Norman Augustine, former chairman and CEO of Lockheed Martin, pointed out in his classic book Augustine's Laws, that "the top 1 percent produce nearly twenty times the per capita output of the bottom half in many measurable undertakings."
This is another way of saying that you get a lot more productivity from the very best people. But Augustine was talking about an organization's productivity. Does this law also generalize to a nation's productivity?
Reihan Salam-author of The Agenda-recently sent me an interesting article by the economist Garett Jones of George Mason University on "National IQ and National Productivity," which essentially shows that a nation's intelligence level is associated with a number of important economic outcomes. In the article, Jones stresses that "policymakers should include measures of national average IQ when reporting a nation's level of human development" as at present no nation appears to do so. He also points out that one way of raising a nation's IQ level is to allow smarter immigrants into the country. This is related to an earlier article of mine (How Do You Make An Intellectual Dream Team?) where I stressed the importance of both developing the talent that we have and also recruiting talent from other countries to increase our nation's competitiveness.
So the overall IQ level of a nation appears to matter. But what about that smart fraction of the population, or people from the right hand tail of the bell curve? Wouldn't Augustine's observation lead us to conclude that what matters is really the top 1% or perhaps 5%?
Now psychologists Heiner Rindermann of Chemnitz University of Technology and James Thompson of University College London have published a paper in the journal Psychological Science on the concept of "Cognitive Capitalism: The Effect of Cognitive Ability on Wealth, as Mediated Through Scientific Achievement and Economic Freedom." The authors examined cognitive ability datasets from over 90 countries to show that average IQ is essentially the decisive factor of human capital and that it is really the top 5% of a country's population-or the smart fraction-that largely impacts a nation's wealth.
The authors write that "Cognitive ability influences wealth through its effects on high achievement in technological and scientific research...and through improvement of economic institutions (economic freedom)."
Dr. Rindermann told me that because the modern cognitive demands of work and everyday life are growing, essentially "wealth has become cognitive wealth," and in particular "high ability wealth" or the smart fraction of the population is what matters. And it is the absolute ability level of this fraction of the population that makes the difference.
Logically, it would make sense that if the mean IQ of nation A was higher than the mean IQ of nation B then the absolute ability level of their respective smart fractions would follow a similar pattern. Yet this is something that empirically we just don't know because we don't have systematic studies on the smart fractions of different countries. However, some of my research using the Duke University Talent Identification Program sample that tests the top 5% sheds some light on the smart fraction in the United States.
Consider that in international results on the PISA America lags behind other nations, including China (see my article on this here). But these results are based on averages and the PISA does not sample from the entire range of the top 5% nor do the measures have sufficient headroom for this gifted population (see my article on this here). Therefore, it is clear that on average American students are doing worse than Chinese students, but whether the smart fraction of American students are on par with the smart fraction of Chinese students is something we just don't yet have data to evaluate.
However, as Mark Zuckerberg's character noted in the opening scene of The Social Network, we do know that China has a very large number that composes their smart fraction. So perhaps it's not just absolute ability level, but also the sheer power of raw numbers when it comes to the influence of the smart fraction within any nation.
© 2011 by Jonathan Wai
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The image was taken from Charles Johnson's blog, The Claremont Conservative, which can be found here.