Angus Deaton and Modern Economics
Now for some more serious Nobel Prize news. Some Austrians were hoping for William Baumol and Israel Kirzner for the economics of entrepreneurship, but the committee went with a safer choice and recognized Princeton's Angus Deaton for his work on measuring consumption and inequality. You can find lots of discussion in the usual places; Lynne Kiesling has useful comments here. I don’t know Deaton’s work well but he has been on the unofficial short list for the last several years and his work is important and influential for economic growth and development, poverty and health, and related areas.
I can’t help poking a little fun at the economics profession, however. You may have heard the joke that economists used to win the Nobel prize for explaining to the general public something that previously only economists understood, but now they win it for explaining to their fellow economists something that the general public has always known, e.g.:
- Politicians care about themselves (Buchanan).
- Don’t put all your eggs in one basket (Markowitz, Miller,and Sharpe).
- You can’t fool all of the people all of the time (Lucas).
- Some people know more than others (Akerlof, Spence, Stiglitz).
Deaton’s major insight: aggregate measures of consumption and inequality conceal important differences among individuals.