The Economics of Gifted Education: Smart Fraction Theory

In part 1 of this post I bemoaned the limited research on the economics of G&T education.

One consequence is that, when it comes to defending gifted education against recession-driven spending cuts, there are very few weapons in the arsenal. This is a major problem and urgent action is needed to rectify it.

In reviewing the research I could find – and searching for the ‘magic bullet’ – I was struck by the untapped potential of ‘smart fraction theory’. This is highly controversial and contested territory, but it would certainly repay further exploration.

We need to backtrack a little in order to explain how ‘smart fraction’ thinking has developed.

The impact of cognitive ability on economic growth

In 2008, Hanushek and Woessmann published a comprehensive and influential paper on The Role of Cognitive Skills in Economic Development.

Their core argument might be summarised as follows:

  • Empirical studies show that extending the quantity of schooling does not necessarily bring about improvements in human capital that impact positively on economic growth
  • Schooling is too narrow an indicator;  there are other factors at play, both environmental and genetic. So it is better to assess improvements in cognitive skill, as demonstrated by performance on international comparative tests such as PISA and TIMSS
  • Cognitive skills have a significant positive impact on personal earnings and, in macroeconomic terms, on economic growth, whether in developed or developing countries
  • Analysis of PISA and TIMSS maths, science and reading scores suggests that, were countries performing at the OECD mean of 500 points to improve to 540 points – the level of top performers like Finland and South Korea – they would secure a 5% improvement in GDP over a 20 year period
  • The model suggests that improvements in top end performance and in average performance have separate and complementary effects on economic growth.

This last point is revisited in a 2009 follow up study .

This finds that that, were countries to secure an improvement of 10% in the proportion of students scoring at 400+ points and 600+ points respectively, each would have a positive impact on economic growth – and the intervention at the top end of the ability range would have 4 times greater impact than the intervention at average ability levels.

Unfortunately though, the statistical analysis shows that a 10% improvement at 600+ points would be much harder to achieve than the commensurate improvement at 400+ points.

However, support for top level performers is likely to have relatively stronger impact in developing countries compared with developed countries.

The overall conclusion is that providing better basic education for all and also pushing significant numbers to very high achievement levels is the best policy for economic growth.

The Smart Fraction

The concept of the smart fraction was first introduced by the pseudonymous La Griffe du Lion, who may or may not be the American academic Robert Gordon.

In 2002 he published a Socratic dialogue called ‘The Smart Fraction Theory of IQ and the Wealth of Nations’.

It explores the relationship between national average IQ and per capita GDP, finding a strong positive correlation. The author suggests that:

  • contributions to national productivity require a minimum level of cognitive ability
  • this is around IQ108 , about the level needed for a first degree
  • the smart fraction is the percentage of the population which record at least this IQ.

The economic and statistical argument behind this analysis appears slightly frail. Moreover, the fraction is pitched at a level which makes it barely relevant to apologists for G&T education.

Worse still, the smart fraction has since been appropriated by those who would wish to prove racial differences and even to justify eugenics. This territory is a cul de sac for G&T education and we should give it a very wide berth indeed.

The SMART fraction reinvented

The missing link between these two studies was provided in 2009 when Rindemann, Sailer and Thompson published ‘The Impact of Smart Fractions, Cognitive Ability of Politicians and Average Competence of Peoples on Social Development.

The authors are psychologists rather than economists and it will be interesting to see whether their work stands up to scrutiny from the latter.

Their key argument and findings follow:

  • There are strong links between findings in the economic tradition (human capital) the educational tradition (literacy) and the psychological tradition (intelligence) suggesting they are measuring ‘the same underlying latent factor’ of cognitive ability
  • The smart fraction should be pitched similarly to Hanushek and Woessmann’s higher level, defined here as the 95th percentile on TIMSS, PISA and PIRLS tests of comparative academic performance, which is said to be equivalent to IQ125
  • It is also possible to identify a ‘non-smart fraction’ comprising those performing at the 5th percentile (IQ 70-75)
  • Proxies are established for high national cognitive achievement – the average annual number of patents per million people, the number of Nobel Prizes relative to population size, the number of scientists and engineers employed in R&D per million people and the proportion of high technology exports as a percentage of all manufacturing exports
  • There is a much stronger correlation between high national GDP and the smart fraction than high national GDP and average cognitive ability
  • There is also a strong correlation with most of the indicators of national cognitive achievement (less so for Nobel Prizes in literature) and with the identified indicators of political sophistication.
  • The positive impact on GDP can be isolated mainly to STEM-related achievement asopposed to achievement outside the STEM fields, suggesting the formers are the main drivers of national affluence
  • As might be expected, the negative impact of large class sizes is more pronounced on the ‘non-smart fraction’, whereas the positive impact of early tracking (setting) is stronger for the smart fraction
  • Further research is required that examines different ability levels and uses other indicators of high achievement

Their ultimate conclusion: ‘our results emphasise the importance of nurturing the highly gifted’.

What can we learn from this?

To date there is scant evidence online that the findings of Rindermann et al are attracting peer review.

I would give much to know whether Hanushek and Woessmann find this treatment convincing. The methodology and logic do need to be tested rigorously, especially the vital issue of causation.

There is a pressing need for a leading economist of education to endorse or qualify Rindermann’s conclusions.

That might spark further collaboration between economists and experts in G&T education, doing much to stiffen the backbone of gifted education research, as well as providing a much needed justification for continued investment during this period of financial retrenchment.


June 2010

The Economics of Gifted Education

Some 20 years ago I completed an Advanced Diploma in Educational Administration and the Economics of Education at the University of London Institute of Education.

Ten years on, when I first took up responsibility for G&T education, I was astonished to discover that there was no substantive academic research in the economics of gifted education. This seemed odd given the strong emphasis during my course on the value of human capital.

Human Capital

Human capital is the collective term for the knowledge, skills, understanding and personal attributes that equip a person to generate economic value.

Much of this capital is typically acquired through education, an investment that generates financial and non-financial benefits (known as externalities or spillover benefits) to the individual and to society:

Private returns Social returns
Financial benefits Higher salaries Increased tax revenue
Spillover benefits Better healthImproved life expectancy Reduced crime ratesBetter social cohesion

I did not expect to find any work on the private returns to participation in gifted education programmes. It would be hard to isolate the benefits from those of compulsory education, and to undertake the necessary longitudinal studies comparing participants against a robust control.

But I did expect the cognitive skills of G&T young people to be recognised as a valuable commodity; their development seen as an important investment in national economic competitiveness. And I anticipated some recognition of the role of gifted education in treatments of the contribution of human capital to economic growth.

New economic growth theories

Endogenous Growth Theory became fashionable shortly after I completed my course. It gives significantly greater emphasis to the macroeconomic benefits of investment in human capital and the significance of technological progress.

According to this theory, as I understand it, investment in human capital brings about innovation, improves the efficiency of production and results in better products and services.

This generates increasing returns and so brings about continuous long-term improvement in economic growth. That is the theory, at least, though empirical studies have not always demonstrated this in practice.

But I can find very little reference tothe benefits of gifted education in any empirical studies. This might be explained by the difficulty of identifying and quantifying the numerous components of human capital, whether within compulsory education, tertiary education or CPD. Or it might be because gifted education benefits only a relatively small minority of the workforce, so is perceived to have a relatively small impact.

The complex nature of human capital is conveyed by the OECD’s work, which identifies four different types, the first two typically associated with academic study, the last two with practical experience:

  • Know-what – or factual knowledge such as that required by lawyers and doctors in order to practise;
  • Know-why – the scientific knowledge that underpins technological development and which typically resides in universities and research laboratories;
  • Know-how – the skills or capability required by employees relating to their role and typically maintained within each company or business;
  • Know-who – access to networks that support the sharing of know-how, know-why and know-what.

Knowledge-based Economies

Regardless of the mixed conclusions from empirical studies, modern growth theory has led many countries to develop plans for their transformation into Knowledge-based Economies (KBEs).

This term has been applied to many smaller Pacific Rim states (Hong Kong, Singapore, Taiwan), the accession countries of the European Union, the EU in its entirety and nations as divcerse as India, Iran, Korea and New Zealand.

A KBE is an economy in which the generation, application and dissemination of knowledge is seen as the principal driver of economic growth. Education is key to the development of a successful KBE and most national plans focus heavily on strengthening the education sector.

It is in these national delivery plans and in the commentaries upon them that one begins to find references to G&T education. Indeed, the rationale for gifted education in these countries is typically linked with the transformation process. This is evident in much of the literature about gifted education in Singapore, South Korea and now Saudi Arabia.

Two other areas of economic research may hold particular promise for gifted education.

The Creative Class

One is the work of Richard Florida,a professor at the University of Toronto and founder of the Creative Class Group think tank in Washington DC.

Florida identified the creative class, a socio-economic group, comprising some 40 million creative and knowledge-based workers in the US, destined to play a key role in future economic growth.

Florida argues that countries and cities that actively seek to support and retain such highly mobile workers will thrive, whereas those that do not will stagnate or even decline.

These ideas are influential, even though they remain controversial.

One important question for gifted education researchers is whether there is a strong correlation between the cities that score highly on Florida’s ‘creativity index’ and local education systems that are effective in developing the next generation of the creative class, including the not inconsiderable minority likely to be present in G&T populations.

Several KBE’s are now strengthening the creative dimension of their gifted education programmes in response to a perceived lack of innovative capacity amongst their students. One corollary of Florida’s argument may be that several of our big cities need to do the same.

The second area of promise is the beguilingly named ‘smart fraction theory’. But I want to say more about that in my next post.

Why this matters

The key conclusion I want to draw is that – now we are in recession and there is heavy pressure on public expenditure – G&T education is at great risk of being cut because it is wrongly believed to be an unnecessary extra. This would be an excellent time to accumulate the research evidence to disprove that belief.

So when, for example, US senators attempt to remove Javits Program funding, the gifted lobby is equipped with sound economic arguments and calculations to show why this would be so shortsighted.


June 2010

Hungary’s Plans to Strengthen G&T Education Across The EU

Back in November 2007, a group of leading European gifted educators met in Brussels, Belgium – under the aegis of COST – to discuss progress towards a European roadmap for meeting the needs of gifted learners.

A full record of the proceedings can be found here, including details of participants and the resolution agreed by the group.

In 2008, a few of the original participants met with EU officials in Brussels to discuss the scope for an EU funding bid, to establish the European G&T network originally proposed in the 2007 resolution.

The officials we spoke to were very encouraging but, as I began to co-ordinate a bid on behalf of the partners, some of the German speakers argued that they could short-cut this process by writing to the MEP who had inspired the original COST workshop.

Needless to say, this did not succeed – and it effectively scuppered the partnership upon which the intended bid was to be based.

Now there is a great opportunity to revisit this idea.

During the first half of 2011 – from 1 January until 30 June – Hungary will assume the Presidency of the European Union, sandwiched between the Presidencies of Belgium and Poland.

Hungary intends to focus on talent support as one of the major themes of its Presidency, highlighting the economic and social benefits, including greater competitiveness, stronger social mobility and better social cohesion. This will position talent support as one key to unlocking European economic growth following the current recession.

You can find more details of Hungary’s plans here. They are overseen by the wonderful Dr Peter Csermely, President of the Hungarian National Talent Support Council, ably assisted by a team including the equally wonderful Csilla Fuszek, who works for the Csanyi Foundation.

Hungary has identified four main outcomes from its talent development theme:

  • An international conference on the role of talent development in the 21st century school and the contribution it can make to EU competitiveness. The conference is scheduled for 8-9 April 2011 in Budapest.
  • A first European Talent Day, building on the successful national talent days held in Hungary, Romania, Slovakia and Serbia. The idea is to hold a series of national talent days, starting in Spring 2011, which will eventually be unified into a single European Talent Day by 2014.
  • The inclusion of references to talent support in key EU policies and documents, including the next iteration of the EU Education and Training Strategy, covering the period 2012-2014. Hungary plans to promote a non-legislative act (NLA) on talent support.
  • An Open Method of Co-ordination (OMC) Expert Group on Talent Support to provide a basis for ongoing EU-wide discussion of talent support issues. This will provide a basis for agreeing common objectives, establishing benchmarks and monitoring progress.

All EU countries are invited to express support for the European Talent Day. An international organising committee will be established which will meet for the first time in October 2010. In the meantime, G&T interests are invited to offer support by emailing

I have asked the English Department for Education (DfE) to consider this request on behalf of the Government. In the meantime, I am canvassing support from other UK G&T interests with a view to submitting a co-ordinated response.

This is a great opportunity to advance European collaboration in gifted education – one that we must seize with both hands. I commend the Hungarians for their wisdom and foresight in taking this lead.

Do please use the comments facility to ask any questions. I will, if necessary, get back to you offline.


June 2010