Angus Stewart Deaton (Edinburgh, United Kingdom; 1945) earned a PhD from the University of Cambridge in 1974 then went on to teach econometrics at the University of Bristol from 1976 to 1983. His first contact with Princeton University was in 1979 as Visiting Professor, and he would later take up a full professorship at this institution, where he remains to this day.
After being awarded with the BBVA Foundation Frontiers of Knowledge Laureate, he was awarded with the Nobel Prize of Economy in 2015, and joined the National Academy of Sciences of the United States. He is a member of the Chief Economist’s Advisory Council of the World Bank and also a Senior Research Scientist for the Gallup Organization. Author of over 160 publications, he is a Corresponding Fellow of the British Academy, a Fellow of the American Academy of Arts and Sciences, and of the Econometric Society and, in 1978, was the first recipient of this society’s Frisch Medal for an analysis of consumer demand in the United Kingdom over the first 70 years of the 29th century.
President of the American Economic Association in 2009, he holds honorary doctorates from the University of Rome, University College London and the University of St. Andrews (Scotland, United Kingdom), and has served successively as Associate Editor, Co-editor and Editor of the journal Econometrica (published by the Econometric Society).
Speech
Economics Finance and Management, 4th edition
In his concern for human wellbeing, be it material, physical or spiritual, Angus Deaton has taken economics from academia to the home and back again, exploring how economic fluctuations and public policies affect people on the ground. It was for his “fundamental contributions to the theory of consumption, savings, and the measurement of economic wellbeing” that the international jury granted him the BBVA Foundation Frontiers of Knowledge Award in the Economics, Finance and Management category.
This British economist, resident in the United States, puts theory to work in designing rigorous methods of application to real-world problems. As the jury puts it, “his work has been characterized by an attempt to understand empirical evidence in terms of a clearly articulated theoretical structure or underlying mechanism.” It was as an undergraduate at Cambridge that Deaton developed an interest in savings from his reading of researchers like Milton Friedman, Richard Stone, Franco Modigliani and Simon Kuznets. On returning to the same university in a research post, he was assigned to the savings part of a large-scale economic model and, in his own words, has never looked back.
In the course of his career, Deaton’s curiosity has led him into new areas and research directions, but without ever deviating far from his main interest, the wellbeing of people. “Saving,” after all “is about how people balance wellbeing now with their wellbeing in the future.” So it was perhaps inevitable that he would next flip the coin to the other side, consumption, where he would author seminal contributions like those brought together in the landmark publication ‘Economics and Consumer Behavior’ (1980 with John Muellbauer). By then he had joined the staff at Princeton University, where he remains a professor to this day and has set in train such major initiatives as the Center for Health and Wellbeing, the Office of Population Research, and the Research Program in Development Studies.
Deaton moved on from applying microeconometrics to analyze consumer demand to employing consumption as a key measure of welfare and poverty. In the words of the jury’s citation: “He has helped us to a better understanding of the relationship between consumption and income, while showing that there are parts of this relationship that do not work and need to be reformulated.”
“He has helped us to a better understanding of the relationship between consumption and income, while showing that there are parts of this relationship that do not work and need to be reformulated.”
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Indeed Deaton is renowned among colleagues for his creativity, which has led him to propose novel alternatives to more traditional approaches, like using per capita con-sumption as a yardstick of development in place of per capita income. “At the aggregate level of a given country, this change does not make a great deal of difference, the exception being where we are comparing countries with very high and very low rates of national saving, such as the U.S. and China, for example,” he explains. “But it really does matter when we look at individual households or people. Income is much more variable over time than is consumption, which is simply a better measure of material living standards.”
He reached these conclusions after extending his methods to large-scale household surveys with specially targeted questionnaires, whose results he judged could offer a more reliable guide than the aggregate data of National Accounts. And he admits he was the first to be surprised by the discrepancy between the findings of household surveys, on the one hand, and those of national income accounts, on the other. “This is one of those puzzles that is not well understood. We don’t know how much of the problem is with the surveys, and how much with the National Accounts. Almost certainly, there are errors in both.”
The determination to correct these errors is part of what has inspired his search for new methodological tools. A basic first step to estimate the number of poor people is to set a poverty line, which will depend in turn on the price of the goods and services available for consumption. Deaton’s work on price indexes and the definition of poverty lines has proved highly influential, calling into question the official calculations of certain countries and international organizations. For instance, the application of his methods to poverty research in India has provided firm evidence that not all of society is benefiting from the economic growth of this emerging world power, giving rise to an intense social and political debate.
Asked about why and how he began doing research on developing countries and particularly India, where his work has resonated so strongly, his reply mixes childhood dreams with a large dose of harsh reality: “I grew up in a very dark, dreary, and cold city, Edinburgh in Scotland, and India seemed like a magical, warm, and exotic place. I always wanted to go there, and did so as soon as I had the opportunity, more than 30 years ago. It was natural for me to apply my earlier interests in poverty, inequality, and wellbeing, to India. An issue like poverty analysis seems much more important when you’re actually in a really poor country.”
Deaton sees much to value in his chosen discipline: “I think the economics profession is quite open to new ideas, and new ways of doing things.” And his own work is a good example. In 2010, he made a much-talked-about entry to the research field dealing in wealth and its relation-ship to happiness, with the publication in Proceedings of the National Academies of Sciences (PNAS) of a paper co-authored with psychologist Daniel Kahneman, himself a Nobel prizewinner in Economics.
He continues to work on happiness issues, exploring “what the answers to happiness questions mean, and whether they should be used more heavily in public policy.” But he also remains concerned about the measurement of material wellbeing and its international distribution, and about problems of global poverty and inequality. “I think of all of my work, from the very beginning, as being about some aspect of wellbeing; starting with material wellbeing then broadening out to health – so vital to all of us – and happiness. I think it is impossible to think about wellbeing without analyzing the difference in its share-out, which is inequality,” he concludes.
