When Bryan says "IQ matters a great deal" I hear "inelastic factors of production." IQ won't change much in the short run, and perhaps IQ -- rather than effort or environment -- accounts for more of good (and bad) outcomes than we used to think. But we all know that inelastic factors of production can be taxed and subsidized without much deadweight loss. More generally, the belief that value comes from inelastic factors will not favor markets or liberty. The historical correlation between IQ research and anti-egalitarian social engineering is not a complete accident.
Yes IQ matters for policy, but I see no particular reason why libertarians should welcome this conclusion. Libertarian philosophy does better under the traditional story of the self-made man.
To clarify our disagreement, we need to distinguish between two kinds of un-libertarian policies: government "investments in people," and simple redistribution. My original argument basically targeted the former. Tyler's doubt, however, focuses on the latter.
Is he right about redistribution? If, like me, you thought that labor supply was highly inelastic long before you studied IQ, then recognizing that IQ is also inelastic should not change your estimates of the deadweight costs of redistribution. The plain fact is the moderate redistribution is not economically devastating, whether or not you think IQ matters.
But more importantly, IQ research seriously undermines the moral case for redistribution. One of our most basic moral intuitions is that people who succeed because of their personal ability deserve what they have. "He won because he was the best" has a lot more moral authority than "He won because he got lucky." Indeed, "He won because he was the best," is practically as compelling as "He won because he worked the hardest." IQ research confirms that capitalism is, as advertised, a meritocracy.
Think of it this way: Why does IQ research make leftists so angry? Well, the strongest argument for redistributing Olympic medals is that the winners cheated, and aren't really better athletes than the losers. Similarly, the strongest argument for redistributing wealth is that the winners cheated, and aren't really more economically productive than the losers. It isn't impossible to defend redistribution after you admit that people are rich because they are smart. But it is a lot harder.