To take things in a totally different direction, I wonder about the extent to which loss and risk aversion are related to intelligence. A few years ago, Jesse Shapiro, Daniel Benjamin, and Sebastian Brown wrote a paper on an intriguing subject:
In this paper, we ask whether variation in preference anomalies is related to variation in cognitive ability. Evidence from a new laboratory study of Chilean high school students shows that small-stakes risk aversion and short-run discounting are less common among those with higher standardized test scores, although anomalies persist even among the highest-scoring individuals. The relationship with test scores does not appear to result from differences in parental education or wealth. A laboratory experiment shows that reducing cognitive resources using a cognitive load manipulation tends to exacerbate small-stakes risk aversion, with similar but statistically weaker effects on short-run impatience. Explicit reasoning about choice seems to reduce the prevalence of these anomalies, especially among the less skilled. Survey evidence suggests that the role of cognitive ability may extend to adult behaviors that are related to small-stakes risk preference and short-run time preference. [Emphasis added.]
In describing his research agenda, Garett Jones, an economist at GMU, writes:
A two standard deviation rise in an individual person’s IQ predicts only about a 30% increase in her wage. But the same rise in a country’s average IQ score predicts a 700% increase in the average wage in that country. I want to understand why IQ appears to have such a large social multiplier.
The story is much the same for math and science scores: A person’s individual score predicts little about how she’ll do in the job market, but the richest and fastest-growing countries in the world tend to do much better on math and science tests. If the IQ multiplier is even half as large as it appears to be, then health, nutrition, and education policies in developing countries should be targeted at raising the brain health of the world’s poorest citizens.
My suspicion is that while loss aversion is very common among the very brainy, they might have an easier time getting over this “irrational quirk” in the course of repeated trials. And that’s yet another reason we should collectively invest in raising our own brain health. Indeed, that’s one reason why I’m more concerned about environmental pollutants than some of my ideological allies. In November of 2009, Scientific American published a short piece on pollution’s toll on the brain:
The most recent of these studies found that New York City five-year-olds who were exposed to higher levels of urban air pollutants known as polycyclic aromatic hydrocarbons (PAH) while in the womb exhibited an IQ four points lower than those subjected to less PAH. Alarmingly, “the drop was similar to that seen in exposure to low levels of lead,” says epidemiologist Frederica Perera, director of the Columbia Center for Children’s Environ mental Health and head author of the study, in which mothers wore personal air monitors during their pregnancy. The IQ change was enough of a dip to affect school performance and scores on standardized tests.
“These weren’t even superimpressively high levels of pollution,” Perera says. “The levels we measured in our study are comparable to those in other urban areas.” Most PAH pollutants come from motor vehicle emissions, especially diesel- and gas-powered cars and trucks, and from the burning of coal.
This has definitely shaped by thinking about carbon pricing. While I’m convinced by Jim Manzi’s arguments against an economy-wide carbon price as a tool against climate change, I do think it’s vitally important that we sharply reduce our reliance on coal-burning plants, particularly in light of the impact of mercury emissions.