The Economics of Stupidity

Here’s Bryan Caplan:

I’m an IQ realist, all the way.  IQ tests aren’t perfect, but they’re an excellent proxy for what ordinary language calls “intelligence.”  A massive body of research confirms that IQ predicts not just educational success, but career success.  Contrary to critics, IQ tests are not culturally biased; they fairly measure genuine group differences in intelligence.

Yet I’ve got to admit: My fellow IQ realists are, on average, a scary bunch.  People who vocally defend the power of IQ are vastly more likely than normal people to advocate extreme human rights violations.  I’ve heard IQ realists advocate a One-Child Policy for people with low IQs.  I’ve heard IQ realists advocate a No-Child Policy for people with low IQs.  I’ve heard IQ realists advocate forced sterilization for people with low IQs.  I’ve heard IQ realists advocate forcible exile of people with low IQs – fellow citizens, not just immigrants.  I’ve heard IQ realists advocate murdering people with low IQs. 

When I say, “I’ve heard…” I’m not just talking about stuff I’ve read on the Internet.  I’m talking about what IQ realists have told me to my face.  In my experience, if a stranger brings up low IQ in Africa, there’s about a 50/50 chance he casually transitions to forced sterilization or mass murder of hundreds of millions of human beings as an intriguing response.  You can protest that they’re just trolling, but these folks seemed frighteningly sincere to me.

Don’t such policies flow logically from IQ realism?  No way.  If someone says, “I’m more intelligent than other people, so it’s acceptable for me to murder them,” the sensible response isn’t, “Intelligence is a myth.”  The sensible response is, “Are you mad?  That doesn’t justify murder.”  Advocating brutality in the name of your superior intellect is the mark of a super-villain, not a logician.

But don’t low-IQ people produce negative externalities – negative externalities that well-intentioned consequentialists will want to address?  I’m no consequentialist, but the consistent consequentialist position is: Not if the “solution” is worse than the problem!  And if your “solution” involves gross human rights violations, there’s every reason to think it is worse than the problem.  We should be especially wary of self-styled consequentialists who rush toward maximal brutality instead of patiently searching for cheap, humane ways to cope with the social costs of low IQ.

A couple of questions may arise from reading this:

  1. Where the hell does he meet these people? What are the negative externalities low-IQ people supposedly produce?
  2. If there are such negative externalities, what are the “cheap, humane ways” to cope with them.

What are the negative effects of having a low IQ? Well, people with low IQ are, on average, less productive than people with high IQ. That’s definitely a negative effect – but does it also constitute a negative externality? I.e. does it not only negatively affect the person with the low IQ but also third parties?

Under institutions of private property this is not the case.

The only negative effect of low productivity caused by low IQ (or laziness for that matter) is on the salary of the respective person. In a private-property society, salary – the amount for which a person can sell what he or she produces – corresponds closely to the real value of that product to the people who consume it. You get out what you put in. If you put less in, you get less out.

However, besides the sphere of private property there is yet another sphere: politics. And in the political sphere there is no comparable internalisation of the negative effects of stupidity as in the sphere of private property. When a government produces bad laws, everybody bears the costs, not just those who voted the politicians into office. So, in the political sphere low-IQ people can indeed produce a virtually unlimited amount of negative externalities.

Of course, due to, e.g., rational ignorance even a democracy consisting exclusively of high-IQ people would overproduce bad laws. However, adding stupidity to the mix certainly exacerbates the problem.

The solution proposed by some IQ realists is apparently to eliminate low-IQ people – either by straight out killing them or through “softer” methods such as a No-Child Policy for people with low IQs.

The thing is: this would not only be morally reprehensible but also (pardon the pun!) stupid: a waste of resources and also not very effective. Not eliminating stupids, but eliminating politics – the only sphere where stupids can, and do, cause significant social costs – is the smart solution.

Just because we are used to law being produced monopolistically by parliament doesn’t mean this is the best or even only possible way.

In a Polycentric Legal System law would be a private good produced on a private market. Different people in the same country could subscribe to different legal codes.

Now, when a low-IQ person buys bad law, this is, in principle, his/her problem. The negative effects of the bad legal code are internalised by the persons subscribing to that law – at least far more so than in a democratic system where I am no less subject to the costs of bad laws than the people voting for them. Of course, this internalisation is not complete because I may have to incur costs to have my good legal code applied in the case of a conflict with somebody subscribing to a bad legal code.

However, market forces can be expected to lead to rapid improvement in the quality of law in general.

In a democracy you buy nothing but promises. You may know how one party ran the country for the past four years, but not how the opposition party might have run it. In a Polycentric Legal System people can compare alternative brands – much like in the case of “normal” products. Information would be imperfect, as it is in making most decisions; people may make mistakes. Stupid people may make more mistakes. But at least alternatives exist; they are there to be looked at. You can talk with neighbors who subscribe to a different legal code and compare costs and benefits.

By turning law over to the private market, making a choice between different legal rules will be much like making a choice between different cars or different Internet providers. So we can expect the same positive effects of competition.

Remember that the sphere of private property is made up of the same people as the sphere of politics but the quality of the products in the former is infinitely better.

Achieving efficient law simply requires changing the way people choose legal rules, not changing the people who make the choice.

The Most Important Book For Every Libertarian To Read

I recently saw a list of Ten Books Every Libertarian Should Read on the website of the Adam Smith Institute, which did not include the one book I consider to be (by far) the most important for every libertarian to read.

I am talking about The Machinery of Freedom by David Friedman.


The book shows that libertarianism cannot be stated as a simple and convincing moral principle from which everything else follows. Instead, economic analysis is used to arrive at libertarian conclusions.

The obvious way to find out what the laws of a society ought to be is to start with general principles of justice and see what laws are necessary to implement them. David Friedman argues that that cannot be done and gives a long list of questions which cannot be answered using libertarian principles. For example, libertarian principles of justice provide no way of deciding what ought to be included in property rights, how they may legitimately be defended, or how violations ought to be punished.

Friedman argues that, while libertarian principles provide no answer to the relevant questions, they are all questions that can, at least in principle, be answered by using economic theory to discover what rules maximize human happiness.

Friedman shows that a system in which legal rules are generated by firms competing in a private market can be expected to produce efficient rules and goes on to use the tools of economic analysis to show under what circumstances such a legal system would or would not be stable.

The reason why, in my opinion, The Machinery of Freedom is the most important book to read for a libertarian is this application of economics to the field of law.

So, if you are a libertarian, go and read The Machinery of Freedom by David Friedman. And if you aren’t a libertarian, still read it. It’s stellar economics and a hell of a lot of fun to read.