A recent study from the University of Bath discovered that individuals with higher IQs make significantly better decisions by accurately forecasting future events, affecting their overall success in life.
A recent study conducted by the University of Bath’s School of Management has provided compelling insights into how individuals with higher IQs make more accurate predictions, leading to better decision-making and subsequently improved life outcomes.
Published in the Journal of Personality and Social Psychology, the research underscores the correlation between cognitive ability and life successes.
The study, involving data from the English Longitudinal Study of Ageing (ELSA), focused on the predictive capabilities of individuals over 50 in England regarding their life expectancy.
Participants were asked to estimate their probability of living to certain ages, and these estimations were compared with national life tables from the Office for National Statistics. The research controlled for various factors, including lifestyle, health and genetic longevity.
By analyzing participants’ scores on various cognitive tests and genetic markers tied to intelligence and educational success, Chris Dawson, a professor of economics and behavioural science at the University of Bath, demonstrated that individuals with higher IQs tend to have more accurate beliefs about future uncertainties.
“Accurately assessing the probability of good and bad things happening to us is central to good decision-making,” Dawson said in a news release. “Almost all decisions we make, whether it’s starting a business, investing, crossing the road, or choosing who to date, all require probabilistic assessments.”
The findings revealed that people within the highest 2.5% of the population regarding IQ made significantly fewer forecasting errors compared to those within the lowest 2.5%.
“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,” Dawson added.
Dawson suggests that presenting explicit probability estimates on crucial information, such as health and finance, could assist individuals who are prone to forecasting errors in making more informed and accurate decisions. This approach could mitigate the disadvantage faced by those with lower cognitive abilities.
“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,” added Dawson.
The implications of this research are profound. Better-calibrated expectations about the future can influence how households make vital decisions, ranging from how much to save, when to retire, to whether to invest.
“Poorly calibrated expectations can lead to bad financial decisions and reduced economic welfare, which can adversely affect national growth,” Dawson added.
Source: University of Bath