BUSINESS
10/12/2015 10:32 am ET Updated Oct 13, 2015

Economics Nobel Prize Winner Radically Redefined What It Means To Be Poor

The work of Princeton professor Angus Deaton focuses on measuring poverty around the world.

Princeton professor Angus Deaton won the Nobel Memorial Prize in Economic Sciences on Monday for his work on consumption, income and poverty. 

Much of his work focuses on how to measure poverty around the world. The question of who is poor, he says, is very easy to determine at a community level. It's doable at a national level. But when you try to determine just who is poor worldwide, it's nearly impossible. Figuring out what poverty is globally is a big part of Deaton's work.

He has asked whether poverty should just be measured in terms of the question, "Do you have enough to eat?" or whether there are other factors that should play into the definition -- and whether those factors are different across different societies. 

Deaton wrote a very good (non-technical) essay about the difficulties of measuring poverty back in 2003. In it, he writes of all the different factors that have nothing to do with having enough food that go into determining if someone is poor around the world:

Even if you have enough goods, they are worth little if you are not healthy enough to enjoy them. Children who live in an unsanitary environment will obtain little nutritional benefit from the food that they eat if they continually suffer from diarrhea. More broadly, girls who are denied the opportunity to go to school experience yet another type of poverty, the poverty of not being able to read and to participate in activities that are only open to the literate. People are also poor in another sense if they lack the resources to participate fully in the society in which they live, who in Adam Smith’s term “are afraid to appear in public,” even if their incomes would be sufficient in some other society.

Deaton's 2013 book The Great Escape looks at the interaction between health and wealth over the last 250 years, and how the two in combination have contributed to the amount of inequality that we see today. Here's a small excerpt (taken from a longer excerpt posted by Cardiff Garcia), in which Deaton argues that income inequality has a huge effect on democratic outcomes, and is therefore a big problem: 

The very wealthy have little need for state-provided education or health care; they have every reason to support cuts in Medicare and to fight any increase in taxes. They have even less reason to support health insurance for everyone, or to worry about the low quality of public schools that plagues much of the country. They will oppose any regulation of banks that restricts profits, even if it helps those who cannot cover their mortgages or protects the public against predatory lending, deceptive advertising, or even a repetition of the financial crash.

To worry about these consequences of extreme inequality has nothing to do with being envious of the rich and everything to do with the fear that rapidly growing top incomes are a threat to the wellbeing of everyone else.

In this video, Deaton himself gives an overview of his work on the origins of inequality.

For more on Deaton and his work, see Monday's posts from Alex Tabarrok and Tyler Cowen.

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