Here’s some revealing data about the changing nature of work published in The Economist:
There are numerous studies showing the same trend towards non-routine cognitive work.
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What can we infer from this?
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If we make the reasonable assumption that the non-routine cognitive work demands involve complexity, problem solving and learning of new skills, we can infer that general intelligence (g) has high adaptive value in today’s economy – particularly fluid intelligence (Gf):
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Fluid intelligence or fluid reasoning is the ability to think abstractly, reason, identify patterns, solve problems, and discern relationships in novel situations. Crystallized intelligence, by contrast, is our existing knowledge base – what we have already learned through education, training and practice.
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It turns out that general intelligence (g), measured by full-scale IQ tests, is virtually identical with Gf at the psychometric testing level, so we can simply talk about IQ. IQ is cognitive capital.
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How can we act on this inference we’ve drawn?
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Well, we could look for ways to improve our intelligence in order to improve our economic adaptability and success. It’s largely based on this line of reasoning that the potential for cognitive (brain) training to augment cognitive capital has become such a hot topic.
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If we make the assumption that IQ is critically important in the present day economy, you would expect that:
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- At the individual level, cognitive ability predicts cognitive ability predicts income.
- At the national level, there should be a positive impact of cognitive ability on a nation’s wealth.
- Academics and economists should develop theories about the critical importance of IQ in the economy
- Business leaders should encourage the training of cognitive ability in preparation for the economy.
Are the facts in accordance with these 4 expectations?
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The answer is: definitely yes!
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Let’s look at each in turn:
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Expectation 1
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Here is data from the US Bureau of Labor Statistics showing mean income as a function of IQ decile.
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Here is a general scientific review of the evidence, concluding “ample evidence at the level of individuals show that cognitive ability predicts and theoretically explains job performance and income”.
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Tick!
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Expectation 2
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Here is data showing GDP per capita for different nations as a function of average national IQ (from the research of psychologist Richard Lynn and political scientist Tatu Vanhanen):
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In a 2011 study by Rindermann & Thompson looking at the IQ-wealth link of 90 countries, for each one-point increase in a country’s average IQ, the per capita gross domestic product (GDP) was $229 higher. For the smartest 5% of the population in each country it made an even more dramatic difference to salary: for every additional IQ point in that group, a country’s per capita GDP was $468 higher.
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And here is a general scientific review of the evidence, concluding:
“cross- sectional and longitudinal studies using different methods and controls have shown a positive impact of cognitive ability on a nation’s wealth: This was found using different cognitive human capital indicators as education, student assessment tests, or psychometric IQs and different economic criteria as GDP per capita, economic growth or national welfare”.
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Tick!
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Expectation 3
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According to Jerry Muller in his article Capitalism and Inequality in the March 2013 issue of Foreign Affairs, we live in a ‘cognitive economy’ where cognitive ability is at a premium:
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“…a period of growing equality of access to education and increasing stratification of marketplace rewards, both of which have increased the importance of human capital. One element of human capital is cognitive ability: quickness of mind, the ability to infer and apply patterns drawn from experience, and the ability to deal with mental complexity. Another is character and social skills: self-discipline, persistence, responsibility. And a third is actual knowledge. All of these are becoming increasingly crucial for success in the postindustrial marketplace.”
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For a specific theory of IQ as cognitive capital we now have Heiner Rindermann’s influential Cognitive Human Capital Theory. This claims that cognitive ability (intelligence, knowledge and the intelligent use of knowledge) furthers at the individual, institutional and societal level productivity, production, income and wealth (Rindermann, 2018).
According to Rindermann:
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“IQ is relevant for technological progress, for innovation, for leading a nation, for leading organizations, as entrepreneurs, and so on.”
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Take innovation, here is data from the National Bureau of Economic Research showing the clear relationship between visuospatial IQ and the probability of becoming an inventor.
Take innovation, here is data from the National Bureau of Economic Research showing the clear relationship between visuospatial IQ and the probability of becoming an inventor.
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According to the Cognitive Human Capital Theory, a high IQ in a knowledge economy is useful for:
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- Problem solving at work
- Learning at work
- Adaptability at work
- Continuous improvement at work
- Being flexible in workplace
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These capabilities all contribute to more economic success.
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Tick!
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Expectation 4
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The American Management Association stated in 2010:
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“Proficiency in reading, writing, and arithmetic has traditionally been the entry-level threshold to the job market, but the new workplace requires more from its employees. Employees need to think critically, solve problems, innovate, collaborate, and communicate more effectively.”
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According to the Association of American Colleges & Universities (2010) employers know what they want from their employees and what colleges should be teaching their future employees: The top choice is – teach students to communicate effectively both orally and in writing, followed by “critical thinking and analytical reasoning skills.”
According to the Association of American Colleges & Universities (2010) employers know what they want from their employees and what colleges should be teaching their future employees: The top choice is – teach students to communicate effectively both orally and in writing, followed by “critical thinking and analytical reasoning skills.”
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Tick!
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To summarize, in this article we have looked at IQ-economy data that demonstrates the critical role of IQ – and particularly fluid reasoning – as cognitive capital in the economy.
