Summary: New research reveals that individuals with higher IQs are significantly better at predicting future outcomes, leading to smarter decision-making. Using data from the English Longitudinal Study of Ageing, researchers assessed how accurately people over 50 could estimate their own life expectancy.
High-IQ individuals were found to make more precise forecasts—errors were less frequent and less extreme compared to their lower-IQ counterparts. These results suggest that cognitive ability, including genetics linked to intelligence, plays a central role in how people evaluate risks and probabilities.
Key Facts:
- IQ & Prediction Accuracy: Those in the top 2.5% for IQ made significantly fewer forecasting errors than those in the lowest 2.5%.
- Genetic Influence: Intelligence-related genetic markers were associated with improved probabilistic reasoning.
- Policy Implications: Presenting explicit probability data could help people make better decisions about health and finance.
Source: University of Bath
A new study from the University of Bath’s School of Management has found that individuals with a higher IQ make more realistic predictions, which supports better decision-making and can lead to improved life outcomes.
The research, published in the Journal of Personality and Social Psychology, shows that people with a low IQ (the lowest 2.5% of the population) make forecasting errors that are more than twice as inaccurate as those made by people with a high IQ (the top 2.5% of the population).
The research used data from a nationally representative sample of people over 50 in England (English Longitudinal Study of Ageing ELSA), assessing their ability to predict their own life expectancy.
Individuals were asked to predict their probability of living to certain ages, and these estimates were compared with the probabilities taken from Office for National Statistics life tables (a demographic tool used to analyse death rates and calculate life expectancies at various ages).
The study controlled for differences in lifestyle, health, and genetic longevity.
By analysing participants’ scores on a variety of cognitive tests, as well as genetic markers linked to intelligence and educational success, Chris Dawson, Professor of Economics and Behavioural Science at the University of Bath, showed that smarter individuals tend to have more accurate beliefs about uncertain future events – they are more skilled at assessing probability.
Individuals with a higher IQ are significantly better at forecasting, making fewer errors (both positive and negative) and showing more consistent judgement compared to those with a lower IQ.
“Accurately assessing the probability of good and bad things happening to us is central to good decision-making,” said Professor Dawson.
“Almost all decisions we make, whether it’s starting a business, investing, crossing the road, choosing who to date, all require probabilistic assessments.
“IQ is already known to predict health, wealth, income, occupational status and educational attainment and this research highlights one possible channel through which people with a lower IQ do worse on all these outcomes.”
Professor Dawson suggests that explicitly stating probability estimates on information relating to health and finance for example, rather than relying on individuals to do their own calculations, could help people prone to forecasting errors to make more informed, accurate decisions.
“The study shows that certain genetic traits linked to intelligence and education are associated with more accurate predictions, suggesting that lower cognitive ability may causally contribute to the formation of more biased assessments,” said Professor Dawson.
“Probability estimation is the most important aspect of decision-making and people who struggle with this are at a distinct disadvantage.
“Expectations about the future shape how households make critical decisions – like how much to save, when to retire, or whether to invest. Poorly calibrated expectations can lead to bad financial decisions, and reduced economic welfare, which can adversely affect national growth.”
About this IQ and decision-making research news
Author: Alison Jones
Source: University of Bath
Contact: Alison Jones – University of Bath
Image: The image is credited to Neuroscience News
Original Research: Open access.
“IQ, Genes, and Miscalibrated Expectations” by Chris Dawson et al. Journal of Personality and Social Psychology
Abstract
IQ, Genes, and Miscalibrated Expectations
Almost all formal models of decision making under uncertainty require agents to judge the likelihood of relevant uncertainties.
Typically, decisions are best made when these judgments are accurate. In the context of probabilistic subjective survival expectations, from a nationally representative English sample of participants aged over 50 (N = 3,946), we test whether IQ is associated with calibration.
We find strong evidence that high-IQ respondents make substantially lower forecast errors and produce less noise in their predictions than low-IQ respondents.
These results are confirmed when we leverage the randomness in genetic variants linked to IQ as an instrumental variable (Mendelian randomization) and when directly using participants’ genetic variants related to educational attainment—that captures IQ as well as other cognitive and noncognitive traits relevant to educational success.
These results highlight important channels through which IQ contributes to beliefs about the world and may explain why low IQ is often linked to poor financial decision making, lower economic growth and economic welfare, and judgmental biases.
