Monday, October 12, 2015

Is This Year's New Nobel Prize Award in Economics a Curtsy to Thomas Piketty?

Angus Deaton has been awarded the 2015 Nobel Prize in economics.

He is a dual UK and US citizen, who was born in 1945 in Edinburgh, UK He has a Ph.D. 1974 from University of Cambridge and has been Professor of Economics and International Affairs at Princeton University since 1983.

It is worth noting that his most popular book, The Great Escape: Health, Wealth, and the Origins of Inequality was named after a Steve Mcqueen movie.

From the blurb to the book:
The world is a better place than it used to be. People are healthier, wealthier, and live longer. Yet the escapes from destitution by so many has left gaping inequalities between people and nations. In The Great Escape, Angus Deaton--one of the foremost experts on economic development and on poverty--tells the remarkable story of how, beginning 250 years ago, some parts of the world experienced sustained progress, opening up gaps and setting the stage for today's disproportionately unequal world. Deaton takes an in-depth look at the historical and ongoing patterns behind the health and wealth of nations, and addresses what needs to be done to help those left behind.

Deaton describes vast innovations and wrenching setbacks: the successes of antibiotics, pest control, vaccinations, and clean water on the one hand, and disastrous famines and the HIV/AIDS epidemic on the other. He examines the United States, a nation that has prospered but is today experiencing slower growth and increasing inequality. He also considers how economic growth in India and China has improved the lives of more than a billion people. Deaton argues that international aid has been ineffective and even harmful. He suggests alternative efforts--including reforming incentives to drug companies and lifting trade restrictions--that will allow the developing world to bring about its own Great Escape.
Here is an FT video where he discusses the book.

I am not a big fan of those concerend about inequality, especially in the United States and other developed countries. (SEE: This Is What Those Who Are Concerned About Inequality Fail to Grasp) nor am I big fan of government involvement in "solving" poverty here in the US, but Deaton does make an important observation when he points out the failures of international global organizations in helping cure poverty.

Casey Mulligan has more on both points:
 As part of the world becomes rich and no longer worries about day-to-day survival, it can look outward. Many residents of developed countries have a “need to help” those less fortunate.
But the attempts to help often – perhaps even usually – go awry. 
As medical progress began to diffuse around the world, people stopped dying so young, and that made for an increase in population, especially in less-developed countries. Developed countries thought they would help poor nations by encouraging population control, based on the dubious proposition that more people means more poverty.
“What the world’s poor – the people who were actually having all these babies – thought about all this was not given much consideration,” Professor Deaton says, citing China’s continuing one-child policy as an example. He adds: “The misdiagnosis of the population explosion by the vast majority of social scientists and policy makers, and the grave harm that the resultant mistaken policy did to many millions, were among the most serious intellectual and ethical failures of a century in which there were many.”
Other types of foreign aid to developing nations have also been a disaster, he says, with “pictures of starving children being used to raise funds that were used in part to prolong war, or to N.G.O.-funded camps being used as bases to train militias bent on genocide.”
Professor Deaton’s book is primarily international in focus, and he insists that help for the American poor is different and more effective than aiding the world’s poor.
Nevertheless, American readers may be left wondering how much aid to American poor, is, as Professor Deaton says, “more about satisfying our own need to help, and less about improving the lot of the poor.”
That said, Deaton does seem to be obsessed with inequality, including developed country inequality, as evidenced by this letter to the Royal Economic Society,

His seeming approving comments in the letter, of the anti-capitalist, inequality hater, Thomas Piketty, show us just how he expects his data collection work, which was singled out by the Nobel Prize Committee, to be used:
 Deaton spearheaded the use of household survey data in developing countries, especially
data on consumption, to measure living standards and poverty. In so doing, Deaton helpedransform development economics from a largely theoretical field based on crude macro data, to a field dominated by empirical research based on high-quality micro data.
He showed the value of using consumption and expenditure data to analyze welfare of the poor, and identified shortcomings when comparing living standards across time and place.
Deaton’s research has addressed issues of great practical significance, and his contributions have influenced policymaking in developing and developed countries. His work covers a wide spectrum, from the deepest implications of theory to the grittiest detail of measurement. The common themes are connecting theory and measurement, and linking micro and macro data by using relevant statistical methods. 
Bottom line: The Noble Committee appears to be making a curtsey toward the socialist Piketty, and his rage against inequality, with this year's award.


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