Does the Market Select for Stupidity?

Thinking about a position I have previously defended, that collective intelligence may exert a downward pressure on the intelligence of its constituent parts, it seems it should have some implications for the selection pressure on markets with respect to the complexity of the market agents that compose them. If collective intelligence improves when its constituent parts are ‘dumber’, then an economic system, which processes information through market transactions, will function better when market actors are dumber. More complex actors’ preferences will be less well revealed by their actions, and so the aggregated information will be noisier.

This is true even given that simpler economic actors are more easily manipulable. Manipulability of actors means that actors will interpret signals in predictable ways, and react to them in predictable ways. Manipulability, then, is just a form of very effective communication, which can be abused by actors who can recognize and take advantage of it, but which also makes market information less noisy.

But there seems to be some evidence against this. IQs have improved over time, and even more so in developed countries with relatively open economies. This is weak evidence, since there has been less and less competition between different markets composed of different actors as a global market has emerged and its interconnections proliferated, and changes in nutrition, health, and the rates of violence have positive impacts that are likely to swamp any downward pressure from the market. Furthermore, the revelation of preferences is influenced more by shared worldview and equivalent levels of intelligence: for the purposes of making interactions more meaningful, it will often matter more that individuals think the same way, than it matters exactly how they think.

Other opposing evidence comes from other social-but-not-eusocial animals, such as wolves. Many social animals appear to be smarter as individuals than similar animals that do not interact socially. Wolves, flocking birds, dolphins are smarter than equivalently sized big cats, lone birds, and sharks, for example. This again may have more to do with access to nutrients, but at least it shows that whatever pressure exists cannot be very large.

This speculation is necessarily incomplete without actually looking at who is rewarded by the market, and what enterprises get selected for and copied and perpetuated. In that sense, it says more about the metaphor of market-as-brain than about the market itself. It also may count as a strike against the original assertion about how collective intelligence and individual intelligence interact.

IQs have improved? Where did you come up with this idea for I looked into it and raises in IQ remain disputable?

K: this provocative post leads one into many different thoughts…

is there an argument for the collective intelligence over individual intelligence?
are we smarter because we belong to a collective, pack of animals, as it were…
it seems to me, that you are asking several different questions… what is the
relationship between individuals intelligence and the collective intelligence…
and what is the relationship between such things as economic market forces and
and collective intelligence…and the relationship between forces manipulating
the economic market and collective intelligence versus individual intelligence…
as we are pack animals, like bee’s and birds and dolphins and wolves,
this Darwinian idea that we achieved our intelligence because we were
animals who did belong to a pack is most likely true…and what does that
mean to us? all kinds of questions lie within the range of your initial questions
and those questions deserve some thought as well… thank you for your
very intriguing question…I shall give it some more thought…


Intelligence is correlated with genetics (thus: biology), with climate (thus: geology and geography), with politics and education (thus: culture), with demography, with economy …

[MOD EDIT: this post originally quoted this post in its entirety]

It’s known as the Flynn Effect, and the finding has been replicated. I do agree there’s some dispute, for instance over whether the effect is on real IQ or just measured IQ. However, I think much of the rise is real and I think that’s the prevailing wisdom among intelligence researchers. We know from other sources that nutrition and health care access are linked to improved cognitive outcomes, so it makes sense that as the world gets wealthier and healthier we’d see a real increase in intelligence – and there’s evidence that’s it’s plateaued, which is also to be expected for wealthy nations where most people have all they need to be physically healthy, i.e. the low-hanging fruit has been plucked.

Peter, I just finished an excellent book called Scale, written by Geoffrey West, who looks at the organization of biological and human systems and tries to deduce fundamental laws of how they are related. A physicist by training, he makes some pretty astounding claims, first about biological scaling, e.g. between elephant hearts and mouse hearts, and then at scaling in human systems, e.g. cities and social networks. Relevant for this discussion, he finds strong evidence that larger, denser cities produce more innovation per capita, which supports the idea that there’s a distinction between collective intelligence and individual intelligence. I highly recommend it if these kinds of questions are interesting to you, it’s definitely occupying a lot of my thought recently.

What I read about the Flynn Effect is that the rises were within the lower end of the intelligence scale but not at the highest end of intelligence which would mean that more people at 70s or 80s now are more like 80s or 90s. Health may account for that increase in the number of low IQ people rising 5-10 points, but the other end, the high end of the intelligence spectrum remains unchanged, so I don’t buy what you are selling.

Flynn himself does not believe that the people become more intelligent in general. Cf. James Flynn / William Dickens, “Heritability Estimates Versus Large Environmental Effects”, 2001.

Wendy, I don’t think that makes sense. IQ is always centered around the average score. 100 is always average intelligence across the population of test takers. The effect was noticed because the test had to be recalibrated upwards over the course of generations.

Do you have any sources saying the distribution has changed, that the curve has become more compact or lopsided?



If you want to check the validity of your theory, look at the behavior of the stock market. You cannot not find any better example of how collective intelligence use to work.

That is absolutely true and stock markets are a perfect example of that. They are totally manipulated.

There are two ways of determining stock prices, one is fundamental while the other one is technical. Fundamental researchers study about economic prospects of a company. On the other hand, technical researchers have nothing to do with the economic performance of the company. They only study how the majority of the market participants use to behave at the different price levels of the company, in your terminology, collective intelligence.

There is no such evidence, or i have not seen it at least.

That is irrelevant for your theory. You are talking about collective intelligence which is actually nothing but an average intelligence of all the participants in any given ecosystem. Thus, it is a relative issue.

Means, the general increase or decrease of the intelligence of all the participants would not have any bearing on the difference between the intelligence of different participants. The manipulated ones will always remain so in the comparison of the manipulators.

with love,
sanjay … t-invented

Weird. I checked my history and I only read from four links which I listed above. I don’t get the Flynn Effect significance exactly which only covers a span of 78 years or less.

Sometime it doesn’t, sometimes it does.

Since machines have become capable of serving and repairing machines, less humans are needed. And in future machines will probably even be capable of inventing machines, then no human will be needed. But will the humans have to be intelligent then (provided that they will still be there)?

That part can be guaranteed to be true.

But that part is too simplistic. It isn’t merely the dumbness of the constituent parts that brings about intelligence. It is the order of cooperation between the dumb parts. The dumb parts must be organised in the best manner for intelligence.

What pressure does the market bring to bare on that concern?

If none, then the market’s effect upon intelligence in inconsequential.