Our main finding is that risk aversion and impatience both vary systematically with cognitive ability. Individuals with higher cognitive ability are significantly more willing to take risks in the lottery experiments and are significantly more patient over the year-long time horizon studied in the intertemporal choice experiment.
The link is here, gated for most of you (non-gated is here), and the authors are Thomas Dohmen, Armin Falk, David Huffman, and Uwe Sunde. The subjects, by the way, were Germans. The results held somewhat less strongly for females and younger individuals.
Reading through the study, they controlled for various things but not household income. In general payment now vs payment later is more likely to appeal to people who need money now. Furthermore, there is a correlation between income and cognitive ability (though this may well be smaller in Germany than in the US). I’m curious why they didn’t control for income; the questionnaire they used certainly had that information on it, according to the article.
Well sure, the smarties are better at crafting opaque schemes to leave someone else holding the bag if their risks blow up in their face. Dummies have little skill at thinking up a better way to say “it wasn’t my fault, so don’t punish me.”
So, the lottery isn’t a tax on stupidity?
Behavioral economics “lottery experiments” are usually the opposite of the kind of lottery experiments I see people down at my local liquor store engaging in when they stop by to pick up some lottery tickets, a pint, and a pack of Luckies. Vernon Smith’s experiments are usually positive sum for the players, while the California State Lottery is very definitely negative sum.
there is a correlation between income and cognitive ability (though this may well be smaller in Germany than in the US).
Why would it be smaller? Germany has more social mobility, and thus is probably more meritocratic, which could mean that the correlation is larger.
We know that the smartest guys from Wharton go to Wall Street. What is the direction of causation–do they go to the Street because they see it as the world’s biggest and best casino, or has it become a casino because the smartest guys are going there?
Conversely, if income was entirely determined by genetics, social mobility would be very low and meritocracy very high.
chris – The cause of the Flynn effect is unknown and it certainly does not necessarily mean that a substantial portion of IQ is learned.
Could we get some study that says left win atheists are smarter instead, since im very impatient. So that study says im stupid, i dont like that.
(seriously what is it with that internet obsession about iq bullshit).
I think that higher IQ persons choose by making the best use of their available knowledge and get the best suitable as per their requirement. They carried out the systematic functioning in order to carry out any task that no error remain in to that.
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