Princeton professor wins Nobel memorial prize in economics

He explained that his first mentor, Sir Richard Stone, a Cambridge economist who won the Nobel Prize in 1984, had instilled this passion in him. He is author of four books and many journal articles, and has for many years been concerned with understanding individual and household behaviour and its links to well-being.

“Looking at the people behind the numbers has led him to consider the relationship between economic policy, allocational resources in the household, and consumption and savings over the life cycle”, she said.

“I am so thrilled for Angus Deaton”, said Cecilia Rouse, dean of the Woodrow Wilson School of Public and worldwide Affairs.

The broad themes of Deaton’s work were laid out in a paper he co-wrote with the economist John Muellbauer in 1980, An nearly Ideal Demand System. Their results showed that children consume about 30 to 40 percent of what adults consume, suggesting the extent of poverty among families with children is overstated. How does their consumption change over time? “There are many unfamiliar things in a new country”, he wrote, “and one of the most immediate, for me, when I first came to America, was the lack of interest in inequality, among either academics or the general public”.

How much of society’s income is spent and how much is saved? But in the aggregate, consumption varies much less than income, an observation known as the Deaton paradox. Despite his relative obscurity, his colleagues and peers said he deserved recognition for refining a rigorous approach to studying economic development based on careful consideration of detailed data. The second, the Deaton Paradox, puts forth the idea that a shock to the income doesn’t necessarily mean a shock to consumption. When economists seek to understand how a tax cut might boost the economy during a recession-as the USA did during the Great Recession-they are relying on assumptions about how that money will enter the rest of the economy through increased consumption. “More than anyone else, Angus Deaton has enhanced this understanding”. Deaton’s contributions since the early 1980s have been widely recognised as shaping micro-, macro- and developmental economics, and for helping countries device effective welfare schemes to reduce poverty. It’s one person at a time who’s in poverty. “He’s always had a concern for trying to capture the complexity of the real world”. He also challenged the notion that “wealthier is healthier” by studying quality of life in developing countries, particularly South Africa and India. “But I do worry about a world where the rich get to make the rules”. His areas of research include “poverty in the world and in India”, “health status and economics”, and “household surveys”. Even then, there can be empirical issues.

Charles Kenny, a senior fellow at the Center for Global Development, sees a central question at the heart of Deaton’s research.

Angus Deaton became the 47th recipient of the Nobel Prize, for three decades of research analyzing living standards in the developing world. There are massive failures of basic sanitation, infrastructure, education, and more, and government officials often act as parasites, extracting bribes and thieving whenever someone manages to create real economic development.

This gets to another point that comes up in Deaton’s work, which is the overwhelming importance of well-functioning social institutions, especially the state.