Nobel laureate Angus Deaton changed India’s approach to poverty
Angus Deaton, who won the Nobel prize in economics on Monday for his wide ranging work on consumption, helped redefine the way poverty is measured around the world, notably in India.world Updated: Oct 13, 2015 01:58 IST
Angus Deaton, who won the Nobel prize in economics on Monday for his wide ranging work on consumption, helped redefine the way poverty is measured around the world, notably in India.
The secretary of the award committee Torsten Persson singled out Deaton’s work in showing how individual behavior affects the wider economy and that “we cannot understand the whole without understanding what is happening in the miniature economy of our daily choices.”
In a press conference following the announcement, Deaton said he expects extreme poverty in the world to continue decreasing but that he isn’t “blindly optimistic.”
There are still “tremendous health problems among adults and children in India, where there has been a lot of progress,” Deaton said. He said half the children in India are “still malnourished” and “for many people in the world, things are very bad indeed.”
Deaton has done “very careful, detailed work with household-level data sets (in poor countries) so that one could understand the effects of changes in policies on how people behave,” Dani Rodrik , a Harvard economist, said.
In his 2013 book, “The Great Escape,” Deaton expressed skepticism about the effectiveness of international aid. He noted, for example, that China and India have lifted tens of millions of people out of poverty despite receiving relatively little aid money. At the same time, many African countries have remained mired in poverty despite receiving substantial aid.
Committee member Jakob Svensson said Deaton introduced the “Almost Ideal Demand System,” which has become a standard tool used by governments to study what effect a change in economic policy such as an increase in sales taxes on food, will have on different social groups and how large the subsequent gains or losses will be.
The Royal Swedish Academy of Sciences also highlighted the model that has become known as the Deaton Paradox, in which he laid bare a contradiction between earlier theory and data on consumer behaviour.
Ingvild Almas, associate professor at the Norwegian School of Economics, said the Indian government has changed its methodology for measuring poverty thanks to research from the likes of Deaton and that has affected poverty-reduction policies.
“For instance, Deaton found that there were a lot more poor people in rural areas of India than previously thought,” she said.
“In practice, that has affected India’s subsidy system for the poor, which allows them to buy necessities. Households that were not defined as poor before can now be reached with these policies, and that is a direct result of Deaton’s research.”