Angus Deaton – Nobel Prize in Economics in 2015 and India

R Vaidyanathan

Bangalore, Oct 17th

[dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]A[/dropcap]ngus Deaton, a professor at Princeton, has won the Nobel Prize in economics for his diverse contributions to the study of consumer spending. His research has explored how people, particularly the poor, make decisions about what to buy and how much to save.

The Royal Swedish Academy of Sciences recognized Mr.Deaton, an American and British citizen, for work that examined how consumers spend or save, how they distribute spending among different goods and how to measure poverty and welfare.

“To design economic policy that promotes welfare and reduces poverty, we must first understand individual consumption choices,” the academy said. “More than anyone else, Angus Deaton has enhanced this understanding.”

In his 2013 book, “The Great Escape: Health, Wealth, and the Origins of Inequality”, he provided an upbeat assessment of human progress over the past 250 years. He argued with well documented data about substantial increases in wealth, health and longevity. But he also sounded a note of concern over vast inequalities between and within nations.

Born at Edinburgh this British/ American is known for his analysis of consumption, poverty and welfare.

[dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]D[/dropcap]r. Deaton said Monday that he was heartened by the brighter political spotlight that had been thrust on income inequality. While inequality can be a positive extension of rising wealth, he said he had grown concerned that things were moving too far in the wrong direction. “It is a great danger if inequality becomes so extreme that it can threaten democracy,” he said in an interview.

A related concern: Global growth has slowed in recent decades, a trend that predates the 2007-09 financial crisis. Slower growth “poisons everything,” Mr Deaton said, and is particularly combustible when combined with rising inequality.

“There are many people in the rich world who are really suffering and see their lives getting worse,” he said, largely as a result of globalization and other real-time developments. “It makes politics much harder.”

“It is a great danger if inequality becomes so extreme that it can threaten democracy”…

– Dr. Angus Deaton

In his 2013 book, Mr Deaton concluded that international aid had little to do with progress in the developing world, and suggested that free trade and new incentives for drug companies would make a larger contribution in the future. His criticism of international aid efforts drew a sharp rebuttal from Bill Gates.

“What was impressive about this Nobel is how many different fields Angus has contributed to,” said William Easterly, a New York University economist. His rigor in improving various measurement standards was particularly courageous, he said, given the “tortuous details” and politics involved.

“No one accuses him of having an agenda on these questions, and there are a lot of people in this field who do have an agenda,” said Mr.Easterly.

Even though Thomas Piketty’s book “Capital in the Twenty-First Century” received lots of attention the recent book by Deaton “The Great Escape: Health, Wealth and the Origins of Inequality.” is of more relevance to India.

[dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]A[/dropcap]ctually he has examined time series data on poverty and nutrition in India and published a paper (Food and Nutrition in India: Facts and Interpretations) along with Jean Dreze in Economic and Politcal weekly [EPW] in 2009. This article provoked lots of debate with Utsa Patnaik of JNU at that time. Interestingly he has published a large number of articles—in Indian journal EPW out of his more than hundreds of articles

Some of them are:

1. Health Care Delivery in Rural Rajasthan (with Esther Duflo and Abhijit Banerjee), 2008
2. Poverty and inequality in India (with Jean Dreze), 2002
3. Adjusted Indian poverty estimates for 1999-2000 (2003)
4. Prices and Poverty 1987-2000 (2003)
5. Food and Nutrition in India Facts and Interpretations (With Jean Dreze) 2009
6. Price Trends in India and Their Implications for measuring Poverty (2008)
7. Stunting among children: Facts and implications (With Diane Coffey, Jean Dreze, Dean Spears and Alessandro Tarozzi (2013)

Deaton argues that between 1983 and 2004-05, the average calorie consumption in rural areas declined 10%. The decline was sharper among the better-off sections of the population. It was a puzzle as there was no significant change in the price of food relative to other commodities and as per capita incomes had increased during the same period.

Deaton and Dreze concluded that on account of better health as well as lower activity levels, the calorie requirements declined.They also argued for a better nutrition monitoring methods to understand such puzzles. We do need better data and monitoring mechanisms on nutrition issues.

We hope the current government takes steps in that direction.

Views are personal