The Jewish state has come a long way in divesting itself of the “scourge of socialism,” but it’s still got a long way to go, says Professor Charles Murray, a celebrated, and often controversial, American intellectual and author. If Israel were to take advantage of its greatest natural resource — the Jews, or more correctly the Jewish capacity for creativity, he argues — “this country could be Hong Kong squared.”

Murray, one of the best-known figures among the conservative intelligentsia in the United States, is a fellow at the American Enterprise Institute (AEI). He is in Israel to participate in a conference on the free market in Israel, sponsored by the Jerusalem Institute for Market Studies, a sort of AEI for Israelis.

The four-day conference is discussing the role of religion in economic freedom, and is being held in honor of the 100th anniversary of the birth of Milton Friedman, the economist credited with shaping economic policy for US President Ronald Reagan, and the libertarian “ying” to the state-interventionist philosophy of his “yang” opposite, John Maynard Keynes. Participating in the event along with Murray are some of the leading lights of American conservative thought, including David Friedman (son of Milton, and lecturer at Princeton), Randy Barnett (who is fighting Obamacare on constitutional grounds), Russ Roberts (a leading critic of the Obama administration’s handling of economic issues), and others.

Murray’s seminal work, “The Bell Curve,” netted him accusations of racism for purportedly claiming that blacks are less intelligent than whites and are dragging down America’s intellectual level. Murray says he and his co-author Richard Hernstein never made such claims, and that he has made correcting the impression that he did “a major life mission. Race was ancillary to our research, and genes were not an issue.”

Genetics may not have been the focus of The Bell Curve, but they certainly are the focus of his views on Jews, whom Murray says are not only intellectually outstanding, but, as he wrote in a 2007 Commentary Magazine piece, are “G-d’s Chosen People,” an unusual assertion, he says, for a Scots-Irish Gentile from Iowa to make.

In that article, Murray elaborated a position that Jewish genius is caused by a sort of social/genetic selection based on the ability to cope with the heavy intellectual demands of Judaism. Those who were able to cope with the requirements for membership in the Jewish community – learning Torah and using a prayerbook (in both cases, of course, you had to know how to read) – maintained their Jewish identity, while those less capable intellectually dropped out.

“Historically the bottom 15% had a hard time reading,” Murray said. “After the destruction of the Second Temple you had millions of Jews disappearing.” They weren’t killed off in riots or pogroms. “After the end of Temple ritual and the rise of book learning, when Judaism became intellectually demanding, many of them felt too pressured to keep up with the demands of Judaism, and they dropped out for an easier religion.”

The result is that over the generations, Jews have self-selected for intelligence, and that explains why Jews score significantly higher than every other group on IQ tests, the best available tool to determine true intellectual ability, Murray wrote in the piece. “After I wrote the ‘Jewish Genius’ article I wrote another one on the same theme, and I remember including numerous times statements like ‘we expect the data to show,’ etc.,” he said. “Today, though, the situation is different. Knowledge in this area has exploded, and I would say that the data clearly confirms what I wrote.”

Jews in Israel are just as intelligent as their diaspora counterparts – although at times Jews have been a little too smart for their own good, he said. “There’s an old joke that Jews are wealthy everywhere, except in Israel. Somehow the superior Jewish intellect brought them to make stupid choices.”

Murray was referring to Israel’s long affair with socialism and statism, the remnants of which are still with us. Fortunately, he said, Israel has finally begun moving away from state control. “I’m not an expert on Israel’s history, but it seems that the changes that were unleashed a few years ago are finally beginning to have an impact.”

The effect of those changes can be seen in the flowering of Israel’s hi-tech economy and the country’s financial stability. More needs to be done before Israel becomes a true free market, he said. But if it does, watch out. “If Israel fully implemented the free market policies advocated by Milton Friedman, the growth here would be explosive.”

Most of the data in the studies Murray cites are based on Ashkenazi Jews, and there was a historic dearth of information on Sephardim. “We don’t have enough data on Sephardic communities,” Murray pointed out. With that, though, “in Iberia 900 years ago there was an explosion of Jewish accomplishment,” he said, that offered evidence for their intellectual strength as well.”

If Middle Eastern Jews were engaged in crafts and industry as opposed to intellectual pursuits, they are now studying in universities and colleges, so the dormant intelligence they possess as part of their Jewish legacy will now be able to come to the forefront, he said. And the same holds true for Jews from other parts of the world; those who prefer to assimilate and avoid the Jewish intellectual challenge end up leaving the Jewish people.

How is Israeli brainpower affected by Israel’s less than stellar education system? “School does not affect IQ too much,” said Murray. “What it is supposed to do is teach information. So even if kids are going to mediocre schools, their IQ is not going to go down. However, they may have less training in professions.”

That, however, is likely to be temporary, as they are likely to land in a situation where they will be more intellectually challenged. “Education should not be hard to do – we’ve been doing it for thousands of years,” said Murray. “But somehow public education ends up sinking to a level of mediocrity. Everywhere, school is less demanding.”

And Israel is going to need that creativity if peace is ever to be achieved. “The situation here is very complicated, and you can’t learn about it in a visit of just a few days. But from what I have seen I am coming away very pessimistic about the future.”

His group, Murray said, visited Hebron and Bethlehem with a Palestinian guide this week. “We got a view from the ‘other side,’ which we usually do not, that I considered very interesting. I am not drawing any conclusions based on a trip of a few hours,” he said, “but I don’t see how peace is going to be established in this or even the next generation.”

If someone here does figure things out, it could be a crowning intellectual achievement.