The story is here and http://blogs.discovermagazine.com/d-brief/?p=1771. The claim is that mortgage borrowers with poor math skills defaulted at a much higher rate than other mortgage borrowers.
Levels of IQ and financial literacy showed no correlation with likelihood to default, but basic math skills did.
I refuse to draw the inference that the reason these folks defaulted was that they misunderstood math. First, we are talking about a sample size of 339 borrowers. That is a very small sample. Second, there are a bunch of explanatory variables that are highly correlated: credit score, IQ, and math score. That makes it much harder to separate the effect of any one of those variables. Someone else using the same data might try slightly different specifications and get very different results. Especially in such a small sample.
Do I think that low math skills are correlated with default? Absolutely. Do I believe that there is a high marginal contribution to default of low math skills, conditional on other known factors such as credit score (and IQ, if known)? Not until this sort of study is replicated in other samples using other specifications.
This conclusion suggests that the study’s sample displayed a low correlation between IQ/financial literacy and basic math skills or even a negative correlation. Not a likely occurrence based on my experience and what should qualify as intelligence, financial literacy, and basic math skills.
It’s more politically correct to publicize that it’s bad math skills rather than low intelligence in general.
The “elites” are OK with things that make it look like education can fix. “People who have poor math skills” are not a morally protected group like “People who have low intelligence.” The math people are just victims of a poor education system that doesn’t have enough resources to make a big enough difference.