Will the intelligent inherit the earth? IQ and time preference in the global economy

Social science research has shown that intelligence is positively correlated with patience and frugality, while growth theory predicts that more patient countries will save more. This implies that if nations differ in national average IQ, countries with higher average cognitive skills will tend to hold a greater share of the world’s tradable assets. I provide empirical evidence that in today’s world, countries whose residents currently have the highest average IQs have higher savings rates, higher ratios of net foreign assets to GDP, and higher ratios of U.S. Treasuries to GDP. These nations tend to be in East Asia and its offshoots. The relationship between national average IQ and net foreign assets has strengthened since the end of Bretton Woods. ______________________________ I would like to thank participants at the Informal Faculty Lunch, sponsored by the Mercatus Center at George Mason University, as well as R.W. Hafer, the Spring 2012 students in master’s macroeconomics at GMU, and participants at the 2010 Midwest Macroeconomics Meetings and the Canadian Economics Association meetings for helpful comments. This paper draws on an earlier working paper by Garett Jones and Marta Podemska, “IQ in the Utility Function.” All errors are my own. Twitter: GarettJones. email: [email protected].