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I stumbled across a blog written by a "40-year old hedge fund manager" called Spartacus, which is kind of spooky because I'm a 40-year old hedge fund manager who occasionally blogs. Even more fun, the findings of the Bell Curve continue to resonate, especially with economists. It seems Charles Murray wrote a new defence of his original position entitled The Inequality Taboo. Not many subjects create as much name calling as this subject, which I find instructive because no one gets mad when you say something wrong like 2+2=5.

Anyway, Brad Delong's critique of Murray's latest makes mention of this note by Bowles and Gintis:
If the heritability of IQ were 0.5 and the degree of assortation, m, were 0.2 (both reasonable, if only ball park estimates) and the genetic inheritance of IQ were the only mechanism accounting for intergenerational income transmission, then the intergenerational correlation [of lifetime income] would be 0.01, or roughly two percent [of] the observed intergenerational correlation [of lifetime income between parents and children].
That's curious. The link provides some more data behind those back-of-the-envelope calculations, but it seems low from my own experience (2%?), and contrary to this study Murray did when he addressed many issues about the correlation between IQ and income in this brief article.

First Murray defines these IQ segments: Very Dull <75, Dull 75-89,
Normal 90-109, Bright 110-124, Very Bright 125+. Then he notes:
The National Longitudinal Study of Youth (NLSY), included in its sample 5,863 subjects who shared the same household with at least one other NLSY subject as brother or sister, thereby enabling researchers to replicate The Bell Curve's analyses without worrying about the ambiguities that arise when different data bases are being compared.

To qualify for the sibling sample I use here, both siblings had to have a valid score on the Armed Forces Qualification Test (AFQT) administered in 1980. To make matching for background as unambiguous as possible, I further limited the sample to pairs of subjects who were full biological siblings and who lived in the same home with both biological parents through at least the younger sibling's seventh year.
In 1992, the median earnings for the Normals was $20,000. Their Very Bright siblings were already averaging $33,500 while their Very Dull siblings were making only $7,500. Once again, the Brights and Dulls each fell about halfway between ($26,500 and $14,000 respectively).
Thus he documents considerable correlation between IQ and income independent of SES. I find this hard to reconcile with the Bowles and Gintis estimation of 2% that DeLong finds so convincing. Of course, I remember Bowles mostly for his vigorous championing of East German productivity from state-sponsored production plans in the months prior to the wall falling in 1989.
pauln meinte am 29. Aug, 20:32:
Could you explain what "degree of assortation" refers to? I guess I'm too lazy to figure it out. 
Mahalanobis antwortete am 29. Aug, 21:52:
Couples tend to be more similar in IQ than would occur by random mate choice (assortative mating) and this similarity is associated with an unknown correlation m of their genotypes." 
HedgeFundGuy antwortete am 29. Aug, 21:56:
The genetic correlation is the degree of statistical association between genotypes of parents and children, which is 0.5 if the parents’genotypes are uncorrelated (random mating). But couples tend to be more similar in IQ thanwould occur by random mate choice (assortative mating) and this similarity is associated with an unknown correlation m of their genotypes. The effect is to raise the genetic correlation of parent and offspring to (1 + m)/2.

So m=0.2 means parents IQs are positively correlated at about 0.2. 
pauln antwortete am 30. Aug, 04:09:
Thanks; I'm surprised m isn't higher.

If h=1 and m=1, intergenerational correlation of lifetime income would be only 0.07 in that formula. 
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Mahalanobis meinte am 29. Aug, 21:47:
Seems that Bowles and Gintis
are trapped in a linear world. Their analysis is all about playing around with various (partial) correlation coefficients. Maybe somebody could tell them that the correlation coefficient measures the strength of the linear association between two variables.

>>If the heritability of IQ were 0.5 and ...

I just skimmed through their paper but on page 9 they write that a rough estimate (which enters the equation DeLong referes to) of the direct and indirect (including schooling) effect of IQ on earnings is 0.266, which has to be interpreted (if I understand them correctly) as "a one standard deviation increase in IQ (afaik 1 sd = 15 points) leads to a 27 percent of a standard deviation increase in earnings". I don't have any troubles with semilog transformations, but I don't see the benefit of normalizing earnings. I can only guess that the estimated effect is probably too small.

This is the only figure (yes, no scatterplots at all) in the whole paper (Intergenerational Income Transition Probabilities):
Somehow I do not have the impression that parent's and children's incomes are bivariate normal distributed... Also interesting: "The income of the children was measured when they were aged 26 [sic] or older. Great! Proper comparisons should be made around age 50. 
Acad Ronin meinte am 30. Aug, 04:50:
Minor point: If there is heritability in IQ, the observed sibling correlation is almost certainly an underestimate given that as Roman law had it, although the mother is always known, the father isn't. Two siblings could well have different fathers, and the assortive effect might not work as strongly for affairs as for spouses. Furthermore, any large sample probably includes some adoptees. 
Mahalanobis meinte am 31. Aug, 00:38:
Fwd: 2+2=5
From: Sean R

I like your blog. It is well written and fun to read. The Bell Curve, however, is clearly wrong. Below I have pasted conservative econometrist James Heckman's brief explanation of why you cannot base public policy on their findings. If you try to change public policy based on saying that 2+2=5, people absolutely will get mad. Academic research has policy consequences, and that is why people hate this book.

James Heckman Journal of Political Economy, October 1995:

"The Book fails for five main reasons.

1. The central premise of this book is the empirically incorrect claim that a single factor - g or IQ - that explains linear correlations among test scores is primarily responsible for differences in individual performance in society at large. Below I demonstrate that a single factor can always be constructed that "explains" all correlations in responses to a test or correlations in scores across a battery of tests, but in general this g is not constructed by conventional linear methods. There is much evidence that more than one factor -- as conventionally measured -- is required to explain conventional correlation matrices among test scores. Herrnstein and Murray's measure of IQ is not the same as the g that can be extracted from test scores available in their data set. They do not emphasize how little of the variation in social outcomes is explained by AFQT or g. There is considerable room for factors other than their measure of ability to explain wages and other social outcomes.

2. In their empirical work, the authors assume that AFQT is a measure of immutable native intelligence. In fact, AFQT is an achievement test that can be manipulated by educational interventions. Achievement test embody environmental influences: AFQT scores rise with age and parental socioeconomic status. A person's AFQT score is not an immutable characteristic beyond environmental manipulation.

3. The authors do not perform the cost-benefit analyses needed to evaluate alternative social policies for raising labor market and social skills. Their implicit assumption of an immutable g that is all-powerful in determining social outcomes leads them to disregard a lot of evidence that a variety of relevant labor market and social skills can be improved, even though efforts to boost IQ substantially are notoriously unsuccessful.

4. The authors present no new evidence on the heritability of IQ or other socially productive characteristics. Instead, they demonstrate that IQ is more predictive of differences in social performance than a crude measure of parental environmental influences. This comparison is misleading. It fails to recognize the crudity of their environmental measures and the environmental component that is built into their measure of IQ, which biases the evidence in favor of their position. Moreover, the comparison as they present it is intrinsically meaningless.

5. Finally, the authors' forecast of social trends is pure speculation that does not flow from the analysis presented in their book. Most of the social policy recommendations have an ad hoc flavor to them and do not depend on the analysis that precedes them. The appeal to Murray's version of communitarianism as a solution to the emerging problem of inequality among persons is a deus ex machina flight of fancy that is not credibly justified."

related items:
Heckman: Brave or Disingenuous Econometrician?, hedgefundguy


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TangoMan meinte am 31. Aug, 02:55:
Heckman - Ten Years Later
We wrote about Heckman's research since his critique of The Bell Curve here. Note the following points:

1. he grants that IQ is a measure of cognitive ability
2. in fact, he uses IQ interchangeably with cognition and cognitive skill
3. he grants that IQ is not easily altered
4. he grants that it is important

Also, see Heckman's recent paper, the conclusion of which reads:
Minority deficits in cognitive and noncognitive skills emerge early and then widen. Unequal schooling, neighborhoods, and peers may account for this differential growth in skills, but the main story in the data is not about growth rates but rather about the size of early deficits. Hispanic children start with cognitive and noncognitive deficits similar to those of black children. They also grow up in similarly disadvantaged environments and are likely to attend schools of similar quality. Hispanics complete much less schooling than blacks. Nevertheless, the ability growth by years of schooling is much higher for Hispanics than for blacks. By the time they reach adulthood, Hispanics have significantly higher test scores than do blacks. Conditional on test scores, there is no evidence of an important Hispanic-white wage gap. Our analysis of the Hispanic data illuminates the traditional study of black-white differences and casts doubt on many conventional explanations of these differences since they do not apply to Hispanics, who also suffer from many of the same disadvantages. The failure of the Hispanic-white gap to widen with schooling or age casts doubt on the claim that poor schools and bad neighborhoods are the reasons for the slow growth rate of black test scores.
Regarding your link to the related Heckman posting, and the reference to econometrics, have you by chance seen the Jones & Schneider 1330 IQ regressions paper? 
HedgeFundGuy antwortete am 31. Aug, 04:26:
Economists still won't touch IQ
I know several labor economists, and they all know that things like the AFQT trump most other variables in explaining things in panel data sets. But there is simply no appetite for this strand of inquiry. You could be 100% right and neatly explain 10 "puzzles" with one swoop, but the right people (editors at the top journals) would find the work objectionable on some minor grounds they don't apply to other more tenuous hypotheses. The axiom of equality is too strong. Expecting economists to discover IQ links to economic phenomena would be like expecting someone in the Education Department to praise homeschooling. 
Mahalanobis antwortete am 31. Aug, 04:58:
I haven't read the
Jones & Schneider paper yet, but I'll take a look at it soon. I'm a little bit wary for two reasons:

1. see my post on Proxying Human Capital and Abiola's reply (Didn't you guys from Gene Expression once clash with Abiola on your blog?)

2. Growth regressions are really fragil and one can ask whether they make any sense at all. Some time ago I have written a short summary/handout on The Neoclassical Growth Model and the Hypothesis of β-convergence. Awful, ey? And I didn't even mention such things as measurement error and misspecification.

There are a couple of papers I have to read before being able to enter the discussion. Jesus, Andrew Gelman one refered to this wide ranging article by Flynn... still didn't find the time to read it.. ;-D. 
TangoMan meinte am 31. Aug, 04:59:
Not Just Economics
the right people (editors at the top journals) would find the work objectionable on some minor grounds they don't apply to other more tenuous hypotheses.

Dr. Greg Cochran had a university administrator threaten to shut down a journal if the editor published his paper on Ashkenazi Intelligence. Another journal refused to publish the paper because of Zorba the Greek. We covered it here and here and Cochran and his co-author Harpending join the dialogue in the comments.

Expecting economists to discover IQ links to economic phenomena

Things may be changing though - don't you find Heckman's conclusion to be quite unpolitic and blunt? I expect to see papers with greater predictive validity coming from the Behavioral Economics school. Our take here and some additional links here, here and here. If the research starts yielding results I can't see how modellers are going to avoid seeking higher precision or greater efficacy. If Heckman could get past the gate-keepers (yes, I know a Nobel Laureate is given more leeway that some ass't professor with the ink on his Ph.D still fresh) there is hope for others. 
HedgeFundGuy antwortete am 31. Aug, 18:11:
Heckman's bluntness
Like abortion, the really important questions about IQ are dependent on the heredity, importance and distribution of it. All Heckman really said was something about the distribution (between people, over their lifetimes). He then said it wasn't important, and did not address heredity but probably would take issue with that too. So he conceded what he thought was an unimportant, or insufficient, plank from his opposition. 
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