Economic freedom also becomes much less important (P-value of .18), although it is a pretty good proxy for the corruption index (which hones in more on IQ). After controlling for IQ and economic freedom, each point on the Transparency International Corruption Index (scaled with ten being squeaky clean and zero showing absolute corruption) ups PPP just over $3,300, down from $4,300 without controlling for IQ and economic freedom.
Corruption and IQ are inversely correlated of course (with an r of .68). Thus IQ "explains" about 46% of the variance in corruption levels and viceversa. But there's more to do with PPP in the 54% remaining on the corruption side than on the IQ side. It appears, then, that IQ likely helps goad citizens into collectively demanding rectitude in business and politics but that realizing such rectitude is significantly more important than IQ, at least at the national level.
I add the caveat because I suspect globalization is a steroids for corruption and a sedative for national IQ. As MNCs and entrepreneurs increasingly expand overseas, they play a correspondingly larger role in the economic development of the host country. They pour investment in, create local jobs, and help open up external markets. Foreigners with high IQs make dull nations wealthier. If a military junta threatens to take control or lots of grease is required to get the gears to turn, however, the MNCs and other business entities are hesitant to enter. So a lack of corruption lets in smart people who augment the nation's wealth without raising its IQ. IQ is still a powerful force, but the way it's been measured isn't optimal (for PPP anyway). The UAE epitomizes this (found here):
In the UAE as a whole, with a total population of 2.5m, nationals are outnumbered seven to one by mainly non-Arab aliens: 1.2m Indians, 600,000 Pakistanis, 100,000 Iranians and contributions from dozens of other nations, including 50,000 Britons. In Dubai, nationals fall to a mere 8% out of a million-plus.The IQ tests Lynn and Vanhanen used span a long period of time. Presumably, the test results were not found by testing foreigners. How much, then, does the IQ of the natives matter in the UAE? By letting in big corporations full of sharp people, the UAE is doing more for its PPP than taking a magic pill to boost its IQ from an estimated 83 to a Russian 96 would do if the pill's side effects included Russia's level of corruption and state control.
The UAE, as a quasi-corporate-owned state, is an extreme example, but globalization is trending us toward more of them. In a critique of Lynn and Vanhanen pointed out to me by John Bolton, we see that IQ correlated with PPP at .76 in 1998 while economic freedom correlated with IQ at only .68. Recall from above that those correlations have now basically swapped positions. I haven't found corruption data for 1998, but I suspect its correlation with PPP has increased over the same time period that the link between IQ and PPP has been attenuated.
The second paranthetical caveat is due to the variables for which a nation's IQ definitely can shed some enlightenment--making babies and dying. Births per woman correlates with IQ at .81. Life expectancy correlates with IQ at an astounding .85. Economic well-being and the number of doctors per capita don't hold a candle to IQ. The correlation between both of these together and life expectancy is only .72. When IQ is controlled for, PPP loses statistical significance and doctors per capita loses 80% of its correlation strength. This is, incidentally, the highest single variable correlation with national IQ I've yet seen--are there any others that are stronger?
Taking births and life expectancy together yields a correlation with IQ of .88. Controlling for one does not eliminate the statistical significance of the other. My theories on why:
-Smart people take better care of themselves. They are more likely to engage in healthy eating habits, exercise regularly, and get enough sleep, less likely to partake of behaviors they know to be damaging, etc. Seeking out this information and understanding it takes some level of intelligence. And because the benefits are long-term in nature, duller people are less likely to engage in them.
-As for births per woman, I've expounded a little on this before. Bearing and raising children takes an enormous amont of time. Smarter people are more likely to grasp the commitment required in producing offspring. These smart people have a perpetually growing number of other options that require a prodigious commitment as well. They can blog, day-trade, game, travel, program, learn an endless amount about an endless number of subjects via the internet, etc. Duller people, even with more money, are less likely to be self-starting in these activities and less likely to fully grasp how having children will hamper their ability to partake in the same activities. So the distractions of a high IQ society do not deter them as much from having urchins.