October 16, 2015
On the early Monday morning of October 12, 2015, the 69-year-old Princeton University Professor was delighted to
The Royal Swedish Academy of Sciences has decided to award the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel for 2015 to Angus Deaton, Princeton University, NJ, USA for his analysis of consumption, poverty, and welfare.
Angus Deaton was born in 1945 in Edinburgh, Scotland UK. A dual citizen of the United States and the United Kingdom, Deaton’s research in economics has built bridges between theory and data. As a result, his contributions have left clear and lasting impressions in practical economic policy and in modern economic research.
Mr. Deaton received his PhD in 1974 from the University of Cambridge, UK and is currently a Professor of Economics and International Affairs at Princeton University, NJ. The Royal Swedish Academy of Sciences held a press conference on Monday, October 12, 2015, in Stockholm. To honor Angus Deaton’s achievements in the field of economics, three members of the Academy offered a brief introduction to Deaton’s most important contributions.
Here are some key takeaways mentioned, addressing the importance of understanding and correctly measuring consumption:
Consumption is at the center of economic research:
- Essential determinant of human welfare
- Basis for measuring poverty in low-income countries
- Largest component of aggregate demand—business cycle
- Given income, flip-side of consumption is savings (investment)
Angus Deaton receives the 2015 Prize in Economic Science for three related achievements:
- Design of demand systems
- Links between consumption and income/micro and macro data
- Living standard and poverty in developing countries
Mr. Deaton has working papers and publications dating back to 1971; he is a highly esteemed influencer in economic sciences and a respected academic professional. Without a doubt, laureate Angus Deaton is deserving of the award as he has a wide range of notable accreditations.
The amount of published work by Angus Deaton can occupy your leisurely reading for hours, literally—I would know. Mr. Deaton’s micro and macroeconomic tests or groundbreaking empirical research based upon the advanced analysis of detailed data wasn’t what I found to be his most impressive accomplishments.
While the guest of honor Angus Deaton was not physically in attendance, his enthusiasm was very much present, heard loud and clear over the telephone. Mr. Deaton’s candid answers, following questions asked by reporters during the press conference, resonated in my mind. His impression of current affairs and his ability to translate possible outcomes in context was what I found impressive and may transpire to be the most relevant contributions to the current economic state of the world.
Reporter (Swedish Television)
You are awarded, among other things, for you work on gender discrimination within the family in developing countries. How would you say your work addresses this problem and help?
Like a lot to my work, I’m mostly concerned with trying to measure the extent of these things. I was mostly concerned with looking at whether little boys and little girls are treated differently and we certainly found a little bit of that, but I’m not sure that this measurement really established exactly what was going on and I think more direct measures are probably better.
Reporter (Swedish newspaper: Svenska Dagbladet)
I would like to hear your ideas on the current refugee crisis. After all, you have studied poverty; I would like to see from your point of view. How do you see what is happening at the moment?
I think what is happening has been proven in long-distance history and what we are seeing now is the result of 100 years of unequal development in the rich world, which has left a lot of the world behind.
Those people who have been left behind would like a better life, and that’s putting enormous pressure on the boundaries between the poor world and the rich world. Again, I’m not sure that understanding this leads to a solution for the very difficult problems that are facing Europe right now.
Reporter (Swedish newspaper: Svenska Dagbladet)
I know this is a big question, but from your point of view, do you see anything that could solve the situation?
Well, I think poverty reduction in the poor countries will solve the problem, but it’s not going to solve the problem for a very long time. In the short run, stabilizing political volatile situations in war zones really would help.
Reporter (Swedish newspaper)
I would like to ask you about extreme poverty that has been decreasing quite a lot in recent decades. Do you foresee a continuation of that development or do you think there are any thresholds that are hindering it in the future?
Yes, I do foresee a decrease. I think we’ve had a remarkable decrease over the last 20 or 30 years and I do expect that to continue. But like all forecast, it’s an extremely dangerous business because really bad things can happen.
I don’t want to sound like a blind optimist because it’s also true that there are enormous numbers of people in the world; the World Bank has just come out with recent estimates of about 700 million people who live in something close to destitution. There are also tremendous health problems among adults and children in India, where again something like half of the children are way, way undernourished.
So while I expect things to get better, you have to keep remembering that we are not out of the woods yet. For many, many people, things are very bad.
Reporter (The Green Post)
Regarding your analysis of consumption poverty and welfare, I’d like you to explain this: in the current consuming society, should we consume more to expand the economy or should people save a little bit or consume according to their income?
In spite of this very distinguished prize, I don’t think it’s my role to tell people what they should be doing and whether they should be saving or consuming more. I am not someone who believes that the increase in consumption has been really worthless. I don’t think it’s a rat race, I think a lot of what we have now are things that make our lives better. I think the problem ahead is not to stop that, but to stop inflicting damage on other people around the world.
For instance, it's clear that there are huge unsolved problems with climate change. For example, I think the current upward trends in inequality are very worrying in many contexts around the world. I don’t have a simple answer. My measurements tend to show that things are getting better, but there’s still a lot of work to be done. The world is not a good place, but it’s getting better.
Reporter (Swedish television)
The Prize in Economic Sciences was established in 1969 and your work is about poverty and welfare. Why do you think you are awarded, now, at this point, by your field?
Well, I just found out why this morning; you’ll have to read the citation. I’m absolutely delighted, not just for myself but because this sort of work is being recognized. That’s a wonderful thing.
Reporter (Post Daily)
I think your analysis is based on a lot of data. How did you collect all the data and how many countries have you covered?
Gosh, that’s a really difficult question. I’ve collected a little data myself throughout my career.
I mostly relied on data being collected by other people, particularly data by collected by Statistical Offices around the world, which are these great, unsung heroes.
With our understanding of economics, there’s magnificent work being done by Statistical Offices, especially Statistical Offices in poor countries that labor under very difficult circumstances in many cases.
My own work has focused on many, many countries at various times. I’ve done a lot of work in the United States; I’ve done a lot of work in Britain. I’ve spent a lot of my career working in India and South Africa.
With my good friends at the Gallup organization I’ve recently done a lot of work, looking all around the world and they have some wonderful data in looking at well-being all around the planet.
Reporter (Swedish news)
What was your first reaction when you received the call from Stockholm? Who told you the great news?
Gosh, I was pretty sleepy. It’s hard to remember what I felt like at that time. I was just delighted. Obviously, like many economists, I knew this was a possibility. But in any given year, the odds are very, very small. I was surprised and delighted. It was wonderful to hear the voices of my friends from the committee.
Measuring and understanding consumption is a complex endeavor and today more than ever, the current condition of the global economy is far from perfect. However, thanks to the work of Angus Deaton, economists have a much deeper understanding of a number of core issues relating to consumption and can provide practical insight which can improve modern economic opportunities.