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Friday, August 28, 2009

Why Does Intelligence Correlate With Money?

Greg Mankiw is an economics professor and (at least used to be) an economics adviser to Mitt Romney. He posted this graph on his blog from the NY Times blog:
Now, for the record I do not like standardized tests. It's another whole blog post, but lets just say I think they are ineffective. That aside, standardized tests have convinced a lot of people that they measure at least some type of intelligence.

Which brings me to my question: Why does it seem intelligence correlates with money? There seem to be two types of answers:
  1.  If you have money you live in the nice part of town with good schools.  You have more money to throw at education: books, tutors, etc...  You value education because you probably have one yourself which rubs off on your kids.  This is the nurture argument.
  2. If you have money it is probably because you are naturally smart, have genes conducive with intelligence, and pass those genes to your kids.  This is the nature argument which Mankiw is partial to.
Now Mankiw points out an important observation:  We need to see the same plot where we only consider adoptive children.  They don't have the same genes as the parents so if that curve is flat it is probably genetic, whereas if it looks like the above, it is probably do to "living a luxurious life" with all the extra perks that brings.

So what do you think?  Does anyone have any thoughts or insight to explain what causes the above graph?

6 comments:

  1. The graph doesn't show intelligence per capita. I think it is safe to assume that as the graph ascends the associated population shrinks. In other words there are fewer smart people than "dumb" people. Higher wages and earning power are associated with rare skills. You don't get payed a lot if anyone can do the job. (Unless it's a union job =:)So the few smart people fill the top paying positions because those positions require rare skills.

    Of course this doesn't account for brilliant science grad students who tend to break the curve. See http://theeternaluniverse.blogspot.com/2009/08/bart-simpson-demoralizing-grad-students.html

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  2. Stan, yeah, if our kids (we being grad students) were to take those tests with us still making what we do, let's just say that graph would imply they would be destroyed.

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  3. Here is an except of “De l’esprit des lois” De Montesquieu, which did contribute to the American constitution apparently (I translate) :
    “A man is not poor because he has nothing, but because he is not working. The one who has no possessions and who is working, is as much comfortable than the one who has one hundred “├ęcus” of income without working. The one who has nothing, and has a job, is not poorer than the one who has ten “arpents” of ground and has to make them work in order to survive. The worker who did give his art to his children as a legacy, did let them a good which did multiply in proportion of their number. It is not the same with the one who has ten “arpents” to survive and who divide it for his children.”

    Thus money is not everything, knowledge and intelligence are as much important for the dignity of a person ; as well in the human right of the French revolution, in the article 6, that is written that what are important are the talents and virtues (and not the money). But when intelligence and money are together everything is right. Finally I think education (often helped by money) and genes are both important.

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  4. Cartesian, that is an interesting quote. Yes (at least they teach us this) Montesquieu had a big impact on America's development. I've always wondered if the French cared about him or only us.

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  5. I have to agree with you, because when I quote him in France generally I have some problems coming from the immorality of the people. And this is true that the French seem less moral than the Americans (and they do not respect enough innovators, there is arrogance) ; then I really feel I am closer to the Americans for a lot of things. Finally they do even not respect the article 6 of their human rights, and they want to criticize the other countries about it.

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