Angus Deaton, a professor at Princeton, has won the Nobel Prize in economics for his diverse contributions to the study of consumer spending. His research has explored how people, particularly the poor, make decisions about what to buy and how much to save.
"I've always been interested in what makes lives better for people and how they behave," Deaton said Monday morning in a phone interview with the Post.
The Nobel Prize committee recognized Deaton, 69, for his "analysis of consumption, poverty, and welfare" — a broad phrase to describe a broad body of research.
"His work covers a wide spectrum, from the deepest implications of theory to the grittiest detail of measurement," the panel of Swedish economists wrote in its announcement.
"I always thought that because I'd worked on so many different things they would tend to pass me over," Deaton joked.
"But they did a wonderful job of sort of cobbling it all together and making it sound really integrated," he said.
Deaton's early research into theories of consumption and survey techniques helped bridge the divide between those who study the choices of individuals and those who study the larger economy.
In recent decades, he has spent much of his time using those ideas to investigate poverty in developing nations, especially India and South Africa. The prize Monday brings attention to the increasingly vigorous field of development economics.
"I'm so delighted, not just for myself, but that this sort of work is being recognized," Deaton said by phone at a press event Monday.
Asked about the refugee crisis sweeping Europe, Deaton expressed sympathy for those who have been uprooted by poverty and war. "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's efforts surveying poor households — measuring malnutrition, living standards, and whether parents discriminate between boys and girls — has helped economists better understand those who live on less than a dollar a day. Through his research, often with the World Bank, he has been a first-hand witness to the decline of extreme poverty in recent decades.
At the press event Monday, Deaton expressed optimism about continued progress — but reminded the audience that several hundred million people still live in "something close to destitution."
"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."
The Nobel prize in economics comes with an award of about $976,000, and most winners have been American. Edinburgh-born Deaton has joint British and U.S. citizenship. In 2014, economist Jean Tirole of France won the prize for research into market power and regulation.
What his research showed
Early in his career, Deaton's work circled a key question in economics: how macroeconomic forces arise out of the everyday choices people make about their spending.
Studying demand, he explained, means studying the sum of these individual decisions. "If you ping someone with a price, how will that change their behavior? What effect will it have on them, and on the economy?"
Economists predict the effects of taxes, subsidies, and other government policies by thinking about how groups of perfectly rational people should behave. In the 1970s, research in this field had stumbled over a strange phenomenon. Given real-world data, the models seemed to say that people weren't behaving with any common sense.
Deaton argued that something was wrong with the existing models — they weren't summing up the people in the right way.
In 1980, Deaton and macroeconomist John Muellbauer designed a more flexible set of equations they called the Almost Ideal Demand System, which now forms the foundation for how most governments analyze the economic impact of their policies.
Deaton also showed that there wasn't enough data to understand how people saved and spent throughout their lifetimes. Again, the problem was analyzing statistics at the national level. This was a popular and convenient practice, but Deaton proved that zooming too far out could lead to wrong conclusions.
Instead, economists need information about individual households over the course of time. Following a large group of the same people for decades is expensive, but here, Deaton made a statistical breakthrough. He showed that economists could glean plenty of insight from random surveys conducted regularly, which is easier to do.
When the World Bank took up the task of collecting household surveys around the world in the 1980s, Deaton became a key consultant. This opened a new chapter in his career, as he began to use his analytical techniques to understand the world's poorest regions.
During the 1990, Deaton collaborated with Shankar Subramanian to review painstaking surveys of what households in India ate. Their research showed that even the extremely poor could afford enough food to survive, ruling out the theory that malnutrition is the main cause of poverty — and opening a new line of inquiry into why so many poor families remain undernourished.
Another famous Deaton study addressed the mystery of the "missing women" — a term coined by Amartya Sen to describe a situation in many developing countries where boys far outnumber girls. Aside from infanticide and abortion, another theory for the plight of the missing girls is that they are more likely to die growing up because their families starve and neglect them.
Deaton sought to detect gender discrimination within families by tracking the consumption of "adult" goods like tobacco and alcohol. These kinds of purchases tend to diminish after a family has children. Deaton showed that in Cote D'Ivoire and Thailand, there were only small differences between how boys and girls affected a family's budget, causing researchers to reexamine their theories of discrimination. Everyday favoritism may be hard to detect, but follow-up studies, for instance, have shown that girls tend to die more than boys during droughts in India.
Changing the way we study developing countries
Deaton's research has always been obsessed with bringing detailed data to bear on big economic questions, which led to his career's remarkable second act investigating the lives of the poor. His efforts collecting and studying surveys of households in developing countries invigorated an entire branch of economics by showing that there was serious, empirical work to be done illuminating the lives of the poor.
Brown President Christina Paxson, an economist and frequent co-author with Deaton, said his research helped establish "the idea that you could study development economics with great integrity, with very, very, high standards."
Amitabh Chandra, a professor at Harvard's Kennedy School of Public Policy, called Deaton the "Obi-Wan Kenobi of Economics" in a tweet.
Colleagues have been quick to remark on his faith in the data, but also his deep concern over how data are collected.
"Deaton's hallmark is fastidiousness with the data," said Kaushik Basu, Chief Economist at the World Bank and professor at Cornell. "He's the most careful person I have ever seen. He does not make any compromises."
Deaton's faith in empirical methods has been carried a forward by a new pack of economists, sometimes called "randomnistas," who have popularized the use of strict scientific methods to study poverty. Their hallmark is the randomized controlled field experiment, which they employ to test ideas about improving the lives of the poor. Can a free bag of lentils convince parents in India to vaccinate their children? Can free school uniforms in Kenya keep kids in school? These studies have led to great optimism about the future of foreign aid, in which the impact of every dollar is measured with precision.
MIT economist Abhijit Banerjee, a recent pioneer in the field, praised Deaton on Monday for demonstrating the power of data. "He has shown us that descriptive evidence, carefully put together and eloquently presented, can be a powerful antidote to ideology, prejudice and lazy thinking," Banerjee said in an e-mail.
Deaton, ironically, is skeptical of the experimentation trend in development economics. In 2012 he debated Banerjee onstage over the merits of randomized trials, which Deaton believes have been "oversold." He's not against them, he said again on Monday, but he is wary of the idea that they are a magic bullet for the problems of foreign aid.
"I don't think you can reform foreign aid by doing a bunch of randomized controlled trials to discover what works, because the trouble is that what works is a highly contingent concept," he said. "If it works in the highlands of Kenya there's no reason to believe it'll work in India, let alone Princeton, New Jersey."
Deaton opposes foreign aid to developing countries in large part because he believes that aid can distort political institutions and foster corruption. He would rather see forms of help that do not directly meddle with a country's markets. Rich countries that wanted to help could devote more resources to malaria research for instance, or open their doors to more immigrants. Deaton suggests that the World Bank could help developing countries secure more favorable trade deals. His 2013 book, The Great Escape, discusses some of these ideas.
For an economist who first made his name untangling technical questions about consumer demand and savings, the field of development economics has become a surprisingly cozy home for Deaton.
Paxson sees the work as a natural evolution of his interests. "The issues that he cares about — consumption, poverty, human welfare — where are they the most relevant? Where are they the most pressing? In the developing world," she said.
Or, Deaton said, it might just be a British thing.
"I grew up in Scotland in a cold, miserable, dirty place and I always dreamed of warm tropical countries," he teased. "Especially India. You know, we Brits are very into India."