Angus Deaton, born in Scotland but a longtime professor at Princeton, has won the 2015 Nobel Prize for Economics "for his analysis of consumption, poverty, and welfare." The Scottish-born economist is best known for his work on health,consumption, poverty, wellbeing, and economic development.
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| Angus Deaton Photograph: Princeton |
1.Inequality has gone beyond the point where it is helping us to get rich, and is now a very serious threat.
2.He cites inequality as a factor driving climate change. He’s also worried about its impact on politics and democracy.
3.I worry about a world in which the rich get to write the rules which the rest of us have to obey.
4.Deaton tells his audience in Princeton that the “great concern” is the slowing of economic growth in the developed world, even before the financial crisis.
5.That slowing growth poisons everything... particularly for those at the bottom.
6.There are many people in the rich world who are really suffering, and whose lives are getting worse. They see that as a consequence of what’s happening elsewhere.
And the consequences of that could be “very difficult” indeed, he adds.
7.Deaton also explains that his driving passion has been to be very honest with data, rather than allowing politics to intrude.
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| Deaton is on his feet, and looking very happy as the audience give him a thunderous ovation: |
Consumption, great and small.
To design economic policy that promotes welfare and reduces poverty, we must first understand individual consumption choices. By linking detailed individual choices and aggregate outcomes, his research has helped transform the fields of microeconomics, macroeconomics, and development economics.
Methodologically, Deaton is about both empiricism and individualism, arguing for a close look at data on how specific human beings and households behave, rather than stylized models or big national-level aggregate data.
He's trying to look behind the easiest summary statistics and understand what is actually happening in people's lives — who is better off than whom, and why. That's a subject that has very broad application. If we want to improve the lot of the worst-off people, we need to know who they are and how to measure improvements in their well-being.
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| Professor Angus Deaton. |
1.How do consumers distribute their spending among different goods? Answering this question is not only necessary for explaining and forecasting actual consumption patterns, but also crucial in evaluating how policy reforms, like changes in consumption taxes, affect the welfare of different groups.In his early work around 1980, Deaton developed the Almost Ideal Demand System – a flexible, yet simple, way of estimating how the demand for each good depends on the prices of all goods and on individual incomes. His approach and its later modifications are now standard tools, both in academia and in practical policy evaluation.
2.How much of society's income is spent and how much is saved? To explain capital formation and the magnitudes of business cycles, it is necessary to understand the interplay between income and consumption over time. In a few papers around 1990, Deaton showed that the prevailing consumption theory could not explain the actual relationships if the starting point was aggregate income and consumption. Instead, one should sum up how individuals adapt their own consumption to their individual income, which fluctuates in a very different way to aggregate income. This research clearly demonstrated why the analysis of individual data is key to untangling the patterns we see in aggregate data, an approach that has since become widely adopted in modern macroeconomics.
3. How do we best measure and analyze welfare and poverty? In his more recent research, Deaton highlights how reliable measures of individual household consumption levels can be used to discern mechanisms behind economic development. His research has uncovered important pitfalls when comparing the extent of poverty across time and place. It has also exemplified how the clever use of household data may shed light on such issues as the relationships between income and calorie intake, and the extent of gender discrimination within the family. Deaton's focus on household surveys has helped transform development economics from a theoretical field based on aggregate data to an empirical field based on detailed individual data.
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“To design economic policy that promotes welfare and reduces poverty, we must first understand individual consumption choices.
“By linking detailed individual choices and aggregate outcomes, his research has helped transform the fields of microeconomics, macroeconomics, and development economics.”
His book, The Great Escape: Health, Wealth and the Origins of Inequality, argues that a more sophisticated analysis of economic data shows that while most people in the world have gained in terms of health and wellbeing from GDP growth, there are many groups that have missed out.
Economists are applauding the decision to reward Edinburgh-born microeconomist Angus Deaton of Princeton for his analysis of consumption, poverty, and welfare.
This global view is reflected in his latest research, which he says “focuses on the determinants of health in rich and poor countries, as well as on the measurement of poverty in India and around the world”.
Measuring poverty is often based on snapshot surveys of income levels, but Deaton is lauded for adopting groups or cohorts of the population and examining the improvements, or not, in their wellbeing.
Deaton, 69, was born in Edinburgh and educated at the same private school as former prime minister Tony Blair, Fettes College. He went to Cambridge where he later taught, before moving to the US and taking dual citizenship.
He is currently the Dwight D Eisenhower professor of economics and international affairs at the Woodrow Wilson School of Public and International Affairs at Princeton.
Ref:
http://www.theguardian.com/business/2015/
http://www.vox.com/2015/10/12
http://www.theguardian.com/business
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