Princeton
The Princeton economist Angus Deaton is singularly devoted to facts and close measurement. The latest winner of the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, he is a fierce empiricist who deploys data to slay gauzy theoretical speculations on the sources of economic growth, poverty, and inequality. His work focuses on what counts as economic growth, how to properly measure what people consume, what actually makes them happy, and how development aid has utterly failed to help poor countries.
One of his studies involves the sex ratio between men and women, which is skewed unnaturally toward men in many poor countries. One popular theory in the 1980s for the differential survival of boys over girls was that tradition-minded families allocated more resources, chiefly food, to sons than to daughters. Deaton tested this hypothesis with data from careful surveys of how consumption changed after the birth of children in families in the Ivory Coast and Thailand. He found no significant differences in how resources were distributed between daughters and sons. The anomalous sex ratio in many poor countries must be the result of other dynamics, such as sex-selective abortions and the use of contraception once the desired number of sons is born.
Nobel Committee
More recently, Deaton has been trying to figure out why the number of calories being consumed by people in India has apparently been declining over the past 25 years while their incomes have been increasing. Deaton suggests that Indians may be eating less because they are healthier (thus needing fewer calories to offset disease) and are engaged in less strenuous physical labor. Nevertheless, the undernutrition figures for the subcontinent remain among the highest in the world—that is, 50 percent of children are underweight for their ages and 50 percent of women have a low body mass index.
With regard to well-being, Deaton challenges the Easterlin paradox—the economist Richard Easterlin's notion that after a certain level of income, more money can't buy happiness. In 1974, Easterlin argued that that increasing average income did not raise average well-being. Among other evidence he cited survey data that showed that Americans in the 1970s were no happier than Americans in the 1940s, even though their incomes had basically doubled since then.
Deaton compared data that measure emotional well-being versus life evaluation. Emotional well-being does appear to top out at around $75,000 per year in the U.S. But there is no income satiation point using an 11-point life evaluation scale in which 0 represents a person's worst possible life and 10 his or her best possible life. In general, the higher a person's income, the more he or she is satisfied with the course of his or her life. It is certainly wonderful and valuable to enjoy the moment, but real and lasting pleasure comes from a life well lived.
Princeton
In his 2013 book The Great Escape, Deaton reprises his years of research on how, over the past 250 years, a significant proportion of the world's people managed their "great escape" from humanity's natural state of abject disease-ridden poverty and ignorance. "Life is better now than at almost any time in history," he writes. "More people are richer and fewer people live in dire poverty. Lives are longer and parents no longer routinely watch a quarter of their children die."
How did this great escape occur? Improving health played a big role. Citing English demographic data from 1550 to 1750, Deaton shows that average life expectancy during that period hovered around 35 years. The nobility generally had more food yet did not live any longer, so Deaton argues that "it was disease, not lack of nutrition, that set the limits on life expectancy." After 1750, the life expectancy of British aristocrats began to increase while that of the commoners remained stuck. By 1850, aristocrats were living 20 years longer, on average, than commoners. Why? Deaton suggests that the divergence arose from different health habits, with the gentry having the wherewithal and knowledge to take advantage of fancy and expensive new medical technologies such as variolation to prevent smallpox and chinchona bark to treat malaria.
In the 19th century, wealthier folk were also the first to accept the germ theory of disease and adopt hygiene practices that fended off deadly infections. Once the germ theory of disease was widely accepted, public sanitation measures followed, including filtered municipal water supplies, pasteurized milk stations, and sewerage, reducing the toll of infectious diseases. The resulting decline in disease, debility, and death set off a virtuous feedback loop in which societies with improved health became ever more well-fed, productive, and innovative. With the spread of health and medical knowledge, life expectancy has increased from the global average of 35 years in 1900 to around 70 years today.
Now rapid growth in China, India, and other countries is propelling hundreds of millions out of poverty. "Both theory and experience suggest that economic growth is the surest and most lasting solution to poverty," argues Deaton. In 1981, 42 percent of the world's population lived on incomes beneath the World Bank's international extreme poverty line. Since then the world gross product has just about tripled. Using its updated international extreme poverty line of $1.90 per day the World Bank in October forecasted that such poverty will fall from 902 million people or 12.8 per cent of the global population in 2012 to 702 million people, or 9.6 per cent of the world's population in 2015.
Deaton thinks this mass escape from poverty has nothing to with the fact that rich countries of the world have spent around $5 trillion in real dollars in aid to poor countries since 1960. Rather than helping, aid from rich countries has far more often than not harmed the poverty-stricken in poor countries. That's chiefly because aid goes to corrupt elites that maintain their power by buying off factions and then squirrel away what's left over in their offshore bank accounts. Aid is a perverse incentive. It is not too much to say that more immiserated a tyrant keeps his people, the more aid will flow his way.
Deaton's relentless empiricism is also his weakness: Throughout his work, he unsatisfactorily handwaves that economic growth is the result of the fact that a country had the luck to stumble into the right sort of "politics." In fairness, he does observe in The Great Escape that poor countries remain poor because they "lack the institutions—government capacity, a functioning legal and tax system, security of property rights, and traditions of trust—that are a necessary background for growth to take place." Absolutely correct as far as that goes, but he often confuses democracy with liberty. Ultimately, Deaton's analyses never grapple with how the undirected spontaneous activities enabled by the institutions of liberty initiate and sustain the "great escape" that his data and measurements so brilliantly document.
Looking to the future, Deaton is worried about the effects America's rising inequality could have on future growth. Citing the work of the economic historian Eric Jones, Deaton observes that growth has from time to time taken off in various societies around the world only to be "snuffed out by powerful rulers or priests who either appropriated the innovations for themselves or banned the activity altogether because it threatened their own positions." His chief concern is that the super-rich will capture our political system and seek to choke off the sources of Schumpeterian creative destruction that threaten to undermine their fortunes. Will a rising class of crony capitalists kill off economic growth here? Good question.
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