More comments from winner of this year’s Nobel award in economics
Prof. Angus Deaton won the 2015 Nobel award in economics. Mentioned this earlier.
His contribution to expanding the frontier of economics knowledge is to study development and poverty from the consumption side instead of income side. This approach looks at what can people buy instead of what income they have.
Fun article talking about some of his ideas was in the Financial Times on October 12: Nobel Prize winner Angus Deaton shares 3 big ideas.
Assessing the differences in earnings between high income and low income people is far more nuanced than public discussion would indicate. He is quoted saying:
“Inequality is an enormously complicated thing, that is both good and bad.”
I am still working through his superb book, The Great Escape, but have picked up his point is that inequality is caused by some people being the first to benefit from new technology, economic expansion, or improved health care. The benefits spread and others enjoy the fruits of the developments later. While the benefits are spreading there is inequality.
Most of the discussion and policies visible today would end inequality by slowing development of new things, restraining economic growth, inhibiting entrepreneurs, and taking away wealth from those who have already escaped poverty.
The moral approach would be to figure out how to bring along those who haven’t caught up or those left behind.
The more popular approaches have the unintended consequences of reducing the health and wealth of everyone.
Aid can be helpful and it can be harmful, he says. The unintended consequences can easily include more corruption and creating tensions between the public and those in power.
There could be big payoff from additional research to address problems such as mortal diseases. Such research would be conducted in the West. Article quotes him as saying:
“I am in favor of giving money not just in Africa, but for Africa”
He believes that focusing on how many people are living below an artificially defined cutoff is
“… like chasing an unicorn through the woods”
His point is that changing well-being is more important than an increasing income level. He cites India as an example which has seen an increase in per capita income but where the outcomes in terms of education and health are still poor.
He is not fond of the sustainable development goals set by the UN.
Of the SDGs, he says:
“I am not a great fan, there is no way to measure them. A lot of it is just people trying to make themselves feel better.”
Here is what the SDGs will deliver:
- Unmeasurable results for the poor.
- Improved self-esteem for the self-appointed rescuers.
That is the same point I’ve made before. Which do you prefer? The outcome of actually helping people or the emotion of feeling good about yourself.