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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.



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