Bryan Caplan  

Is Greed in the Genes?

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Behavioral geneticists will tell you that intelligence and personality are highly heritable.  But at least for economists, intelligence and personality are mainly interesting insofar as they predict that variable that "really" counts - income.  How heritable is that?

Quite.  This 2002 paper by Bowles and Gintis reports that identical twins' incomes have a correlation of .56, versus .36 for fraternal twins.  Using standard formulae, this implies that genes explains 40% of the variance of income, family environment 16%, and non-shared environment 44%.  A recent working paper by David Cesarini gets income correlations of .545 for identicals versus .266 for fraternals, implying that genes explain 56% of the variance, shared environment -1%, and non-shared environment 45%.

It's easy at this point to say, "Of course!  Intelligence has a large effect on income and is highly heritable, so it follows that income will be highly heritable, too."  But Bowles and Gintis show that the heritability of income is far larger than the IQ effect can explain.  (See Arnold's doubts here). 

What if you add in personality measures?  David Cesarini does just this - and finds that measures of IQ and personality explain a bit more than one-third of the heritaibility of income.  That's a lot more than B&G got, but the glass is still two-thirds empty.

So where are the other two-thirds of the income heritability coming from?  Here's an hypothesis that seems promising to me:

1. Standard personality tests largely neglect the personality trait of greediness.  (Alternate labels: Orientation toward money, materialism...)

2. Greediness is moderately-strongly heritable.

3. Greediness strongly predicts income, all else equal.

Take me, for instance.  IQ tests say I'm smart, and personality tests say I'm conscientious.  But money doesn't matter much to me.  When someone leaves academia to earn five times the income, I don't feel envious; I feel relieved not be to leaving academia!  The end result: While I'm financially comfortable, I earn a lot less than many people with similar intelligence and work ethic.

So what do you think?  If measured intelligence and conscientiousness account for one-third of the heritability of income, how much could measured greediness explain?


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The author at CORRUPT.org: Remaking Modern Society in a related article titled Will I Become An Economic Hotshot? writes:
    Bryan Caplan educates us in the fine art of biological determinism and economics: Behavioral geneticists will tell you that intelligence and personality are highly heritable. But at least for economists, intelligence and personality are mainly interesti [Tracked on March 11, 2009 7:00 AM]
COMMENTS (24 to date)
Dennis Mangan writes:

I think it makes a lot of sense. In the book "The Millionaire Next Door", the authors state that the millionaires they studied had one thing in common: a constant awareness of money, how to make it, and how to keep it. They looked at every decision in their lives as to how it would affect them financially. So they had a strong "orientation toward money".

El Presidente writes:

I would guess about half, but that would be very hard to pin down. Would be fun to try though.

Dain writes:

Standard personality tests largely neglect the personality trait of greediness.

Wouldn't this trait "greediness" be captured as a subset of one of the 5 standard personality types? I suppose it means isolating the effect of this particular trait, which supposedly nobody has done yet?

Barkley Rosser writes:

Bryan,

Face it. In a Galt-strike world, you are just a loser, :-).

Lord writes:

Not just greediness, but morally corruptible as well. I used to think Gapingvoid's social hierarchy/corporate pyramid of losers, surmounted by the clueless, and topped by sociopaths was a joke, only to find it the reality.

Methinks writes:

I think how much money one makes is a poor measure of greed because it leaves out other forms of compensation.

Is someone who overuses a socialist healthcare system less greedy because his overuse can't be calculated in his income? Is a person who abuses the welfare system to extract more goods and services without working for them less greedy than a person who invests his time and money to start a company just because the expected return on the start-up (along with the risk) is higher than the expected return on welfare fraud? Are the people voting for politicians to cut taxes for themselves while increasing taxes for another group less greedy than the entrepreneur?

I also don't think your lack of envy is an indication that you're less greedy. My mother also refuses to leave academia. Why would she? She has tons of time off, tenure (which means she no longer competes) and a pension coming from the university. Her life is set. That doesn't mean she's not greedy it just means she's not motivated. I have my own business and I have none of her time off or security, but I'm compensated for that by making more money. If I weren't, I might have settled for the cesspit of academia (sorry, I don't know how you tolerate it).


Greed is just wanting more. Everyone is greedy. Everyone wants more of different things. Using income statistics to measure greed is just stupid. Who isn't greedy for something?

hamilton writes:

Prof Caplan,

I like the points that Methinks makes. Isn't your statement of "greediness" just a claim that you are very unwilling to trade a little time for thoughtful contemplation for even a great deal of material reward? And Methinks has the reverse of this situation? And, if so, aren't we just saying that we can more precisely measure the one dimension (material reward) and not the other (time for contemplation)?

It's not even that I disagree with you, I think. There probably is some personality trait that leads one to choose a life of questing for ever higher levels of material compensation over other forms of well being. I'm just not sure that "greediness" is the proper term for it.

Niccolo writes:

I think you make a mistake by factoring greed out of the equation of personality.


First, one has to ask, what is greed? Well, when analyzing greed and asking of its origins I come to a couple of conclusions about the person.


I think a greedy person is usually either,

A). Highly paranoid or uncertain about the future, thus amasses large amounts of wealth waiting in preparation for the inevitable storm.

B). Giving of him/herself to his/her loved ones, taking very little as an individual, but earning much to give to those in close proximity.

C). Possessing high tastes with feelings of inadequacies about anything but the best.


I think these three types of people are perfectly replicated in Jung's personalities, so I don't think there's any need to separate greed from the equation of persona.

dearieme writes:

A technical point: "have a correlation of .56, ...Using standard formulae, this implies that genes explains 40% of the variance of income...": I loathe that use of "explains". Anyone who's done an elementary stats course knows what you mean, of course, but it's horribly misleading for the layman. First we tell him that correlation doesn't imply cause, then we tell him that something that we infer from correlation "explains" something. Aargh!

But on your substantial point, I tend to agree that having a keen desire to make money probably does partly explain - in the layman's sense - who makes money.

Lance writes:

I've always taken "The Fountainhead" for more than a metaphor; and this article explains it

Zdeno writes:

IIRC Bowles and Gintis also found a pretty significant coefficient on "locus of control" or something similar. Then of course there's risk-taking, creativity, leadership etc. IQ tests are useful and informative, but there are a lot of traits it doesn't capture that influence earning ability.

Greed is probably one of them, but I would prefer "materialism" or "consumption over leisure preference" since as someone pointed out, everyone is "greedy."

Zdeno

Troy Camplin writes:

Perhaps there is a certain amount of materialistic greed there, but I think other factors are at play. My experience has been that the poor are far more materialistic than the middle class or the wealthy. Many are poor because they waste whatever money they get on material goods rather than saving or investing the money to improve their economic situation.

I read somewhere recently that time horizons and one's relation to time is highly predictive. Those with very short time horizons are poorer than those with very long time horizons. This does seem to have a genetic component to it. Further, the middle classes tend to be future-oriented, the poor present-oriented, and the wealthy past-oriented. How much of one's relation to and perspective of time is heritable?

stanfo writes:

I continue to be amazed by how much you blog about topics and things that I have thought much about.

bill shoe writes:

I think "greedy" is a bit too simplistic. Greedy can be short or long term (Niccolo alludes to similar sub-types in previous comment). I think short term greed usually results in low income, long term greed results in high income. Long term greed also known as ability to delay gratification.

Standford Marshmallow Experiment demonstrated large correlation between delayed gratification ability and SAT performance. We know there is large correlation between SAT and IQ. Thus probably positive correlation between income and delayed gratification, with delayed gratification being similar but not identical to IQ. This has potential to explain income-IQ gap.

I think this is similar to Caplan's theory, but with greed more narrowly defined and with delayed gratification ability being the smoking gun.

Tom writes:

This 2002 paper by Bowles and Gintis reports that identical twins' incomes have a correlation of .56, versus .36 for fraternal twins. Using standard formulae, this implies that genes explains 40% of the variance of income, family environment 16%, and non-shared environment 44%.

Please could anyone explain how you derive 40%, 16% and 44% from .56 and .36?

fundamentalist writes:

You really need to define greed. Do you really intend to suggest that the desire to improve one's condition is greed?

"...identical twins' incomes have a correlation of .56, versus .36 for fraternal twins. Using standard formulae, this implies that genes explains 40% of the variance of income..."

Maybe you meant the R-squared is .56, versus .36. The R-squared shows the explanatory power of the predictor variable, not the correlation. If the correlation is .56, then the R-square is 0.31 and genes explain 31% of the variance. If the correlation is .36, the R-squared is 0.13 and genes explain 13%. Also, this is a very simple model. I haven't read the paper, but wonder if other variables were tested in order to determine if genetics was acting as a proxy for something else?

hacs writes:

Behavioral Genetics?

It is known between geneticists how complex are even basic personality traits (its definition is other serious difficulty to a truthful scientific agenda), involving multiple genes and unknown interactions among them.

The "normality" has always been much more complex to typify (except in periods of authoritarian or aristocratic social framework). Pathological personality traits are easier characterized than non pathological attributes, however, even today there is not a consensus about the effects of child abuses (even moral abuses as excessive criticism) on the behavior in adult life (inclusive the development of social and academic skills), for example. A lot of case studies and some demographic figures show multiples long run aftereffects, despite of any genetical, social and economic attributes.

Sir Francis Galton (despite his important contributions to Statistics), his notions of Hereditary Genius and Eugenics need to be forgotten, but they are being retaken with a new name and package. Will it be necessary more millions of injured people to that ill-conceived ideas might be ignored?

SydB writes:

You've not considered the well known result that taller and more physically attractive people draw larger incomes.

Therefore the attention given to greed seems misplaced and biased.

lizWCU0966 writes:

For decades scientists have argued the nature versus nurture argument concerning how much of that we become is a direct result of heredity and how much is a result of our environment. In Bryan Caplan’s blog he applies this argument to ones income and wealth, suggesting that greed is an inherited trait and greedy people will attain a higher level of income.
Personally I do not believe that ones ability to earn a higher income is passed down in their genes. I do believe that a person who grows up in a home with parents that are responsible and good role models will more than likely grow up to earn more money than someone who comes from a dysfunctional family whose caregivers don’t hold down steady jobs and spends their income on alcohol, drugs, or other devastating habits.
Someone growing up with a responsible parent is taught early on the importance of a job, of an education, of being fugal, of saving for the future and planning ahead. Maybe a person labeled as greedy only had the misfortune of growing up with greedy parents for role models. I myself believe that environment plays a larger role than heredity even when it comes to our personalities. Maybe Luther Burbank, a noted American botanist, summed it up best when he said “Heredity is nothing but stored environment.”

The Cupboard Is Bare writes:

It's just my opinion, but greed has a negative connotation. When I think of greed, what comes to mind is a person who engages in unethical practices for personal gain of a financial or emotional nature.

Many people have a great deal of money and continue to make more, but I don't consider them to be greedy unless that money was made in an unethical manner. Instead, I think of these people as being successful and fortunate enough to be doing something that makes them happy. Along the way, it's not uncommon for them to help a lot of other people achieve both emotional and financial success.

I don't know about the numbers, but what I have discovered is that parents who lie, cheat, steal, coerce and abuse in order to get what they want, frequently pass those traits on to their children. The children may say that they never want to be like their parents and for the most part avoid those behaviors; but I have repeatedly seen examples where the child will exhibit the very behaviors they say they want to avoid when they want something badly enough.

Mr. Econotarian writes:

"Personally I do not believe that ones ability to earn a higher income is passed down in their genes."

The truth holds regardless whether you "believe" it or not. The science shows that genes explain 56% of the variance of income.

dearieme writes:

“Heredity is nothing but stored environment.”
You can live in a kennel but you won't develop a wet snout and a waggly tail.

hacs writes:

The behavioral geneticists would use better their time and skills forecasting the long term values to the equation x(n+1)=r*x(n)*(1-x(n)) with r in [3.6,4] and x(0) in (0,1).

laurenwcu writes:

Professor Caplan asks an interesting question in his blog post. He asks, is greediness genetic? Caplan makes the astute observation that even though he himself is considered “smart” and “conscientious,” he does not feel the need to go after a job that would increase his income. This is a key difference in those who are greedy and those who really don’t care about money. Even though Caplan has the mental capacity to take on the job he chooses to make less money because he enjoys his job in academia.

With this said, I think that people, in general, have a drive to want something. This something can be material, money, cars, and houses, or something that rewards the mind, a challenge, happiness, and success. Often times one believes the material items in life will lead to happiness and create the illusion of success. I feel that this ideology is passed on from our parents to us. Most parents raise their children for success, and in today’s society success is shown through material possessions. As children grow they begin to form their own opinions that often times are similar to those their parents impose on them. This is why greediness appears to be genetic.

Involving the idea of the correlation of intelligence to greediness is a unique concept. Through my eyes, I see well-educated people being able to go beyond the idea that material possessions equals success. However, this sometimes is not the case. Many well-educated people are influenced by money to change jobs, even if it means not being happy. I think this happens because, they think money will give them happiness. Essentially, they are replacing the happiness that was in their old job for the happiness from money that they will experience in their new job. They are now forced to spend money on material possessions to try and get happy.

All in all, I think it would be nice to be able to drive an Audi A5 to work everyday, park it in my parking spot, slave over work, and then drive it home. But, the idea that I have a problem with is, is it going to make me happy. I cannot answer that question because I have never experienced this, but I can tell you that I am happy with my life and that is because the people who are in it. I also feel that my parents raised me to be this way to have success and happiness through life, not material possessions.

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