David speaks with Garett Jones, an Associate Professor of Economics at George Mason University, and the author of 3 books: Hive Mind, 10% Less Democracy, and The Culture Transplant.
They talked about: Democracy, how good it really is, and whether we have too much of it. Then they looked at intelligence, the impact IQ has on your job prospects and whether companies and nations should optimise for having higher IQ workers. Finally, they discussed culture—what it means, how it changes us, and the impact immigrants have on the places they move to.
His research interests include macroeconomics, monetary economics, and the micro-foundations of economic growth.
His work has appeared in journals such as the Journal of Monetary Economics, the Journal of Economic Growth, and Critical Review.
He has served as an associate editor of the New Palgrave Dictionary of Economics and wrote the preface to the Dictionary's 3rd edition.
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👤 Connect with Garett:
Twitter: @GarettJones
Books: Hive Mind | https://amzn.to/3lgMOdV
10% Less Democracy | https://amzn.to/3Lpbcol
The Culture Transplant | https://amzn.to/3LsttAU
📄 Show notes:
00:00 | Intro
03:03 | Narrative arc of Singapore Trilogy
06:22 | Economics of disagreement
08:27 | Elite vs. public perspective
13:18 | Trusting the masses vs. elites
16:51 | Surprises in Congress
21:43 | Garett’s career journey
29:03 | Intelligence vs. behaviour
34:55 | Upbringing and values
38:11 | The Melting Pot Theory
43:13 | Cultural differences between immigrants
49:54 | Cultural values and IQ
55:13 | Sticky SAT scores
58:47 | Market forces and fixes
01:06:28 | Bad policies and technological development
01:11:33 | Environment's impact on culture
01:16:03 | Remote work's impact on society
🗣 Mentioned in the show:
Adam Smith | https://en.wikipedia.org/wiki/Adam_Smith
Joel Schneider | https://education.temple.edu/about/faculty-staff/w-joel-schneider-tuh42402
Capitol Hill | https://www.aoc.gov/explore-capitol-campus/buildings-grounds/history#:~:text=History
Patriot Act | https://en.wikipedia.org/wiki/Patriot_Act
Tyler Cowen | https://en.wikipedia.org/wiki/Tyler_Cowen
Talent | https://amzn.to/3mVt0gv
Robert Axelrod | https://en.wikipedia.org/wiki/Robert_Axelrod
The Evolution of Cooperation |https://amzn.to/3JsOYz6
Steve Jobs | https://en.wikipedia.org/wiki/Steve_Jobs
Elon Musk | https://en.wikipedia.org/wiki/Elon_Musk
Bill Gates | https://en.wikipedia.org/wiki/Bill_Gates
The Melting Pot Theory | https://en.wikipedia.org/wiki/Melting_pot
Neo Europes | https://homework.study.com/explanation/what-are-neo-europes.html
David Epstein | https://davidepstein.com/
Range | https://amzn.to/3ThRnkJ
Michael Kramer | https://en.wikipedia.org/wiki/Michael_Kramer_(narrator)
FANG company | https://www.investopedia.com/terms/f/fang-stocks-fb-amzn.asp#:~:text=Investopedia
Charles C. Mann | https://en.wikipedia.org/wiki/Charles_C._Mann
The Wizard and the Prophet | https://amzn.to/3JHF7Xo
Malcolm Gladwell | https://www.gladwellbooks.com/
Nathan Nunn | https://scholar.harvard.edu/nunn/home
Origin of Gender Roles Women in the Plough | https://scholar.harvard.edu/nunn/publications/origins-gender-roles-women-and-plough
Balaji Srinivasan | https://en.wikipedia.org/wiki/Balaji_Srinivasan
The Network State | https://thenetworkstate.com/
👨🏾💻 About David Elikwu:
David Elikwu FRSA is a serial entrepreneur, strategist, and writer. David is the founder of The Knowledge, a platform helping people think deeper and work smarter.
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📜Full transcript:
Garett Jones: IQ is underrated from the point of view of what the average American thinks, but it's overrated from the point of view of what the average top executive thinks. Normal people might think like, well, these IQ scores are all messed up and they're kind of worthless. But people who are top executives are like, I want the smartest person. But the most of what makes great employees great is not their IQ. you really wanna figure out whether the person is a great fit for your job and look for signs of creativity, innovation, whatever unique set of skills are gonna make that worker awesome in your job is going to matter more than what their individual IQ score is.
David Elikwu: Hey, I'm David Elikwu. And this is The Knowledge. A podcast for anyone looking to think deeper and work smarter. In every episode I speak with makers, thinkers, and innovators to help you get more out of life.
This week I'm speaking with Garrett Jones. Garrett is an associate Professor of economics at George Mason University, and the author of Three books Hive Mind, 10% Less Democracy and the Culture Transplant. And all of these books have incredibly interesting ideas that we unpack through our conversation. So you're gonna hear us talking about democracy and how good it really is, and perhaps there is an extent to which the masses might be better off. Trusting and listening to the elites.
And then we talked about intelligence and the ways in which your IQ might shape your outcomes and your job prospects, and also whether countries and companies should optimize for having higher IQ workers and some of the knock on effects that that might have.
So then we talked about culture and the ways in which since the 15 hundreds, over time it has shaped our lives and our behaviors and the way that we interact, not only with each other, but with the economy and how sticky culture can be, even though there has been massive migration around the world.
So we talk about the impact that immigrants have on the countries that they move to, and the ways that over several generations they can begin to influence and enhance the culture. So it's a really interesting conversation at the intersection of economics and politics and culture. And I think a lot of people are gonna find this really compelling.
So you can get the full show notes, the transcript, and read my newsletter @theknowledge.io.
Every week, I share some of the best tools, ideas, and frameworks that I come across from business psychology, philosophy and productivity. So if you want the best that I have to share, you can get that in the newsletter at theknowledge.io.
You can find Garrett online on Twitter @garrettjones and find his full Singapore trilogy published by the Stanford University Press. I'll leave the links to all three books in the description if you're watching on YouTube or in the show notes if you're listening to the podcast.
And before I let you go, if you love this episode, please do share it with a friend. And don't forget to leave a review wherever you listen to podcasts because it helps us tremendously to find other listeners just like you.
One of the first questions I wanted to ask actually is if you could explain the narrative arc through your three books you've written this Singapore trilogy, as you call it, how would you describe the narrative arc? Cause they seem to interconnect in some different ways between all three of them.
Garett Jones: Well, yes. So all three books in the Singapore trilogy are really my attempt to sort of get at the wealth of nations, you know, at the old Adam Smith question, right? Let's make an inquiry into the nature and causes of the wealth of nations. And, you know, my fellow Macroeconomists, we've enjoyed these big picture approaches. That's sort of our take is like, how can we find a ridiculously simple story that can explain maybe half of everything and then leave the details to somebody else. So the first book was really inspired by my talking with psychologists, especially my childhood friend Joel Schneider, who's now a, a psychologist psychometrician.
We talked about research that found that cross-country test scores predicted the wealth of nations really well and standardized test scores. He and I together worked out some statistical work and we found out that statistically these standardized test scores are much better predictors of national prosperity than just about anything else out there. Since then, other people have reinforced this research. Including some new work by the World Bank. And so that just got me thinking that basically other fields have something to add to economics and economists have something to add to other fields. So together, us working together, we said something new.
And so that was the first book in what became the Singapore Trilogy Hive Mind, how your nation's IQ matters so much more than your own. The second book was really thinking about, how we economists, we monetary economists in particular, we take for granted that like central banks are super awesome and that having them separate from the voters is actually good. And we don't spend a lot of time thinking about the fact that that's pretty undemocratic. But when you look around at modern governance, a lot of the things we like best about modern governance are things that aren't all that democratic. Like independent judges, independent central banks, long terms for politicians.
So that was my book that was really about economics meets political science. And then the third book, my most recent one, Culture Transplant is really about finding out about culture, really studying things that normally anthropologists discuss. So, trying to figure out how migrants bring their cultures from one place to another.
So each book, the reason Singapore matters to each of them is because Singapore is a country with exceptionally high test scores. Singapore is a country that has very limited democracy, to put it politely. And Singapore is also a country that's heavily shaped by Chinese migrants who brought the culture of Ming Dynasty China, and made a great success of it in Southeast Asia.
The narrative arc is really one book is economics meets psychology, the second book is economics meets political science, and the third is economics meets anthropology.
David Elikwu: Okay, Awesome. I wanna ask a quick question about the central banks, just because you brought it up and I wanna start there just because I probably have less questions to ask specifically on that. But it 's one that just immediately came to mind. Loads of people, the regular people, and this is something you touch on in your book, the masses complain about central banking and a lot of people can feel like central banks make mistakes and they make decisions that go against the best interests of a lot of people.
So how do you marry, I guess the economic perspective of something that you think is a good thing overall with something that for a lot of ordinary people within the masses, they disagree with?
Garett Jones: Well, this is the case where at the average person just thinks money matters way more than it does. I mean, obviously in on some level, the amount of money you have in your pocket affects how much you can buy, right? But when economists do big cross country comparisons and we check and see, well, when countries have hyper inflations or super low inflations or something in between, does basically the rate of inflation or the rate of money printing really appear to have that much of a causal effect on how rich you are, in your country. And the answer is no, basically bad monetary policy, high erratic levels of inflation are more of a symptom of a lot of other bad things going on than they are a bad thing by themselves. And so that's a big mega picture of this.
But at the micro level, I mean obviously there's political manipulation of banking in corrupt countries, right? Some people can get loans if they're connected. Some people don't get loans if they're not politically connected, that's obviously important. The solution to that problem is to have a more technocratic central bank, one that's more independent of political cronyism and led by basically, people who are nerdy folks like me, who are very socially awkward and, we don't have enough social skills to be politically connected, my fellow Macroeconomists, that's a little glib, right? But it's the idea that you want politics out of banking as much as you can and at the same time recognizing that the reason some countries are rich and other countries are poor, central banking is very low on the list of what matters there. Great central banking is nice to have, it's a plus factor, but it's not a major driver for the wealth of nations. Monetary economics, totally overrated as a cause of national prosperity.
David Elikwu: Okay, that makes a lot of sense. And I mean, I really wanna dig down on this idea that, like I said, for most people, they seem to be at odds with a lot of, not just economics, but also politics in terms of what the elites or the people in charge might believe compared to what the man on the street believes.
And I guess there's a sequence of postulations, I guess, from your book, which would be not just from your book, but Okay. So you start from the position that, the man on the street doesn't necessarily understand the invisible hand of economics, they don't necessarily know everything that is going on. Then you have the complex interaction of democracy, which we have, which in some ways is a great thing and seems to be better than a lot of other systems. But democracy says that we have to give control and at least a voice or some kind of power to the masses and to the people. And they get to vote, they get to have their say. But then you get to the kind of final point where very often what people think is best for themselves is not actually what's best for them. And sometimes you need leaders that can make decisions on behalf of the people that seem to be contrary to what they think is best for themselves. But then I guess squaring the circle, you can end up in a place where when the authority is doing what it thinks is best for you, you know, there's an invisible line between that and jumping straight to autocracy
Garett Jones: Absolutely, yeah. And you know what that, those are terrible, right. So, there are two great things about democracy that are pretty unambiguously true. One is, democracies essentially never have famines and democracies rarely kill their own citizens to a large degree, right? So those are two great things about democracy, and if anybody wants to make any argument for autocracy or monarchy or whatever it is, they have to fight against those two facts, right?
And they're pretty both well nailed down by economists in quantitative studies. But beyond that, what we call democracy today is basically the voters checking in on a largely independent government every couple of years, right? So, the United States is pretty rare in having a whole house of government, which is actually two blocks that way from me.
Of the House of Representatives and there they have two year terms, right? And almost nobody in the world makes that mistake of having political terms that are that short. We know that on average it seems like you need to give a little bit more distance from the voters, to get many good things done in politics. And that's not a cure all, but it's a symbol of the fact that having voters too close to the political system is probably bad on average. So that's one sign, like when we look around, like people who say we need more democracy rarely think, Hey, the masses should be voting on each and every government decision, and they certainly don't think that people should be voting on interest rates. So there's a little bit of a confused discourse when people say they want more democracy.
So a little bit of distance seems to make politicians behave a be a little bit more long farsighted. This is something that the American founders thought about when they wrote about why they wanted the US Senate to have these long six year terms. They said, you know, sometimes you're gonna vote for something in your first year in office and you kind of know it's gonna take three or four years to be really obviously good from the voter's point of view.
So a longer term helps with that, and that's pretty undemocratic saying you gotta wait six years to check in on the government and fire the people. So the second point that you make about, the invisible hand is really well taken, right? Being against competition and the market is pretty intuitive on a lot of dimensions. As consumers we're, it's obvious, like I wanna have a lot of goods to choose from. But when you're a supplier of a good, especially when you're the supplier of your own labor, the first thing you think is the boss shouldn't be able to fire me. There ought to be a law against that. Like, unless I'm a total drunk or unless I start beating people up at work, right? Unless it's really bad, it's just common sense that I should have strong worker protections and economists, you know, we check this stuff out statistically, we check it out by using intuitive models and all around, it looks like on average you wanna let bosses, fire workers for kind of the reason you wanna let people get outta marriages. So, marital security has its benefits and its costs, job security has its benefits and its costs. And overall around the world, it seems that we get our best matches both in the dating world and in the job world when we allow people to end their relationships. So that's one version of the invisible hand that I think, takes a couple of steps of reasoning to walk through.
But you can understand why for centuries, for millennia, people oppose divorce. Cause you know, what are people gonna do if you get divorced. Similarly, there's been a much a similar battle over whether, we should stick with the common sense idea that nobody should be fired or unless they make egregious errors, and instead we kind of understand that you're not gonna get high dynamism, high productivity businesses unless you can let workers go now and then.
David Elikwu: Okay, that makes sense. One thing I'm interested in is the title of your second book, the 10% Democracy. Why Should Oh, yes. Fantastic. So why you should trust the masses Lesson and the Elites More.
What I'm interested in, okay. Maybe, first of all you could give a definition of what you mean by elites, because I guess the second part that I'm quite interested in is, maybe for a lot of people when they think of elites, they think of the people, a different kind of invisible hand. They think of people making things happen behind the scenes and the people that have all the control. But realistically, even when we look at politics half the time, it doesn't look like a lot of these people are agree anyway. And even within their own parties, I'm thinking of America for example within the Democrats and the Republicans, there's almost two halves on both sides, right? Have like the super liberal or radical progressives, and then you have the rest of the Democrats. And then on the Republican side you have maybe, what Biden called the MAGA Republicans and then the rest of the Republicans. So it doesn't always seem like the elites themselves agree. So maybe how would you define elites and how do you marry that dissonance? Where for the regular person, it doesn't even seem like these people have it together for themselves. So why should we trust them?
Garett Jones: Well, I intentionally picked the word elites rather than just saying, you know, going with the more Aristotelian approach of talking about the best, the aristocracy, right. So the elites are basically just whoever happens to be on the top of your society at the moment, right? They may be educational elites, legal elites, politically connected folks, inherited wealth, some mix of that, right? And I wanted to argue that not that these people are perfect, they might be terrible, but since I'm an economist, my goal isn't to compare things to utopia. My goal is to compare things to the alternative and the alternatives are ruled by the elites, is ruled by the masses. And have you talked to the masses lately?
This is sort of the story, right? So as an economist, I'm trying to compare things to non utopian alternatives. We often get accused of making unrealistic assumptions in our models, in our theoretical models in economics, but my gosh, listen to somebody sing the joys of democracy. And that's a form of utopian as a beyond anything I could handle, right? So, when I'm looking at the elites, like there's some cases where I think it's pretty obvious that like, the elites are way better than the masses, and that'll be the case in say, central banking or like most judicial decision making or firefighting. You just don't want the average person deciding whether you put out how to fight a fire, right? You just wanna leave that to the experts. But beyond that, my goal was to say look, these clowns over here on Capitol Hill, which is just my right here.
You're actually better off having them in charge of a lot of this stuff. Because when you give them six years for a term, they care about the long run in a way that a lot of voters don't have to think about it. And so, even that mediocre version of our elite, the politically elected elite, who's sometimes cares about campaign donors, sometimes cares about the voters, sometimes cares about who's gonna hire them after they leave Congress. Then with all their flaws is still better than running things by a national plebiscite. So that's kind of like I wanna point out, so I'm here to point out like some elites you already kind of know are good and you just don't wanna say it. But the other elites who are mediocre, we've created rules to get them to focus on the long run, in a way that's way better than leaving it to just to the voters.
David Elikwu: Okay. And you mentioned that Capitol Hill was just to your right there or to my left in the mirror image. So going back to the, the popular conception maybe from the layman, that economics is has a lot of stuff that works in theory and is different in practice. An interesting question from my view is I know that you worked in Congress in the nineties.
I'm interested to know, was there anything that surprised you or was there anything that you thought work one way in theory and was different in practice?
Garett Jones: Well, it's that, I mean, it's hard to get good ideas moving in Washington because everything in politics, well, 9 times outta 10, most of politics is about coalition building, right? And you're rarely even in the Senate when there's only a hundred senators, even in the Senate, it's hard for any one senator to be pivotal enough to build that coalition.
So much of politics is a bunch of people throw their good or bad ideas into the bin, it all gets kicked around in Congress. And then when either the president or the Senate majority leader decides it's time to put together a bill, that's when they start grabbing all the ideas that are in the idea bin and trying to figure out what's gonna work politically.
So much of Capitol Hill life is about marketing, right? People set up late at night coming up with clever acronyms for their legislation. They coming up with clever bullet points for how they're gonna sell it on the evening news.
My boss, but just before I got there, somebody on his team actually has the credit for coming up with the acronym for the Patriot Act, the bill that basically, you know, restricted a lot of civil liberties in order to make it easier to fight terrorism. But they took great pride in the fact that they came up with an acronym that worked and it stuck and it's lasted for decades. So political marketing turns out to be really central and that's not just about selling things to the masses, it's about selling things to the other 99 senators. That's something that I think outsiders don't appreciate as much.
David Elikwu: Sure that makes sense. But even what you were just saying, and it might seem like I'm going back a bit to something we just talked about, I think they're connected. The principal agent problem where it seems like the incentives for the people that are in these positions don't always align with the positions that they are supposed to be representing. They have a very different set of, you know, they have their own personal agenda for propagating themselves and their careers. They also have the incentives of their network and their worldview, which again, might be misaligned with other people's. As you mentioned, there's a lot of focus on, maybe you get to create some acronyms, you get to put your name in the history books in some respects. Or even just being able to get things done. Cause I think that's another hard thing where sometimes you end up in a position like a few years ago, the government shut down because again, you can't get both sides of the aisle on the same page.
Garett Jones: Yeah, you're right. Principal agent problems are everywhere in politics. In politics, in electoral politics, in democratic politics, the principle is, are the voters back home, right? And so the principle, those voters back home do a sort of lazy job of monitoring the agent, the politician they send up there.
And one of the pieces of magic about the Senate is that it's clear that politicians act like the voters back home. Only remember what happened in the last two years of the six year term. So the term they use on Capitol Hill for this is a senator being in cycle, a senator's in cycle when he is two years away from your election, and that's what he's really expected to basically cave into the voters and panders of them. Or in other words, they're supposed to act like they're democratically elected officials. So that's when in a way the principle agent problem is solved. But by the standards of economics, that's when politicians often make the worst decisions. So it turns out that economists, it turns out that senators are less likely to vote for free trade bills, for instance.
When they're coming up for reelection, they're more likely to vote for free trade bills when they're further from re-election. And if there's one idea that economists pretty much agree on, it's that free trade bills, lowering tariffs and all that is pretty much a pie grower all around that tends to grow the pie for the whole country. And so sometimes that solving that principle agent problem is actually bad for what giving the voters what they want. If the voters want prosperity and they want the politician to vote against free trade bills, then they want contradictory things, right? So we want politicians, like I personally want politicians to do things that help human flourishing broadly construed. And sometimes that means picking one thing the voters want over another thing that voters want. So I'm glad that sometimes politicians have found a way to blow off the voters and to increase the principle agent problem. Sometimes that's the, when we talk about standing up to the mob or profiles and courage, those are all phrases that we use to talk about making the principle agent problem bigger, where the person basically disobeys their boss, right?
So, and sometimes that's a good thing, and we call that political bravery and that's undemocratic. But we should be comfortable with that tension that sometimes doing the right thing for the people means doing what the people don't want.
David Elikwu: Fair. Okay. In Hive mind, one of your other books, you make the correlation between cognitive ability and economic growth. I mean, maybe taking a step back from that, I'm interested to know what got you interested in this relationship in general and maybe going back through your career in general. Like what was the set of steps that led you to, to getting to where you are now?
Garett Jones: Well, I, I tried a lot of other social sciences before I landed in economics. Basically, I was too chicken to take all the math classes that I would need to go get an economics PhD. So first off, I tried out a political science PhD at UC Berkeley, and it was clear that wasn't gonna go anywhere. I took a master's degree, took a year off, and took a bunch of math classes and decided like, you know, economists, they have these thin models, these simple reductionistic models, but they're simple reductionistic models can take me further than I think the more verbal style of reasoning that goes on in the other social sciences.
So that big break that I needed to kind of pause my intellectual career, take the math and embrace some reductionism, some oversimplification for a while. I think that turned out to be a really positive part of my intellectual journey. And when I was in grad school economists were taking more interest in trying to explain why some countries were richer than others. Cause it was getting easier to collect all this cross country data, not just from 10 or 20 or 30 rich countries, but from middle income and lower poorer countries. And the data was getting more reliable by the year. So I sort of watched that data building up, but in the back of my head, what I thought was, I don't really need to, I don't really need to do research into why some nations are richer than others because more or less, Adam Smith was right when he said that all you need for a nation to go from port to rich is peace, easy taxes, and a tolerable administration of justice. And at least two of the three of those are totally outside the purview of economics, at least peace and a tolerable administration of justice, right. And I thought most of the wealth of nation stuff is gonna be some other field's job. Like we economists aren't gonna be very good at that. So that's part of the reason I held off on it at the beginning.
But later on as I spent my time in the Senate and as like a lot of economists in that era, I got more bored by monetary economics cause we were just kind of convinced it didn't matter that much. And we seemed like we had solved a lot of problems. It seemed like, I decided to go back in. I want to explain why some countries are richer than others. I wanna see what's going on with this line of research. And around that time is when Joel Schneider, the psychologist, got in touch with me and told me about this data set of cross country IQ scores that were very, they were flawed and imperfect and we always talked about that in our research, but they correlated really well with a smaller set of international math, science and literacy scores that other researchers had come up with. And so I thought, you know, a whole lot of data in economics is flawed and imperfect, and let's see if we can do some research with this flawed and imperfect data. And that got us thinking about how generalized mental skills, standardized as measured by standardized tests seemed to capture something that really was important for modern prosperity.
Basically, running a modern economy means solving a lot of little puzzles. So a lot of the things that we find difficult in IQ tests are actually something that shows up in running a small business, in coming to political bargains and solving an engineering problem. When you're trying to fix a bridge and you're not quite sure what's wrong with it, you know, as one psychologist says, intelligence is what you need when you don't know what you need. It helps a little bit everywhere. And I saw a lot of little signs in economic research that suggested that, that general mental set of skills was gonna pay off a lot. And that got me going down that path of realizing that there was a payoff here. And the, finding that I'm most excited to buy, which has been replicated by other people since then is that, smarter groups on average are more cooperative.
Simple crude imperfect IQ tests are good predictors of group cooperation. So smarter individuals are not more cooperative, they're actually more Machiavelli in it, if anything, in experimental settings. But when you put teams of smarter people together as measured by IQ tests, they seem to cooperate more and grow the pie rather than sort of try to stab each other in the back in order to grab a bigger slice of the pie. I think that's a pretty important finding cause the foundations of trust of cooperation of trying to grow the pie rather than fighting over the size of the slices. That's a big part of explaining where prosperity has come from over the centuries, and I'm glad I can make a small contribution to that.
David Elikwu: Okay. That makes a lot of sense. And that's a really interesting finding, and I know that you've come across some other ones that you talk about in Hive Mind, for example. I'm thinking of, there's quite a few things. First of all, just the drastic difference in the impact when you look at the top 10 countries and the bottom 10 countries economically and how that correlates with IQ score. But then also I think you also talk about, I think it's almost a difference to the power of six of the difference between, let's say an individual's correlation with their salary or their wages and then on a larger scale the country's correlation.
Garett Jones: So basically the short version of that is that my early finding was that IQ mattered six times more for countries than it does for you as an individual. So an individual person's IQ is an okay predictor of your lifetime, of your average lifetime wages. It's not terrible. It's maybe better than any other single thing you could find. Education may be better years of education. But at the same time, we're talking about going from like IQ at the 10th percentile to the 90th percentile, predicting maybe, oh, 50% hike and wages, 70% hike and wages. I mean, that's nice, that's good. But if you went across countries with a test score gap that big, you'd be talking about countries being 8 or 10 times richer, not 80% richer, right? The difference between 80% versus 800 or 900%, that's a huge difference, right.
My colleague Tyler Cowan, wrote a book called Talent about High, higher good Individuals. And what he says in there about IQ is that, IQ is underrated from the point of view of what the average American thinks, but it's overrated from the point of view of what the average top executive thinks. So normal people might think like, well, these IQ scores are all messed up and they're kind of worthless. But people who are top executives are like, I want the smartest person. But the most of what makes great employees great is not their IQ. If you're hiring one person at a time, at a firm, like, sure, it's nice to know whether the person went to a good school and what their SAT score is. But you're, you really wanna figure out whether the person is a great fit for your job and look for signs of creativity, innovation, whatever unique set of skills are gonna make that worker awesome in your job is going to matter more than what their individual IQ score is.
David Elikwu: Sure that makes sense. There's another correlation which you mentioned earlier this idea of maybe some individuals with a higher IQ being a bit more machivillian for example. And I think that is, is one of the things, just like you said, where okay, for an individual person, the IQ isn't the only thing that counts, particularly when you're thinking of hiring an employee.
But what I'm interested in knowing from your perspective is, and it's not just limited to IQ, but people often conflate intelligence and I guess behavior. And so you see some examples, I was just seeing some people having a conversation the other day on Twitter, for example, of like Steve Jobs or even Elon Musk in some respects now. And you see quite some other people also who exhibit traits of exceedingly high intelligence and also just high competency and high proficiency in all manner of things like these are clearly smart, incredible, brilliant people. But they might also exhibit some traits that are not the best for cohesive work environments or just kindness or empathy or some other things in general. And I think one thing that a mistake people can make is conflating the two and associating both of those things together.
Garett Jones: Yeah. Intelligence is not virtue at all, right. One of the usual findings in psychological research is that intelligence correlates very little with personality overall. The one it does correlate with a little bit is, so your IQ score correlates a bit with your openness, like your willingness to try new things, your risk taking, but it doesn't correlate at all with being conscientious. And if you think about what makes somebody like a Steve Jobs or an Elon Musk person exceptional, part of it, just part of it is that combination of high IQ plus being willing to put in like 80 to 120 hours a week, on a job when it's necessary. And a lot of smart people just aren't willing to do that. So you're getting somebody who's basically gotten really great draws, they've pulled two winning lottery tickets. They won the IQ lottery and then they won the conscientiousness lottery.
Now it turns out that a lot of them may also be kind of high on the traits that people consider Machiavellian, right? Versions of high neuroticism, sometimes. It's not really clear whether, like, usually being neurotic, being very volatile in your emotions is kind of bad. It's possible that it's a kind of game theoretical trick people can use to extract more wealth from other people. Like I can, I can start yelling at you erratically as a form of punishment, and that might draw some more work out of you. And it's possible that there could be some evil forms of Machiavellian and personality dynamics going on in highly productive teams, right? There's a bit of mystery to what makes productive teams so productive. I wish I could tell you that it's all about like happy, happy joy, joy where nice traits and kindness and generosity and living the golden rule are the only things that work.
But one of the things you learn from normal game theory is that, being willing to drop the hammer on someone, being willing to show that you won't get ripped off is part of the magic of this, part of the magic of what makes team cooperation work. In the excellent book by Axl Rod, the Evolution of Cooperation, he talks about how basically the way to get cooperation in groups is to start nice, but then don't be a pushover. Be willing to drop the hammer and punish when someone betrays you too often. And so there's an element of what in other settings we call good cop or bad cop. And there's another element of having the velvet glove, the iron fist with a velvet glove over it, right. Start nice, but then be willing to speak softly, carry a big stick. These are all beams that we have out there, that there's some element of meanness that may be functional for teams. And I suspect, I mean, I suspect that people don't like to say this out loud, but that Steve Jobs yelling at people. Is that part of what made Apple work well? Am I sure that it was not part of what made Apple work well? I don't know. I know that game theory can tell me that sometimes yelling at people can get you good stuff.
David Elikwu: Yeah, I think that's the balance people find hard to strike. But I think maybe my intuitive response to that might just be, very often I see people thinking that same way and trying to intentionally replicate those aspects of what they see in Steve Jobs, what they see in Elon Musk, et cetera, et cetera.
But the issue is, and you can extrapolate this also to people making other types of decisions like, oh, Bill Gates dropped out of college, I should drop out of college. You know, any plan that involves you being Elon Musk is probably not the best plan to have, right. And whatever all the other stuff that made Steve Jobs, who he was and as great as he was you probably couldn't emulate simply just by being disagreeable or just by, you know, just emulating one, one random aspect of his character.
Garett Jones: Yeah, and some part of that, for instance, the disagreeableness. The disagreeableness probably functions better at the higher level you are rather than the lower level. At the lower level, you need to work with people, right? You need to pull people in. Once you have a big surplus and you wanna make sure the surplus keeps growing, maybe different strategies work, right?
So, you know, I've read just enough about Napoleon to know that he was a lot nicer guy when he started off, right. So, I mean, that's to put it mildly, right? He knew he had to build coalitions, he had to build teams. And then once he knew he was on top and there were only two people he had to push out in order to become the, the dictator, the emperor, that's when he did it, so he bited his time. And so starting off mean is probably not the right thing to do because so much of modern, success in modern capitalism really is about cooperation. So getting people to work with you, getting people to entrust you with their money or with their time, that's important and that's people are skeptical and cautious in giving their money or time to other people, and they want to give it to people who they don't think are gonna betray them and be disagreeable.
David Elikwu: Yeah. So we're starting to get into this, the crossover between values and IQ, which I think is gonna be really interesting territory, and we're gonna get into some of that in a moment. But one question that I really wanted to ask you was, I know that you grew up in the Mormon church and one of the things you've talked about in your books is also the, I guess first of all where IQ comes from, but then also there's an extent to which environment and where you grew up and how you grew up can influence your IQ.
And so I'm interested to know how you think that upbringing and that balance, maybe not just your, your IQ, but your, the values and how some of that might have influenced your work.
Garett Jones: Yeah, I definitely think that being raised among the Mormons, being raised as a Mormon, really helped me build social skills and helped me learn to get along with strangers in a way that I wouldn't have otherwise. I mean, I was a sort of nerdy, bookish kid, and Mormonism, every Mormon congregation, it's about 200 people. It's all run by volunteers and everybody takes turns basically taking different positions. And so you learn a little bit about what it means to lead and then in turn to be led. You learn something about how organizations work at a very natural level. From the time you're say, 10 or 11 onward. And so I think Mormons grow up with less naivete about basically the flaws and promise of team activity, right? And say, you know, people who don't, people who, are never in the middle or upper levels of a hierarchy might just think, oh, that hierarchy's all against me. But once you've served in a couple of rungs in it, you realize, man, it's hard to make these things work. You know, I wanna hold a church activity. How do I get 15 people to come to this thing? And if I can't get 15 people to come to my activity, how am I gonna run a website that gets millions of people to come to it? I do think that Mormonism builds a form of social capital that is rare among modern American faiths because of the fact that it's run by volunteers.
I think that's extremely helpful. I'm really glad I got that experience. The fact that Mormons combined this element of sticking within the club for a lot of hours a week. They've cut back on it since then, it's not as many hours now, with going out into the world and being missionaries and living in foreign countries at a young age. I think it does give them a kind of a neat mixture of cultural dynamism plus cultural conservatism that is sort of a secret sauce. I mean, it's no surprise that they're overrepresented in places like the FBI, the CIA, other, you know, intelligence agencies, because they speak a foreign language, they know how to work in organizations and they can usually pass the drug test. And that's a key to success in a lot of big bureaucracies nowadays.
David Elikwu: Fair. I think what you just touched on also speaks to culture, and I'm interested in maybe there, there's a macro and micro level to this. I know that you talk about the macro level in the culture transplant, but you know, how do you find the dynamics? Maybe let's start within a country of how some of these different cultures interact and how that can influence whether it's IQ or economic development. Because I think what you end up with as, as much as, okay, there's a macro picture where you can say, okay, the average or the mean of all the IQs in this region, here is the distribution, here is how this works, here's how this looks. But obviously within that, we are already in a position. In a lot of these nations, the US for example, where it's heavily diversified and you have loads of clumps of different types of cultures, different types of communities that are already preexisting. So we can't even necessarily start from a fresh state and say, oh, okay. How it is here before you have all these immigrants and before you have anyone coming into it with a different culture or a different faith or a different background or set of values.
So I'm interested in, I guess, yeah, like how do you find, I know that there's an extent to which you disagree with the melting pot theory and that makes sense, but the existing cultural milieu in the US and how that contributes to its economic development.
Garett Jones: Yeah, United States is this amazing outlier on so many levels, right? So, it's a country with enormous, it's much more income per person in the US obviously is a lot higher than Western Europe, right? And yet we officially think of the US as a sort of offshoot of Western Europe, right? That's the first order model of the U.S. Like a bunch of Europeans violently invaded North America, made a country, right? And those people ended up being like, even to this day, 30% richer. So, there's something different about this place, that's where I'm, I am right now in the US and the other streams of American, of the American demographic experience, the enslavement of Africans, the diminishment, the slow motion genocide of Native Americans over the course of centuries. These all shaped the American demographic background. And then at some point more, of course more and more Europeans came bringing different cultures. It turns out that the set, the easiest to study wave for some purposes, in the last few decades in econ has been to look at that second wave of European immigration. So it's the, my Irish ancestors, it's Italian Americans, German Americans, those folks moving in, in the mid to late 18 hundreds. Now there's just enough data recorded that people couldn't kind of compare the before and after.
And, you know, I had a college professor in a class say, America never really changed after they let the Germans in. Excuse me, America's never really been the same since they let the Germans in. So he thought that, once there was that big wave of German immigration to him, hah that's when the great era of the founding fathers was gone. That was his point of view, not mine, right? Because my Irish ancestors were part of that second wave.
I mean it, it turns out that wave of immigration has been studied a lot and all of the optimistic stereotypes of immigration turned out to be true, which is that wave of late 18 hundreds, early 19 hundreds immigration seems to be associated with more innovative activity. We'd like to measure patents, right? Economists that we find those easy to measure. More innovative activity, there's a lot of prosperity. And that wave of migration seemed to make America richer, right? Scandinavian Americans moved to the upper Midwest, which was a really inhospitable place, and yet their wages ended up higher than that of the average American in the first and second generations.
So, America, how much of that is that Americans built, a form of a culture that made those folks better? And how much of that is selection that the people who came from Europe and who were willing to voluntarily migrate were actually people with higher human capital, higher conscientiousness? This is hard to tell. This is gonna be a project for the 21st century. Your generation gets to find out the answers to that questions, like maybe in, maybe by this time next year, chat GPT can just answer that question by pulling up the data automatically.
But, you know, America has had both good and evil experiences with immigration. We can tell that the recently heavily studied waves of immigration, the cliches are true. The first generation definitely adds a lot to the innovative potential of the country. And where my work follows on is looking at the second generation and beyond, asking those kinds of questions that are more about, more closer to what long termist philosophers would care about. First generation, super heavily selected. I'm more curious about what's going on in the second and third generation, cause it hasn't been studied as much.
David Elikwu: Sure. And one of the things that you found is that culture can be quite sticky in the second to fourth generation. I'm not sure if you've looked much beyond that and, and how
Garett Jones: It's hard to measure it beyond that, right? Like Yeah, yeah, I mean, for instance, when we're measuring people who say they're fourth generation, we usually only have one measure, list three places your ancestors came from in a survey and whichever one you list, number one, they count you as that. So with second generation, we have a lot better data because they often ask people just, where was your mom born? Where was your dad born? Right, so that's much more precise data. And so when you're finding that persistence to the second generation, for say whether women stay in the workforce, how many children women have, these are pretty objective measures and we find a lot of stickiness in the second generation, bringing old country attitudes to the new country they move in. And this isn't just about America, it's been heavily studied in Europe as well. Europeans have been interested in this. So those are two countries where there's a lot of, been a lot of recent immigration the last few decades and second generation attitudes, sometimes sticky, sometimes not, depends on the issue.
David Elikwu: Sure there's an aspect of it that I am surprised does not play a bigger factor or, or doesn't factor into the statistics as much. And I'm interested to know, I guess your thoughts on that, which is, I would assume that immigrants by and large, maybe by proxy in some ways, Are somewhat different culturally from the rest of the people in the place that they came from, because they're a self-selecting group. They are people that intentionally decide that I am going to go and chase something better or something different. And not everyone thought that, right. And so what I'm interested in is, what's The halfway point because I think there's a point that you make, which resonates a lot with me.
So I came to the UK from Nigeria and for example, actually great example, my younger sister was born here and grew up here. And I can see some differences between how I might think of some things and also maybe my parents and how my sister might think of some things considering that she did all her schooling here and, everything that she knows about the world, I guess is rooted here in some ways, even though that, even though she has visited Nigeria. And I think you can extrapolate that to lots of immigrant stories where, there's the poles, which is okay, the old world. How did everyone think? Where in the place that you came from, you and your family and, and you being a self selector, deciding to make this voyage. How do you think, and then the new place that you're going to, and I feel like a lot of people are somewhere in the middle where it is correct that perhaps they may not assimilate fully and you may not, let's say you come from India and you go to America. The day you arrive, you are not necessarily having all of the same liberal values or whatever the American values may be as every other American on the street. However, you probably are more likely actually to enact some of those values as opposed to some of the values from the place that you came. That is what I would've thought.
Garett Jones: Yeah. So the first generation, actually is more assimilated on some issues than the second generation is, this is something that Europeans have found to a great extent with religion, right? So people who migrate from heavily religious countries to Europe often decide to go to Europe because, Hey, I'm not that religious. I'm tired of being in a place where religion's dominating everybody's life. And then they, they get there, then the second generation, their kids grow up and are often more religious than the parents who came to the new country. So that's just one example that's been heavily studied in Europe. The very last study that I cite in the end of chapter one, actually has a collection of data for first and second generation. And I won't get the numbers right, right now. But it is often the case that first generation immigrants are more assimilated on key issues than second generation immigrants. You know, if you're the kind of person who cares about what accents people have and how often they speak the language. Yeah, the first generation might not, they might have kind of strong accents sometimes, it's hard to shake that, right. No matter how hard I try, if I move to France, I'm always gonna speak it with a weird accent.
But in terms of values, the self-selection factor that you mentioned is gonna be really important. And it's gonna mean that on a number of issues, people who can choose to move to a country are gonna pick a country on average that they think they can assimilate into pretty easily, right. Or that they want to assimilate it to. So either supply side or demand side reasons. So, and then the second generation, often you see a bit of a, what some people call a backlash effect. But it may just be you know, what statisticians would call mean reversion. You're reverting to the mean of the home country.
David Elikwu: Okay. The mean reversion point is interesting, but I was just thinking about the backlash and I think, you know, what's the extent to which you think there might just be? I feel like with all cultures there is an always an extent to which very often your kids kind of revert against some of the you did they're
Garett Jones: just rebelling against the parents, right. And so the way, the way you can measure that, one way to measure that is to just see if it's true for many different cultures in many different ways. Suppose people are coming from an irreligious, a very irreligious country to a medium religious country, right? The parents, if the parents migrated because they're moderately religious, the idea of the kids rebelling by being super irreligious is a little bit odd. You could also rebel by just going more toward the norm of the new country. So if the parents are basically meeting halfway between, why is it that so often on average, the kids are reverting to a mean in a country that they themselves have never been to. There's more than one way to rebel, you can rebel forward to the country you're living in, or you can rebel backward to the place that your ancestors came from. And on average, people are rebelling backward to the country that their ancestors came from,
And that's a sign of some kind of cultural transmission that's deeper than just simple rebellion against parents.
David Elikwu: And one of the things that you say is that, that can be both good and bad. It can be great if the cultural values in the place that they came from are fantastic and they mesh very well with the culture of the place that they're going to. But sometimes they can have some negative externalities as well, where those cultures don't necessarily match so much. But also, I guess well, there's two aspects to it. One, oh, go on.
Garett Jones: But I'll stop you right there because I wanna point out that like some cultural conflict is worth it, right? Because if the people, say, for instance, the simple example of savings rates. If migrants from a high savings country move to a low savings country, I don't want those people to conform to the low savings norms in the new country. I want them to import the high savings norms, right? Maybe some of it'll rub off a little bit. If a country with fairly low education levels has a bunch of migrants from high education countries move in, there's gonna be some culture conflict, but it's probably worth it to have that cultural conflict if it raises the average education level in the country. So there's some forms of friction that are worth it. So, like, you know, education savings rates are two easy ones to talk about, and for which it's fairly well documented.
David Elikwu: Yeah. Okay. You raise a really interesting point and what I want to try and separate is, okay. You raised the point of the savings rates, which I know that you've correlated with IQ in the past, and there's a benefit of having immigrants that come that have, I guess, both of those traits having high IQ because that increases the economic outcomes for the nation and also having the, the cultural value of having high savings rates, because that's also a net benefit. And also you talk about how, when you have people that come in with certain values, I think you use the analogy of like a supermarket shopper. So you have cashiers, two cashiers in a supermarket, and if one of them is, I think if the more productive one is watching the other one. Then the other one ends up being more productive. And so the idea as it pertains to this might be that if you have someone that's coming in to a country that has this value of having high savings rates, then other people seeing them are also gonna want to stop saving more. And so it has a nets ad for the economy.
But what I'm interested in is, okay, that has clear benefits, but we also talked about the fact that the benefits that you might add as an employee or to the workplace might be not limited to IQ. And so there might be some cultural values and, and maybe you can correct me if you think differently, there might be some cultural values that you could come with that similarly are a net benefit because they can rub off on other people, but they might not correlate with IQ. Does that land with you at all?
Garett Jones: Oh yeah. I think the simplest one to talk about here is individualism versus familism. The idea of ha of valuing a nuclear family and favoring, generally favoring individualism and a neutral rule of law versus familism slash nepotism. I stick up for my family, right or wrong. I wanna make sure that I can get my cousin a job, even though he's a ne'er-do-well, he shows up drunk.
So that second world view is associated with corruption on average across countries. It's also associated with strong demand for labor market regulations. That individualism rule of law approach is associated with tighter families, smaller, more nuclear families, and being willing to say, yeah, punish him, he's guilty. I think that's something that doesn't really correlate with IQ on any level.
The simplest version of this is just looking within Europe. If you go in the north versus south axis within Europe, the further north you go, the more you see these nuclear families, that Protestant ethic, a tolerance for the rule of law. The further south you go, the more tolerance you see for sticking up with family and strong labor market regulations. And this is something that Alberto, the late Alberto Alesina worked on.
I think that's something that's important. It's a cultural norm about basically being willing to treat people as individuals versus me needing to stick up for my clan. And that second approach is rational and it's emotionally intuitive. You wanna help your family, right? But it's something that seems to be an impediment to the wealth of nations.
David Elikwu: Okay. Very interesting. One thing that you just touched on is slightly outside the realm of your work, but I wanna ask you about it anyway. And it is the extent to which I think we're seeing a lot of individualism and there have been a lot of benefits of that. But then I think we're also seeing a lot of negatives of that, where people are losing a lot of the closeness and the cultural fabric within our societies is kind of breaking down a bit as we become a lot more individualized. And that level of individualization before was just limited to, let's say like a family unit. And now the units are individuals, right. The majority of, well not majority, but a lot of household incomes are actually now just a single person. And so the single person is almost the household in many ways. And we've seen that have also lots of negative externalities. The same, some of the same regions that you talked about, which are in the, in the north of Europe, some of the Scandinavian countries also have skyhigh rates of depression and sadness and all kinds of other stuff. Some of that maybe is weather related and just not having a lot of sunlight.
But I do think there is also a correlation across a lot of the west actually, where the more individualistic we become, the more maybe like sad and the more we lose some of the cultural fabric that can have some benefits, even if they are not economic. They might not contribute to innovation or making us better in some ways, but they are better for us as humans. So how does that, how does that land with you?
Garett Jones: Yeah. I agree with you that like, this is a very personal decision about for a collective decision, it's a very personal decision. It's about subjective value, and economics really should be about giving people the subjective values that they want. Economists, the way we usually like to think of something like this that's so hard to wrap your head around and hard to test. It's to say, watch how people vote with their feet. A lot of people are happy to talk romantically about these highly familistic, close-knit networks, but hardly anybody decides like, okay, I'm gonna, I'm just gonna pack it up and just move to Southern Italy and just go with the full familism.
You know, I have a an aunt whose ancestors came from a very poor part of Italy. And I asked her, did any of your relatives ever want to go back? Did they ever get nostalgia for moving back to their small town in Italy? And she's like, no. She said, no, there was nothing there for them. So there was no romance about the small town life. So the question of whether people can get the what the right balance is between the two is very important. I don't think any, I think very few people would be willing to take a 50 or 75% wage cut to get that small little family network. If it were a 10 or 25% wage cut, they might be like, yeah, that might be worth doing.
But just look around the people you see and ask yourself, how much would people be willing to sacrifice in terms of say, rule of law and prosperity in order to get the tighter knit family that they romanticize? They'd be willing to trade off something I would myself, but it's not gonna be enough to justify making that choice collectively. Cause it's probably a pretty expensive choice. Again, the classic version of this that social scientists discuss is looking at northern versus southern Italy. There are a lot of other things involved in northern, in the north versus the south, but at a raw level of comparison might, people from Southern Italy, young people very often try to move to the north. They know they're giving up something, but they really want the money instead. So, they're willing to make that trade off so, we should probably think that we'd probably wanna make that trade off too.
David Elikwu: Fair. One of the things that you talk about in your books is this idea of the SAT score and SAT being for statehood agriculture and technology. I would love if you could, okay. First of all, maybe the precursor is maybe explaining this correlation between, some of these attributes of culture and the IQ or economic development, and then maybe you could explain. What I'm really interested in is what makes that so sticky, this SAT score, because I think in your work, you started it from the 15 hundreds and looked forward. But I'm also thinking like from a cultural perspective, when you look at like both politics and religion have huge impacts on people's culture, people's values, the way that they interact with each other. What is it that makes this way of scoring so sticky despite some of these other conflating factors?
Garett Jones: Yeah, well, the heart of this literature, which is known as the deep roots literature, I can start off like this. In the old world, it turns out that basically not much has changed economically since about 1500. The regions of the world that were most technologically sophisticated in the year 1500 are the most technologically sophisticated day, and they have the highest levels of income. So if we think, so in 1500, both Western Europe and East Asia, were fairly technologically sophisticated. And the Middle East, North Africa was somewhat less. So, they'd already been falling behind for a couple of centuries. Western Africa, their area just south of the Sahara, that band was quite a bit below that, but not dramatically below. And then the further south one goes in Sub-Saharan Africa, the less technologically sophisticated they are, so at that time.
So that's the story of the old world. The question is, and that has been, like you say sticky, one question as you say, is why is it so sticky? And I have to say that my fellow social scientists do not have an answer to that question, right. We kick around multiple ideas, and we don't know which things are more important and which things are less important. I'm enough of a game theorist to think that a lot of equilibria are really sticky. A lot of outcomes, a lot of social norms are really sticky. And even if one person changed, even if one person wanted to change the norm, it's hard for everybody to change it. Right? Switching from forks to chopsticks, it's just hard for any one person to do in a society. Even when you think it makes sense, the fact that these, that these rough rank orders even persisted after the European religious revolutions of the 15 hundreds, the Protestant reformation it survived, the rough rank orderings survived the, all of the shocks and horrors of European colonization in East Asia, right? Two world wars, right? It's amazing that these things lasted. And then when we look to the new world, we see that countries that had a lot of migrants from Western Europe tended to turn out a lot like Western Europe. We called these countries Neo Europes. So on the question of why is it sticky, I think the right answer is that nobody knows. I say toward the end that we should treat the stickiness of these cultural and institutional norms the same way we treated aspirin over the last 200 years. So for 200 years, for almost 200 years, nobody knew how aspirin worked, but we understood it well enough to give it to people. And we were willing to basically build medical science around the advice. Take aspirin when you have a fever or when something hurts.
Similarly, I think a lot of these, the stickiness of cultural norms and the stickiness of government institutions surviving migration is something that we should stick with as a default, even if we just have to leave it to future research to figure out what that really stands for. Personally, I think game theory matters a lot here and cultural norms and the rigid, the difficulty of getting people to switch from less productive but common sense norms like strong family values. To those Northern European individualism norms. If they can't make that switch, then what hope is there for the rest of the planet?
David Elikwu: So you talk about game theory and the equilibrium mattering a lot, and there's a question that I wanna ask. I'll take you on a better path to get there. I'll tell you the question now. The question's gonna be why does game theory not, not necessarily game theory, but why does the, why does market forces not fix more things? And so, okay. The path I want to take is going through a lot of your work. We start with this idea, we've just been talking around this idea that culture and the SAT score within this context, how that impacts the country's IQ and economic development. And then I think there's another point in which you are talking about the, it's a developmental theory, but it's essentially, you, you use the example of the O-ring. So in the 1980's there was the,
Garett Jones: The space shuttle challenger, yeah. Shuttle
David Elikwu: Yeah. Which had an explosion and it all comes down to this tiny o-ring that probably costs about $5. But what it meant is that, you know, all this, this energy was escaping the shuttle, the shuttle blows up. We lose an entire space crew.
And the analog that came to mind was in, David Epstein's book. He talks about, strong link and weak link activities, or strong link and weak link skills. And it kind of rang a similar bell for me where you have some strong link things, you have some weak link things that, for example, is a weak link thing. If you have a weak link in the chain, this hugely complex thing that you're trying to build, a space shuttle, one tiny thing that goes wrong is catastrophic. It doesn't work. I think there is an extension which societies can be a bit more resilient with having being more strong link, but I think what you are postulating is that actually it can be also a weak link thing where, and this is where you have that theory where it's essentially about the difference between matching and mixing. If you have, I think the analogy you used was with vases, if you have one person that's making vases and one person packaging them, if the person making the vases has a very high rate of being able to make them without dropping them and completely shattering it, if they're doing really well, but then you have one person that every now and then, maybe 25% of the time, they're gonna drop one of the vases and break it. If you have two of those people each, you probably want the two people that do it a hundred percent of the time to work together. And the people that break it to stand over there and do it themselves rather than trying to mix them, because those mathematically, they don't balance each other out. If you have one person that's gonna get it right a certain amount of the time and someone that's gonna get it wrong a certain amount of time, they don't necessarily balance each other out.
And the analog that I thought of that was like, let's say like an orchestra. An orchestra is also a weak link sport where, if you have a whole group of people that are playing everything perfectly, they're getting all the notes and you have one person somewhere in there that is doing something slightly off, you hear it instantly and everything is ruined. The whole thing goes to pot. And you can't balance it out by adding more bad players or worse players, simply because your best player is sick. You can't add three people that play the violin badly. That doesn't fix it at all. It's better to actually have two orchestras, you take the people that are mediocre or not as good and you put them over here and you have all the good people, you put them over here. So anyway, all of this is a long preamble.
But the point being that I think this is then extrapolated to nations, right? And so you say if you have a median IQ in a country and you might not necessarily want lots of, or you might want, you might prefer to have people with higher IQs coming to your country because that is going to raise or at least maintain the average IQ that you have. That goes to this like mixing and matching problem. But my question is like, but why does the free market not fix that? Like I would've thought if you came from somewhere where, you know, if you're looking at the error rates, right? If you come from a place where you have some engineering skills, but you don't have enough engineering skills to make a space shuttle, you just make a bike, right? And, and your country can be really, really good at making bikes. And this other place can be really good at making space shuttles. And you probably shouldn't bother going over there. But if you as a person that's really good at making bikes, which is a low complexity thing compared to a space shuttle, were to apply for a job at NASA, you're not gonna get the job right? And so if you have some of these people where we're saying maybe they're lower skilled and they are migrating to places where there is a need for higher skills, or you want to keep the average IQ level higher, like, why does the free market not fix that? You know, you would've thought, oh, you go there and it sounds like you can't get a job and maybe you have to go somewhere else.
Garett Jones: Well, I mean, on average people who are pretty skilled engineers, do have an okay shot at getting jobs in the rich countries, don't they? I would think of that as one example. I don't know if bikes per se are the right example for me to use as an illustration. But someone who's a moderately skilled engineer who can find a way to get an H1B to the US or an equivalent engineering related visa to Western Europe, I have a hunch those folks are gonna get employed in something where they can use their skills. Certainly the US makes an enormous use of engineers from a wide variety of countries. This is something that American engineers sometimes complain about on Twitter a lot, right? They say, oh, I'm facing all this competition for all these foreign engineers, so at least I know that exists in the real world.
This the question, I mean, NASA per se, probably has some dumb government rule about needing to hire Americans. This is unfortunate that the federal government has dumb rules about that for a lot. The Federal Reserve fortunately doesn't, fortunately, they hire a lot of foreigners. I guess my answer to the question is a lot of engineers on average, people with good engineering skills are in high enough demand in the rich countries that they, that seems to be one slot where people can actually move up and trade their skills from one country to the next.
David Elikwu: But then the question is, so why does that lead to the negative externality? Is it only the case where you are comparing the person you got to the person you could have got that had even higher IQ. I thought it's more of a comparison to, let's say there was someone that's already in the country that would've been better or could have been doing that thing. If someone else comes and does that thing instead, then your average outcomes are reduced.
Garett Jones: Well, when I think about O-ring processes, and this is Michael Kramer's idea, new Nobel laureate, recent Nobel laureate, harvard guy. His story is that if you can get more people who are skilled enough to be in your o-ring sector, which is your fragile delicate output sector that will just keep scaling up the more people you have. I mean, the way he writes it down, it says a very naive, simple pollyanna style economist model. But I think it's totally true for the US. It's probably true, it probably would be true for Japan as well if they let in more engineers. I don't know how much it's gonna be true for European countries because of their labor market regulations, but the US in particular is gonna be a place where Silicon Valley and a few other key technical centers are always hungry for talent and they act like they are on an assembly line where they can always add one more step. So it's not that they'll add you at, it's not that you'll get a job at a FANG company, but it's that you'll get a job at a company that has a 1% chance of being a FANG company 10 years from now, right?
So I think that hunger for talent is something that's one of the signs that the O-Ring story matters to explaining real world technical phenomenon. Basically frontier, high tech, super precise output is a sector where a lot of value can be created if you can just get a few more people. And being able to get rid of unproductive workers is part of making that work. Because, like you said, if you're required to keep a bunch of low quality flute players on your flute playing assembly line, that's really just gonna hurt the whole orchestra, right.
In practice, a lot of those workers will just become dead weight, but a company can only carry so much dead weight for so long, right.
David Elikwu: Sure, that makes sense. I wanna ask a question. I think maybe it's two questions, which goes back to the, the robustness of the SAT score, which is really around, like why is this not undone by, let's say, bad policy? And I think you've given examples of this where let's say communism or socialism, right?
Why is it that having bad policies or bad religions does not completely undo the previous technological development that you had. And simply because your, your country was really good at doing stuff in the 15 hundreds. But you've regressed socially or culturally in some way as a result of bad policies, bad judgment, bad leadership for long spans of years. There's plenty of countries where you have one bad leader after another or simply a, a bad leader relative to the trajectory of the rest of the world where you just slowly start falling behind. Why does that not kind of have a bigger outcome?
Garett Jones: Yeah, that's a great question. This is one of the stories, so why is it, so we look at China, right? And China was at the, not quite at the technological frontier in 1500 we're pretty close and then like most of the non-European world, they had bad centuries interacting with the colonizers and conquests, right. And then a lot of East Asia started doing well once, you know, after World War II. But China, the communist dictatorship in China, the aftermath of World War II in China, the slow recovery from communism, their mediocre switch to some half capitalism, half communist hybrid. It's brought them back, but not all the way back. But so many people have a sense that if China, and I have a sense that if China got its act together, China could be, it could aspire to being as rich as Taiwan, right? The country that lost the Civil War. China could be, China could aspire reasonably to being almost as rich as Hong Kong, maybe half as rich as Singapore.
So we all have a sense that like China has a cultural destiny that it's not fulfilling. If I wanna pick a country that's even a bigger example, that it's North Korea. I mean, everybody has a hunch that if somehow you could get rid of the a hundred generals who control that country and the South Koreans could peacefully move in. Within like a generation, it'd be super rich, right? And we don't have that hope for many other countries in the world. We have a hunch that there's this cultural, this centuries long cultural persistence. This has something to do with norms that people are passing on from parent to child, from generation to generation. And again, I don't know what the mix is of, like I hypothesize, if someone finds out that some of this is genetic, I hope future research can sort that out. If all of this turns out to be game theoretic, I hope future research can sort that out. I hope it turns out to be the latter, I hope it turns out to be a cultural set of norms and that future research can find ways to shift those norms peacefully and gradually over time.
But it is something that lasts and the attempts to fix it have been generally unsuccessful and the best that we can hope fortunately public health measures, public health measures have found ways to actually increase IQ scores. We all have a sense, a worthy sense that getting led out of the environment and having good childhood nutrition from, you know, prenatal to about the age of three is gonna have huge impacts on cognitive skills. Is that enough to close the gap? I don't know. Is that enough to overcome all of the other cultural differences that are well documented that show up in the cultural persistence literature? I don't know. So we have ways with our current stock of knowledge, we have ways to close that gap partially, we need to get people talking about the multiple well-documented gaps in order to make closing those gaps a top priority.
I think the World Bank has been pretty good on this. The fact that the World Bank finally started creating systematic IQ tests, standardized tests across countries and reporting them, that helps make it more of a priority to close the gap. You can't close gaps that you're not measuring in the first place. So it took them about, you know, 15 years after my research for them to start documenting the standardized test scores. Maybe in another 15 or 20 years they'll start documenting more rigorously the intergenerational persistence of savings rates, demand for government regulation. And that will in turn lead to more research on ways to close those gaps. First, we have to document the gaps, show that they're persistent. Then we can sort of start nagging the international bureaucracies to find ways to close those gaps.
David Elikwu: Sure. That makes a lot of sense. And one of the things that you mentioned, for example, that we can fix through environmental cues, like, taking the light out of petroleum and improving education. Some of those things do have big impacts on IQ. I'm really interested in this balance of, so I'm speaking to Charles Mann later this week, and he has a book, the Wizard and the Prophet, and it's this idea, and I think it applies in some ways to what we're just discussing, where, okay, you have the Prophets, which will say, instead of focusing on in innovation, we should focus on like bettering the world that we already have. And so the Prophet's solution to this example might be, okay, let's focus on, getting the lead out of everywhere and let's focus on education, let's focus on just fixing the existing status. And the wizard, on the other hand, the wizards might say, okay, let's actually focus on innovation. Why don't we try and improve, even the environment like through technology. Why don't we use innovation to actually shift, the curve?
But one thing that I'm interested in is, I think you kind of touched on it, is this idea that environments in many ways have shaped culture where, as an example. Malcolm Gladwell talks about this. I know that there's some documentation on this. I'm not aware of all the full body of research, but the idea that actually, okay, for a huge part of China's history, you couldn't actually grow much in lots of China just because there's no like water, particularly in like Central China. And so that presented a lot of issues to their development. And then eventually they figured out that they could build these kind of like terraces just on dry land and suddenly you can use that to grow a bunch of things. And one of the other things I was reading from some research is just the way that from a cultural perspective, the fact that they had to grow, let's say, rice and some of these types of grains, the types of grains that they had to grow, cultivate certain types of behaviors within the population. Because growing rice and growing some of these things, you know, all agriculture in general requires patience, it requires forethought. You have to think ahead, you have to be cooperative. So there's a lot of behaviors that that engenders.
Meanwhile, for example, I was also thinking even in Nigeria, you have different types of Farmers. You have some people that are like herders, which they herd animals. And then you have some people that just grow plants and they, they grow other things. And it's interesting how the cultural differences manifest. And there is some work on this as well where people that were traditionally maybe more nomadic people or that were herding animals are actually faster to get to conflict because you always had to be protecting your animals from the people that could take them or the people that could steal them. That was your wealth. Your wealth is on wheels and it can walk away. Someone can steal it. There's a bunch of stuff that's wrapped up in, how you have to protect what you have. And that manifests then in culture and goes back to what you were saying about what makes it sticky.
So, but all of this to say well one question that I have off the back of that is like, If culture is so sticky, then why don't people assimilate better? And why are we not able to? Why is it not malleable that when you then move to somewhere that requires you to maybe act in a different way than the place that you came from. Even if you had, like you say, the second generation, they have no inherent memory of having to work in a different way or having to do things in a different way. And yet they're still acting like that. Why are they not quicker to assimilate to the culture of the new place?
Garett Jones: Yeah. This is, this is the great puzzle, right. And I don't have any answer I gave, which I would give would just be pure speculation. And so, like, I try hard to avoid rampant speculation. I actually pulled up one of the papers while you were talking about this. The ones you're talking about the Nathan Nun has worked on a paper called on the Origin of Gender Roles Women in the plough. And it gets at this question that basically, cultures that were plough driven tended to basically be more patriarchal. Cultures that were less plough driven tended to be less patriarchal, because the demand to herd cattle and to pull the plough turned out to be something that men were specialized in for centuries. So it created a, yeah.
The descendants of societies that traditionally practice plough agriculture today have less equal gender norms. So why is it so sticky centuries later, right? Why are people carrying this up? Is it a pure, is it, how much is it? Can we do 90 plus percent of the explaining with game theory, essentially, like if there's a sizable culture that moves in, if 10,000 people from the plough heavy culture move to someplace else, even if they stop ploughing, they still are raised in a culture where people were patriarchal when they were growing up. And so maybe there's a 90 plus percent persistence of the cultural norms of the way you grew up.
If people just start raising kids the way they were raised instinctively just by force of habit, that by itself could get us that. But your point is well taken. Why don't they just adapt to the place that they are? Right? And the answer might be, so one possible answer is you don't look around at the world around you when you're deciding how to raise your kids. You're going back to the memories of your own experience as a child, rather than looking out to the world around you. So even though we think that basically TikTok, memes run the world, really it's ancestral memory that runs the world. That would be one simple story, right? I'm willing to trot that out. I'm willing to have people say that there might be some other explanation. I do not know, but this is important to find out whether it's something as simple as game theory that can explain it.
David Elikwu: sure. One of the last things that I wanted to touch on as a topic, which I would find really interesting, and it connects some of the work that you've done in the culture transplant and also the hive mind, which is how do you feel that the changes in society, from the perspective of like remote work and going remote, how does that impact a lot of the work that you've done and how you see societies continuing to progress? Because there are some ways in which, okay, if we had this problem, or this, you know, conundrum around, oh, what happens when people migrate around? What happens to the culture? What happens to the IQ? What happens to all of these things? What happens in a world when people don't need to move around? And actually what happens is you can have someone, and you have this now, for example, loads of engineers in Nigeria are working for American companies, working technically in Silicon Valley, but the economics are going straight to Nigeria, right? That the money being paid to them is going to them in their home country, but they are contributing economically somewhere thousands of miles away. And so you have that balance where countries in some ways ends up being or could end up being a transfer of wealth to the, the global south where, you are able to give the economics, the money to a lot of people in countries where labor might be cheaper or more economical, but then you are able to get the value extracted in these other countries. And so there's some element of value on both sides.
Garett Jones: Yeah. This is, I'm curious, when you mentioned that, the first thing I thought of is, will cultural norms meet in the middle when people are teleconferencing for 4, 6, 8 hours a week between, say, Nigeria and Silicon Valley. I mean, there's gonna be a whole wave of papers that are studying different effects of telecommuting, international telecommuting, this in particular. And one of the things that'll happen, I think will be people checking for changes in cultural norms. Do the Silicon Valley engineers start adopting some of the cultural norms of the Nigerian engineers, and then there'll be statistical tests. Are they meeting half and half? Is it 90/10? Is it 80/20? And statistics is perfect for this, right? It could be something as simple as, how people write emails. People will start with something simple like that. People measure productivity norms. They'll measure hours of the day, that people are working. And maybe something as they may end up measuring actual output at some point.
So the rise of greater telecommuting a obviously means people have less face-to-face interaction in the office, which is part of acculturation. I really worry about that for young workers not having the cultural norms of being around people a lot, cause. I feel like rubbing shoulders with famous professors is kind of how I learned to be a professor myself. But on the other hand, they're able to meet people from a rough far richer pool in a more, more global and more diverse pool. And not just here, not just romanticizing diversity, but with self-chosen networks. When they're networks that you choose yourself, you have a chance at finding the person who's just the right fit for you. So I wonder if the rise of telecommuting will mean that a firms are much pickier about who they hire, cause they feel like I don't have to hire people within a 50 mile radius. I can hire globally. So I have a shot at getting far better matches because I'm, it's the equivalent of setting your online dating search for 200 miles rather than five miles. You have a shot at getting a better match. And we're gonna find out how much people adopted the norms of people who are quite, quite different from them.
David Elikwu: Yeah, but also just following on from that, I am interested to find out whether statehood ends up mattering like you say, if the culture is able to change or to shift, but also the fact that it doesn't actually matter, even if you are someone from the us you could work from anywhere else. And so actually working within the US infrastructure doesn't require you to be in the US. You don't necessarily like, what does it mean to be American in a sense anymore? Like obviously I'm not talking about five years from now this is very far future.
Garett Jones: But we, we've wondered about this for a long time, right? So, the law of one price, you know, one of the most powerful forces in economics would tell us that if the workers aren't equally productive, they should be getting paid just as much. Not out of kindness, but out of self interest. Cause any firm that is considering hiring a $100,000 in a year engineer in Silicon Valley, would rather pay $90,000 to get an equally good engineer from the global south, right. They'd, you know, if they could. The thing is that the force of competition means that there's gonna be dozens, hundreds of firms competing for these engineers from the global south. And so very quickly, this isn't something that's gonna take centuries or even decades. It should happen within a couple years that the wages of those workers will get bid up to being equivalent if the workers really are equivalent.
So this is something where, you know, economists naively believe that your wage is a measure of your marginal productivity. And I kind of go with that. And the only things that can get in the way of that would be huge transactions costs, if it's really hard to coordinate people across time zones, if it's really hard to coordinate people because the internet connections aren't good enough, that breaks down the relationship. But other than that, A. I think there's gonna be more convergence in these engineering wages across countries. B. That's not the same as the state going away because everyone still wants their welfare payments, their social security payments, retirement security, whatever we call it in different countries to be taken care of by their local government. And so I think this demand for a local government that takes care of us is gonna be still be very strong. And this is just a reminder, the fiscal powers of the state, the taxing and spending powers of the state are gonna be with us, I think for a long time, as long as people care about associating with those close to them. So as long as their lives are built around, as long as their social lives are built around physical geography, there's gonna be a strong demand for fiscal state that provides local services to people.
David Elikwu: Okay. Are you familiar with Balaji Srinivasan?
Garett Jones: Yes. Yeah, the Network State. right.
David Elikwu: Yes. Yeah. I'm interested to know, when I was, I was reading some of your work earlier, I was just thinking there are some ways in which that could be the perfect encapsulation of some of the ideas that you suggest. Where, what happens when you can, like you mentioned, you can effectively pick all the people that you work with and everyone you engage with. And actually from an economic perspective, you can self-select all of the people that end up becoming part of your network. And, and if everything is digital, then really what is the difference between whether you all happen to live in the same country or whether you just happen to be a cluster of people that are working in cohabiting together. And I will just say there are some extents to which I don't necessarily fully understand or conceptualize the network state as he fully puts it. But I do think there is maybe a potential balance there.
Garett Jones: I think, there's room for a balance there of moving in that direction, and I think it will happen naturally. But both the 2008 global financial crisis and the 2020 Covid pandemic, both showed the very strong limits to that. Traditional territorial states are where everyone's eyes turned to in a financial panic. All of the countries in 2008 that said, we are not going to protect our banks no matter what. We're gonna let banks fail, or we're not gonna have depositor insurance in our country. They all backed down and they protected people in their physical territory. So the fiscal powers of the state turned out to be really important in a crisis, and voters really wanted that. In 2020, same thing with the pandemic, voters demanded the regulatory power of the state to come in and shut down either schools or require masking or require testing. And these very traditional powers of the government that were geographic have turned out to be really important whenever the slightest width of crisis comes along. So dreams of internet states fade in the face of a crisis, and I think that'll continue to be true for decades to come.
David Elikwu: Fair. Okay. One last question that I really wanted to ask you because we didn't get to talk too much maybe about broader economics is, you wake up tomorrow and you are, you've been elected the president, you've already spent some time in the Senate, so it's familiar to you, but you get to pass four laws that you know they're gonna pass, two of them are related to some of the work that you've done, and two of them are about something completely different that you care about or interested in. What four laws do you pass?
Garett Jones: Oh it's great. I would pass a law making, creating a high skilled migration regime for the U.S. That would basically make it extremely easy for people with advanced degrees or other similar credentials to move into the US and get permanent residency at a much higher rate than present. I don't know if that's 3, 4, 10 times not infinity. I'm not, I wouldn't open borders, but make that easier at a much, much higher rate. That's the first thing I would do.
Second thing I would do is, I would dramatically weaken a lot of wages and hours legislation. I'd really weaken, let's say the Department of Labor, in the US and equivalent organizations. I think that letting people have the freedom to hire and fire is an important part of boosting productivity. And I'd won a law that made it hard for those rules to come back. So I think those are two things that would do a lot for productivity itself.
I guess the first one is related to my research. The second is not. On monetary economics, I would, oh, I would also make the United States House of Representatives terms six years instead of two. So two years is very, is just not long enough. So that's three right there that relates to my work.
So I pick one more that's not at all related to my work, I'll make it about tax policy. I would make taxation of, I would tax capital at half of its current rates and keep it there forever. The normal optimal rule from economic theory is that capital shouldn't be taxed at all. There's a little bit of, bit of debate about it and so I'd rather than have an endless debate about it. I just split the middle and say, let's have a tax on capital investments, interest rate, interest investments, whatnot. Half the current rate in capital forever.
So to sum it up, low tax on capital, six year house terms, much freer high skilled immigration and, dramatically cut back on wages and hours legislation. Yeah.
David Elikwu: Okay. And we'll see hopefully from the comments on this episode who wants you as their president
Garett Jones: I, I'd love to see that. Yes.
David Elikwu: Thank you so much for tuning in. Please do stay tuned for more. Don't forget to rate, review and subscribe. It really helps the podcast and follow me on Twitter feel free to shoot me any thoughts. See you next time.
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