The Nobel Prize in Economics – or the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, to be exact – is not awarded for a single book. But in the case of this year’s awardee, Angus Deaton, a single book helps understand why he was chosen.
The book, 2013’s The Great Escape: Health, Wealth and the Origins of Inequality, isn’t one of the Princeton University economist’s academic treatises, such as his breakthrough 1980 volume with John Muellbauer, Economics and Consumer Behavior, his 1992 book, Understanding Consumption, or 1997’s The Analysis of Household Surveys: A Microeconomic Approach to Development Policy, all of which were cited by the Nobel committee. No, The Great Escape is more a cri de coeur that came at a point in an academic life where Deaton reviews what he knows about escaping poverty (and its attendant ills) with what his life before academe taught him to create a surprisingly upbeat prescription for the future.
While the book was generally well-received with caveats –Bill Gates, for one, considered Deaton’s hammering away against foreign aid as a key flaw of a book he otherwise liked –it wasn’t until Piketty’s Capital in the Twenty-First Century that treatises on inequality would enter the bestseller lists.
As Cambridge economic historian Charles Read told The Guardian in explaining why he suspects Deaton was honored today, “…the book’s main conclusions have gone down well in the scholarly community. As we wrote more than a decade ago: ‘Mr Deaton is perhaps the only economist at work in this area who is acknowledged by all sides both as authoritative and as having no ideological axe to grind.’”
The learning in the book, a synthesis of 69-year-old Deaton’s work over decades (helpfully summarized here by the Nobel committee), is of course what he was honored for. As the committee put it, his award came “for his analysis of consumption, poverty, and welfare.” But in fact, he was awarded for building bridges – between disciplines, between theory and reality, between people.
The committee went to pains to note that “one common denominator in [Deaton’s] research is the desire to build bridges between theory and data. Another common denominator is building bridges between individual behaviors and aggregate economic outcomes.”
As Escape demonstrates, that analysis is tied to Deaton’s own life, begun as the son of a Yorkshire miner who rose to being a civil engineer via his own bootstraps, which imbued the elder Deaton with a deep respect for education. The younger Deaton’s own love of learning, despite being a self-described “bright kid,” bloomed a tad later. As he details in his delightful micro-biography, “Puzzles and paradoxes: a life in applied economics” (PDF here), his economics epiphany came with a bit of coercion from his Cambridge teachers:
“I quickly drifted away from both rugby and mathematics, tried to become a philosopher of science, but was refused by my college tutor, and instead adopted into a largely pointless student life of card-playing and drinking. Eventually, my college, losing patience with my aimlessness, told me that I could leave, or stop pretending to study mathematics. What to do? ‘Well, there is only one thing for people like you. . . . .economics.’ I should have preferred to leave—but doubted that I could explain to my father, who already felt that I was not making enough of the opportunities that I had, and that he had lacked—so I accepted the inevitable, and set off for the Marshall Library, where the aimlessness came to a surprised and delighted end.”
It was at Cambridge that the study of consumption first piqued his interest, in part through the pioneering work of scholars like Franco Modigliani (a 1985 Nobelist) and Richard Brumberg, although Deaton himself found the field “in a mess” at the time. Deaton’s first job was at the bank of England, and his first academic posting was back at Cambridge, where he was hired as a research assistant on a project measuring national wealth; “just as I had drifted into economics as an undergraduate, I drifted into it as a profession though, at the time, it was just something to do,” he wrote. Such ‘drift’ was inspired — his published work on consumption in the journal Econometrica won him the debut Frisch Medal while at Cambridge, and paved the way for him to be named chair of econometrics at the University of Bristol before he turned 30.
In 1983 Deaton was recruited to Princeton, where he is currently Dwight D. Eisenhower Professor of International Affairs and Professor of Economics and International Affairs at the Woodrow Wilson School and the Economics Department.
“In spite of an increase in bureaucratization over the years, Princeton remains a wonderful environment in which to work, even after the financial crash of 2008; never in 30 years have I felt that my work was hampered by a shortage of funds. Princeton is close enough to Washington and New York so as not to be isolated from finance and from policy, but sufficiently withdrawn to have an element of the ivory tower, and to be insulated from the waves of fashion that sweep all before them in hothouses like Cambridge, Mass.”
The specific achievements in his career that Deaton is being honored for, according to Nobel, are for three related outputs: “the system for estimating the demand for different goods that he and John Muellbauer developed around 1980; the studies of the link between consumption and income that he conducted around 1990; and the work he has carried out in later decades on measuring living standards and poverty in developing countries with the help of household surveys.”
“India has been a continuous source of fascination,” Deaton wrote in his micro-biography, both as a place and a source of economic puzzles that need solving, a challenge he has taken on with gusto. The county, he added, “has become the exemplar, not of imperial glory, but of global poverty, and of the hope that economic growth might one day do away with it.” His own work there, often with support of the government, has been to study price indices, and on how they affect measures of poverty.
That work involves building a third bridge, between the developed and the developing world, which in turn brought Deaton to the World Bank’s International Comparison Program, which creates the metrics that allow comparisons of purchasing power – usually more valuable to understanding differences than official exchange rates – across borders.