Global poverty features as one of the leading research topics for this year’s Nobel Prize in economics winner Angus Deaton. The Princeton University professor took the award “for his analysis of consumption, poverty and welfare,” said the Nobel committee in its announcement Monday. Deaton is a giant in the international development space for his research on poverty and inequality.
“[Deaton’s] interests were so wide and his contributions so influential, in so many big questions of development. His idle afterthoughts helped start huge literatures, like the cross-country study of coups and wars, often years before others caught on,” wrote Columbia University political scientist Chris Blattman, in Foreign Policy. “All in all, this is a great decision from the committee from the perspective of caring about poverty, inequality, and getting the evidence right.”
Deaton gained wider attention in recent years for criticizing foreign aid. His 2013 book, The Great Escape, uses his decades of research to describe the challenges faced by the world’s poor. The concluding section offers ideas on how to alleviate poverty – singling out the harm caused by wealthy countries providing foreign aid. He concedes that foreign aid helps make improvements on health, but does not change the structural problems that contribute to poverty.
“Unfortunately, the world’s rich countries currently are making things worse. Foreign aid – transfers from rich countries to poor countries – has much to its credit, particularly in terms of health care, with many people alive today who would otherwise be dead. But foreign aid also undermines the development of local state capacity,” Deaton argued in an OpEd promoting the book.
It is his scholarly contributions that are most important, and why he was awarded the Nobel. Deaton devised ways to compare living standards. Looking solely at incomes was not going to explain much when cost of living and spending differ throughout the world. That led him to look at consumption – how much people spend and on what.
The underlying drive for Deaton was to understand how people actually lived. Well-developed economic theories helped explain large scale changes, but they were inadequate in detailing differences among individuals or groups. That led him to focus his research on people living in poverty. Calls for better data when dealing with issues pertaining to poverty are made on a regular basis – that movement owes quite a bit to Deaton for making major advances and raising the level of importance for measurements.
“Suppose you wanted to understand the effect of a subsidy on rice on the well-being of farmers,” Dani Rodrik, a Harvard professor of international political economy, said to the New York Times. “He has produced an approach that you can actually use with household data to trace through the effect of something like this on the well-being of different farmers.”
Knowing that also contributes to a better understanding of inequality. Measuring changes and their effects on the rich and poor illustrates the differing abilities to cope. Deaton addressed inequality directly in his book – arguing that it is a major concern for democracy.
“If democracy becomes plutocracy, those who are not rich are effectively disenfranchised,” wrote Deaton. “The political equality that is required by democracy is always under threat from economic inequality, and the more extreme the economic inequality, the greater the threat to democracy. If democracy is compromised, there is a direct loss of well-being. … To worry about these consequences of extreme inequality has nothing to do with being envious of the rich and everything to do with the fear of rapidly growing top incomes are a threat to the well-being of everyone else.”
Deaton’s win comes at an important moment. The new global development goals were just established at the United Nations. Goal 10 specifically calls for reducing inequality, a problem experienced in most parts of the world. Economic growth along is not a solution. We understand that better thanks to the work done by Deaton.