Following Marginal Revolution's recommendation, I bought Ian J. Deary's Intelligence, which is a summary of research on IQ testing.
For me, the most interesting chapter was on the Flynn effect (see also this post), which is that IQ scores have been increasing by about three points per decade. This fact has generally been masked by the fact that researchers periodically "re-norm" test scores to set the mean at 100.
As an economist, my first instinct is to treat the Flynn effect as a result of economic growth. That is, like height or longevity, IQ is something that increases incrementally as the standard of living rises.
Some folks leap on the Flynn effect as a demonstration that IQ is not purely genetic. I think that, as with height or longevity, most individual differences are genetic. However, environmental factors are significant when one looks at averages of groups under very different economic circumsances. Or, to put it another way, there may be very little that you can do at the margin to improve your child's IQ, just as there is very little at the margin that you can do to increase your child's height, even though environmental factors affect both.
Deary raises the possibility that the Flynn effect reflects a secular increase in test-taking ability, with "true" intelligence unchanged. He writes (p. 109)
Compared with a mean of 100 in 1992, the mean for the population in 1942 would be almost at a level that indicated mental handicap for the average person. (It is this consideration that makes me very sceptical about the veracity of these supposed 'IQ gains.')
Deary also points out that the Flynn effect is contra-indicated by the decline in SAT scores. However, since SAT tests are not taken by a random sample of students, perhaps it is the SAT decline that is illusory.
Assume that Deary (the expert) is wrong in his skepticism, and that in fact intelligence has, like longevity or height, been increasing, because of economic growth. In addition, one would presume that average IQ in turn feeds back into economic growth. In fact, this book, which finds a correlation of .7 between average IQ and GDP across countries, treats all of this correlation as causality from IQ to GDP.
Assuming that causality runs in both directions, this implies a sort of virtuous circle. A positive feedback process might be the answer to an important puzzle in economics: the failure of economies to converge. The economic growth models that emphasize capital accumulation all have the characteristic that poor countries should grow faster than rich countries. A model that takes into account IQ might explain how rich countries would grow faster than poor countries.
Discussions of IQ often are tinged with issues of racism. In this regard, it is useful to read Thomas Sowell's critique of The Bell Curve, in which Sowell makes the point that the Flynn effect contradicts a racially deterministic view of intelligence.
For Discussion. What factors might cause the Flynn effect to slow down?