded by small countries having massive short term increases. HERE is some data on that. The most noteable country on the list is China, which has maintained ~8% for some time and is expected to maintain it for some time to come. (note: that data is for one year only, and there can be large year-to-year fluctuations for any country).

Aquamarine - when you see someone puke in the supermarket, report it to someone who works there and a janitor will clean it up. Don't try to do anything about it yourself.

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Volken's phunny phactor rotations, revisited

Aquamarine said:
Lynn and Vanhanen presented the alternative case that that variances between nations in economic success can be positively explained by variances between nations in:
1. National IQ
2. Economic liberality
and,
3. Political liberality
...in that order
That has been heavily criticized.
http://www.suz.unizh.ch/volken/ThomasVolken/pdfs/IQWealthNation.pdf [Broken]

Volken says, "...the authors [Lynn and Vanhanen] confuse IQ with human capital." As I pointed out in the Volken thread, that is a criticism of Arthur Jensen's The g Factor (1998), not of Lynn and Vanhanen. If Volken has an issue with IQ as a major factor in human capital, his issue is with Arthur Jensen's work, and therefore that is where he should be directing his investigations.

The claims are in all cases dependent
That is because science and dogmatic religion are different things. Science is contingent upon empirical data and dogmatic religion is not. Please see Raymond Cattell's A New Morality from Science for a full discussion of that:
http://www.efn.org/~callen/ToC.htm

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Nereid
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Two interesting variations: if you print US$(instead of your own currency, in Tom's new country), then could you use these fake notes to buy goods to bring back to your country? Have you then created new wealth out of nothing? (Hint: try imagining that there's a country setatS detinU, as big as the US, and it does this forgery on a massive scale; oh, and that the forged notes are so good no one can tell them from the real). What if Tom's new country were completely autarkic (absolutely no trade with the outside world)? Oh, and a comment on the important of perception and trust ... the value of your new currency Tom, in$US, has a great deal to do with your national accounts - trade balance, domestic interest rates, capital account balance, ... - all of which are more or less open to determination by really smart people with economics degrees. Then there are currency speculators who read the reports of those really smart people, and are prepared to bet billions (even trillions) on your currency, if they think they can make a profit ... the more out of whack your currency is with the economic fundamentals, the greater the chances are that these speculators will start taking positions ... the more liquid the market for your currency is, the more certain this will happen quickly.

You might be interested to know that one suggestion for Japan to pull itself out of its decade-long doldrums was 'print lots of money' ... the thinking being that the resulting inflation would somehow result in the economic engine revving up.

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Nereid
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Oh dear, back to Lynn and Vanhannen eh?

For those new to this, we had a very extensive discussion of this infamous book some time ago, here on PF (I'll dig up the URL if anyone's interested).

That there is a correlation between the IQ data L+V present and three economic indicators is undeniable; whether national IQ is a (leading) cause of economic success (as claimed by L+V) is a very different kettle of fish.

First, as Aquamarine said, L+V's data is questionable, to say the least.

Next, L+V's case for a causal connection (IQ -> success) is deeply flawed, even assuming the data they use are correct.

Finally, it's quite easy to find plenty of indicators which correlate more strongly with the three 'success metrics' used by L+V than 'national IQ' - an urban/rural measure of where people live, for example (I'm not sure anyone is suggesting that city living causes economic success!).

loseyourname
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Seems to me that a wealthy nation can better educate its populace, thus increasing the IQ. I wouldn't doubt that smarter people are theoretically capable of creating more wealth, but how often does this actually happen? Many of the most intelligent people out there are researchers or professors making next to nothing. Conversely, quite a few wealthy people either were extremely driven or just got lucky, not necessarily a whole lot more intelligent than the average person. Why don't we do an accounting of the personal wealth of posters on this site? Despite our obviously above-average level of intelligence, I'm willing to bet we aren't particularly wealthy.

Volken's individuals-groups confusion revisited

loseyourname said:
I wouldn't doubt that smarter people are theoretically capable of creating more wealth, but how often does this actually happen? Many of the most intelligent people out there are researchers or professors making next to nothing.
Individuals are not groups. One of Volken's mistakes, when he was criticizing Lynn & Vanhanen, was to confuse individual success with group success. And, again, this is old ground that was covered in the Volken thread:

• In addition, nations whose populations have high IQs will have intelligent and efficient personnel in services and public sector employment that contributes indirectly to the strength of the economy such as teachers, doctors, scientists and a variety of public servants responsible for the running of telephones, railroads, electricity supplies and other public utilities....

http://www.rlynn.co.uk/pages/article_intelligence/6.htm [Broken]

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Nereid
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The really interesting thing that's not included - well, one of them - is 'mobility of labour'. If trained nurses and doctors can move to the EU, and get paid far, far more than they would in their home countries, how does this affect the 'national IQ' argument? If a significant part of the 'public sector' can be effectively run by a few, highly educated folk, how does this impact Lynn's naive views (think the telecoms sector ... how many telecoms engineers and managers do you need to run an efficient, modern, wireless-based network? Answer: less than 100, even for a country as big as South Africa - don't forget that most of the workforce in telecoms and electricity are engaged in pretty mundane, routine activities).

One of the 'tragedies in waiting' for the US is the dramatic slowdown of intake of science and engineering students from other countries - the US's (former) ability to attract huge numbers of top class scientists contributed in no small way to its present economic strength. Their contribution to the mythical 'national IQ' was minimal; their contribution to the US' per capita GDP and growth enormous.

loseyourname
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Individuals are not groups. One of Volken's mistakes, when he was criticizing Lynn & Vanhanen, was to confuse individual success with group success. And, again, this is old ground that was covered in the Volken thread:

Most wealth is held and created by individuals, though, not by groups. Furthermore, there are plenty of individuals that do not even consider personal wealth to be a good measure of their success, and many of these individuals are quite intelligent.

In addition, nations whose populations have high IQs will have intelligent and efficient personnel in services and public sector employment that contributes indirectly to the strength of the economy such as teachers, doctors, scientists and a variety of public servants responsible for the running of telephones, railroads, electricity supplies and other public utilities....

Since when is there a correlation between IQ and efficiency? My IQ is way higher than my fathers, but I could never do his job as efficiently as he does it, simply because I am not as physically capable. This is the case with many public service jobs that require physical labor. In the case of non-physical jobs, I would think that organizational capability, as well as the ability to deal well with stress and multitasking, contribute as much or even more to job efficiency than does IQ.

Just take the most prominent and important job in this country: that of the president. Most scholars would probably argue that Lincoln or perhaps Washington was the most effective president we've had, but Wilson was almost certainly the most intelligent. Furthermore, if we look at some of the people in history with the highest IQ's (Goethe, Mozart, Marilyn vos Savant), none of them were particularly wealthy, nor did they seem to have any desire to be.

loseyourname
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Nereid said:
The really interesting thing that's not included - well, one of them - is 'mobility of labour'. If trained nurses and doctors can move to the EU, and get paid far, far more than they would in their home countries, how does this affect the 'national IQ' argument? If a significant part of the 'public sector' can be effectively run by a few, highly educated folk, how does this impact Lynn's naive views (think the telecoms sector ... how many telecoms engineers and managers do you need to run an efficient, modern, wireless-based network? Answer: less than 100, even for a country as big as South Africa - don't forget that most of the workforce in telecoms and electricity are engaged in pretty mundane, routine activities).

You know, I didn't even consider it, but you just made me realize that many remote service jobs are now held by workers overseas. Take, for instance, financial managers living in India. They do a great deal to increase the wealth of the US, but they certainly do nothing to contribute to the national IQ.

Nereid
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loseyourname said:
You know, I didn't even consider it, but you just made me realize that many remote service jobs are now held by workers overseas. Take, for instance, financial managers living in India. They do a great deal to increase the wealth of the US, but they certainly do nothing to contribute to the national IQ.
You've introduced another dimension which Lynn is apparently wholly blind to ... the economic sector composition of a country. For example, the correlation between sector mix and 'national IQ' is truly amazing (countries with low 'national IQs' tend to have most of their workforce engaged in agriculture etc - the 'primary' sector; those with high, mostly in services - the tertiary sector). Lynn et al would have you believe that the causation is IQ -> economic sector. To see how nonsensical this is, consider (as you have hinted) India and Ireland, the Flynn effect, and the economic sector distributions of countries 50 and 100 years ago. If you go back even further, you find that most folk lived in rural areas, and were engaged in agriculture (and other primary sector activities) - yet a mere instant (in terms of genetic composition of populations) later the descendants of almost all those folk live in cities and are engaged in services!

Goethe and the wealth of nations

loseyourname said:
services and public sector employment that contributes indirectly to the strength of the economy such as teachers, doctors, scientists
Most wealth is held and created by individuals, though....

...if we look at some of the people in history with the highest IQ's (Goethe, Mozart, Marilyn vos Savant), none of them were particularly wealthy, nor did they seem to have any desire to be.
And the point was that the creators of wealth in a society do not necessarily enjoy proportional ownership of it. The high-IQ members of a society such as the teacher who creates human capital, and the scientist who creates technological capital, normally do not personally profit as much from their productiveness as do the investors in business enterprises that employ that created human and technological capital. The wealth of a nation may be largely owned by those business investors, but that does not necessarily mean that the high-IQ citizens of that nation – such as teachers, scientists, Goethe, Mozart, and Marilyn vos Savant – did not contribute more than their per capita share of the productiveness leading to its creation.

Since when is there a correlation between IQ and efficiency?
According to Arthur Jensen, the g factor is the most important factor predicting occupational productivity:

• In the world of work, g is the main cognitive correlate and best single predictor of success in job training and job performance. Its validity is not nullified or replaced by formal education (independent of g), nor is it decreased by increasing experience on the job.
(Arthur Jensen. The g Factor. Chapter 9: The Practical Validity of g. p270.)

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Nereid
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Just to put the Jensen quote (thanks hitssquad) in context: he is referring primarily to the US, and (if you study the literature) indirectly to what we'd call 'developed economies'. It would be interesting to see how much this 'best single predictor of success' varies throughout the world, and (if we had a time machine) since the Industrial Revolution. There are some obvious, glaring exceptions: in a great many occupations and places, the best single predictor would likely be general health and/or physical strength.

Well, I was reading somewhere [forget where] that UK and France were "printing" more money then they can cover during the first World War, this was at the beginning of the modern era of money printing. Both countires were almost going to lose the war, and they were having this choice to reduce the lack of money the goverments were facing [I know, they were before the war and after the war rich empires, but the economy was at a big risk]

I was reading that the Islamic Caliphate country during the centuries before its distruction in the world war I [As Ottoman's State at that time] was using a "smart" tactic to keep the trust in the currency and "notes" they were spreading. They cover it by both silver and Gold at the same time, so if they lack one sometimes, the other may help is rescuing the situation.

loseyourname
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Nereid said:
Just to put the Jensen quote (thanks hitssquad) in context: he is referring primarily to the US, and (if you study the literature) indirectly to what we'd call 'developed economies'. It would be interesting to see how much this 'best single predictor of success' varies throughout the world, and (if we had a time machine) since the Industrial Revolution. There are some obvious, glaring exceptions: in a great many occupations and places, the best single predictor would likely be general health and/or physical strength.

Note that Jensen says g is the single most important "cognitive" correlate of success. He says nothing of non-cognitive correlates, such as health, strength, or even motivation.

Nereid
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loseyourname said:
Note that Jensen says g is the single most important "cognitive" correlate of success. He says nothing of non-cognitive correlates, such as health, strength, or even motivation.
Hmm, it guess that's one read of the sentence; however, I read it differently ("In the world of work, g is the [...] best single predictor of success in job training and job performance") - 'main cognitive correlate' refers (solely?) to correlation.

You also point to another interesting facet - I believe you're correct that Jensen does not regard 'motivation' as 'cognitive'; I wonder if 'psychometricians' study motivation? Another example of the great divide in this field of psychology?

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Lynn and Vanhanen presented the alternative case that that variances between nations in economic success can be positively explained by variances between nations in:

1. National IQ
2. Economic liberality
and,
3. Political liberality
...in that order:
I just spent the past 3 days in a conference with Richard Lynn and had a private conversation with him only yesterday. We were discussing the organization of the Mongoloid brain and did not discuss the book he wrote with Vanhanen. There was, however, a paper presented by Michael McDaniel (yesterday) which demonstrated that Lynn's association of national GDP with IQ was not sensitive to the estimates of IQ for nations below 90. If all of the lower ones (down to and below 60) are assumed to have means of 90, the curve fit is virtually identical. He also showed that it is quite likely that Lynn's estimate of this relationship understated the relationship between IQ and GDP. His conclusion: "IQ is a very robust predictor of the wealth of nations." Bouchard pointed out that Lynn's conclusions are especially believable in light of what we otherwise know about IQ.

Lynn presented a paper, but it was on another subject.

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Nereid said:
You also point to another interesting facet - I believe you're correct that Jensen does not regard 'motivation' as 'cognitive'; I wonder if 'psychometricians' study motivation? Another example of the great divide in this field of psychology?

Going through Jensen's chapter on The Practical Validity of g, we find that the various tests, like the ASVAB*, that he uses did not include motivation. However there was an interview as part of the testing for pilot training:

Ratings based on structured interviews (which systematically assess subject attributes including educational background, self-confidence and leadership, flying motivation) were also found to have signifigant predictive validity for success in pilot training. However, when the interview ratings were included in a multiple correlation along with the ASVAB to predict training success, the interview ratings proved to have no incremental validity over the ASVAB score. This finding indicates that whatever predictive validity the interview had was due to its overlapping variance with the predictive component of the ability factors tapped by the ASVAB, which is largely g.
(p 283).

*ASVAB subtests: Arithmetic reasoning, numerical operations, paragraph comprehension, word knowledge, coding speed, general science, mathematics knowledge, electronics information, mechanical comprehension, automotive-shop information.

Nereid said:
Lynn et al would have you believe that the causation is IQ -> economic sector.
Lynn has noted that there is a robust relationship between national GDP and IQ. Do you dispute that? If so, would you supply data to demonstrate it?

To see how nonsensical this is, consider (as you have hinted) India and Ireland, the Flynn effect,
The Flynn Effect??? I have previously posted information here which supports the finding that the Flynn Effect is not a Jensen Effect. If it is not, it has nothing to do with intelligence, but is instead related to specific abilities that do not correlate with g. I discussed this two days ago with Rushton, who was one of the first to demonstrate that the Flynn Effect is not a Jensen effect.

and the economic sector distributions of countries 50 and 100 years ago. If you go back even further, you find that most folk lived in rural areas, and were engaged in agriculture (and other primary sector activities) - yet a mere instant (in terms of genetic composition of populations) later the descendants of almost all those folk live in cities and are engaged in services!
Do you think the above observation disproves the relationship between GDP and IQ? That relationship has existed for centuries. Have you read the conclusions reported by Murray in his book about Human Accomplishment? If so, perhaps you can see a connection? If you can't see the connection, I suggest that you need to give it some serious thought.

Nereid said:
That there is a correlation between the IQ data L+V present and three economic indicators is undeniable; whether national IQ is a (leading) cause of economic success (as claimed by L+V) is a very different kettle of fish.
Only when the observer wishes to take a mind set and ignore the full body of knowledge that pertains to the issue.
First, as Aquamarine said, L+V's data is questionable, to say the least.
As I have pointed out, the conclusion is not sensitive to the data and is probably understated. I challenge you to demonstrate otherwise.

Next, L+V's case for a causal connection (IQ -> success) is deeply flawed, even assuming the data they use are correct.
This is incorrect. Lynn's conclusions are consistent with both the findings of intelligence research and with economic principles. Economist Edward Miller commented that McDaniel's analysis was consistent with the causation effects that have been discussed in detail by Gordon and Gottfredson. These are basically that daily life choices are slightly g loaded and that the variances add enough to accumulate large effects.

loseyourname said:
Seems to me that a wealthy nation can better educate its populace, thus increasing the IQ.
There are no data showing that g can be increased, even a tiny bit, by education. Knowledge and intelligence are different commodities.

I wouldn't doubt that smarter people are theoretically capable of creating more wealth, but how often does this actually happen?
On a statistical basis it can be seen within our country, and within other countries, and between countries. This point has been demonstrated over and over. Yesterday, Dave Lubinski presented very impressive results showing the grossly disproportionate financial success of the top 1/4 of the top 1% of talent search students as compared to the bottom 1/4 of that same top 1%. The numbers are amazingly large, even over that tiny separation.

Many of the most intelligent people out there are researchers or professors making next to nothing.
The people who achieve success in academics were also discussed by Lubinski. He measured their success by tenure and age at tenure. Again, the differences were amazingly large.

Conversely, quite a few wealthy people either were extremely driven or just got lucky,
Some probably got lucky. This subject relates to statistics, not to exceptions and impressions. I suggest that you consider examining real numbers.

not necessarily a whole lot more intelligent than the average person. Why don't we do an accounting of the personal wealth of posters on this site?
You could do that, if you think the results would be meaningful. They would not.

Despite our obviously above-average level of intelligence, I'm willing to bet we aren't particularly wealthy.
Self-selecting groups are often very poor representations. Mensa, for example, has collected data showing that its members have higher incomes than average, but even so, it is likely that Mensans are self-selected in the down direction for success. Successful people are more likely to be working than playing. Lubinski showed that the people in the TS group worked very long hours, in addition to being super intelligent.

Nereid said:
Just to put the Jensen quote (thanks hitssquad) in context: he is referring primarily to the US, and (if you study the literature) indirectly to what we'd call 'developed economies'. It would be interesting to see how much this 'best single predictor of success' varies throughout the world, and (if we had a time machine) since the Industrial Revolution. There are some obvious, glaring exceptions: in a great many occupations and places, the best single predictor would likely be general health and/or physical strength.
It happens that there was a paper presented by Arden and Hill on Friday that showed intelligence to be significant even in preliterate society. The study was one of the most impressive I have seen. Intelligence was determined by the Raven's Color set. The people were Ache (living in Paraguay) and were living at the most primitive level imaginable. Through very well designed methods the researchers found that tribal status was determined by intelligence and not any other factor (of many tested), including hunting ability.

loseyourname said:
Note that Jensen says g is the single most important "cognitive" correlate of success. He says nothing of non-cognitive correlates, such as health, strength, or even motivation.
Really? How did you come to that conclusion? It is simply not true. Have you read The _g_ Factor? Have you read a good sampling of Jensen's papers? Jensen has discussed factors other than intelligence and commented on their importance.

FWIW, I had the wonderful experience of several private conversations with Jensen yesterday and the day before. One lasted for over 1/2 hour. He is brilliant and held in the highest esteem by his colleagues (there are no peers).

loseyourname
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Mandrake said:
There are no data showing that g can be increased, even a tiny bit, by education. Knowledge and intelligence are different commodities.

That may be true, but hitssquad was claiming a correlation between national IQ, not g. The results a person gets on an IQ test depends on more than their intelligence. It depends on understanding of the language, experience taking tests, and attention span as well. A very intelligent person that cannot concentrate will underperform.

The people who achieve success in academics were also discussed by Lubinski. He measured their success by tenure and age at tenure. Again, the differences were amazingly large.

I'm glad to hear that, but again, that is outside of what seemed to be going on in this thread thus far. Although I will note, even then, that tenure is no guarantee of self-satisfaction, which would seem to me the best indicator of success. Any attempt to objectively quantify success seems ill-fated. You can quantify whether or not certain goals have been attained, but you cannot quantify the feeling that a person is really after.

Some probably got lucky. This subject relates to statistics, not to exceptions and impressions. I suggest that you consider examining real numbers.

Well, to be honest, I'd imagine (granted, my assessment isn't all that scientific) that the single greatest predictor of personal wealth is the wealth of one's parents. In order to remove this factor from any study I was personally conducting, I would include only self-made subjects. Do you have any idea if this was considered?

You could do that, if you think the results would be meaningful. They would not.

It would confirm what you said about people that spend a lot of their time playing (or on an internet forum) not being as likely to make big bucks regardless of their intelligence. In fact, I'd like to see a study correlating the percentage of time spend attempting to acquire wealth with personal wealth. I'd be willing to bet (though it's just a hunch) that you'd see a greater correlation here than you would with intelligence. But granted, I'm no expert on the subject, and I'm not attempting to make any authoritative statements here.