Garett Jones has built much of his excellent Hive Mind: How Your Nation’s IQ Matters So Much More Than Your Own on foundations that, while relatively well established, are likely surprising (or even uncomfortable) for some people. Here’s a quick list off the top of my head:
- High scores in one area of IQ tests tends to show up in others – be that visual, maths, vocabulary etc. The “g factor” can capture almost half of the variation in performance across the different tests.
- IQ is as good as the best types of interviews at predicting employee performance (and most interviews aren’t the “best type”) .
- IQ is the best single predictor of executive performance, and for performance in the middle to high-end range of the workforce.
- IQ predicts practical social skills. If you know someone’s IQ and are trying to predict job or school performance, there is little benefit in learning their EQ score. Conversely, if you know their EQ score, their IQ score has valuable information.
- IQ scores in poor countries predict earning power, just as they do in developed countries.
- Test scores such as the PISA test are better predictors of a country’s economic performance than years of education.
- Corruption correlates strongly (negatively) with IQ.
- IQ scores are good predictors of cooperative behaviour.
And so on.
On that last point, there was one element that I had not fully appreciated. Jones reports an experiment in which players were paired in a cooperative game. High-IQ pairs were five times more cooperative than high-IQ individuals. The link between IQ and cooperation came from smart pairs of players, not smart individual players
Once you put all those pieces together, you reach the punchline of the book, which is an attempt to understand why the link between income and IQ, while positive both across and within countries, is of a larger magnitude across countries.
Jones’s argument builds on that of Michael Kremer’s classic paper, The O-Ring Theory of Economic Development. Kremer’s insight was that if production in an economy consists of many discrete tasks and failure in any one of those tasks can ruin the final output (such as an O-ring failure on a space shuttle), small differences in skills can drive large differences in output between firms. This can lead to high levels of inequality as the high-skilled work together in the same firm, leading them to be disproportionately more productive.
Jones extended Kremer’s argument this by contemplating what the world would look like if it comprised a combination of what he calls an O-ring sector and a foolproof sector. Here’s what I wrote about Jones’s argument previously based on an article he wrote:
The foolproof sector is not as fragile as the more complex O-ring sector and includes jobs such as cleaning, gardening and other low-skill occupations. The key feature of the foolproof sector is that being of low skill (which Jones suggests relates more to IQ than quantity of education) does not necessarily destroy the final product. It only reduces the efficiency with which it is produced. A couple of low-skill workers can substitute for a high-skill worker in the foolproof sector, but they cannot effectively fill the place of a high-skill O-ring sector worker, no matter how many low-skill workers are supplied.
In this economy, low-skill workers will work in the foolproof sector as these firms will pay them more than an O-ring sector firm. High-skill workers are found in both sectors, with their level of participation in each sector such that high-skill workers are paid the same regardless of which sector they work in (the law of one price).
Thus, within a country, firms will pay high-skill workers more than their low-skill counterparts, but not dramatically so. Their wage differential is determined by the difference in their outputs in the foolproof sector.
Across countries, however, things are considerably different. The highest skill workers in a country provide labour for the O-Ring sector. If they are low skilled relative to the high-skilled in other countries, their output in that fragile sector will be much lower. This occurs even for relatively small skill differences. Their income will reflect their low output, with wages also lower in the foolproof sector as high-skill workers apportion themselves between sectors such that the law of one price holds. The net result is much lower wages for workers in comparison to another country with a higher-skill elite.
The picture is a bit more subtle than that, depending on the mix of skills in the economy (which Jones describes in more detail in both the paper and book). But the basic pattern of large income gaps between countries and small gaps within is relatively robust.
One thing I would have liked to have seen more of in the book – although I suspect this might have somewhat been counter to Jones’s objective – would have been for Jones to challenge some of the research. At times it feels like Jones is tiptoeing through a minefield – the book is peppered with distracting qualifications that you feel he has to make to broaden the audience of the book.
But that said, I’m likely not the target audience. And I like the thought of that new audience hearing what Jones has to say.