Economists are often examining the variables that lead to prosperity, but surprisingly, intelligence is rarely featured in this literature, despite its high replicability in research. Intelligence is a robust predictor of well-being, job performance, and other social outcomes. Due to heightened reasoning abilities, intelligent people are more cooperative and adept at defusing tension. Intelligent people are also appreciative of the long-term reverberations of their actions because they are more future oriented; as result, highly intelligent people are less likely to make rash decisions.
One can argue that intelligence is a cost-saving mechanism, since intelligent people are unlikely to make flippant decisions that can incur unwarranted costs. For example, if a project costs $2 million, an intelligent employee can propose a cheaper alternative that will yield greater value. Invariably, cost reductions lead to a ripple effect throughout the economy when savings are deployed to finance activities in other areas of the economy.
Intelligence even affects development through the institutional channel, since smarter people create better institutions. Institutions that reward individuals based on political and tribal affiliations will confer benefits on corrupt political actors in the short term, and as a long-term strategy, this will inhibit economic growth by precluding the formation of meritocratic bureaucracies. Countries with efficient bureaucracies will attract superior human capital, and smarter bureaucrats are equipped to design policies that court high-quality investments. Investments lead to jobs, and employment allows people to improve their level of material consumption; so, essentially, having an intelligent population is a great asset. In economics, we would refer to intelligence as a positive externality, since multiple parties benefit from the insight of smart people.
Intelligence is a crucial tool for navigating the complexities of life in an intellectually demanding age, and over the past ten years, researchers have provided a surfeit of data linking intelligence to genetic variants. Due to the heritability of intelligence and other personality traits that correlate with success, some argue that the welfare state is justified by the reality of genetics. Many well-meaning people think that the complexity of the modern economy puts those who lack genetic fortune at a disadvantage.
Yet such concerns are neutered by market dynamism. Intelligence is important, but markets are a consequence of human desires, and these are usually unpredictable. Therefore, we don’t need to worry that some people could become displaced because of lower intelligence. Twenty years ago, no one would have predicted that in 2022 people would be leaving reputable jobs to promote their physiques on OnlyFans. Even more shocking is that in 2020, nine-year-old Ryan Kaju earned $29.5 million from his YouTube channel, and he is just reviewing toys.
Kaju has launched a global empire because people are willing to pay for anything that they deem valuable. To the average person, listening to a boy talking about toys is a waste of time, but there are many children who listen to him, and their habits are enabled by doting parents, who will buy Kaju’s merchandise to make their children happy. Addison Rae is social media sensation who is becoming quite wealthy for just dancing online and looking attractive.
People with higher intelligence will create more value than others; however, because value in the marketplace is subjective, success does not require genius-level intelligence. Average people who respond to market realities will earn more than intellectuals who opt to target niche markets. For example, highly intelligent people built social media platforms like Twitter, Facebook, and Snapchat to entertain ordinary people. Furthermore, newer jobs in technology and finance select for high intelligence, but people employed in these jobs are responsible for building sophisticated products that the ordinary person will know how to manipulate.
Simplicity is key to success in business, so entrepreneurs aiming to cannibalize the market must think like the average Joe. It is no secret that academics writing for a popular audience sell more books than their peers penning tomes for fellow academics. Never forget that average is still the norm and it usually takes a long time for people to become responsive to the transformative ideas that emanate from brilliant minds. Doomsday predictions are unlikely to materialize when markets are dictated by the appetites of ordinary people.
Additionally, gloomy predictions tend to omit the relevance of the personal economy. Economic transactions must advance individual utility, so if the average American household needs to earn over $50,000 yearly to live comfortably, but John survives on $40,000 a year and is quite happy, then John’s utility is being served by his preferences. The fact that highly intelligent people earn more on average is relevant when people have different tastes.
Undeniably, intelligence has significant explanatory power. But we don’t need to envision a dystopia where average people are sustained by the welfare state because their skills have been made redundant due to economic complexity. The unlimited diversity of human preferences ensures that opportunities will always be available for ordinary people to accumulate wealth by catering to diverse preferences.