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National Wealth and IQ at the Edge: American Exceptionalism, East Asian Mediocrity

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Why is the HBDsphere so damn interested in IQ, anyway?

While I can’t speak for the “movement” at large, in my own case the interest stems from the fact that it explains so much about our world. (In fact, I was interested in this topic long before I discovered HBD, Charles Murray, Jensen, Lynn, Rushton, etc). In particular, it convincingly answers the central question of political economy since the days of Adam Smith – why are some nations poor and some nations rich? After all the long debates about the merits of free markets over industrial policy, over the influence of institutions versus geography; after all the human miseries suffered from zealous adherence to some ideology or other, from the Great Leap Forwards in China to the capitalist disaster zone that neoliberalism made of the ex-Soviet Union in the 1990s, after all these blunders, mishaps, and occasional horrors committed in search of the Answer, we find that it mostly boils down to just one ultimately rather banal thing: Some peoples are more intelligent than others, work more efficiently, and hence enjoy greater wealth; and as a result of said greater efficiency, capital naturally flows towards them, further multiplying their output relative to the backwards countries.

In extreme cases, institutional factors do make a huge difference. Countries with a socialist (central planning) legacy – that is, East Central Europe, the ex-USSR, China, Vietnam – are still systemically much poorer than countries where markets have long functioned with at least some minimal degree of freedom, even though their IQs do not differ much from those of the US, Western Europe, and Japan. Stress on the “minimal” – beyond some fairly modest point of economic freedom and basic political stability, it appears that institutions and economic openness offer rapidly diminishing returns; for instance, the Belorussian economy, which is still 90% state owned and a dictatorship, was actually the most successful of all the ex-Soviet economies after 1991, including even economic reform stars like Estonia (actually Azerbaijan performed even better, but it was helped by a massive oil windfall). Speaking of which, on the other side of the correlation curve you have countries with a very big resource windfall per capita – Saudi Arabia, South Africa, Norway, etc. – which are much richer than the level “warranted” by the quality of their human capital. But once we take these two groups out of the equation, and also get rid of tiny finance-orientated city-states, the correlation between national IQ and economic wealth becomes extremely close – a fact all the more remarkable when we consider that estimates of both national IQ and GDP per capita (PPP) can vary fairly widely.

Here is a graph I made from 2013, which shows a correlation of R2=0.84. This is entirely in line with other similar calculations by professional psychometricians like Heiner Rindermann.

World-IQ-and-GDPpc-2009

That said, as I noted even back then, there are some curious outliers in the “capitalist normal” countries. Moreover, these outliers tend to be concentrated at the wealthy frontier: The US is a positive outlier, whereas Japan, the East Asian countries, Finland, and to a lesser extent, the “Anglo offshoots” (Canada, Australia, New Zealand) are negative outliers.

As economic historian pseudoerasmus pointed out on many occasions, while national IQ is central to the growth story for low-income and middle-income countries in catch-up growth, for already developed nations with their standard 100±5 IQs the benefits accrue overwhelmingly to those with more “marginal” advantages, such as those having somewhat better institutions, or conditions for doing business. This is a hypothesis that makes good theoretical sense, but a closer examination reveals that things might not be that simple. The Anglo nations have what are widely regarded as very good institutions, courts, and conditions for business, but they are relative underperformers, even (especially) when productivity is taken into account. Japan has a 5-7 IQ advantage over, say, Italy, but its GDP per capita (PPP) is similar, while its productivity is significantly lower – even though Japan rates higher on ease of business and perception of corruption indices. There must be other factors that are at play, and I will admit that I am unsure as to what they are. But before we get ahead of ourselves, let’s examine the data in greater detail.

This is the data table I used in the charts in this article:

World-IQ-and-GDP-2013-data-table

I limited myself to countries that satisfied the following list of conditions:

  • Those that had a substantial population, at least 5 million or more (smaller countries tend to be financial/tourism hubs with too much artificially inflated wealth).
  • Did not have a central planning legacy that depressed their wealth (so, no country from the socialist camp during the Cold War) or a big resource endowment per capita (so, out go countries like Saudi Arabia and Norway). We are talking primarily of the old OECD members minus Mexico and Turkey.
  • Are wealthy, i.e. have a GDP per capita of at least $20,000. We already established that the correlation between national IQ and wealth in poorer countries is very good; the question we now want to answer is why it begins to break down at the edge of the graphs.

GDP per capita is measured in purchasing power parity terms because it better reflects the real level of production and living standards in any country and accounts for short-term currency fluctuations. Productivity is the GDP per capita (PPP) adjusted for the labor participation rate and average hours worked per country, i.e. GDP per hour worked. Most of the data I got from the World Bank or the OECD, though I frequently had to look for other sources in the cases of Taiwan, Hong Kong, and Singapore. The regional averages were calculated as a weighted population average of each regional label. National IQs were derived from the average of the Math, Science, and Reading component in PISA 2009.

The first series of graphs show regional and country national IQ versus GDP per capita (PPP) data, with the bubbles scaled for population size.

Developed-World-Regions-IQ-and-GDPpc-2013

Here, at an amalgamated level, we already see a distinct pattern: Americans are much richer than they “should” be, whereas East Asians are much poorer. But curiously, the Anglo offshoots are closer to East Asia here than they are to European-stock populations, so it is not at all obvious that it is an HBD issue.

And now for the country specific data.

Developed-World-IQ-and-GDPpc-2013

While all the countries of Western Europe hew close to the line of best fit, again there are three major exceptions: The US to the upside, and Japan and South Korea to the downside.

The obvious and immediate explanation is that some countries have greater labor participation rates, and/or work more hours. So a natural adjustment would be to calculate the GDP per capita generated per manhour of work and see if that explains American and East Asian exceptionalism relative to Western Europe.

I would note at the outset a few caveats to bear in mind. First, in many cases – certainly regarding the US vs. Western Europe – a large share of the differences in overall labor participation is explained by the greater percentage of American youth and the elderly in the workforce by dint of its less generous welfare state (left-wing view) and less restrictive labor laws (right-wing view). Increasing the labor participation of both of these groups will yield only marginal improvements in total output because they are far less productive than people in their prime. Likewise, working longer hours is of questionable value, because workers will presumably either get more tired and less productive, and/or end up wasting time due to Parkinson’s Law (“work expands so as to fill the time available for its completion”). On paper, Greeks work far longer than Germans… if by “working” you mean drinking coffee. The Japanese have it even worse; extra hours “worked” there means pretending to work until the boss leaves. Germans, on the other hand, actually get all the important stuff done quickly and efficiently, and get to enjoy a big chunk of the rest of the day. Americans tend to work long hours and productively.

Even so, on average, productivity is probably more impacted by national IQ than the level of GDP per capita. At the very least, by far the biggest discrepancy – that between the US and Western Europe – largely vanishes after this adjustment.

Developed-World-Regions-IQ-and-Productivity-2013

Although the gap between the Westerners (barring the Anglo offshots) and East Asia then becomes even wider.

Developed-World-IQ-and-Productivity-2013

Now that I’ve laid out all the data, time to consider some hypotheses for American exceptionalism and Asian mediocrity. At the outset, I should thank pseudoerasmus and James Thompson for participating in the Twitter discussion where many of these ideas were initially raised, analyzed, and critiqued.

1) Historical Leadership. The US has been at the technological edge since its inception; Britain industrialized a bit earlier, but there was never a significant gap in per capita output. Moreover, it burst clear of everyone else in the wake of World War Two, which devastated most of Europe. But 70 years is more than enough time to recover and catch up. In fact, that is precisely what happened: The first part of the period was of the Wirtschaftswunder, the Trente Glorieuses, Il Sorpasso, the Japanese Miracle, and the East Asian Tigers. But ever since 1990 or thereabouts, longterm per capita growth rates in developed Europe, the US, and Japan – for all the rhetoric about “European stagnation” and “Japan’s lost decade” – have basically converged. Here is Paul Krugman’s famous chart on this:

europe-japan-convergence-gdp-krugman

The only two major countries for which uncompleted convergence could still be a significant factor are South Korea and perhaps Taiwan. But any further relative gains on their parts, if the past five years are anything to go by, are going to be slow and marginal. For all its dazzling PISA performance and blisteringly rapid economic catchup, Korea’s productivity levels are still equivalent to those of Portugal, which has traditionally been the poorest country in Europe with the exception of a few Balkan backwaters, and Greece, which is at the tail end of a multi-year depression. Both Portugal and Greece have national IQs almost 10 points below Korea’s.

2) Immigration, Population Composition, and IQ Structure. But if anything, this makes the puzzle even more acute. We know that in recent decades Europe received a lot of immigrants, whose IQs are far lower than those of the natives and show no signs of convergence. The US, meanwhile, is host to two major population groups – Blacks and Non-White Hispanics – with consistently subpar IQs that together make up more than 20% of the population. If anything, that should depress productivity, which probably partially explains New Zealand, where ~90 IQ Maoris and Pacific Islanders also make up slightly more than 20% of the population. In contrast, high IQ and ethnically homogenous Japan, Korea, and Finland all underperform, as do Canada and Australia, which are not ethnically homogenous but do make sure to have cognitively elitist immigration policies.

That said, there are two reasons why this effect might not be all that powerful for both Europe and the US. First of all, in both Europe and the US, these NAMs (Non-Asian Minorities) have a relatively greater demographic preponderance amongst the youngest cohorts, whose members are either not in the workforce at all (infants, schoolchildren, students) or aren’t able to contribute much anyway (they are younger workers with less experience; while they might be quicker on the uptake, older workers often beat them with experience, especially in the more cognitively intense professions). This will likely do Europe and the US no good in the longterm, as they develop ever larger, ethnically distinct cognitive/economic underclasses that will pull down overall GDP per capita and productivity, but this probably just doesn’t play that big of a role… for now.

Moreover, at least in the US, the situation is further improved by the presence of sizable “smart fractions,” which have a disproportionately large positive effect on overall GDP per capita according to many psychometricians like Heiner Rindermann. These smart fractions are both ethnic – most notably, the 2% of the population that is Jewish – as well as the result of a global cognitive clustering effect (many of the world’s brightest and most ambitious people are inordinately drawn to US universities and Silicon Valley). It would also explain Israel’s overperformance – while the national IQ is depressed by Arabs and Sephardic Jews, and the economy is burdened by Haredi welfare bums, the Ashkenazi Jewish cognitive elite still manages to compensate for all that and elevate GDP per capita above the global correlation curve.

Some thinkers have speculated that the reason for East Asian underperformance is that although they have higher IQs than Whites, they have fewer very high IQ people (“smart fractions”) because of narrower distributions. The only problem with this very plausible and reasonable theory is that it is almost certainly completely wrong. The PISA tests show that East Asian S.D.’s are no different from those of European countries (though Finland’s, curiously enough, is lower at a statistically significant level). This theory could furthermore be disproved by a cursory glance at a list of names of members of the US Mathematical Olympiad teams – since 2010, fully 75% have either Chinese or Vietnamese last names.

Another, more plausible theory, advanced by Griffe de Lion as well as Rindermann, is that some forms of IQ, most notably verbal, in which the European-East Asian gap is very modest or even non-existent, are relatively more important for economic success than mathematical aptitude, where the gap is substantial, or visuospatial ability, where it is as big as 10 points. (Lynn actually claims that Europeans are verbally smarter, but PISA shows otherwise, though it does confirm that the Asian/European gap in verbal IQ is much less than the mathematical one). This would largely though not fully resolve the puzzle of East Asian underperformance, though you would still have to convincingly explain why verbal IQ in particular is more important for economic prosperity than, say, just g.

Finally, we must also bear in mind that gaps in cognitive ability can increase or decrease with age. Most tests of intelligence are performed on children or teenagers because it is easy to get big, representative samples from them. But what is true for under-18s may no longer be true for the mid-25s, when fluid intelligence is maximized (the ability to learn), or the 50s, when crystallized intelligence (total stock of applicable knowledge and experience) is maximized. For instance, while male and female IQ tends to be similar, though the latter have famously narrower distributions, it appears that at least on progressive matrices tests, a 5 point gap opens up during the 20s in favor of men and persists thereafter. Just as a significant part of the Flynn Effect can be explained through faster maturation due to better nutrition and parasitic disease control during the past century, so the biological reality that men fully physically mature about five years later than women could explain the appearance of a gender IQ gap in adulthood. Could there be similar processes at work in regards to different ethnic groups? Certainly it seems to pertain to the famous Black-White IQ gap, which increases with age, and very substantially so. Note that productivity in most smart fraction professions peaks in the 50s, when crystallized intelligence is maximized.

Could it be that the Asian IQ lead over Europeans in childhood and adolescence closes or even reverses with age? I have no idea. I was unable to find any hard statistical data on this. (Do tell me in the comments if you have). So for now it must remain but a stab in the dark hypothesis. However, if this is indeed the case – that the Caucasian/Asian IQ gap diminishes or even reverses with age, or put another way, that the much maligned “old white man” really is the smartest dude around – would be able to fully explain Asian underperformance, especially if paired with the observations on the relatively greater importance of verbal IQ as it pertains to economic prosperity.

3) Institutions and Economic Freedom. We know that in the most extreme cases – for instance, central planning under Communist regimes – lack of economic freedom leads to substantially inferior economic outcomes relative to what they might have been under market conditions. Beyond some minimal level, however, the role that increasing economic freedom plays seems to be subject to rapidly diminishing returns. Chile is one of the freest economies on the planet thanks to Señor Pinochet, Argentina is the exact opposite – but their GDP per capita is virtually the same, as – who’d have guessed it? – are their national IQs. But Chile and Argentina are middle-income countries, so institutional differences might not be making themselves felt as much as in fully developed countries.

So let’s look at the biggest outliers and the quality of their instutitions and business environment, as proxied by the World Bank’s Ease of Doing Business indicator and Transparency International’s Corruption Perceptions Index.

gdp-iq-outliers

Now this is hardly a rigorous statistical test, but it’s clear that there’s little or no evident connection. All negative outliers are well within the world’s top quintile by ease of doing business – unlike, say, Italy (56th) and Greece (61st), which although poor by OECD standards are not however major outliers on the IQ charts. Finland, Australia, New Zealand, and Canada are some of the freest economies and best places for business on the planet.

The only two negative outliers which might have a significant problem with corruption are Taiwan and Korea. Now Taiwan is… a strange case. According to one poll, also carried out by Transparency International, 36% (!) of them said they paid a bribe in the past year. This is almost certainly a statistical fluke. On the other hand, only 2% of Koreans said they paid a bribe in the past year; only Denmark, the UK, and Norway, all countries that everyone agrees have minimal levels of everyday corruption, claimed to have paid fewer bribes. Assuming they weren’t lying, perhaps Korea’s rating on the CPI is overly pessimistic. Regardless – that’s still a lot better than most of the rest of the world, including rich non-outlier countries like Italy and Greece, both of whom are joint 69th on the CPI rankings.

4) Economies of Scale. The US is a single integrated market of more than 300 million people with a common language and set of laws and institutions, which enables massive economies of scale. To a lesser extent, this is also the case in the EU, which now has common markets but is still divided by political-fiscal barriers that are make life very difficult for at least some of their members, such as Greece and the Mediterranean countries generally. While Japan might not be of continental proportions, it does have a very substantial population – at 127 million, it is more than one and a half times as big as Germany’s – so it should enjoy most of the benefits from this as well. This factor would have a negative effect on Australia and especially New Zealand, which have low populations themselves and are geographically distant from other big markets.

5) Geography. The US has some of the best geography for industrial civilization on the entire planet: Multiple excellent ports on both seaboards,and the massive Mississippi River and Great Lakes water network that interconnects the entirety of its central core at next to no cost. Europe has middling geography, while Japan’s is poor and prone to natural disasters. Australia and New Zealand are very isolated, making economies of scale unrealistic. That said, the role of geographic factors in our days of dirt cheap oceanic bulk transport and dense railway networks is presumably quite modest.

6) Resource Windfalls. I purposefully excluded those countries where the economy is very clearly radically inflated by large resource windfalls per capita, such as Norway, but even so this factor is still significant for Canada, where natural resource rents as a share of GDP is at 4.4%, and Australia, where it is 8.0%. Combined with their relatively high national IQs and careful immigration policies, their “underperformance” becomes more puzzling, if anything. Even though the US also has a very substantial resource endowment, its effect is swamped by the overall size of its economy; natural resource rents as a share of GDP are a mere 1.3%.

7) Financial Windfalls. Might be a factor in Singapore’s good (relative to the rest of East Asia) performance. Why not Hong Kong? Because after it rejoined its motherland, China had no particular reason to favor it over, say, Shanghai or Guangdong, and quite a lot of disincentives to, considering the pro-Western tilt of many of Hong Kong’s elites. Singapore, however, was free to continue its project of becoming the world’s third major financial hub after London and New York, and its skyhigh GDP per capita (though unremarkable productivity) is a result of that. However, as mentioned at the start, I purposefully excluded places that were so small that a financial or tourism sector could play a dominant role, such as Luxembourg, Monaco, and Liechtenstein, all of which have ridiculously inflated GDP per capitas. Once you get to a British scale, let alone an American one, the impact of global financial centers like London or New York on GDP per capita becomes swamped by the overall economy.

8) American Alpha. Artificially lower risk premiums in the US means foreigners are willing to “irrationally” invest in American bonds at rates well beyond equilibrium. Here is Willem Buiter’s explanation of this phenomenon:

Some of the excess returns on US investment abroad relative to foreign investment in the US may have reflected true alpha, that is, true US alpha – excess risk-adjusted returns on investment in the US, permitting the US to offer lower financial pecuniary risk-adjusted rates of return, because, somehow, the US offered foreign investors unique liquidity, security and safety. Because of its unique position as the world’s largest economy, the world’s one remaining military and political superpower (since the demise of the Soviet Union in 1991) and the world’s joint-leading financial centre (with the City of London), the US could offer foreign investors lousy US returns on their investments in the US, without causing them to take their money and run. This is the “dark matter” explanation proposed by Hausmann and Sturzenegger for the “alpha” earned by the US on its (negative) net foreign investment position. If such was the case (a doubtful proposition at best, in my view), that time is definitely gone. …

There is no chance that a nation as reputationally scarred and maimed as the US is today could extract any true “alpha” from foreign investors for the next 25 years or so. So the US will have to start to pay a normal market price for the net resources it borrows from abroad. It will therefore have to start to generate primary surpluses, on average, for the indefinite future. A nation with credibility as regards its commitment to meeting its obligations could afford to delay the onset of the period of pain. It could borrow more from abroad today, because foreign creditors and investors are confident that, in due course, the country would be willing and able to generate the (correspondingly larger) future primary external surpluses required to service its external obligations. I don’t believe the US has either the external credibility or the goodwill capital any longer to ask, Oliver Twist-like, for a little more leeway, a little more latitude. I believe that markets – both the private players and the large public players managing the foreign exchange reserves of the PRC, Hong Kong, Taiwan, Singapore, the Gulf states, Japan and other nations – will make this clear.

Such a painful adjustment is indeed what has been occuring in Mediterranean Europe. But note that his pessimistic and falsifiable predictions specifically in regards to the US – that there would be “a global dumping of US dollar assets, including US government assets” – have yet to happen.

9) Cheaper Land and Energy Inputs. Land in the US tends to be pretty cheap, outside the North-East, the SF Bay Area, and a few other prestige locations. Much cheaper than in developed Europe or in Japan. Energy inputs are also lower, specifically in relation to fuel, which is taxed at much lower rates than in Europe or Japan. This should lower the cost of business across the board and increase overall thoroughput.

global-fuel-tax

The only problem? The countries right next to the US here are Canada, Australia, and Japan – some of the biggest negative outliers.

10) Hedonics and GDP Fiddling. There are various claims that the US is really… generous at calculating its GDP. Perhaps “American exceptionalism” is just a statistical artifact? I haven’t studied national accounting practices on any detailed level, though pseudoerasmus has and he is skeptical, and I’m also a bit put off that a lot of the sites that make these claims tend to be libertarian goldbugs and LaRouche types. That said, I will admit to an intuitive sense that there might be something behind this. As the commentator Lazy Glossophiliac has pointed out a few times, many things that are either free or cheap in Europe and most of the rest of the world can be pretty damn expensive in the US. The healthcare industry is just the most blatant (and perhaps grotesque) example, accounting for a prodigal share of American GDP while delivering population health outcomes that are, in general, nothing to write home about. Americans dine out much more frequently than Europeans – the labor of chefs and waiters appears in GDP, while creating a home cooked meal does not. You can probably extend this to quite a lot of different things.

American Exceptionalism, East Asian Mediocrity

To sum up: At the technological edge of high IQ/high wealth per capita, there appears an interesting and puzzling disjoint between the US, which is a big positive outlier, and Japan and the rest of East Asia, which are big negative outliers. Adjusting for labor participation and hours worked, to get in effect a measure of productivity, largely resolves “American exceptionalism” relative to developed Western Europe, but if anything widens the chasm between the West and East Asia even further. Moreover, Australia, Canada, and New Zealand – all Anglo-derived settler societies that are culturally close to the US and enjoy low corruption and good institutions – are moderate negative outliers.

In general, possible explanations are either critically flawed in some way, or only partially explain some difference while deepening the puzzle around some other difference. For instance, cheaper energy inputs might appear to partially explain why the US is a positive outlier, but then it would make the question of why Canada and Australia are negative outliers – even though their fuel taxes are also low – all the more inscrutable. Beyond some fairly minimal conditions like having free markets, the quality of institutions do not appear to play any significant role.

Still, it is possible to identify a few factors that likely play some important role:

1) Economies of Scale – Clearly give the US and to a lesser extent, continental Europe, a boost. Many of the negative non-East Asian outliers are relatively isolated island nations with small populations, especially Australia and New Zealand.

2) Smart Fractions and the US – The two biggest rich positive outliers, the US and Israel, have many duller ethnic minorities but also enjoy an Ashkenazi Jewish cognitive elite. Moreover, a significant percentage of the world’s smartest and most ambitious people immigrates to the US.

3) Personality, Culture, IQ Structure – Apart from the partial exception of Singapore – a fact that is mitigated by its status as a financial city-state – all East Asian states economically underperform relative to where they “should” be at. This is The (Other) East Asian Exception. This leads me to believe that the cause of this must be something that is culturally or even biologically common to the region. Maybe it has something to do with a relative lack of creativity in terms of personality (in Nobel Prizes per capita, as in GDP per capita, Japan far more closely resembles Italy than Germany; while Korea has yet to win a single real, i.e. non-Peace, Prize); maybe it is a consequence of East Asia’s shame culture, which is more socially stultifying than Europe’s guilt culture, and can lead to inefficiencies like paying undue respect to an incompetent boss who just happens to be older; maybe it is simply that East Asian IQ is simply “worth” about 5 points less than European IQ due to its particular quirks or structure (specifically, the fact of the Asian advantage in verbal IQ being much more relatively modest relative to Whites); and/or maybe – and this is by far the most tentative hypothesis here – it might be that the East Asian IQ advantage over Europeans disappears in adulthood, meaning that Europeans still retain a relative preponderance in the fraction of smart 40-50-60 year olds who are responsible for most of the greatest scientific and cultural accomplishments.

4) Other Factors – This leaves only Finland and Canada to explain. Finland’s underperformance might be due to the lower S.D. of its national IQ, if the PISA tests are accurate. Moreover, Richard Lynn pegs Finnish IQ at a standard British 100. Perhaps, for whatever reason, Finns simply perform unduly well on PISA. If Lynn is correct, it would not even be an outlier. Or it could be their particular psychological profile, which might be unfavorable for the expression of ingenuity. Canada could be a modest negative outlier because it borders the US and loses too big a percentage of its smartest fractions to its giant southern neighbor.

 
• Category: Economics, Science • Tags: Economic Theory, IQ, Psychometrics, Race/IQ
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248 Comments to "National Wealth and IQ at the Edge: American Exceptionalism, East Asian Mediocrity"

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  1. Comments can begin.

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  2. Could you put data for the various proposed non-IQ explanations in a datasheet? If so, then we can test them statistically instead of merely discussing them.

    Specifically, we can use this method: https://thewinnower.com/papers/using-bayes-factors-to-get-the-most-out-of-linear-regression-a-practical-guide-using-r and the equivalent frequentist version (fitting all possible models given a set of predictors, then finding that with the highest R2 adjusted value). I will write the code for analysis if you/someone makes me a nice dataset.

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  3. Japan has, in my opinion, the second strongest pop culture on Earth after the Anglophones. Their animation films http://en.wikipedia.org/wiki/Studio_Ghibli
    pop music http://en.wikipedia.org/wiki/Yasutaka_Nakata
    and computer games http://en.wikipedia.org/wiki/Pok%C3%A9mon
    show a lot of creativity.
    My guess would be that East Asian confucianist traditions stifle innovation with their strict social order based on age and seniority. I remember (but I can’t source) an article that stated that being an innovator in a japanese business brought much bigger risks and far fewer advantages than in an american company.
    The US is an outlier because not only attracts the global smart fraction, but has clusters (Silicon Valley, Hollywood, Wall Street) that have specialized in discovering and harnessing talent in a manner that amplifies it’s effect.

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  4. Reservations:

    1) not so sure about the national IQ calculation. More about referring to it as IQ.
    2) not so sure whether Anglo offshoots is a useful category. May be useful to drop all the data into a cluster analysis and see what the natural clusters of countries are.

    Also, perhaps compare with average wage or wealth rather than GDP per cap. Average wage captures the value of what people are incentivized to do, GDP perhaps some measure of productivity beyond what is transferred to the worker.

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  5. Again chapeau for this overarching post. Very comprehensive. Re: American exceptionalism my money’s on economies of scale, flexibility (cognitive self-sorting), statehood (of the Federal Government), the “smart fractions” and self-sustaining legacy leadership. Combine two or three of these attributes together and you can explain Silicon Valley (flexibility + size), the Military-Industrial Complex (size + statehood) or most of the other world-class attributes of American power.

    I suspect that even if American immigration is dysgenic overall, that this is more than made up by these other factors, and especially all the (very) bright people who come. The U.S. really leads an amazing “global brain drain” (or global cognitive sorting..). The low-performers don’t do too much damage so long the historic majority runs the middle and lower rungs of administration. When the low-performers start taking over entire cities, counties or even states, then their corruption and dysfunction could take its toll. And of course, the gap between the self-segregating cognitive elite and the teeming masses is likely to become a real chasm..

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  6. what is the IQ of Sephardic Jews?

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  7. Lynn estimates it’s around 98. Basically Sephardic Jews didn’t undergo the same level of selection for higher IQ as the Ashkenazi in Europe because they were not allowed to monopolize the high IQ demanding jobs by the Muslims. (Also I suppose that the higher IQ level of Germans, Poles, etc. relative to Arabs meant that the Sephardi could be smarter relative to the locals just by merely being about as smart as the duller European groups).

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  8. I can try but I don’t know to what extent the exercise will be useful, because many of these factors are quite hard to quantify (e.g. geography).

    Anyhow, I think it’s best to carry on this conversation by email. I’ll try to send it to you tomorrow or on Sunday.

    ,

    Please expound on your IQ criticism. Do you object to using PISA figures? They correlate closely with other estimates including those by Lynn and Rindermann anyway. Personally I prefer them because of how standard, high sample, and internationally comparable they are.

    Finding international wage data is harder than for GDP and I don’t see how they would be more useful, quite the contrary in fact.

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  9. In extreme cases, institutional factors do make a huge difference. Countries with a socialist (central planning) legacy – that is, East Central Europe, the ex-USSR, China, Vietnam – are still systemically much poorer than countries where markets have long functioned with at least some minimal degree of freedom, even though their IQs do not differ much from those of the US, Western Europe, and Japan.

    Well, to quote the venerable HBD Chick, where do institutions come from?

    But, as I’d said, there’s a good reason for that, and it’s not just because of a “legacy of communism” (after all, communism is largely gone now):

    To quote myself:

    A lot of people talk about the determining factors behind national success. Lots of factors have been invoked. The HBD-aware invoke (of course) average IQ, but many countries in the world show that that’s not enough. So other factors get invoked. Due to the correlational nature of these, assessing causation is difficult – unless you use behavioral traits, which are (sorry blank and half slatists) largely inherited.

    Here’s some of the factors that don’t matter:

    Size (see Japan, Finland, and any number of small dysfunctional countries)
    Diversity *per se* (e.g. Switzerland, Albania, China)
    Resources (e.g. Arab oil states, S. Korea)

    All that matters are two things: high average IQ, and high-trust people. You can even have several high-trust populations (e.g. Switzerland). And that’s all.

    “Diversity” becomes a problem, really, only when there’s one or more clannish populations in the mix. Virtually ALL the “diversity” problems currently being experienced by Western countries is conflict between the non-clannish base populations and one of more clannish minorities. Switzerland manages fine with three different (relatively) non-clannish populations. So does, for that matter, Belgium and even France (Occitania – future discussion). Meanwhile, “homogenous” Italy, Albania, and Greece flounder.

    Size, to the extent that it correlates with problems, only occurs because large states tend to encompass multiple populations – often clannish ones. So, trouble sometimes ensues. But size is not inherently a problem so long as the state manages to be primarily comprised of high-trust groups.

    When you look around the world, you can see that average IQ and non-clannish (or at least high-trust, in the case of the Japanese and other similar “in-betweeners” – possibly includes Singapore and Taiwan) people make the difference. All the rest stem from these. These two things can explain 100% of the variance (haven’t checked, but maybe I will).

    Of course, the challenge is that, with the possible exception of the Semai, there are no low-IQ non-clannish/high-trust populations, which are basically confined to NW Europe.

    The World Values Survey (among many other data) backs me up:

    But curiously, the Anglo offshoots are closer to East Asia here than they are to European-stock populations, so it is not at all obvious that it is an HBD issue.

    Everything is an HBD issue, Anatoly.

    In that instance, it just appears that it is really both the U.S. and East Asia that are outliers. The rest of the Anglosphere doesn’t seem anomalous then.

    It might have been helpful to do your analysis with the ex-communist nations included. That might have revealed if there was a deeper pattern. Especially since, unlike you, I don’t think there’s anything special about the legacy of communism for the outcomes in today’s world.

    For instance, while male and female IQ tends to be similar, though the latter have famously narrower distributions, it appears that at least on progressive matrices tests, a 5 point gap opens up during the 20s in favor of men and persists thereafter.

    That doesn’t appear to be actually true. This is an artifact of more attrition of males on the lower end and the greater male SD. Getting truly representative samples of adults is very difficult.

    Maybe it has something to do with a relative lack of creativity in terms of personality

    Bingo! Funny, the ABC series Fresh Off the Boat is based on this idea.

    I have more data to support this idea that I will reveal at a later date.

    But, primarily, it’s hard to argue with the World Values Survey data, or other data showing the same results like the GLOBE study. Success is a result almost entirely of the traits of the people in question. This affects not just intellectually ability, but institutional structure, worker productivity, etc. This all begins at basic day-to-day interaction, which ultimately gives you the structure of everything that follows. What might be interesting is if you could see if you could plot your outliers on the WVS map. It seems to more they are drawn towards one pole of the map and/or pushed away from other poles. Indeed, there’s this (opens image).

    There are many posts of mine that are clearly relevant here:

    Welcome Readers from Portugal! | JayMan’s Blog (on the inability of local wealth/resources to explain IQ gaps – causation clearly goes IQ -> development, not the other way around)

    “Racial Reality” Provides My 150th Post | JayMan’s Blog (more on national development and the fact that national differences long pre-date 20th century upheavals, like the World Wars or the rise of communism)

    Predictions on the Worldwide Distribution of Personality | JayMan’s Blog

    Anyways, very good post. This is an excellent point of reference, and if anything, serves to dash PC theories about national differences and highlight the importance of innate differences between people (which goes well beyond IQ and are in fact responsible for “institutions”) – as the example of Israel illustrates, which likely arose as per HBD chick’s theory.

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  10. I don’t know if mentioned but what about “hegemonic” premium; maybe being the sole hyper power has an effect on national wealth? Also re Israel the aid donations capital transfers from the U.S., as Noam Chomsky states, are not insubstantial.

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  11. Studies have shown that Asians infants are more passive than are European (or European-American) ones:

    https://books.google.com/books?id=vHrCuqliNQ8C&pg=PA178&lpg=PA178&dq=infants+passive+asian+european&source=bl&ots=7KQ4eO_YV0&sig=PMn24cRyBOhXQeb4agl5RSSq8K4&hl=en&sa=X&ei=GCcpVY66GomeNu-MgOgF&ved=0CEsQ6AEwBg#v=onepage&q=infants%20passive%20asian%20european&f=false

    Asian cultures also tend to be more collectivistic.

    It may be that slightly higher average IQs do not compensate for greater passivity and less individualism, with respect to national “performance” or “achievement.”

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  12. “Why is the HBDsphere so damn interested in IQ, anyway?” for me there are hbd issues which are at least as intersting, especially differences in physical strength and differences in sexual attractivity. These issues do impact everyday life probably stronger than IQ differences. But still, of course, IQ is fascinating.
    A few points: I can not really imagine that east asians do cognitively mature faster than caucasians, while this is of course an important questions which should be studied further. At least the folk-sociology among east asian immigrants to my home country is that they see themselves maturing slower. This of course mainly reflects differences in the behavior in numerous social situations, on the partner market etc., but still is does not hint in this direction.
    Also, as it is already stated in the article, it is quite unlikely that verbal IQ has better economic returns than mathematical / spatial IQ, if anything the trend should be reversed. Engineering builds up more wealth than law.
    All in all I would say that GDP is determined by two factors: ability and capital. When ability is equal and GDP is different this leaves differences in capital. In the article those aspects are already included in the categories geography, resources and energy prices. Although this leaves a question about the underperformance of Australia etc. those differences still can probably explain in part the east asian underperformance. Although I think postcolonial studies etc. are 99% crap I also think western countries, and especially the USA somehow still profit of the fact that Europeans conquered and settled huge territories with fertile soils etc.
    And one maybe a little bit ridiculous idea: maybe physical strength also plays a role? Of course this is unlikely in a modern, automized, IT-based economy, but still an average 180 cm / 80 kg caucasian guy with strong hands and a IQ of 100 can work more than an average 170 cm / 60 kg japanese guy with an IQ of 103. And still today many people work with their hands.
    One last issue which is as far as I see omitted in the article: dependancy rates are not only different between different countries because of different labour participation, but also because of fertility. East Asian countries with extremely low fertility have low dependancy rates – for the moment, not in future, they are living some kind of demographic credit. So this makes their underperformance even more striking.

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  13. Could it be that the Asian IQ lead over Europeans in childhood and adolescence closes or even reverses with age?

    No. Japan was at the top in the OECD adult skills study.

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  14. All I have argued is this. The United States, unlike most other rich countries, has all three elements : high hours worked per worker, high productivity (output per hour of work), and high employment-population ratio (mostly because of higher ratios for youth and old). Most other rich countries do not have all three in combination. Some have only 1, others have 2.

    The above are tautologically true decompositions. So the fact which need explaining is why the United States has all three elements, and most other rich countries do not. Any explanations which do not proceed from that observation, does not work.

    I think voluntarily chosen policy differences account for most of the differences in the rich countries’ GDP per capita. The reasons different policies are chosen by different rich countries of course must cite differences in culture, historical experience, personality traits, etc.

    The non-policy factors cited by Anatoly are either irrelevant, or make small contributions at best. (They can be calculated.)

    As for Chile and Argentina, Anatoly simply repeats an argument I have already refuted.

    Chile’s and Argentina’s GDP per capita are similar, but the underlying components are quite different. Chileans work longer than Argentinians and have lower productivity.

    http://research.stlouisfed.org/fred2/series/AVHWPECLA065NRUG

    http://research.stlouisfed.org/fred2/series/RGDPTHCLA630NUPN

    http://research.stlouisfed.org/fred2/series/RGDPTHARA630NUPN

    Also, Argentina and Chile have had very different GDP/capita for most of their history :

    https://pseudoerasmus.files.wordpress.com/2014/07/southamerica1.gif

    What’s the only thing which has truly changed in Chile in the past 30 years ? Policy.

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  15. Another, more plausible theory, advanced by Griffe de Lion as well as Rindermann, is that some forms of IQ, most notably verbal, in which the European-East Asian gap is very modest or even non-existent, are relatively more important for economic success than mathematical aptitude, where the gap is substantial, or visuospatial ability, where it is as big as 10 points. (Lynn actually claims that Europeans are verbally smarter, but PISA shows otherwise, though it does confirm that the Asian/European gap in verbal IQ is much less than the mathematical one).

    How does one measure reading scores or verbal ability across different languages? It doesn’t seem possible to me. Is there any meaningful way to measure whether a person at the 90th percentile of reading ability in Japanese is better or worse than someone who is at the 90th percentile in English?

    Regarding verbal skills, of all foreign students I’ve seen at universities, East Asians are by far the worst at picking up English and speaking it well. They seem significantly worse than students from the Middle East, Eastern Europe, Africa, and Lating America.

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  16. How does this “hegemonic premium” work ? Explain the mechanism.

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  17. Silicon Valley does not preferentially contribute to US GDP. It contributes to world GDP via technological diffusion. Therefore, there is no reason, a priori, to cite the existence of SV-style high-tech culture as an important reason behind the US lead over other rich countries in GDP/capita.

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  18. Thanks for writing this detailed post. I will add few things.

    -Sephardi Jews-

    Nobel per million stats: http://i.imgur.com/9qVfKCt.png

    As you can see Sephardi success is quite high. Either they have very high SD with avg iq of 98-100 (Italian Sephardi seem extremely successful) or their avg iq is higher, when you calculate it by taking nobel winning threshold as 140 Sephardi iq looks like 105-108. Also Lynn estimates Sephardi iq 98 and Ashkenazi iq 110. I think Ashkenazi avg iq is 115 and Sephardi iq would be higher too. Another problem may be difference between Sephardi Tehorim (Spanish then later Dutch/Ottoman Sephardi) and the recent more ”Mizrahi Sephardi”.

    -Iq and Income-

    Interestingly when you look at the relationship btw iq and income in US there are almost no exceptions.

    White American: IQ 100 / $ 54,857 (includes White Hispanics – probably closer to 60,000)
    East Asian: IQ 105 / $68,088
    Indian: IQ 110-112 / $86,135
    Ashkenazi: IQ 115 / $100,000

    5 point IQ difference equals to something like $14.000 income difference.

    -East Asian mediocrity-

    Only at highest levels (nobody knows why, may be related to hierarchy/authoritarian culture (selection), testosterone levels) but that really matters a lot. In Israel and US Ashkenazi smart fraction are extremely accomplished and has great impact on economic success.

    This post is really important to understand the importance of smart fraction:

    http://infoproc.blogspot.com.tr/2014/12/quantum-gdp.html

    Very few people discovered quantum mechanics and few people understand it. But ”today a third of GDP is attributable to quantum mechanics” – in developed countries. (If the mean is low you won’t have the necessary smart fraction to produce tech related to QM)

    -Spatial iq-
    Spatial iq doesn’t seem to be as important as verbal/mathematical iq. I’m seeing different numbers but Ashkenazi verbal/math iq are probably between 115-125 (verbal esp high) and spatial btw 98-100. (their non selected iq from Middle Eastern times) It doesn’t seem to effect Ashekanazi success in todays math/machine civilization.

    And one last thing: there doesn’t seem to be a European pop with avg iq higher than 100 maybe except Huguenots. (assimilated today)

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  19. Regarding East Asia, Anatoly and most other commenters completely ignore that productivity in manufacturing is VERY high in East Asia — much higher than its GDP/capita would suggest. Japan basically converged with the United States in manufacturing productivity around 1990. Almost all of the difference in the economy-wide labour productivity between the United States and Japan is therefore due to differences in non-manufacturing, mostly services.

    From this paper

    http://scholar.harvard.edu/jorgenson/publications/industry-origins-us-japan-productivity-gap

    I’ve uploaded a chart illustrating the above :

    https://pseudoerasmus.files.wordpress.com/2015/04/tfp-gap-japan-usa.jpg

    This, again, points to voluntarily chosen policy differences as a major determinant of the gap in GDP/capita between Japan and the United States. Japan strongly regulates its service sector in ways which preserve small scales and multiple layers of distribution. The Japanese have had many opportunities to deregulate in this area, but have declined. People want it kept that way.

    This needs to be kept in mind when generalisations are made about East Asia.

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  20. I forgot Argentina’s hours worked

    http://research.stlouisfed.org/fred2/series/AVHWPEARA065NRUG

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  21. I would guess it’s not possible to really map, but how does risk-taking factor into it? Certain western European populations are portrayed as more risk-taking, more free-spirited, more adventurous. If nothing else, free of group consensus, strict social codes and a sense of limits that is present in the relevant Asian populations. Can it come down to desire as the defining factor?

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  22. “Señor Pinochet, Argentina is the exact opposite – but their GDP per capita is virtually the same, as – who’d have guessed it? – are their national IQs”
    -I seriously doubt this is any longer true. Argentina has been notorious for understating its inflation since 2007. Also, Chile was, for most of its history, known as a mining country, and Argentina as a first-world country. Give it time.
    As for the explanations in this post, I only find the cheaper land and other natural resources one plausible. Argentina and the United States had huge productivity premia in the late 18th century due to the large amount of land per worker there.

    https://books.google.com/books?id=KFZHAAAAYAAJ&printsec=frontcover&dq=wealth+of+nations&hl=en&sa=X&ei=B38kVYaCG5LZoASch4DIBQ&ved=0CCYQ6AEwAA#v=onepage&q=north&f=false

    There’s another big missing explanation in this post: protectionist policies in Japan and Korea. According to The Korean, protectionism pays a large role in services productivity in South Korea:

    http://askakorean.blogspot.com/2014/10/koreas-labor-productivity-and-how-to.html

    And in Japan, trade as a percentage of GDP has always been surprisingly low. Also, as Noah Smith points out, Japan never had a neoliberal revolution.

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  23. All this IQ gobbledegook is fine and IQ as one of the metrics, definitely, has its place in the economic assessments. What missing, however, from all these economists’ efforts to employ mathematics in the issue, is:

    1. “The War, more precisely Continental War, issue–a single, most important, factor which defines national intellect;
    2. The structure of GDP, which matters and which defines the national skill levels. US GDP is case in point.

    Huntington’s 14 points are as relevant today as they ever were, as well as Rifkin’s argumentation in “The End Of Work”. No matter the goodness of best fit lines–in the end it is what one can and can not produce, which defines a real weight.

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  24. Interesting topic and a lot of fascinating hypothesis, for what its worth I think the adult stage Iq variance is the least likely explanation. I’m confident if we had large accurate sample size testing of whites and east Asians in there late 20′s to early 50′s we would find the current pattern more or less repeated. A point of consideration in this is that Iq correlates within nations regarding wealth( as you well know) and east Asians earn on average more than whites in America , and as far as I know, Canada, Australia etc.

    I think it highly likely that whatever the explanation its likely to be multifaceted. I do wonder about how much of GDP is a statistical artifact. Given that Europeans have so many things covered by the government. Obviously GDP proxies strongly with wealth, BUT to whatever extent GDP isn’t an accurate proxy for wealth, then looking at GDP to uncover the relationship between wealth and IQ will have some inaccuracy built in.

    Another consideration is Social capitol, I have heard (and I confess ignorance, I don’t have data, perhaps you do) that in many parts of east Asia corruption runs higher. They are less trusting of each other. And i think more importantly -LESS CARING OF EACH Other-which might be a different animal all together from being distrustful or likely to rip off. In my estimate whenever you encounter a large variance in behavior between two groups, genes probably play a role. So it could be something like social capitol bio diversity at work. Social intelligence then? Which might be a reason for the importance of verbal iq, at any rate this is of course speculation.

    I know people think homogenous societies have more social capitol than diverse ones like the US. Putnams famous detractions on diversity come to mind. But consider the following point, populations that can tolerate and trust outgroups to such an extent to create succesful diverse socities probably have high social capitol. IF indeed social capitol is a largely heritable trait that may bode poorly for such countries as there population changes. But not because of diversity per se, but because of the new groups with lower social capitol moving in.

    You point to countries that have a lot of diversity, like Isreal and the US, and consider the possibility of a smart fraction lifting the countries NET GDP. I suspect this explains a small part of the variance , but not all of it. A very left wing person might point to this as evidence of diversities benefits. But maybe more accurate conceptualized as the benefits of having a society that can tolerate, welcome and allow diversity. I know this still leaves some countries as negative outliers, like Canada etc-which would seem to plausibly have high social capitol.

    Which brings me to looking at basic cultural factors. The US is a brand name, and might enjoy an inflated value to its product. Petro dollars and what not. Maybe like how our keyboard is QWERST instead of ABCD, history plays a role. The US got to top as an investment spot and it has a lot of inertia behind it. Perhaps this is a hard thing to change. Surely, we have all seen signs in the past decade that it is changing, that relative to the rest of the world america is less exceptional. At any rate, fascinating article, and should give a small pause to the Iq fanatics. NOt because IQ isn’t important-it is probably the most important variable we can concretely lay hands on- but because we have good evidence to show other factors at play.

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  25. @ Cpluskx
    that was an interesting post. I have a few questions:

    is the high medium IQ of the south asian population in the USA the result of selective immigration or does it reflect a medium IQ of the south asian population as a whole which is only in our times temporary depressed by poor living conditions in south asia?

    I thought spatial and mathematical IQ were more or less the same or at least highly correlated and verbal IQ – while of course still correlated to both via general factor g – would be something different. Know you say mathematical and verbal IQ are one category and spatial IQ is something else. Do you have any literature I could read about this? Also I wonder now it is even possible to measure mathematical IQ. As far as I see regular IQ Tests do have two types of questions: verbal questions as for example analogies and ravens matrices. The latter measure spatial IQ I think.

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  26. Many excellent replies all round. I will be tackling them in approximately the order they appear from now on.

    @Jayman,

    It might have been helpful to do your analysis with the ex-communist nations included. That might have revealed if there was a deeper pattern. Especially since, unlike you, I don’t think there’s anything special about the legacy of communism for the outcomes in today’s world.

    The reason I excluded ex-Communist nations right now (as opposed to, say, in 2035) is that 25 years just isn’t long enough for them to finish their convergence from the artificially depressed economic state they were in under central planning. This is especially so when you consider that for some of them, especially the ex-Soviet states, most of the 1990s were “wasted” on the structural transition from a rigidly centrally planned system to free markets with some semblance of enforceable legal noms. Once their average growth rates for some reasonable period of time, such as a decade, stop gaining relatively on Western Europe/The US, only then can we say that their convergence has finished and we can start making comparisons.

    Example – Estonian society is less clannish and has considerably greater trust than, say, Italy. It also has better institutions, greater ease of business, and lower corruption. It is frequently cited as a star reformer. It is in the Eurozone. It has a high IQ, higher than Italy’s and not far behind Finland’s (the gap is mostly due to the Russian minority). I hope you will not dispute any of that. But it still has a considerably lower GDP per capita and a very considerably lower productivity level than Italy. As you would expect, the gap between them is closing at a considerable rate. Relative to 2003, Italy’s real output per capita has declined by close to 10%, whereas Estonia’s has grown by 40%.

    Now one problem is that the area where Communism came to power is coterminous with areas which were outside of the Hajnal Line and had an exogamous community family system. This makes it easy for people who insist on looking at things from too much of an HBD prism to be confounded. They should bear in mind that other factors like unfinished convergence could (and are) playing a very big role as well. One really obvious way to illustrate this is to ask why despite broadly similar IQ and trust profiles, the European Med (Greece, Italy, Spain, Portugal) is still considerably wealthier and very considerably more productive than the Visegrad (Czech/Slovak, Hungary, Poland) and Baltic nations. And why the latter are closing the gap.

    That doesn’t appear to be actually true. This is an artifact of more attrition of males on the lower end and the greater male SD. Getting truly representative samples of adults is very difficult.

    This seems like a plausible explanation. Is this a hypothesis or is there a citation/quote?

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  27. Nota bene :

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  28. @Jayman
    “Where the institutions came from?”

    In that case, Jayman, the institutions came with the Red army and where not the result of the local population propensity.

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  29. Anatoly,

    How would you explain the phenomenon of highly successful diasporas from some of the less well-performing countries? For example, people from Greece and Italy (where nutrition and other factors that affect IQ are satisfactory) tend to be very upwardly mobile when they immigrate or work abroad. Is this because mostly high-IQ nationals are impelled and succeed in going abroad? Or does it point to systemic problems outside of cognitive considerations, such as corruption, within the countries that prevent a more stable, prosperous economy?

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  30. High avg iq of South Asian population in US is a result of selective immigration. Avg iq in South Asia will increase with better nutrition / iodine sufficiency / becoming more machine society but it won’t reach 110. I think 95 would be ceiling for South Asia. (if no recent strong selection for iq or artificial intervention)

    For the verbal/math/spatial iq you can look at this and references:

    http://web.mit.edu/fustflum/documents/papers/AshkenaziIQ.jbiosocsci.pdf

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  31. There’s another big missing explanation in this post: protectionist policies in Japan and Korea. According to The Korean, protectionism pays a large role in services productivity in South Korea

    Yes, see my comment above on Japanese manufacturing productivity, which is much higher than its overall productivity. The same with South Korea.

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  32. @ Cpluskx: thanks

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  33. Great post Anatoly

    Jayman as always providing good insights. You might to take a look at the work of Jayman and Hbdchick. They have gone beyond the casual focus on IQ to see what else lies behind differences in economic(and other) differences but they remain within the HBD sphere. Turns out there is more to HBD than just IQ. :)

    On the question of East Asian’s lagging behind I believe the great statistician La Griffe du Lion figured this out:

    SMART FRACTION THEORY II: WHY ASIANS LAG

    http://www.lagriffedulion.f2s.com/sft2.htm

    @Jayman
    When can we expect this new post of yours? Been waiting for an update for a while now and it sounds right down my alley

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  34. Anatoly, Krugman’s chart only shows growth in GDP per working-age adult since 1993. It does not show convergence in the level of GDP/waa. The USA is still higher than Europe or Japan in this respect :

    http://2.bp.blogspot.com/_-EMpadQx4hM/S_sDwsxWuaI/AAAAAAAAARg/N9g-psKyWKI/s1600/japan3.png

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  35. If there’s one thing I know about MANOVAs, it’s their resistance to solving the validity question.

    This article is a very good case in point.

    Sorry AK, but anyone seriously interested in socio-economic solutions – which have to include the crucial biometric of mortality/disease rates – would dismiss these correlations as ‘noise.’

    BTW, American ‘exceptionalism’ wasn’t an envious nod at ‘Manifest Destiny :’ it was Uncle Joe quipping about Yankee hubris/delusion. Perhaps currently best manifested as General Breedlove.

    Plain ole ‘nutjob’ does it for me. :)

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  36. Anonymous
    says:
         Show CommentNext New Comment

    White people spend an inordinate amount of time and energy on how whites have a higher iq than blacks. And this is supposed to explain everything you need to know about black people. With blacks, IQ is king and explains everything.

    With Asians, white people cannot just look at IQ because Asians have higher IQs and they do not want to be pigeon holed by IQ like black people are. So they invent a lot of reasons why IQ matters with blacks, but not with Asians.

    They I’ll say things like creativity and collective society, ignoring that relative to black people whites are more collective and less creative than black people. Yet this is seen as a positive for whites.

    What does this all mean? It just means that white people are trying to game the system by trying to prove that their race is the superior and deserves this or that.

    That is all. Welcome to America in the 21st century. :)

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  37. Anatoly mentioned my hunch about the cause of the US per capita GDP exceptionalism. I’ll expand on it here. He’s seen me do it before, but this is a bigger audience, so there are more opportunities for criticism.

    The US has a more market-oriented economy than most other rich countries. I think that a more market-oriented system will tend to throw up more economic activity, while not necessarily achieving more customer satisfaction.

    The US healthcare system spends much more money on the last year of life than other rich countries’ healthcare systems. Why? It’s largely a for-profit system. It maximizes revenue and profit, not the number of healthy man-years. The general breakdown of the body in the last year of life is a great excuse to order up more machines. Medications are overprescribed, procedures are overperformed, the amount of economic activity is maximized. Spending per patient breaks world records while life expectancy stays safely behind them.

    The US has less public and more private transportation than most rich countries. We can debate for a long time what’s better, but obviously the car model spends more money per passenger-mile than the train model.

    The US higher education system is more market-oriented than those of most rich countries. At the highest end it’s better than them too, at the middle and low ends it’s worse. Without looking it up I suspect that even at the low end the US system spends more money per student than the educational systems of most rich countries simply because it’s more market-oriented. The more lawyers colleges can put out, the more money they make. Who cares if the economy needs that many lawyers? The silent hand? Tell that to all of those unemployed law school grads.

    Overproduction is the common thread here.

    The US retirement system is more market-oriented than those of most rich countries. The silent hand maximizes the amount of trading in the stock and bond markets, the brokerage fees, the salaries of the mutual fund managers. Are American retiress living better for all that economic activity than the retirees in less market-oriented rich countries? I doubt it.

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  38. Thanks.

    I guess that particular theory goes out of the window, then.

    A few additional observations:

    For example, Korea is among the three lowest-performing countries when comparing the skills proficiency of 55-65 year-olds; however, when comparing proficiency among 16-24 year-olds, Korea ranks second only to Japan. Similarly, older Finns perform at around the average among the countries taking part in the Survey of Adult Skills while younger Finns are, together with young adults from Japan, Korea and the Netherlands, today’s top performers.

    Although that’s the result of Flynn.

    pp. 103: Table showing gap between 16-24 yo’s and 55-65 yo’s. Korea has the highest gap, which is not surprising because out of all these countries it was the only one that was truly a Third World country in 1950. (Also: A strike against Unz’s theory of the East Asian Exception to socio-economic influences on IQ). Japan also has a gap, but it is moderate and comparable to that of France, the Netherlands, Spain, Finland, Poland, Italy, Germany, and Estonia. This is not too surprising either since its level of socio-economic development in 1950 was not to dissimilar from that of Spain, Poland, and Italy (though Germany, France, and the Netherlands were considerably richer and more advanced).

    pp. 108: Brightest 55-65 yo’s in the US, as measured by problem solving capacity in technological environments. So some support for theory that US exceptionalism is a legacy thing. Though it should be noted that the Anglo countries, Sweden, and the Netherlands are not far behind. (Though Sweden and the Netherlands are very productive).

    … Okay, this report is really fascinating. Thanks for bringing it to my attention. Better to continue this in another blog post.

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  39. Now one problem is that the area where Communism came to power is coterminous with areas which were outside of the Hajnal Line and had an exogamous community family system. This makes it easy for people who insist on looking at things from too much of an HBD prism

    You can never look at things too much from the “HBD prism”, I say. :)

    The data back me up. We know that the heritability of key behavioral traits, views and attitudes, and major life outcomes are all highly heritable. What’s more, and much more key here, these things aren’t heavily affected by within cohort environmental variation (between is a different story). This is affirmed by large behavioral genetic studies from national samples (of “diverse” countries, like the U.S. or Italy). If local conditions were a factor in affecting key variables of interest, then it’d show up in the shared environment, since children growing up together should be more similar than those growing up in completely different parts of the country. Of course, extended twin studies break it down even further (see The Son Becomes The Father | JayMan’s Blog).

    Once their average growth rates for some reasonable period of time, such as a decade, stop gaining relatively on Western Europe/The US, only then can we say that their convergence has finished and we can start making comparisons.

    Fair enough.

    Example – Estonian society is less clannish and has considerably greater trust than, say, Italy.

    Northern Italy or Southern Italy? Italy is like two (or perhaps three) countries in one. In terms of GDP per capita, Estonia seems more comparable to Southern Italy right now than Northern Italy. In terms of corruption, it seems more in line with Northern Italy, though.

    They should bear in mind that other factors like unfinished convergence could (and are) playing a very big role as well. One really obvious way to illustrate this is to ask why despite broadly similar IQ and trust profiles, the European Med (Greece, Italy, Spain, Portugal) is still considerably wealthier and very considerably more productive than the Visegrad (Czech/Slovak, Hungary, Poland) and Baltic nations.

    To be sure (I’ll come back to that). But taking a look at the map of GDP per capita in PPP across Europe (2008, seen here A Tale of Three Maps | JayMan’s Blog), it seems the West Slavs and the Balts fit in with southern Iberia and southern Italy (the low IQ areas), though Greece is somewhat ahead, all things considered (though, so is Ireland).

    However, all that said, along the lines of what J. P. Rushton said about India, development is no guarantee of the eventually matching Western levels. I don’t doubt that the economies of these nations are still “recovering”, however, I don’t expect them to get very far, over all. But sure, we’ll have to wait and see on that one.

    But back to this point:

    Now one problem is that the area where Communism came to power is coterminous with areas which were outside of the Hajnal Line and had an exogamous community family system.

    It’s not like the deficiencies – or broadly, the differences – between East and West (and North and South, for that matter) end merely at economics. They are visible in a whole suite of national characteristics, many of which are regularly featured on my Twitter feed (one of which was recently discussed by Steve Sailer):

    Which country would be the perfect setting for a “Fast & Furious” / “Mad Max” crossover sequel?

    Even driving behavior follows the Hajnal line. Sailer gave video samples of Russian driving in an earlier post. Road Rage, clean water, views on homosexuality, drinking, homicide, etc. aren’t just the legacy of communism.

    Interestingly, in many of these characteristics, South Korea clusters with the other countries in that corner of the World Values Survey map. It’s not just the commies.

    It’s entirely possible that even a high IQ society is stunted from reaching Western levels by a lack of high trust (or other features that make life difficult in clannish honor societies). Perhaps Russia and China will never match nearby nations for that reason. I will also argue that low openness to experience (a hallmark of a clannish society) seems to correlate with low creativity; societies that score low seem to lack the ability to produce like Western nations can (this will be part of a future post).

    Here’s the cite on the sex gaps in IQ:

    Are apparent sex differences in mean general intelligence created by sample restriction and increased male variance? (2009)

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  40. Sephardi Jews-

    Nobel per million stats: http://i.imgur.com/9qVfKCt.png

    As you can see Sephardi success is quite high.

    How Sephardic are they?

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  41. Regarding East Asia, Anatoly and most other commenters completely ignore that productivity in manufacturing is VERY high in East Asia — much higher than its GDP/capita would suggest. Japan basically converged with the United States in manufacturing productivity around 1990. Almost all of the difference in the economy-wide labour productivity between the United States and Japan is therefore due to differences in non-manufacturing, mostly services.

    Robots?

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  42. Sephardim aren’t arab jews. Most of iberian or real sephardim “immigrate” for other european countries as Netherland and Britain during “inquisition”. Italiots and greek jews also seems to be a two particular jewish collectivities. Stop generalizing “sephardic” term for all of jews in middle east.
    If XIX physiologists, criminologists and psychologics are really right, then geniuses are more like “neurosis”. East asians are too “perfect” to have a lot of unbalanced outliers. Perfect in a evolutive perspective, not moral.

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  43. “Where the institutions came from?”

    In that case, Jayman, the institutions came with the Red army and where not the result of the local population propensity.

    You sure about that?

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  44. Curious people spend a large amount of time trying to figure out how the observed distribution of scientific and technological achievement, as well as of wealth, came about. IQ is an important tool in that search. It explains a lot, but not everything.

    “relative to black people whites are more collective and less creative than black people.”

    Creativity is best measured by results. What have blacks created?

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  45. Nice, Anatoly! A comprehensive post covering a long list of interesting issues.

    Panda’s 2 cents:

    There’re many conflicting ( or “conflicting”) data suggesting potentially many conflicting conclusions. How come? One of the major reasons that has been overlooked is perhaps what’s the comparison basis, without which one can easily reach the conclusion that American Exceptionalism, East Asian Mediocrity.

    The Americans and the East Asians were/are not at the equal comparison basis, not then 300 years ago, not now (slightly better though).

    As we all know that whenever 2 things are compared at a different basis, we’re comparing apple and orange, then of course conflicting conclusions.

    Here Panda has to repeatedly introduce two key concepts that are almost completely missing in all the major scholar works Panda comes across – “Civilisational Advantage” , longwith the “Multiply Effect” it carries.

    One shall have no problem understanding why we were/are not at the equal basis after knowing what is “Civilisational Advantage”:

    Do we clearly realise when discussing HBD, don’t we, that we’re been living under the absolute world dominance of Western Civilisation (by and large Anglo-Saxon-German-Franco-Ashkenazi) for the last 300 years at least?

    – We speak/write English as the world language, dressed in suits&tie, listen to pop&rap…

    - USD is unconditionally the world researve currency with which all major commodities are priced, (btw, the only 2 centres that dertermine the final price of commodities and everything else including what your labour worth are NYC and London).

    - We are under the financial structure (e.g. fundamentally basic issues like what are the general practices of Finance, what is counted as GDP? how nominal GDP is calculated, how much each wroth in the market, what’s the productivity and how it’s valued, etc, all the data comparison points) theoritically set up by Anglo-Saxon authors almost exclusively…

    THIS is what Panda would call “Civilisational Advantage” and its “Multiply Effect” (both reasonable and unresonable, across board in economics, market, culture, geopolitics, etc ) that the Western civilisation currently enjoys.

    Our comparison basis therefore, is not the same!

    Of course, as a civilisation dominated by Western “Civilisational Advantage”, the East Asia (led historically by Chinese Civilisation, recently spearheaded by Japan) can make things at the similar universal value as Western civilisation , such as a hammer, a sewing maching, a computer, etc, yet for the vast majority of services (which are priced heavily in nominal GDP, hence weath calculation), it is not only noy universal valued and but also contains large differences in market prices – hence“Multiply Effect” of “Civilisational Advantage”. This has immense impact on all the “conflicting “data that Anatoly described. Simplely consider some of the most obvious:

    1. why the market value of this (https://www.youtube.com/watch?v=85Fc2amPf34) , produced by people with > 120IQ , is about 10 bucks, oke, 50.

    while the market value of this (https://www.youtube.com/watch?v=uXALGD7G25Q), produced by people with perhaps combined IQ of 120 , is about multi-millions?

    Mind you these count as “GDP, GDP/per cap”, and “productivity” in today’s world.

    2. why the market value of cloth like these (https://www.youtube.com/watch?v=ah89Ra5fcpU) is under 20 bucks ,

    while the market value of a RL Polo suit or a pair of Pepe Jeans worth 10 or 100 times more?

    Mind you these count as “GDP, GDP/per cap”, and “productivity” in today’s world.

    3. why a 90 IQ full time secretary job of a regular markting firm based in US starts at USD 40,000, while a 130 IQ full time electronic engineer job based in Taiwan is at USD 26,000 at market value ?

    Mind you these count as “GDP, GDP/per cap”, and “productivity” in today’s world.

    4. Why any 85 IQ half time native English teacher of an evening course in China is at least USD 24,000, while a 135 IQ full time PhD lab researcher job in the same city worths probably the half of it?

    Mind you these count as “GDP, GDP/per cap”, and “productivity” in today’s world.

    etc.

    Because of “Civilisational Advantage” , longwith the “Multiply Effect” it carries, not strictly according to IQ ranking though, : )

    To suggest that the average American real productivity is higher than, or almost catch up with, that of Japan, or even that of South Korea, is a joke, if you have ever lived in these countries. Mind you 1990′s Japan had almost demolished the entire high tech industry of the US prior to the “Plaza Accord” under the gunpoint.

    “Average productivity”? Pauleez! If USD is not the world’s reserve currency today, or even English not the langue franca any more of the world communication, the differences would be even much larger.

    2 things in the begining made the Anglo-Saxon dominating the world:

    1. The generation of Britain’s Industry Revolution (and perhaps 2 or 3 generations thereafter) soemhow had WAY MORE THAN 100 average IQ, Panda guesses.

    2. A historical coincidence that Ming China burned their entire fleet voluntarily and closed the border to the outside world eversince, before conquered by the barbarian Manchus (hence China – the leader of East Asia Civilisation was gone to dogs), while at the almost the same era, the West discovered the New World (Americas+Australia – the size of entire the old Eurasia) , together with all the minerals, real estates/value, natural resources…, without any competition at all, hence the sheer size of almost freelunch-alike wealth basis laying the firm fundation for its later on industrialisation and world-wide empire building, in order to form this “Civilisational Advantage” we see today.

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  46. How would you explain the phenomenon of highly successful diasporas from some of the less well-performing countries? For example, people from Greece and Italy (where nutrition and other factors that affect IQ are satisfactory) tend to be very upwardly mobile when they immigrate or work abroad.

    Selective migration. The bigger the barrier, the better the immigrant (compare Muslims in the U.S. vs Muslims in Europe), typically.

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  47. I continue with my theory that smart east asian fraction are overwhelming composed by “high achievers” ( kind of gifted) and lower proportion of the gifted-gifted and creative-gifted types. A qualitative difference cause by personality differences.

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  48. “Spatial iq doesn’t seem to be as important as verbal/mathematical iq.”

    I’m not aware of any Jews who contributed to the Industrial Revolution. Jewish contributions to science have been almost entirely in theory. Experimental science, discovery through tinkering with physical objects, the sort of stuff that Edison and Tesla did, even the sort of stuff that Korolyov and von Braun did – I don’t think that Jews have ever done that. And I’m Jewish by ancestry.

    I doubt all science and technology will ever be confined to theory.

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  49. From the current 81 to supposely 95 – 1SD that is, it’s a heck of a lot of Flynn :)

    Where South Asians originated from? Originally from ME Arabs, Persians and Turks ( all with mid 80s IQ, yes, they are now better nutritioned, with iodine sufficiency, many, such as the Irianians and Turks, are becoming more machine societies, but hey, still mid 80s IQ currently), before mixing with South Asian indigenous tribes (mid 70s IQ).

    The combination of people of mid 80s IQ and people with 70s IQ reaching 95, or like some said 110, is an revolutionarily giant leap forward for the mankind, don’t you think?

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  50. I just realized that I typed “silent hand” instead of “invisible hand”. Funny.

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  51. Anonymous
    says:
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    If I recall correctly, only one is half-Ashkenazi, others are all completely Sephardic.

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  52. If I do a caste-name analysis of the annual National Merit Semifinalist list for California
    ( same pattern applies for other states )

    South Indian Brahmin = 35%
    North Indian Brahmin = 10%
    North Indian Merchant ( inc Jains, Sindhis ) = 20%
    Forward Caste Dravidians = 20%
    Kayasth ( North Indian scribe ) = 5%
    All these castes add up to 15% to 20% of Indian population and less than 50% of South Asian diaspora

    the rest ( inc Sikhs, Patels, Caribbean hindus ) = 10%

    the rest category of non-elite castes, easily account for about 50% of the total Indian diaspora
    and win just 10% of slots

    The same applies to most spelling bee winners, Intel science talent winners

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  53. Indian IQ is caste dependent

    About 70% of the Indian population gets affirmative action quota and is genetically lower IQ and lower caste

    The 112 IQ study for Indian IQ, I dont know the caste composition

    If you do caste name analysis of winners of elite contests like California National Merit Semifinalist, you will find 90% of the winners are from the elite castes, about 15% to 20% of Indian population

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  54. Japan has low productivity because Japanese are less likely to fire unproductive workers. There are both institutional and cultural(some commenters have used terms like “collectivist” earlier) incentives for this, but whichever one emphasizes, the point is that much of the unproductivity has to do with what you could call less cut-throat ruthlessness on the part of employers. Incidentally, when most people write about “productivity” it is implied to be a good thing which one always want to raise. But one can argue that not firing people as often leads to greater social cohesion, less instability, etc. Due to their obsession over particularly narrow economic metrics, economists and financial “experts” have been saying bone-headed things about Japan for decades now, how it’s a basket case economy, how productivity is low, and all this crap about how things are going to be a disaster for the in the future as a result of these things(“bug in search of a windshield” is one useful idiot’s phrase). But the country remains one of the highest GDP per capita in the world, high life expectancy, low crime, low unemployment, etc.

    Also in Japan it’s common for workers to stay at the same firm for their career instead of changing companies more often as you see in the U.S. for example. This is obviously strongly related to firings being less common, but this tendency should be pointed out because it’s important in its own right. It has the same impacts as well, it tends to have a downward impact on productivity and dynamism but arguably is good for stability and cohesion.

    I do not see the evidence that a lack of innovation is the “problem”(I put problem in quotes because it’s not clear to me high productivity is as important as most people assume it to be). That annoying buzz word, innovation, is not something easily measured. When people do come up with ways of trying to measure, like patents per capita or something(I’m skeptical how well these actually measure “innovation”) Japan usually ranks high. So I think that explanation of East Asians not being creative is based on little more than stereotypes and Western wish-fulfillment.

    East Asians often innovate in ways that are not as valued by Westerners by the way. An example are production practices. Look up what “Kanban” is if you want a quick example, but suffice to say, Japanese have been extremely innovative in these less sexy ways and it has a lot to do with why a lot of for example American manufacturing has lost out since the 70s. But most people dismiss this type of innovation because they personally do not value it. Of course they value the consumer products that these methods allow to be produced in an affordable way, but that’s not going to get in the way of talking about how awesome we are and how East Asians are stifled, not creative, passive, and other vulgar nonsense.

    On the point about how Japanese are not creative I could also make points about the impact of Japanese culture, but some other commenters have already pointed this out so I don’t have to bother.

    I focus on Japan in this post but much of what I say is probably true to varying extents in South Korea and other northeast Asian countries.

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  55. More data is needed on gini and income distributions in these countries. The USA and UK benefit disproportionately from having large firms headquartered in their cities, which in turn is an artifact, to some extent , of their recent civilizational dominance. If much of apples manufacturing is done in China, back office work in India and research in Israel that artificially inflates american GDP.

    And as another comment above noted, traditional societies are going to have lower gdps than atomized consumer countries. A businessman and his strong independent career woman wife who spends all day at her government job are going to hire a nanny and pay for daycare etc. Not so in traditional Malaysia or somewhere where young girls don’t dream of snagging the corner office, where grandparents stay nearby, where public transport is common, where ghetto thugs and white flight haven’t forced people to buy and sell houses every few years. Atomized consumerism began in Europe and was perfected in America. The rest of the world cannot be judged until capitalist liberalism has destroyed their family networks and other traditional non monetized social systems and replaced everything with trade and contact.

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  56. Also the claim by Willen Buiter that the U.S. will need to generate surpluses to meet the demands of its borrowing abroad is economic nonsense. It is based on a misunderstanding of how money is created(and it is created, there should be no confusion about that) and also ignores that every transaction is two-sided. For the U.S. to be unable to continue to “borrow abroad” by being the consumer giant it is, buying stuff everyone else produces, that means China and the rest will not longer be able to produce and sell all the stuff they do, which isn’t good news for their economies either. Were the U.S. to suddenly be unable to consume at current levels, that would be a disaster for producers as well.

    But since the U.S. has control of its own currency, unlike the Mediterranean countries of Europe(the main reason that comparison is worthless), there is no threat of the United States running out of dollars or being unable to finance its debt(inflation, empirically is not a significant either). There is also not much threat of a global dumping of U.S. dollar assets any time soon.

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  57. Thiel says the world is concentrating too much on bits, and not enough on atoms, which could be a way of saying too much theory and not enough objects.

    https://medium.com/conversations-with-tyler/peter-thiel-on-the-future-of-innovation-77628a43c0dd

    Perhaps the European genius is (or was) more closely connected to the physical world, while the Jewish genius is more theoretical (and verbal). No doubt this has to do with differing occupations in history.

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  58. There is also some evidence that within the same country people from traditional wheat growing regions are are more individualistic than people from rice growing regions (even if they are city dwellers with no connection to agriculture).

    I wonder how a GDP comparison between rice and wheat growing regions in China would look like.

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  59. Anatoly Karlin: Please expound on your IQ criticism. Do you object to using PISA figures? They correlate closely with other estimates including those by Lynn and Rindermann anyway. Personally I prefer them because of how standard, high sample, and internationally comparable they are.

    Finding international wage data is harder than for GDP and I don’t see how they would be more useful, quite the contrary in fact.

    I don’t have any beef about using a measure that is a composite of “the average of the Math, Science, and Reading component in PISA 2009.”

    I’m not keen on calling it IQ though. There’s no real evidence of that – that the Australians have a 3 point IQ advantage on the US, or Finland practically has IQ 107.

    With Finland for instance, when it’s actually tested, it falls average. E.g. see Roivainen – “Are Cross-National Differences in IQ Profiles Stable? A Comparison of Finnish and U.S. WAIS Norms” or the standardisation samples cited by Flynn – http://tinyurl.com/ls64847.

    Moreover, when you break down their PISA, their advantage is strongly female – http://www.brookings.edu/research/reports/2015/03/24-brown-center-report-loveless?cid=00900015020089101US0001-03281. Do they have this large sex difference with much smarter women or something, or is the PISA not actually capturing “IQ” that well?

    Re: wages, it depends on what you want to know about wealth.

    If you want to know how productive and economically busy a country is on the world stage relative to its population, you probably do want GDP per capita.

    If you want to know how much value people living in those societies are capable of getting the international market to transfer to them in the form of wages and wealth, then you may want to know about their wages and their wealth.

    Annual GDP reflects value of “all final goods and services produced within a country in a given year”. If a country’s people are perhaps involved with markets that don’t necessarily have the end result of final production of anything in their country, yet are clearly being highly compensated for their work (so clearly its very valuable to people who actually own the wealth), GDP per capita could give an varying result from wages and wealth.

    Either way, I think the comparisons of wealth and wages to PISA and “IQ” would add context, so if you’re interested, data for a subset of OECD that has these indicators and overlaps with your dataset:

    http://i.imgur.com/qb0ZcGQ.png / http://i.imgur.com/vzKJlqa.png – average 2009 wage vs PISA09 PPP / Exchange Rate

    http://i.imgur.com/tCTN35V.png / http://i.imgur.com/XtQHTMY.png – average 2009 wage vs “IQ” PPP / Exchange Rate

    http://i.imgur.com/VezoXsR.png – 2014 median disposable household income vs PISA09

    http://i.imgur.com/DJgORDf.png – 2014 median household wealth vs PISA09

    The shapes are similar – low correlations between the variables among the OECDs, some differences worthy of note.

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  60. Anonymous
    says:
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    Another problem may be difference between Sephardi Tehorim (Spanish then later Dutch/Ottoman Sephardi) and the recent more ”Mizrahi Sephardi”.

    There’s a lot of confusion about these terms. There are the Dutch and Ottoman Sephardi but there are also Sephardic groups that settled in the Arab countries. A Jew from Morocco for example might be a Sephardic Jew or a Berber Jew. Algerian Jews are also predominantly Sephardic but the Tunisian and Libyan Jews are not.

    However, I would think it’s difficult to measure the average IQ of various Jewish groups from Arab countries, since those communities don’t really exist any more, with their best and brightest settling and doing well in France, Canada and the US, and those with less opportunities going to Israel. The average IQ of these groups’ descendants in Israel wouldn’t accurately reflect the average IQ those groups had back in their Arab host countries.

    Iraqi Jews seem to do well in Israel compared to other Israeli groups from Arab countries and it seems likely to me that the reason is that their community was not fractured in the dramatic way the other communities were and more of their brightest ended up in Israel. The Iraqi Jews are Mizrahi and not of Sephardic origin, btw.

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  61. Its civilisational advantage hypothesis don’t work to China during european middle age??

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  62. “The 112 IQ study for Indian IQ, I dont know the caste composition”

    You don’t need to know their cast composition really.

    Are these 112 IQ Indians NE Asians(105)? or Europeans(100)?

    Clearly they are not, so it is impossible for them to have avg IQ as high as 112, unless for 1 out of the following 3 reasons:

    1. it is a widely recognised theory that the direct offsrpings of people of mid 70s IQ (“low casts” in India) and people of mid 80s IQ (“high casts” in India) usually lead to > 110 IQ level on average, or

    2. it is due to very selective immigration (i.e. it is reasonable to suggest that avg IQ of H1B1 Indians in US is about 2 SD above Indians avg IQ in India), or

    3. their “casts” are extraterrestrial beings originated in another planet.

    You choose.

    BTW, on 2: H1B1 Indians in the US having avg IQ of about only 112 is a kinda of proof that Indians in India does have low 80s avg IQ. Why? because if Indians in India had avg IQ of close to 100,for instance, then the avg IQ of highly selective Indians in the US would have avg IQ of about 130, with avg of 112 being way too low.

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  63. Its civilisational advantage hypothesis don’t work to China during european middle age??

    Of course it worked , the other way around though. The Civilisational Advantage at a time was in China’s favour.

    The reason why it didn’t appear as apparent as it is today in Anglo-Saxon world was the fact the world back then was not globalised, with China and Europe having little direct contact with each other.

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  64. How Sephardic are they?

    I think 1 or 2 of them were half Ashkenazi.

    I’d say probably Jewish population during Industrial Rev was very small / not very integrated to rest / were usually in finance / there were lots of oppression. I certainly don’t think Jews are only good at theory, John Von Neumann single handedly created sizeable portion of modern civilization.

    andalay

    Your post contains a lot of false information but yes i also think it’s a giant leap forward for the mankind.

    You are probably right and Iraqi Jews seem really successful (Sassoon, Kadoorie families)

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  65. Von Neumann was a mathematical physicist. He dealt with theory.

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  66. / were usually in finance / there were lots of oppression.

    These excuses are self-contradictory. If Jews were allowed to become big-time bankers, then surely they would have been allowed to become inventors.

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  67. there doesn’t seem to be a European pop with avg iq higher than 100 maybe except Huguenots. (assimilated today)

    I wonder if anyone has ever measured the mean IQ of the European aristocracies. The British upper classes seem to have assimilated less than the others. I’m sure GSS wordsum data can be broken down by Christian denomination. Episcopalians would surely score above 100.

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  68. Would be delighted to know which I said in the post are false info.

    Care to share how this “giant leap forward for the mankind” came into being all of a sudden? Climate Warming or The New Ice Age perhaps?

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  69. Would be delighted to know how exactly “a lot of” what I said in that post “are false info”.

    Care to share how this “giant leap forward for the mankind” came into being all of a sudden? Climate Warming or The New Ice Age perhaps?

    And what is the secret that this “giant leap forward” only appear to occure to South Indians in the US? Why didn’t it make E Asian IQ into 140 , or Africans into IQ 95, or Europeans into 130, at the same time? Just curious.

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  70. Fascinating thread. Worth reading multiple times and mentally chewing on for some time to come. You said it, IQ and it’s variation explains a lot about our world. I hope that in the future people that see this are not pigeon holed as being simply HBDers.

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  71. Anonymous
    says:
         Show CommentNext New Comment

    I’m hardly an expert on the topic, but I feel the persistent issue of “brain drain” is not given adequate consideration in the article.

    It could very well explain part of the apparent advantage the US has over other nations.

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  72. Because East Asian usually don’t have Jesus in their heart? …. nah (I am currently Agnostic), if the prosperity theology were a factor here, S.Koreans would rank better as they are quite more Christian than other East Asians.

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  73. Also in Japan it’s common for workers to stay at the same firm for their career instead of changing companies more often as you see in the U.S. for example.

    You see things like this in the U.S., back when the immigrant fraction of the workforce was low, as it is in Japan today…

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  74. This entire post is riddled with false assumptions, metrics and analysis.

    1) GDP isnt success. It includes prison economy, obesity economy, depression & narcotic economy, whore economy, bloated legal paperwork economy, hedge fund economy.

    2) policies weigh more than IQ. Even in a low median IQ country there must be some high IQ people. If these high IQ people design, implement good policies, IQ loses its predictive and causal power.

    3) north Korea vs south Korea: high mean IQ is worthless with bad policies. Same people, same genetics, same language, same heritage. But huge differences in outcomes.

    4) cheap land: borrowing costs, access to capital and kmow-how, regulations and policies, and implementation speed weighs perhaps as much or more than cheap land.

    5) geography: california with 12% US pop. is earth quake prone. And Katrina? Japan’s geography has advantages. Natural barrier to mass immigration, secluded location in one corner of the world (do your own thing), surrounded by competent, genetically similar neighbors.

    6) financial windfall: vague term. What do you mean? Stock market? Bond market? Currency trading market? Tax free safe haven? Insurance market? Real estate trust market?

    This post is as bad as CNN & fox. I thought Unz.com would be different.

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  75. Bad Nobel chart. Literature, peace, economics, are worthless in these measurements, highly politicized.

    Measure only sciences.

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  76. Regarding East Asia, Anatoly and most other commenters completely ignore that productivity in manufacturing is VERY high in East Asia — much higher than its GDP/capita would suggest. Japan basically converged with the United States in manufacturing productivity around 1990. Almost all of the difference in the economy-wide labour productivity between the United States and Japan is therefore due to differences in non-manufacturing, mostly services.

    Absolutely. The manufacturing efficiency in places like Japan and South Korea is astounding. They are quite innovative and maintain extremely low error rates.

    And don’t forget that the agriculture sectors in Japan and South Korea remain politically very sensitive and important, and are thus highly protected by both tariffs and non-tariff barriers. Because of these political reasons, their agricultural sectors are incredibly inefficient compared to the capital-intensive agribusinesses in the United States, for example.

    This, again, points to voluntarily chosen policy differences as a major determinant of the gap in GDP/capita between Japan and the United States. Japan strongly regulates its service sector in ways which preserve small scales and multiple layers of distribution. The Japanese have had many opportunities to deregulate in this area, but have declined. People want it kept that way.

    The Toyota luxury brand in the United States, Lexus, was an attempt to introduce the basic yet exceptional Toyota customer service in Japan to a select segment of the automobile buyers in the United States.

    In both Japan and South Korea, the level of personal aftermarket service for even inexpensive manufactured goods is incredible compared to the buy-and-throwaway culture that Americans have. East Asian service sectors are financially very inefficient by American and even Western European standards, but for cultural reasons seem to have retained “small scales and multiple layers of distribution.” If your LED TV or Blu-ray breaks in the U.S., you pretty much throw it away and buy another one (unless it broke shortly after purchase), but in East Asia, the manufacturer will often send out a repair man to fix it free or charge a very nominal cost. It’s just culturally impossible to have nonexistent service (in order to have cutthroat prices) and survive as a business in these countries. Clearly they prefer a price-inefficient, but qualitatively-better service. That may lower their PPP GDP per capita and such, but probably makes life easier and less aggravating.

    By the way, another thing to keep in mind about some of these metrics is to look at beyond the snapshot picture and examine the changing patterns over, say, 20-30 years. I am sure Mr. Karlin is aware of these number: http://www.nationmaster.com/country-info/stats/Economy/Patents-granted

    They are from 1998. I would almost guarantee that South Korea was not number 2 twenty to thirty years prior to that time. Remember that there is considerable lag between human (and economic) development and mass affluence.

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  77. Nice comments on Japan.

    By the way, another thing to keep in mind about some of these metrics is to look at beyond the snapshot picture and examine the changing patterns over, say, 20-30 years.

    Yes, excessive inference from cross-sections is a bad habit in these precincts. That was a point I also tried to make about Argentina and Chile. People keep saying they have approximately the same GDP/capita, even though that was clearly not true for most of this century.

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  78. I wouldn’t blame immigration for all of that (though obviously it depresses wages). There have been other changes in the economy, among them greater competition.

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  79. National IQs were derived from the average of the Math, Science, and Reading component in PISA 2009.

    Your numbers don’t tally with Lynn’s:

    http://www.ttu.ee/public/m/mart-murdvee/EconPsy/2/Lynn_Meisenberg_2010_National_IQs_calculated_and_validated_for_108_nations.pdf

    For example: you got Australia at 102.9, Canada at 104.1, Ireland at 99.6, Finland at 106.6, Greece at 96.0…….. while Lynn measures them at 98, 99, 92, 99, 92 respectively. Big difference.

    You are over-estimating european IQs for some reason. Lynn has got East Asia more than half a SD ahead of Europe.

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  80. Could it be relevant that the USA (together with Canada) basically stole an entire continent from its previous inhabitants, virtually exterminated them, and thus had a whole continent’s worth of untouched virgin mineral, forestry, fishery and agricultural resources at its disposal? While all these resources exist worldwide, the low-hanging fruit has mostly been gathered wherever large populations have lived for thousands of years. On top of the successful resource theft, the USA was disproportionately colonized by “go-getters” – people who were tough, unscrupulous, determined and practical. Last but not least, the USA has been characterized since its foundation by the world’s most money-centric culture. In the USA, your worth as a person is directly proportional to your financial net worth. That means gangsters, extortionists and banksters get more respect than teachers, scientists, doctors and nurses (except for the tiny subset of scientists and doctors who also happen to be extortionists – “he became a doctor specializing in diseases of the rich” – Tom Lehrer).

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  81. If a tiny difference in average IQ makes such a big difference in prosperity, why are members of Mensa (who have IQs over 130 by definition) if anything less prosperous than average people? Obviously because high intelligence tends to open your eyes to the many interesting things in life other than money.

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  82. The correlation between IQ and income at the individual/personal level is substantially lower than the correlation between IQ and income at the country level. There is some kind of multiplicative effect, which suggests that a large part of the impact of IQ on national productivity is not just via individual worker quality, but via people’s impact on institutions, policies, etc.

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  83. Value added as by agriculture, fishing, forestry, fossil fuels, and mining is …. less than 4% of GDP in the United States. This cannot be an important determinant of the USA’s unusually high GDP/capita.

    http://www.bea.gov/industry/gdpbyind_data.htm

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  84. @ pseudoerasmus
    but the share of agriculture, mining, etc. was much bigger some time ago, and this enabled the USA to build up a huge stock of capital which nowadays is invested in production and services

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  85. Nice post. A few quibbles. GDP is income, not wealth. They go hand in hand, but you’re not showing wealth statistics. Some countries have high wealth (Sweden, Denmark) but fairly low income, at least compared with America or Switzerland. Wealth is a stock, valuable things like land and oil and art, income is a flow, cash money. The outliers you speak of are selling their wealth to boost their income.

    Also, R^2 is not the same as a correlation coefficient. In a simple linear model with one regressor, R^2 is the squared correlation coefficient. So your 0.84 figure is a bit unclear to me, is it the R^2? or is it the correlation coefficient? If it is the R^2 then this is a tight association indeed. It doesn’t matter much, point taken, but it is good to be careful with language.

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  86. My observation as an engineering manager is that you needed an IQ of above 120 before you were productive. (OK, there are a few exceptions, but not that many.) Thus it is not the average IQ that matters but the number of people in the upper reaches of the spectrum.

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  87. If these high IQ people design, implement good policies, IQ loses its predictive and causal power.

    Not really, the projects today are too big for just a few people to do all the heavy lifting. It took Airbus the combined resources of 4 countries to make something competitive with one company who essentially owned the business. I doubt some African country with a few guys who went to Cambridge and got a degree in aeronautical engineering could take their degree back home and do the same.

    Even the jobs for the guys on the shop floor require some level of skill and intelligence due to their complexity.

    People who argue against average IQ always try to make it about some hidden force holding all these people in the third world down in some way. Yeah, that might have been true 200 years ago before information was widely available. However, nothing is stopping Kenya from developing viable industries. Pakistan was willing to do whatever it took to build a nuclear weapon yet the rest of the country is very backward.

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  88. Chile has fewer % Jews than Argentina. And that may have something to do with perpetual currency crisis in Argentina, and the solution to GDP riddle.

    Also, number of patents may not correlate well with quality of patents or their industrial impact.

    In all these years working in high tech, my overall impression has been that japanese are refined, aristocratic, understated, whereas Koreans tend to be pompous, conceited, and very often overestimate their abilities. Chinese tend to be malicious and not quite trustworthy.

    Informal chats with many colleagues & friends confirmed these assessments.

    Of all the nobels in sciences, japanese have won 19, yet not a single Korean, and only 8 Chinese.

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  89. Have you ever been to Japan? Clearly your statistics are missing much. What’s the value of safe and secure public spaces? There is no street crime in Japan. Streets, under ground malls, subways, etc. are safe to be and conduct commerce. That’s got to be worth many points on your scale of economic performance.

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  90. I didn’t say anything about patents.

    And that may have something to do with perpetual currency crisis in Argentina, and the solution to GDP riddle.

    Chile also used to have a lot of financial crises — including 2 big ones under Pinochet.

    There’s no GDP riddle regarding Chile and Argentina.

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  91. If you read carefully, I do not argue against average IQ differences.

    Its that in the overarching equation, IQ might not be a major factor.

    As for Airbus, Germans are the prime movers, and Francé etc offer a European veneer and collaborative posture. Due to historic tragedies.

    Also, one need not conflate high-tech with material success. New zealand sells butter around the world. Does it require a 105 average IQ?

    With good policies, primary and tertiary sectors, and low tech manufacturing can thrive even in modest IQ populations, generating high GDP.

    Ex: Barbados is 95% black. Due to reasonably satisfactory policies, it has fairly high human development index.

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  92. Capital accumulation faces diminishing returns. So you need improvement in total factor productivity, which merely having a lot of capital does not give you. As it happens, the US convergence with Great Britain circa 1900 in per capita income was driven by productivity growth in the nontradeable sector — mainly transportation, communications, and utilities. In manufacturing productivity, the United States was already far ahead of Great Britain in the 1860s.

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  93. If you read carefully, I do not argue against average IQ differences.

    Its that in the overarching equation, IQ might not be a major factor.

    As for Airbus, Germans are the prime movers, and Francé etc offer a European veneer and collaborative posture. Due to historic tragedies.

    Also, one need not conflate high-tech with material success. New zealand sells butter around the world. Does it require a 105 average IQ?

    With good policies, primary and tertiary sectors, and low tech manufacturing can thrive even in modest IQ populations, generating high GDP.

    Ex: Barbados is 95% black. Due to reasonably satisfactory policies, it has fairly high human development index.

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  94. Ex: Barbados…. Due to reasonably satisfactory policies, it has fairly high human development index.

    The Barbados depend on a fixed resource: sea/beaches. It’s as dependent on tourism as Saudi Arabia is on oil.

    Of course that’s still better than many countries who squander their resource windfall.

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  95. History explains a lot. If you use the year that industrialization started in earnest by some uniform benchmark, that is going to explain a very large share of the variability, certain from U.K. to Europe to East Asia.

    If you want an answer to American exceptionalism, one easy answer may be that we paid a much lower price in property damage and casualties in World War II.

    Another key factor for American exceptionalism may be the longer lasting impacts of the fit immigrant hypothesis. Able people migrate. Less able people stay home. We are a nation of relatively recent immigrants. None of our peers are in the same boat.

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  96. History explains a lot. If you use the year that industrialization started in earnest by some uniform benchmark, that is going to explain a very large share of the variability, certain from U.K. to Europe to East Asia. If you want an answer to American exceptionalism, one easy answer may be that we paid a much lower price in property damage and casualties in World War II

    But that factor is already captured in growth rates.

    So you’re just reframing the question: why didn’t European and Japanese capital stock eventually converge with the US level of capital stock ? European and Japanese rates of capital accumulation in 1945-70 were much higher than the US rates precisely because they were converging. Why did convergence stop where it stopped ?

    That’s functionally the same question as, why does the USA have such a high GDP/capita relative to other rich countries ?

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  97. America’s past productive advantage had to do with its culture – we had an amazing “can do” optimistic attitude towards life. Except for the rejection of black people by white people, we could work together to accomplish something. Our homogeneous Christian culture exuded hope. It allowed us to work together even though we were of different European tribes. A high percentage of every strata of culture could be productive.

    Today we Americans wake up more productive then other countries because of our past, not because of what we are doing today.

    America’s optimistic advantage is currently waning because of the divisive politics of its power seeking wealthy Jewish citizens. Sadly, today we have been pushed into seeing each other in an ethnic sense, not as homogeneous Christians.

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  98. God, what a post! What I wouldn’t have given for this kind of analysis when I was studying Economic History in the late 60s.
    While I need to consider more in depth the various factors discussed, off the top of my head, I would probably assign greater weight to Anatoly’s loosely defined “Hedonics/Fiddling” category in explaining American Exceptionalism.
    Comparing rates of mothers participating in the work force would likely reveal that Americans disproportionately monetize child care, meal prep, simple healthcare, entertainment and lots of other things that don’t go into GDP in more traditional societies.
    Another comparison along these lines would be the level of per capita advertising spending; conspicuous consumption is a more important signal of status in a large culturally diverse anomic economy compared to relative monocultures. Or tax expenditures encouraging home ownership: consider how the greater importance home ownership in the US (relative to even other Anglo-sphere nations) inflates GDP as well as acting as a driver of female workforce participation.

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  99. Good grief, post hoc argument from ideology. Look, there are way too many unknowns to make what is basically a biological argument.

    The claim is that a brain processes, IQ/processing speed, causes behavioral differences in….what? Making money or any other economic indicator.

    The “best and brightest” professional scientists can’t make definitive statements on any ONE issue this post covers. This is truly gobbly-gook.

    Gee, is there a single peer-reviewed citation to anything in this windbaggage? Let’s exclude anything in economics – since nothing in economics, along with the humanities, philosophy and religion, is evidence-based.

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  100. Some analysis of Israel’s PISA results from
    http://cms.education.gov.il/NR/rdonlyres/B9434C77-C102-4D41-BD9B-B8074AFF19BE/192610/PISA_2012_Report_ed1.pdf (hebrew)

    In all 3 scores, Hebrew-speaking students are on par with the first world – same as Norway in math, same as Holland in reading, same as Italy in science. Arab-speaking students have the same scores as Jordan and Tunis. So the mean score of Israel doesn’t make much sense as Arabs are 23% of the PISA sample. I guess the same gap exists in other countries.
    Also Israel’s GDP is somewhere between 32k and 36k, so Israel need to be moved on the graph close to France …

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  101. Great article; just a note that “prodigal” most likely should be “prodigious.”

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  102. The culture of “saving face” in Eastern Asia acts as the equivalent of central planning. It prevents feedback by subordinates to superiors in the chain of command. Therefore, production or service problems cannot be corrected as quickly as in a more “egalitarian” culture. I can attest to this from personal experience. Difficult to quantify no doubt but it exists. The Japanese were smart enough to import western management methods (NYT, Dec. 21, 1993):

    “W. Edwards Deming, an expert on business management who advised Japan on how to rebuild its shattered industries after World War II and urged American corporations to treat their workers as associates rather than adversaries, died early yesterday at his home in Washington. He was 93.”

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  103. Great article, two quick comments:

    1. Regarding the unexpected lagging of GDP in Canada and Norway, please consider that they are snowbound, with many of their ports iced in, for up to half the year. That should have an effect on GDP, don’t you think?

    2. Regarding US healthcare results (bang for the buck), it has long been known (but never mentioned out loud) that the US jumps way up the chart if you exclude NAMs from the results. Is this IQ or culture or something else? I don’t know, but it’s not nothing.

    Keep up the good work.

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  104. The Olympus mega-scandal in Japan was a small window into the extreme corruption of Japan’s secrecy-obsessed corporatocracy.

    One can well make the argument that the most successful criminal behavior will be a reward that the most intelligent reap to the detriment of everyone else. There can be enormous accumulation of wealth which is unequally distributed in the extreme, and accumulated by activities which are only in the interests of a few, which analysis by reduction to total “raw” wealth obscures.

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  105. Comparing rates of mothers participating in the work force would likely reveal that Americans disproportionately monetize child care, meal prep, simple healthcare, entertainment and lots of other things that don’t go into GDP in more traditional societies.

    Excellent point – single working mothers do zero long-term good for society – period!

    It is good for government – it turns over money bringing in more tax dollars – but it is ZERO good for the long-term interests of their children and the future of the culture. These children become unproductive – end of story.

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  106. Twinkie: If your LED TV or Blu-ray breaks in the U.S., you pretty much throw it away and buy another one (unless it broke shortly after purchase), but in East Asia, the manufacturer will often send out a repair man to fix it free or charge a very nominal cost. It’s just culturally impossible to have nonexistent service (in order to have cutthroat prices) and survive as a business in these countries. Clearly they prefer a price-inefficient, but qualitatively-better service. That may lower their PPP GDP per capita and such, but probably makes life easier and less aggravating.

    Land areas and incomes are low, so less municipal waste? If it’s difficult and expensive for customers to junk stuff, they’ll want higher repair rates.

    I hear about Japanese service that it is good, but is very, very (irritatingly) inflexible. It’s all very proper, at the same time they can’t handle deviations from procedure very well. Certain ways of services might make more sense in a tighter society (if the customer and the server are resolutely proper, formal and rigid in their dealings, the customer might get a better outcome… or they may not).

    I’m not sure if the Japs (or other East Asians) find life very easy or less aggravating on the whole. They’re not exactly very high up on those happiness scales. Although maybe they need quality high customer services to take away the irritation or they’d be *really* moody.

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  107. Tourism is the ideal resource for countries whose population would otherwise behave worse than the world average. It encourages the population to conduct themselves in ways which do not frighten away visitors. Bermuda and the Bahamas are two examples. That cynical thought aside, some African majority countries are very well behaved. Ghana is said to have a very mild population. Pleasant surroundings produce pleasant people… as in the Rat Park experiment: https://en.m.wikipedia.org/wiki/Rat_Park

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  108. According to economists that is meaningless because the fools have no way to measure it. That is why the constant calls by economists for immigration to “save” Japan. To an economist a society full of people who hate each other and who are constantly looking to get over on one another is good as long as the GDP goes up each year.

    This is why economics is a worthless pseudo-science.

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  109. Value-added comments only please, Elmer.

    “The claim is that a brain processes, IQ/processing speed, causes behavioral differences in….what? Making money or any other economic indicator.”

    This is too complicated for you?

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  110. American innovation benefited from immigrants. Other countries have not had immigration of this order. However, now even with this boost it is flagging in various. Start up rate is falling, If America didn’t attract immigrate I would say rate would be far lower! And now who in future wants to come to nation of mostly poor old and young people?

    There is a reason why economy needs “financial engineering”! It has become an aged economy very quickly!

    http://www.sprottmoney.com/news/why-u-s-economic-statistics-get-more-and-more-absurd-jeff-nielson-sprott-money-news?mw_aref=7b5b8659dfa071b4c7d0a95a56259dec

    Why U.S. Economic ‘Statistics’ Get More and More Absurd

    http://www.bloombergview.com/articles/2015-04-10/the-u-s-middle-class-poorer-than-you-think

    The Middle Class Is Worse Off Than You Think

    http://www.bloomberg.com/news/articles/2015-04-09/why-your-wages-could-be-depressed-for-a-lot-longer-than-you-think

    Why Your Wages Could Be Depressed for a Lot Longer Than You Think

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  111. Reality is exact opposite to what you wrote.
    Until 1920, america was not known as innovation hub.

    Notable exceptions include Edison.

    After stop to immigration, from 1920s-1960s American innovation soared. Man on moon. Arpanet, semiconductors. 1969.

    Asian immigration was deadly. Espionage, balkanization, corruption.

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  112. Americans are much richer than they “should” be, whereas East Asians are much poorer. But curiously, the Anglo offshoots are closer to East Asia here than they are to European-stock populations, so it is not at all obvious that it is an HBD issue.

    What is curious is your complete disregard of the exorbitant privilege of printing the world’s reserve currency that America has enjoyed since WWII. Neither you nor any of the commenters, with the exception of Panda, recognizes this as a valid explanation for why Americans are much richer than they “should” be.

    http://en.wikipedia.org/wiki/Exorbitant_privilege

    The term exorbitant privilege refers to the alleged benefit the United States has due to its own currency (i.e., the US dollar) being the international reserve currency.

    the Bretton Woods system put in place in 1944…… resulted in an “asymmetric financial system” where foreigners “see themselves supporting American living standards and subsidizing American multinationals”. As American economist Barry Eichengreen summarized:”It costs only a few cents for the Bureau of Engraving and Printing to produce a $100 bill, but other countries had to pony up $100 of actual goods in order to obtain one”.

    Take away this privilege and the US GDP will shrink dramatically. The biggest move in this direction so far, the biggest threat to dollar hegemony, is the establishment by China this year of the Asian Infrastructure Investment Bank (AIIB).

    http://www.aljazeera.com/indepth/opinion/2015/03/asian-infrastructure-investment-bank-150329074949552.html

    China’s foreign minister, along with his Russian and Indian counterparts, was emphasizing a vision that many in the West have long feared – a vision of a new world order….The relevant comment was short, and buried within 30 other paragraphs of much more conciliatory language; nonetheless it was punchy: “Russia, India and China are determined to build a more just, fair and stable international political and economic order.”

    we should now analyse the recent mayhem surrounding the launch of the Asian Infrastructure Investment Bank (AIIB). And mayhem it has been, at least in political terms. From the moment that Britain, on March 12, decided that it wanted to be part of the China-led AIIB, a raft of Washington’s traditional allies have followed suit, turning eastwards with unseemly haste.

    France, Italy and Germany jumped aboard the betrayal bandwagon almost immediately after the UK, then Luxembourg, New Zealand and South Korea. Now that Australia’s cabinet has agreed, despite the prime minister’s protestations, to join up too, the only significant ally sticking by Washington is Japan, and even it is wavering.

    So what’s behind this mass-defection from the Washington consensus, and what will the consequences be for the international financial order? The answer to the first part is straightforward – money. Asia needs $800 billion a year in investment to develop its infrastructure, and numerous countries are keen to help them get it.
    But, as everyone from the European Commission’s vice president to the US treasury secretary have admitted, Washington has been standing in the way of business for years.
    US credibility and leadership in the multilateral system, said Jack Lew, has been lacking, and that’s allowed Beijing to seize the initiative and offer a viable solution.

    Many financial analysts are speculating that the new bank may well prove to be genuinely transformative, its adoption an irreversible step towards the multi-polar world envisioned in Beijing. Because the fact is this bank is not just a standalone initiative, an independent body among many others, it’s a core component of a much broader template, a long-term plan that China began putting in place some time ago. Already, some of the more than $3 trillion Beijing holds in foreign reserves has been deployed in international markets; its economic reach now spreads beyond Asia to the Middle East, Africa and as far away as Latin America.

    The existing global financial architecture, devised 50 years ago when no alternatives existed and all were happy to concede leadership (and benefits) to Washington, is no longer fit for purpose.
    Not only are its institutions – the World Bank, the IMF, the ADB et al – thoroughly dominated by the US (helped, in the case of the Asian Development Bank, by Japan), they impose a coercive and ideologically driven agenda on developing countries that can do more harm than good. Not to mention the fact they simply don’t have the capacity to handle emerging Asia’s development needs. What Washington has chosen to ignore, in fear of losing political power, is that a change to global financial structures is a very necessary evolution.

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  113. Asian countries have a hierarchical social structure.
    A young Asian who has a better idea than his mentor will probably keep mum about it out of respect.
    A high status Japanese man will guess at important information rather than admit that he doesn’t know.
    These traditions are apt to have a strong negative effect on GDP/capita, even though the people are very smart and hard-working.

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  114. I’m not sure if the Japs (or other East Asians) find life very easy or less aggravating on the whole. They’re not exactly very high up on those happiness scales. Although maybe they need quality high customer services to take away the irritation or they’d be *really* moody.

    East Asians (and I am talking mostly about the Japanese and the South Koreans here) are unhappy because they live in highly dense environments with a lot of academic and professional competition (and even shopping can be competitive). So life is very stressful for them. Being crowded usually is. They also have depressing weather (much like Nordics) with lots of disasters like typhoons from the Pacific, snow storms from the Manchurian plains, floods, earthquakes, etc.

    However, they have far more intact family structures and support, much lower crime rates, and, yes, customer service that is quite good. And as with, again, Scandinavians, their governments are ubiquitous in a good way. You can go to the local district/neighborhood offices of the central or municipal government and can get actual service by actual human beings with actual intelligence. They might even smile and bow at you as they politely (if “inflexibly” as you say) address your concerns. Compare that to the experience an average American has at the DMV let alone the IRS (tax time, y’all!).

    As Derbyshire says sometimes, the DMV lady is real in America. And the petty Beamter in Central Europe isn’t exactly customer service-oriented either.

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  115. Jayman, were we talking about central planning, which surely had an impact, or other institutions? Decisions to shoot the intelligentsia, of implementing collectivisation and so on were results of the lost war. This seems to me so obvious that I don’t know how you can argue otherwise: countries with communist legacy still lag behind what you could expect from their average IQ, for example; usually, they (we) gained a lot in terms of GDP per capita; it seems obvious that the legacy of communism plays some role here, as it was equivalent of 50-years lasting natural disaster. I am not saying _eventually_ we will reach levels of Sweden or Germany; merely that right now, we have still not reached our full capacity and the reasons of that is 50 years of communism.

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  116. Before WWII, Poland was comparable or more wealthy than Portugal, Italy, Spain, Greece. Now it is poorer. How you can possibly say that you can account for this by HBD _alone_ and that 50 years of wasting resources, promoting wrong people to the wrong places and creating cliques could have no lasting effect? HBD Chick uses membership in civic associations as one measure of social trust; before WWII it seems that such membership in Poland was higher than now; and that membership in civic association is on the rise in Poland.

    As the Anatolyi answered already, it does not mean that Poland (or Russia) will eventually reach levels of Germany; merely, does _currently_ Poland and other Central and Easter European countries lag behind what is their true potential.

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  117. Twinkie: East Asians (and I am talking mostly about the Japanese and the South Koreans here) are unhappy because they live in highly dense environments with a lot of academic and professional competition (and even shopping can be competitive).

    Sounds pretty much like it makes sense to me – East Asians stress themselves out with all this intragroup competition and intragroup hostility that doesn’t necessarily achieve anything more than a positional good, so can’t cope with having another layer of stress from services, so pay out for ultimately inefficient (but comforting) services.

    Urban population density is an interesting one as well because it tends to raise the GDP per capita within country, so that might be an measure it is worth adjusting GDP per cap or personal wealth against, see if the East Asians are poorer or less than people in equivalently dense areas in the West (I’d expect they would at middling GDP per cap and highly dense living).

    However, they have far more intact family structures and support, much lower crime rates, and, yes, customer service that is quite good. And as with, again, Scandinavians, their governments are ubiquitous in a good way.

    Murder rates are pretty low in Japan, still pretty high in South Korea, for a crime indicator (https://www.quandl.com/c/society/oecd-murder-rates – OECD’s data, which I would give the benefit of the doubt over Wikipedia, a little higher in SK than most of the West, Japan tied with the UK for the lowest homicide rate of any reasonably large country).

    Re: family structures, yeah, you’ve got that figure where the Japanese have 2% of births outside marriage, closer to the 8% of Italians that do than the 50% of Nordics (Sweden / Denmark, who seem to respond very happy despite the weather).

    At the same time, Japanese marriage rates are pretty middling compared to most Western countries, and divorce rates are also pretty similar to Catholic Southern Europe. Even if their marriage and divorce is not very different, they’re still committed to that idea that you marry before you have kids (not after, as the Nords often do).

    I don’t know much about the quality of how much support people get from brothers and sisters and aunts and uncles and the like. I like Japan a lot, but I tend to think of the people as atomised and lonely living in urban areas without much community, worried about burdening others with their problems, turning to odd obsessions, so I wonder if that’s wrong and actually they’re vigorously social and well supported with their families and friends.

    It’d be interesting to see what international perceptions of efficiency of government, and citizen satisfaction, are in Japan, whether they’re high or low compared to other countries. Can’t find any international comparisons.

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  118. I don’t think JayMan knows what Communism is.

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  119. Exactly. Finland’s overall situation (economy included) in early 1900′s was much more comparable to the Baltic countries than to Sweden or Denmark, never mind the US or UK, having just separated from Russia with an earlier history as contested periperal territory. Only later events allowed Finland to take off in a way its neighbours to the south could not, or perhaps more accurately stifled the southern neighbours in a way Finland was not.

    In fact if you look at Karlin’s first graph, you can draw two parallel clines; traditional Western and Southern Europe falls along one from Malta to Netherlands, and all of Eastern Europe is along one extending from Serbia or Ukraine to Finland. Groups along the latter cline have larger gaps between each other, and plausible explanations for that can easily be found in recent history.

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  120. He knows. I’ve already discussed with him (and with HBD Chick) some three years ago about this subject, and I was (stupid me!) sure he accepted some arguments of mine.

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  121. http://pseudoerasmus.com/2014/04/13/anonimo/comment-page-1/#comment-25268 and the following

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  122. Beamter – think Stempel, Stempel, Stempel (“rubber stamp”).

    Visualize a sweaty, officious little man twirling his rubber stamp carousel absent-mindedly while awaiting the next victim, er, citizen. Then add a pinch of imperious based on local flavoring, and a dash of punctiliosity to season to taste.

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  123. For the same IQ or education, do black American have higher income than white or asian?

    If so, then personality explains the difference.

    When I interviewed house-cleaning service, African Americcan contractors demand much higher pay than hispanic contractors for the same kind of service.

    Income is result of supply/demand. When you demand more for the same product, you might get it. Income/wealth is product of many factors including IQ, personality, self-worthness, market ect. Intelligence can not explain every thing.

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  124. Why relying on patent output as a marker for productivity is a bad idea

    http://www.washingtonpost.com/blogs/federal-eye/wp/2015/04/14/the-u-s-patent-and-trademark-office-doesnt-know-if-patent-examiners-are-doing-their-jobs-watchdog-says

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  125. Anonymous
    says:
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    The economic rent of land and natural resources is not counted by value added.because it’s captured by financialization. The economic rent goes to real estate and financial returns. Farming, mining, and energy extraction enterprises are heavily financed, and financial profits are a huge percentage of US domestic profits, something like 30%.

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  126. Why relying on patent output as a marker for productivity is a bad idea

    It’s not so much a marker of productivity as much as a measure of the desire of a given population to come up with new things. As long as the said people are reasonably intelligent, people who seek to invent new things tend to do so sooner or later.

    And I also brought up patents per capita to illustrate the inadequacy of looking at a single time frame.

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  127. Murder rates are pretty low in Japan, still pretty high in South Korea, for a crime indicator (https://www.quandl.com/c/society/oecd-murder-rates – OECD’s data, which I would give the benefit of the doubt over Wikipedia, a little higher in SK than most of the West, Japan tied with the UK for the lowest homicide rate of any reasonably large country).

    That page doesn’t give the years. Here is what the actual OECD website says: http://www.oecdbetterlifeindex.org/topics/safety/

    It ranks Japan at the top and ranks South Korea higher (6th) than most rich European countries in terms of safety (murder + assault rates).

    Looking at the homicide rate under “Indicators,” Japan does excellently and South Korea fares pretty well and keeps company with much wealthier (smaller) European countries.

    Murder rates in South Korea are not “pretty high” by any stretch of imagination. It is by most measures one of the safest countries in the world in terms of crime rates. It has lower murder rate than do countries such as Iceland, Luxembourg, Belgium, and Canada.

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  128. @ Twinkie

    If you look at the homicide stats alone

    “According to the latest OECD data, Korea’s homicide rate is 1.1… In Korea, the homicide rate is the nearly the same for men and for women, at respectively 1.3 and 0.9.”
    Homicide rates are a little higher than Australia (0.6), Austria (0.5), Czech Republic (0.8), Denmark (0.8), France (0.8), Germany (0.5), Ireland (0.8), Italy (0.7),Netherlands (0.9), Poland (1.0), Portugal (0.9), Slovenia (0.9), Spain (0.7), Sweden (1.0), Switzerland (0.5). These are all rates per 100,000.

    So not exactly pretty high, you’re right. Mainly a little higher than the Western and Central European average, based on larger countries mainly. Homicide gets higher east of east Poland, where Central Europe ends, with a few small country exceptions. But it’s hardly a great deal of difference.

    I don’t think homicide rates tend to fall with wealth among OECD countries, more that there’s no relationship. The safety index doesn’t seem to have much relationship with GDPpC or average wage either.

    Korea might do a little better if it had the same age structure as other countries though, as homicide rates fall with age.

    Korea’s position as 6th on that table seems is due to its low rates of physical assault, comparable to low assasult rate countries like Britain, Ireland and Poland and higher than higher assault rate Western Europeans like Sweden and Italy. I wouldn’t have expected Swedes and Italians to be more bar room brawlers of Europe compared to the 3 I mentioned, but it seems there are. Looks like Koreans today aren’t ones to get in a street fight (and the endemic beatings and slaps to the head inflicted on lessers by highers in Korean movies is a false impression, as is how some Korean talk themselves up as rednecks with fiery personalities).

    Not saying Korea is “high crime” or anything – it’s not. “Pretty high” was, I guess, a loose lipped comment based on my impression of Korea’s rate compared to the large Western European states.

    This is just interesting context for those discussions about how East Asian societies are, compared to Western and Central European ones, oh so safe and oh so low crime, so let’s forgive them anything else.

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  129. Thanks! I haven’t read about Habsburg effect before, and it is nice argument against putting every difference between the countries down to the genetic differences only.

    Note I do not claim institutional differences won’t create, in the long term, genetic differences or that genetic differences do not matter. I merely claim that institution and history matter too.

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  130. In the comment right after I had an example of an institutional impact applied specifically to communism.

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  131. The economic rent of land and natural resources is not counted by value added.because it’s captured by financialization.

    Financialization can be done anywhere. Hong Kong has no land or natural resources, and yet its economy is heavily reliant on finance.

    Similarly, you can have a bounty of agricultural land and natural resources, and little in the way of a financial sector.

    Farming, mining, and energy extraction enterprises are heavily financed, and financial profits are a huge percentage of US domestic profits, something like 30%.

    But this is a recent phenomenon. It has nothing to do with the U.S. acquisition of land and natural resources. The U.S. financial sector in the fifties was marginal compared to today, and yet the U.S. at that time had been a capitalist society for generations with most of the same land and natural resources that it has now.

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  132. Anonymous
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    I don’t think you understood my comment.

    Value added is output price minus production cost. It doesn’t give a complete picture of the economic value of farming, mining, energy extraction (or any other form of economic activity) in a financialized economy because rent and interest are part of the production cost while deriving their value from the agricultural or mining yield

    A farmer or miner who leases land from a landowner or borrows money from a bank to buy the land to operate his farm or mine pays rent or interest as a part of his production cost. How much rent or interest the landlord or banker charge is based on the value of the farm or mine, which is based on the agricultural or mining yield. This eats into the value added calculation of the farming or mining.and obscures the complete economic value of farming and mining.

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  133. I understood your comment, but apparently you either did not understand mine or have forgotten the context of your original remark.

    Tom Welsh commented that the U.S. had a virgin territory to exploit after the natives had been dispossessed, but Pseudoerasmus replied that this was too simplistic because U.S. “forestry, fishery and agricultural resources” are insufficient to explain U.S. productivity.

    Your elaboration of an accounting identity doesn’t help your case. U.S. financialization is a recent phenomenon that is not primarily driven by the underlying value of U.S. land and natural resources, but by the productive uses to which they are both put.

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