Public choice economists emphasize the process by which we select political leaders. Electoral and voting rules influence the type of leaders we get. Institutional economists agree and go one step further. Who we choose matters less than the environment we place them in. Leaders, regardless of their personal qualities, respond to the incentives that surround them. The ultimate policies, therefore, largely conform to those incentives. From this perspective, it’s important to adopt institutional incentives for leaders to promote policies oriented toward economic growth and provide the option to flourish.
The same principle applies to the private economy. Productivity is crucial, and higher IQ often correlates with greater productivity. Yet, genetic endowment—including IQ—is beyond individual control. Many other determinants of productivity are not exogenous when we can affect policy. Let’s adopt policies that allow individuals with lower IQ to act productively as if they had higher IQ. Protecting the freedom to contract and private property rights creates conditions whereby even those at the lower end of the cognitive ability distribution can thrive. These principles expand their opportunities. Market signals give them valuable feedback on their activities and enable them to contribute to the economy.
Consider the detrimental effects of compliance barriers and complex regulation. Complex rules governing licensing, zoning, and taxation are hard to understand and deter individuals from above-board economic activities. Participating in the licit economy is important because it includes access to courts and law enforcement. On the margin, barriers cause individuals to act just a little more indigently rather than productively. Barriers to economic activity increase the threshold at which people appear shiftless or incapable of caring for themselves. By removing economic restrictions, we enable individuals to pursue their comparative advantage and reduce the perceived negative effects of low IQ. The behavior of both smart and less smart people is institutionally contingent! Crucially, such policies do not constitute a zero-sum transfer from higher-ability individuals to lower-ability ones.
A personal example illustrates the principle. My grandfather grew up in poverty and didn’t finish high school. Despite being a poor speller and writer, he was resourceful. As a child, he sold scrap wood door-to-door as fuel for stoves… So that he could afford to eat. He went on to secure stable employment, retired comfortably, and turned his attention to his life-long hobby: visiting yard sales and auctions. His hobby was arbitrage. He used knowledge specific to his place and time to identify undervalued items in one context and resell them where they had greater value. This activity provided him with purpose, supplemental income, and genuine value to others—all without requiring advanced education or compliance with cumbersome regulations.
Think of the non-English-speaking contractors who gather at Home Depot parking lots. These individuals, despite lacking formal qualifications, they haggle over prices and coordinate tasks to achieve gains from trade. Their ability to participate in a market with low barriers to work enables them to contribute economically and improve their own circumstances. Nobody directs them to take care of themselves – there’s a natural incentive for that. Reducing barriers unlocks human potential.
The lesson is clear: everyone has a role to play in society due to comparative advantage. Policies that lower barriers to economic participation ensure that individuals, regardless of their genetic or childhood endowments, can contribute meaningfully. Just as “we get the leaders we deserve,” we also “get the less productive people that we incentivize.” Let’s build systems that encourage productivity rather than idleness. By doing so, we foster a society where everyone has the chance to flourish.
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