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Measuring the Immeasurable

June 3, 2010

Tags Free MarketsPhilosophy and MethodologySubjectivismValue and Exchange

"There is no unit of measurement for value and no apparatus that can compare how much something is worth to two different individuals."

Many theorists have attempted to explain why some nations are wealthier than others. One recent explanation by psychologist Richard Lynn is both unusual and chilling at the same time. It is unusual because of its method, and it is chilling because of its unclear underlying motivation. My contention is that even though this explanation has stirred up quite a bit of controversy, it has no significant implications for either economics or ethics.

In his book IQ and the Wealth of Nations, Richard Lynn, professor at the University of Ulster, regresses national per-person gross domestic product (GDP) on results of IQ tests conducted in different countries. He finds a statistically significant correlation between average IQ scores and per-person GDP, and he concludes that this is evidence that national differences in intelligence are important determinants of the economic prosperity of nations.

Ultimately, Lynn's logic is as follows: Mentally able individuals are better at both coordinating individual actions and at developing and implementing new technologies than those who are less mentally able. As a result, countries populated with more mentally able individuals are wealthier. And, since intelligence is to a great extent genetically determined, our ability to improve this situation through better nutrition and education is severely limited. Lynn suggests instead that eugenics could be utilized to alleviate the problem.[1]

I take the conclusions of Lynn's book a bit personally, because it reminded me of an anthropology book that I used to own but have since lost. It was printed in 1941 under the sponsorship of the Nazi regime operating in the Balkans, and it was full of drawings of human skull measurements and comparisons of different "racial features." This book was quite similar to a 1921 book by Herman Lundborg, whose work was used as the basis for the Swedish government's eugenics program — a program that from 1935–1975 sterilized persons with "negative" genetic characteristics.

Both of my grandfathers were among the few survivors of the Yugoslavian Nazi concentration camps, which were run by people who had read too many "anthropological" books like those mentioned above. Thus, I naturally felt some discomfort when reading Professor Lynn's writings, especially knowing that the only reason I am now able to read anything at all is because the radical practitioners of eugenics were not thorough enough in their attempt to purify the genetic pool of the human race.

However, in this article I will not dwell on the question of the truthfulness of Lynn's claims. Instead, let us assume that everything he says about the IQ-GDP correlations of different nations is correct and then examine the implications for the sciences of economics and ethics.

Do Lynn's findings help us, in any way, to evaluate actions of individuals in different countries? Do they give a measure of the economic success of these individuals? Do these results have any general ethical relevance?

Value, Wealth, and Economic Success

Wealth is a meaningless term without the concept of value. If we know that the purpose of human action is to satisfy one's needs and wants, then the material wealth of two different individuals (let alone abstract entities such as nations) cannot tell us much about the satisfaction of their needs and wants. Wants and needs are subjective, unknown, and immeasurable by an outside observer.

We should thus be careful when interpreting empirical observations related to the quantity of goods and services produced in an economy. This is not to say that the GDP cannot tell us anything about a region. It simply means that GDP cannot tell us much about some of the most important economic concepts, such as value and economic success.

Most of today's economists endorse the subjective theory of value. According to this theory, the value of anything exists only in the mind of an individual. Thus, values held by two individuals cannot be compared except by observing an act of exchange. And even then, we can only make somewhat obvious statements — for instance, that in his exchange Jim values good A more than x dollars, while Janis values good A less than x dollars. To take it a step further, stating that Jim values good A more than Janis values good A simply lacks logical meaning.

There is no unit of measurement for value and no apparatus that can compare how much something is worth to two different individuals. This is the principle of the interpersonal incomparability of utility. Individual value scales cannot be superimposed and quantitatively compared. Since subjective value cannot be objectively measured, it cannot be objectively added, divided, or multiplied across individuals. Consequently, GDP is not a measure of "aggregate" value.

For example, if Jim's income is $4,000 and Janis's income is $1,000, does this mean that Jim's wants and needs are satisfied better than Janis's? We don't know. Likewise, if Jim tells you that, on a scale from one to five, his level of happiness is three, and Janis tells you that her level of happiness is four, this does not tell you that Jim is less happy than Janis — because Jim's level three and Janis's level three are not the same subjective state of mind.

Any comparison of subjective states requires the same frame of reference. Even if we know that one individual can buy more goods with his or her income than another, it does not follow that we may compare the two individuals' respective satisfaction. Not only do we not know what each person wants to buy, but even if we knew what each wanted to buy, we have no way of measuring how much satisfaction each one enjoyed in doing so. (This is one of the basic postulates of neoclassical economics, formally articulated by Carl Menger in his treatise Principles of Economics.)

The dubious nature of value measurements becomes even clearer when we note that many voluntary exchanges could never be included in the GDP. For example, friendship is a direct exchange of highly specific services that does not involve an exchange of money (and thus cannot be recorded or taxed in terms of money).[2] However, the provision of friendship is a productive activity like any other. The service is provided to other people because they value the service in the same way they value eating apples or watching a movie. Yet who can tell us the aggregate value of friendship produced in Argentina in 1998?

Another, even more obvious example is this article. The exchange between its author and the Ludwig von Mises Institute did not involve any exchange of money, and it will not be recorded as a productive activity in either the Canadian or the US GDP. However, both parties benefited from the production and exchange of the article. (It is my hope that there is a third party that will benefit as well — the readers.)

If one adopts the position that the satisfaction of one's needs and wants is the ultimate purpose of human action, then the economic success of one's actions can only be measured by ascertaining the degree to which one's needs are satisfied. But, since satisfaction cannot be measured outside the frame of reference of the given individual, the success of one's actions cannot be evaluated by anyone other than the same person whose actions are being evaluated.

Treatment of Others

Another question we might ask is what implications Lynn's findings might have for how we treat others. It may, after all, be more "efficient" to offer less charity to those who are incapable of using that help effectively and to give more to those who are. This is, in fact, one of the subtle messages that Lynn is sending — I say "subtle" because this is not 1941, and messages of this kind require a certain degree of subtlety.

"Making one person's preferences count as the universal, normative principle ought to be considered "moral relativism taken to the extreme'."

For example, Lynn and his North American counterparts, Philippe Rushton and Arthur Jensen, suggest that the efforts to increase the academic success of African Americans will lead to limited results because of the alleged inherently low IQ of this population.[3] Similarly, Lynn argues that foreign aid to Africa will result in only modest results.[4] The implication is that foreign aid is wrong, not because it represents forced charity or an illegitimate transfer of wealth, but because the recipients are unworthy according to Lynn's standards.

He also argues that the immigration policies of Western countries should either be more isolationist, to preserve the IQ of the domestic population, or target the high-IQ east Asian populations and discourage the inflow of (among others) low-IQ African populations. (Fortunately, the Canadian immigration officials did not look at Lynn's and Rushton's work before letting my family cross the border.)

These points are nuanced but their forcefulness is clear: Lynn has his standards and desires to see them implemented institutionally.

The Irrelevance of Lynn's Findings

Even in the unlikely event that Lynn's results are true, I am not persuaded by his normative conclusions. First, the law of comparative advantage tells us that in this world — in which no two individuals are identical — the possibilities for mutual cooperation are omnipresent. Unlike what is presented in some aggregate models, the true nature of comparative advantage is not national or racial, but individual.[5] Only individuals know their own production possibilities and preferences, which they express through voluntary, market transactions. This is why one's "nation" and "race" are not relevant economic categories within the framework of the subjective theory of value.

Basing economic policy on IQ levels overlooks the unique contributions many members of society have to offer. (Perhaps Professor Lynn never read the fable about the mouse and the lion. Being a "lion" is not a sufficient condition for ignoring or mistreating the "mice.")

Moreover, it doesn't follow from judgments about "efficiency" that one ought not to be charitable to those with fewer capabilities than others. Imagine that you had a mentally challenged child or sibling: would you refuse your cooperation because there is someone who could use that help "more productively"?

But aren't at least some generalized judgments accurate? For example, one of Lynn's supporters asks, "Who would argue that disease could be preferable to health or stupidity to genius? It's a case of moral relativism taken to the extreme."

In response, we should note first that "disease" and "health" are not precise or absolute terms; rather, they are abstract concepts. Human beings, on the other hand, have particular and specific preferences, expressed in action, that may often contradict more abstract value judgments. For instance, I can claim — and I am still waiting for someone to prove me wrong — that I would prefer to be ill and live following my own preferences rather than to be healthy and forced to follow someone else's preferences under a threat of violence.

If I think that the most valuable use of my time and resources is to cooperate with my child, sibling, neighbor, or even a man named Jim who lives ten thousand miles away, then there is no study that can prove I should instead cooperate with Janis because she scored high on some test. After all, Lynn's preferences concerning the genetic makeup of humanity do not qualify as a universal, normative principle. In fact, making one person's preferences count as the universal, normative principle ought to be considered "moral relativism taken to the extreme."

To be universal, a principle by definition needs to relate equally to everyone. Eugenic policies of the early-20th century were seen as a means to improve upon the natural evolution of humans. But the "genetic-hygiene" laws were chosen by a few to be imposed on everyone. It is self-evident that those imposing the standard on others are not in the same relation to these laws as are those upon whom they are being imposed.

This is the conceptual difference between natural selection and the practice of eugenics — natural selection applies to all humans equally. It was not brought into existence by any human; this is why, unlike the genetic-hygiene laws, natural selection is value free, and thus any analogy between the two is inappropriate.

Immanuel KantDownload PDF, and, more recently, Murray Rothbard and Hans-Herman HoppeDownload PDF provide examples of the human search for ethical principles that satisfy the universality requirement, where ought and is logically come together. The same way natural sciences discover how we ought to look at the world by discovering what the world is, the science of ethics discovers how we ought to look at other humans by discovering what they are.

$24 $17

 

Economics tells us what human beings are insofar as they act. According to Lynn, we could become more "efficient" if we started acting differently. However, no one can prove this claim since the litmus test for economic efficiency exists only in the mind of the actor. In fact, we see examples of human cooperation contrary to Lynn's prescriptions all the time: it cannot be denied that people choose their friends and associates using all sorts of criteria, not just IQ scores or racial features.

Value is in the mind of the individual: it is subjective. The value of individual ends can only be measured by the individual in question, and it cannot be compared across individuals. It would be a mistake to think that Lynn's method and findings can have any meaningful interpretation in the realm of economics, the science of human action, or in ethics, the science of the evaluation of human action.

IQ is not a measure of one's ability to meet one's own wants and needs, and neither is GDP a measure of the satisfaction of one's wants and needs. In fact, no such measure exists: you cannot measure the immeasurable.

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Notes

[1] Richard Hoste, "The Coming Chinese Superstate: Richard Lynn's Eugenics," The Occidental Quarterly Online (July 2009). Eugenics is of course a rather unpopular and politically incorrect idea. Lynn argues for it in principle but in practice opts only for mild institutional methods of practicing it.

[2] Money is not necessary for the exchange of friendship services because the condition of the double coincidence of wants is met. For example, Jim offers his friendship services to Janis in exchange for her friendship services. This is a direct exchange.

[3] Richard Lynn and Tatu Vanhanen, IQ and the Wealth of Nations (Praeger Publishers, 2002), p. 194; J. Philippe Rushton and Arthur Jensen, "Wanted: More Race Realism, Less Moralistic Fallacy," Psychology, Public Policy, and Law 11, no. 2 (2005): 328–36.Download PDF

[4] Lynn, IQ and the Wealth of Nations, p. 192–94.

[5] Predrag Rajsic, "Comparative Advantage: From an Individual to the Economy" (paper to be presented at the Agricultural and Applied Economics Association 2010 AAEA, CAES, and WAEA joint annual meeting, Denver, Colorado, July 25–27, 2010).Download PDF

Appendix

Pages from a 1921 book by Herman Lundborg whose work was used as the basis for the Swedish government's eugenics program


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