The intelligent inheriting the earth


Jason Collins


August 22, 2012

From a working paper by Garett Jones released earlier this year:

Social science research has shown that intelligence is positively correlated with patience and frugality, while growth theory predicts that more patient countries will save more. This implies that if nations differ in national average IQ, countries with higher average cognitive skills will tend to hold a greater share of the world’s tradable assets. I provide empirical evidence that in today’s world, countries whose residents currently have the highest average IQs have higher savings rates, higher ratios of net foreign assets to GDP, and higher ratios of U.S. Treasuries to GDP. These nations tend to be in East Asia and its offshoots. The relationship between national average IQ and net foreign assets has strengthened since the end of Bretton Woods.

Jones notes that as capital flows become increasingly free, the opportunity for high IQ people to increase their holdings of assets will also increase. East Asian populations, with the world’s highest average IQs, will come to hold a greater proportion of the world’s financial assets than they now do.

Jones argues that policies that lift cognitive skills should be implemented through nutrition, education or immigration policies. This will in turn increase the level of financial assets of the population as they increase their average saving rate. Plus, as Jones has noted in other papers, increased IQ has benefits beyond savings rates.

One interesting element of the paper is the title - Will the intelligent inherit the earth? IQ and time preference in the global economy - which I have paraphrased for the title of this post. While intelligence and reproductive success have an ambiguous relationship in modern settings, lower fertility for the high savers would result in them holding an increasing proportion of the world’s assets, while simultaneously forming a smaller proportion of the population. The intelligent may own the earth, but they might be vastly outnumbered.