Intelligence: A Measure of Human Capital in Nations

Abstract

is a key requirement for the establishment and maintenance of effective institutions. It is the ultimate requirement for innovation, efficient use of resources, and economic growth. This contribution describes two measures of cognitive capital: the average IQ of the population, and the performance of school children on international scholastic assessment tests in mathematics, science, and reading. These two measures are shown to be closely correlated at the country level, and distinct from traditional measures of education. A measure of capital is described that is derived from IQ and school achievement. Data based on measured IQ and/or school achievement are given for 168 countries and territories, and estimates based on neighboring countries with similar population, culture and economy are provided for 28 additional countries. Key Words: Intelligence; IQ; TIMSS; PISA; School achievement; Human capital. Japan is a rich country, and Nigeria is a poor country. There is no lack of explanations for this discrepancy. Some authors have offered geography as an ultimate explanation for economic disparities between countries and world regions (Diamond, 1997; Hibbs & Olsson, 2004; Nordhaus, 2006). Everything else being equal, countries with greater natural resources and greater proximity to world markets should be richer. Nigeria has more natural resources than Japan and is closer to the old industrial centers of Europe. Therefore Nigeria should be richer than Japan. History and culture fare not much better than geography as explanations for macroeconomic trends and developmental disparities. For example, the backwardness of African countries today has been blamed on the trans-Atlantic slave trade of the 18th and early 19th centuries (Nunn, 2008). This, however, begs the question of why Europeans enslaved Africans but Africans did not enslave Europeans. Economic institutions are a more proximal explanation for worldwide economic disparities. For example, the current poverty of formerly rich countries has been blamed on Europeans who introduced or maintained already-existing extractive institutions to force the local population to work in mines and plantations (Acemoglu et al, 2002, p. 1279) during the colonial age. When geography is pitted against institutions as explanation for economic disparities in today's world, institutions are the more immediate predictor (Easterly & Levine, 2003; Rodrik et al, 2002). Institutions are made by people. Therefore the immediate causes of institutional quality and economic outcomes are to be sought in the physical, cognitive or attitudinal traits of the actors. According to this view, Japan is rich and Nigeria is poor because the Japanese possess more human than the Nigerians. The importance of capital at the country level is supported by the observation of large differences in labor productivity between countries (Hall & Jones, 1999). Human capital includes both cognitive and non-cognitive resources. Value systems have been stressed by many writers, from Max Weber's (1930) spirit of capitalism to Gregory Clark's notion that the industrial revolution was triggered not by new incentives, but by people responding differently to incentives that had been in place for ages (Clark, 2007). There is ample evidence for associations of non-cognitive traits with prosperity and economic growth (e.g., Knack & Keefer, 1997; McCauley et al, 1999), but the direction of causality is difficult to ascertain. In addition, the measurement of non-cognitive traits is fraught with conceptual and psychometric ambiguities. Perhaps for this reason, cognitive traits have received the greater attention, as is evidenced by the inclusion of measures for literacy, school enrolment and related measures in the Human Development Reports of the United Nations, the World Development Indicators of the World Bank, and similar compilations. …

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