Berkeley economist Brad DeLong claims:
"If inherited genetically-based IQ were the source of the extra edge that the children of the rich get in our society, than we would expect a parent with 4 times average lifetime full-time earnings—say $200,000 a year—to have a kid with a lifetime average income of $51,500 instead of the average of $50,000. But it is not $51,500. It is $150,000."
To justify this claim, he cites a Rube Goldberg formula from a multiple regression study that I'll leave to you to ponder.
This is a good example of how complex model-building can wind up in the ditch without the authors or readers noticing where things went wrong. It's reminiscent of the baseball statistical analysis battles of the early 1980s between proponents of all-encompassing models like Pete Palmer and advocates of simpler studies like Bill James.
As a Bill James-style study of the impact of IQ on income, Charles Murray's 1997 follow-up to The Bell Curve remains stunning in its simplicity and power. Murray utilized an insight dreamed up by Sanders Korenman of the City University of New York and Christopher Winship of Harvard: "Compare siblings who have grown up in the same home, and with the same parents, but who have different IQs."
This means that we are comparing pairs with less genetic diversity than typical pairs of strangers, and with very similar "shared environments." (They may well differ in the mysterious "unshared environments" of random bumps on the head or whatever.)
Murray once again used the federal government's National Longitudinal Study of Youth that has been following 12,000 people (and their children!) since 1979. In 1980, the Department of Defense paid to have all of them take the military's AFQT IQ test.
The results look much different than Dr. DeLong would wish you to believe. Murray reported in the London Times in 1997 on his study of sibling pairs in the NLSY:
"To make the analysis as unambiguous as possible, I have limited my sample to brothers and sisters whose parents are in the top 75 per cent of American earners, with a family income in 1978 averaging 40,000 (in today's money) [all figures in the London Times article were in British pounds, but the exchange rate was different then, so just think of the incomes as comparative figures.]
"Families living in poverty, or even close to it, have been excluded. The parents in my sample also stayed together for at least the first seven years of the younger sibling's life."[IQ Will Put You In Your Place,May 25 1997]
In other words, this sample represents a utopian America where no child is poor, no child is illegitimate, and even divorce is limited. So, how much income inequality does this model America generate in the next generation?
"Each pair consists of one sibling with an IQ in the normal range of 90-110, a range that includes 50% of the population. I will call this group the normals. The second sibling in each pair had an IQ either higher than 110, putting him in the top quartile of intelligence (the bright) or lower than 90, putting him in the bottom quartile (the dull). These constraints produced a sample of 710 pairs."
So, the Brights had a median IQ of 117, the Normals 100, and the Dulls 83. The differences are a little over one standard deviation (15 points).
"How much difference did IQ make? Earned income is a good place to begin. In 1993, when we took our most recent look at them, members of the sample were aged 28-36. That year, the bright siblings earned almost double the average of the dull: 22,400 compared to 11,800. The normals were in the middle, averaging 16,800."
So, the Brights had incomes 33% higher than the Normals, and the Normals had incomes 42% higher than the Dulls. (It would be interesting to know if Normals with Bright siblings differed from Normals with Dull siblings.)
"These differences are sizable in themselves. They translate into even more drastic differences at the extremes. Suppose we take a salary of 50,000 or more as a sign that someone is an economic success. A bright sibling was six-and-a-half times more likely to have reached that level than one of the dull. Or we may turn to the other extreme, poverty: the dull sibling was five times more likely to fall below the American poverty line than one of the bright.This data can be found in tabular form at the bottom of Wikipedia's "Bell Curve" article.
"Equality of opportunity did not result in anything like equality of outcome. Another poverty statistic should also give egalitarians food for thought: despite being blessed by an abundance of opportunity, 16.3% of the dull siblings were below the poverty line in 1993. This was slightly higher than America's national poverty rate of 15.1%.
"...The young people in our selected sample came from families that were overwhelmingly likely to support college enthusiastically and have the financial means to help. Yet while 56% of the bright obtained university degrees, this was achieved by only 21% of the normals and a minuscule 2% of the dulls. Parents will have been uniformly supportive, but children are not uniformly able.
"The differences among the siblings go far beyond income. Marriage and children offer the most vivid example. Similar proportions of siblings married, whether normal, bright or dull - but the divorce rate was markedly higher among the dull than among the normal or bright, even after taking length of marriage into account. Demographers will find it gloomily interesting that the average age at which women had their first birth was almost four years younger for the dull siblings than for the bright ones, while the number of children born to dull women averaged 1.9, half a child more than for either the normal or the bright.
"Most striking of all were the different illegitimacy rates. Of all the first-born children of the normals, 21% were born out of wedlock , about a third lower than the figure for the United States as a whole, presumably reflecting the advantaged backgrounds from which the sibling sample was drawn. Their bright siblings were much lower still, with less than 10% of their babies born illegitimate. Meanwhile, 45% of the first-born of the dull siblings were born outside of marriage."
Murray ends his "IQ and Economic Success" paper like this:
"People of different political viewpoints may legitimately respond to this presentation with policy prescriptions that are in polar opposition. In many ways, the Left has the easier task. These data are tailor-made for the conclusion that a Rawlsian redistributive state is the only answer. For its part, the Right must state forthrightly why it thinks that a free society that tolerates large differences in outcomes is preferable to an authoritarian society that reduces them. But though the answers may be different for those of competing political persuasions, the challenge is common to all. It is time for policy analysts to stop avoiding the reality of natural inequality, a reality that neither equalization of opportunity nor a freer society will circumvent."