Nobel Prize for economics goes to champion of global equity
Princeton University Professor, Angus Deaton, has won the Nobel Prize in economics for his ground-breaking analysis of consumption, poverty and welfare.
The Nobel Prize committee recognised Deaton’s vital contribution to the study of consumer spending, with particular attention to the world’s poorest.
Deaton has identified that there are glaring inequalities in global developments in health, wealth and wellbeing.
This research shows that as huge, wealthy middle classes have emerged in places like India and China through massive economic development, there are still millions in these places who are desperately poor.
In Deaton’s book The Great Escape, he argues that though many groups have gained in terms of health and wellbeing from higher national incomes, many groups have also missed out.
His latest research reflects this view, which Deaton says “focuses on the determinants of health in rich and poor countries, as well as on the measurement of poverty in India and around the world”.
The Royal Swedish Academy of Sciences commended his research which used household surveys to see how consumers, focusing on the poor, choose what to buy and, in turn, how policy-makers can help them.
These tools that Deaton created have been used by governments such as India to study how poor families adjust spending in response to such policy changes as increased sales tax on foods.
“To design economic policy that promotes welfare and reduces poverty, we must first understand individual consumption choices,” said the Royal Swedish Academy of Sciences.
“By linking detailed individual choices and aggregate outcomes, his research has helped transform the fields of microeconomics, macroeconomics, and development economics.”
Deaton’s extremely detailed analysis of data about poverty at the household level found that India had significantly more poor people in rural areas than previously thought, which led the government to expand subsidies.
“Households that were not defined as poor before can now be reached,” said Ingvild Almas, associate professor at the Norwegian School of Economics.
“That is a direct result of Deaton’s research.”
Deaton’s research also questioned the effectiveness of aid programs in solving poverty, as well as the link between income inequality and economic growth.
In 2014 he said that high-paying jobs in such fields as finance lead skilled young people away from “more worthwhile pursuits.”
He said that the extremely wealthy could be using their disproportionate influence to “write the rules in their favour, and they may work against the public provision of health care or education, for which they pay a large share but have little personal need”.
During a press conference Deaton, who has witnessed the decline of extreme poverty through his work with the World Bank, made it clear that there was still much more to be done to help the 1.2 billion people that still live on one dollar a day.
“You have to remember that we’re not out of the woods yet,” he said. “For many, many people in the world, things are very bad indeed.”
When asked about the European refugee crisis Deaton reflected on how his research can be applied to the situation.
“What we’re seeing now is the result of hundreds of years of unequal development in the rich world, which has left a lot of the world behind,” he said.
Deaton, who said he felt very lucky to win the Nobel Prize in economics, is currently the Dwight D Eisenhower professor of economics and international affairs at the Woodrow Wilson School of Public and International Affairs at Princeton.
Nobel prizes for achievements in physics, chemistry, medicine, peace and literature are awarded annually, with the total amount for each of the 2015 prizes being 8 million kronor ($A1.35 million).
The Swedish central bank created the economics prize in 1968 in memory of the Swedish industrialist Alfred Nobel, with the other prizes being established by Nobel in 1895.
AMES Australia Staff Writer