An economy is a system for generating and trading solutions to problems

Sunday, April 10th, 2022

Robin Hanson once wrote about how intelligent people tend to overestimate how smart everyone else is, and Anatoly Karlin elaborates on this, with support from PISA test scores:

Fortunately, the PISA website has sample math questions from the 2012 assessment, corresponding to each of the six different levels of difficulty, as well as statistics on the percentage of 15-16 year old students from each of the participating countries that is capable of correctly answering it.

Here is the sample question from Level 6, the hardest level:

Helen rode her bike from home to the river, which is 4 km away. It took her 9 minutes. She rode home using a shorter route of 3 km. This only took her 6 minutes.

What was Helen’s average speed, in km/h, for the trip to the river and back?

Karlin notes how few people get this right:

This problem requires a multi-step approach, an understanding of rates, and the intelligence to complete it in the correct order.

Though not especially hard, even at this level. I suspect that many of you can do it in your heads within a minute.

But a majority of all the tested teens begged to differ.

OECD average: 3% (!!). Korea: 12%, Japan: 8%, Germany: 5%. The US, Italy, Sweden, and Russia were all at 2%; the Mediterranean was at 1%.

Some countries where a big fat 100% (rounded up) were unable to do this problem: Argentina, Brazil, Chile, Colombia, Indonesia, Jordan, Kazakhstan, Malaysia, Mexico, Peru, Qatar, Tunisia, Uruguay.

The number of people at this level, the highest measured by PISA, is dwindling away into insignificance in Latin America and the Middle East.

And yet this only translates to an IQ of 120-125. We’re nowhere even near genius level yet.

This matters:

The classical definition of an economy is a system for the production and exchange of goods and services. However, I will argue that you can view it even more fundamentally as a system for generating and trading solutions to problems.


Some of these problems, such as subsistence farming and trucking, are pretty simple and can be accomplished with reasonable efficiency even by relatively dull workers. This is because problems in this “Foolproof sector” (as Garett Jones calls it) require few steps and have only a minimal threshold difficulty, so production in this sector is governed by the standard Cobb-Douglas equation. More highly skilled workers are only modestly more productive, and are thus awarded with modestly higher salaries. Labor differs by productivity, but is substitutable — one experienced waiter is worth two novice ones.

Other problems are very complex and require teams of competent workers to perform multiple complicated steps to create a successful solution. The best are paired with the best for maximum productivity. Moreover, many O-Ring problems might have a threshold limit for IQ, below which no productive work can be done on them in principle (as per the Ushakov-Kulivets model). To be commercially viable, the risk of failure on any one link of a long production chain needs to be kept low. Examples of these “O-Ring” tasks may include: Aircraft manufacturing; corporate merger planning; computer chip design; machine building; open-heart surgeries.


  1. David Foster says:

    “The US, Italy, Sweden, and Russia were all at 2%”

    Something seems wrong here. **Math majors*, plus people who have majored in subjects requiring a lot of math, such as engineering and physics, probably represent more than 2% of the population.

  2. VXXC says:

    Intelligent people tend to overrate themselves.

    Everyone confuses and conflates Intelligence with Virtue.

    Our Intelligent possess neither Virtue [good being acted on] nor Virtu [courage].

    “This is because starting with WW2 the ‘Intelligent’ used tests and college and degrees to dodge either military service altogether or at least ‘shoulder a rifle’ as George Ball* put it [as in what he didn't do].”

    The Intelligent of our times are at *best* clever sillies but usually the pawns of the clever not silly psychopathic Intelligent who have their way by bullying punks who want to be ‘intelligent.’
    After you run out of the ‘Intelligent’ there’s always women which means in our moment of time Karens.

    But as I was just telling someone I was training with the real problem with our vile, cowardly, psychopathic elites isn’t that they are cowardly scum — it’s that they look in the mirror and see Saint Francis or Gandhi and the Gandhi they see is also Stunning and Brave.

    The above being my explanation of Occupy Wall Street was really a job interview. Trustifarians Virtue Signalling against their own Trust Funds and critically believing ‘passionately’ in their own sincerity is a critical test to pass for our Elite’s management track. A strange variation of Moltke the Elder’s ‘Intelligent and Lazy.’ Moltke

    *George Ball was the most important man in American Diplomacy of our time, of the 1940s forward, second only in American Diplomacy importance to John Quincy Adams of whom he was the negation and antithesis, indeed the Anti-Adams in all respects. The real problem was Ball looked in the mirror and saw a Saint staring back…virtuously unaware that his own words reveal him as a sneering psychopath.

    You may judge George Ball in his own words in his memoirs ‘The Past Has Another Pattern’.

  3. Gavin Longmuir says:

    The question is, what were these tests actually measuring?

    A very few people are like Newton, able to develop the concept of gravity ab initio. Most of us do not have that kind of ability, but we can be trained to apply the equations Newton developed. Some people can pass exams, but can’t change a tire; other people cannot pass exams, but can change a tire and fix it too. People have ranges of differing abilities, which is just as well!

    If only 3% of OECD 16-year-olds can answer that kind of question (against a clock, or time unconstrained?), it suggests they have not been trained to address that kind of problem.

    Also, let’s not forget that we were all 16 once. And when we were 16, our hormones drove most of us to spend test times staring at the legs of our female classmates rather than focusing on the questions on the paper.

  4. Isegoria says:

    A third of Americans go on to get a college degree, and a fifth of those get a STEM degree, so, yes, you would expect a fifteenth (7 percent) of the population to be able to do basic word problems. Of course, plenty of people earn a C-average without grasping the material, and I think these questions are exactly the kind of questions you find trivial if you understand the concepts — or if you’ve just drilled analogous problems for the preceding month, which is, of course, how school works.

  5. David Foster says:

    “A third of Americans go on to get a college degree, and a fifth of those get a STEM degree”…one might hope that people with Finance degrees, and/or with CPA certificates, would also be able to handle these problems.

  6. Xin Loi says:

    This is very interesting.

    I graduated from high school in 1977. I was not, shall we say, a math whiz. Senior math SAT 636, poor grades in pre-calc. Calculus in college I found impossible.

    I solved the Helen’s bike problem in my head in 40 seconds.

    So, in the interests of science, I had my kids (who range from 12-25) to do it. One got it right, after a somewhat complex series of operations (but she could show her work!).

    Several kids insisted on 28.32, one was lost.

    I reduced it to “how far did she go in how much time, 15 minutes x 4 = 60, 7km x 4 = 28 with no pencil, no paper, and (especially) no calculator.

    Perhaps there is a systematic issue with math instruction.

  7. Sam J. says:

    Xin Loi says, “Several kids insisted on 28.32, one was lost. I reduced it to ‘how far did she go in how much time,’ 15 minutes x 4 = 60, 7km x 4 = 28 with no pencil, no paper, and (especially) no calculator. Perhaps there is a systematic issue with math instruction.”

    Perhaps you are right and there is some systematic issue.

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