Angus Deaton Quotes

life expectancy among working-class white Americans had been decreasing since the early 2000s. In modern history the only obvious parallel was with Russia in the desperate aftermath of the fall of the Soviet Union. One journalistic essay and academic research paper after another confirmed the disaster, until the narrative was capped in 2015 by Anne Case and Angus Deaton’s famous account of “deaths of despair.

If poverty is not a result of lack of resources or opportunities, but of poor institutions, poor government, and toxic politics, giving money to poor countries—particularly giving money to the governments of poor countries—is likely to perpetuate and prolong poverty, not eliminate it. The

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

Averages are no consolation to those who have been left behind.

It can be bad if the winners try to stop others from following them, pulling up the ladders behind them.

Drawing from 1.7 million Gallup surveys collected between 2008 and 2012, researchers Angus Deaton and Arthur Stone found that parents with children at home age fifteen or younger experience more highs, as well as more lows, than those without children... And when researchers bother to ask questions of a more existential nature, they find that parents report greater feelings of meaning and reward -- which to many parents is what the entire shebang is about.

Economists focus on income, public health scholars focus on mortality and morbidity, and demographers focus on births, deaths, and the size of populations. All of these factors contribute to wellbeing, but none of them is wellbeing.

This book is about the endless dance between progress and inequality, about how progress creates inequality, and how inequality can sometimes be helpful—showing others the way, or providing incentives for catching up—and sometimes unhelpful—when those who have escaped protect their positions by destroying the escape routes behind them.

Globalization gives workers in Asia better access to rich-country markets than ever before, and they can do many of the jobs that used to be done in the rich countries, even without being able to migrate. If this happens on a large scale, Asian wages will rise, and American and European wages will fall, narrowing earnings inequality in the world as a whole. The

We should also be careful not to count the “leisure” of the unemployed as a benefit. Those who have lost their jobs are not choosing to spend more time at home, and study after study has documented that unemployed people are among the most dissatisfied with their lives. So the data in Figure 1 would not be improved by any mechanical adjustment for the value of leisure.

One escape route from this negative conclusion is to argue, once again, that progress is being understated because quality improvements and new goods are not being adequately captured in the statistics. That would mean that inflation is being overstated, because some of the increase in prices comes from better things, not just from dearer things. If so, the poverty line is being increased too fast, and an ever-increasing proportion of the poor are not poor at all. If

If we look at the way an industrial producer creates new products, we see a long list of trials and errors and eventually improvement in quality at a lower cost. Urban policies and strategies, by contrast, often do not follow this logic; they are often repeated even when it is well known that they failed. For instance, policies like rent control, greenbelts, new light rail transports, among others, are constantly repeated in spite of a near consensus on their failure to achieve their objectives. A quantitative evaluation of the failure of these policies is usually well documented through special reports or academic papers; it is seldom produced internally by cities, however, and the information does not seem to reach urban decision makers. Only a systematic analysis of data through indicators allows urban policies to be improved over time and failing policies to be abandoned. But as Angus Deaton wrote: 'without data, anyone who does anything is free to claim success.

Material wellbeing, and measures of it—GDP, personal income, and consumption—have recently received a bad press. Spending more, we are often told, does not bring us better lives, and religious authorities regularly warn against materialism. Even among those of us who endorse economic growth, there are many critics of GDP as it is currently defined and measured. GDP excludes important activities, such as services by homemakers; it takes no account of leisure; and it often does a poor job of measuring those things that are included. It also includes things that arguably should be excluded, like the cost of cleaning up pollution or building prisons or commuting. These “defensive” expenditures are not good in and of themselves but are regrettably necessary to enable things that are good.4 If crime goes up, and we spend more on prisons, GDP will be higher. If we neglect climate change, and spend more and more on cleaning up and repairing after storms, GDP will go up, not down; we count the repairs but ignore the destruction.

Economic growth requires investment in things—more machines, more basic facilities like highways or broadband—and in people, who need more and better education. Knowledge needs to be acquired and extended. Some of that extension is the product of new basic science, and some of it comes from the engineering that turns science into goods and services, and from the endless tweaking and improvement of design that, over time, turned a Model-T Ford into a Toyota Camry, or my clunky personal computer of 1983 into the sleek, almost weightless, and infinitely more powerful laptop on which I am writing this book. Investment in research and development enhances the flow of innovation, but new ideas can come from anywhere; the stock of knowledge is international, not national, and new ideas disperse quickly from the places where they are created. Innovation also needs entrepreneurs and risk-taking managers to find profitable ways of turning science and engineering into new products and services. This will be difficult without the right institutions. Innovators need to be free from the risk of expropriation, functioning law courts are needed to settle disputes and protect patents, and tax rates cannot be too high. When all of these conditions come together—as they have in the United States for a century and a half—we get sustained economic growth and higher living standards.

The evolution of income can be looked at from three different perspectives: growth, poverty, and inequality. Growth is about the average and how it changes, poverty about the bottom, and inequality about how widely incomes are spread across families or people. The

The spread is often measured by the Gini coefficient, named after Corrado Gini, an Italian economist who worked in the first half of the twentieth century. Gini’s coefficient, or simply the Gini, is a number that lies between 0 (perfect equality—everyone has the same) and 1 (perfect inequality, with one person having everything). It measures how far people are apart on average. (If you really want know the details, it is the average difference in income between all pairs of people divided by twice the average income. If there are two of us, and you have everything, the difference between us is twice the mean, and the Gini is 1. If we both have the same, the difference between us is 0, and so is the Gini.)

As we already know from the poverty numbers, the bottom fifth of families gained very little. The growth in their average incomes was less than 0.2 percent a year over the past forty-four years and, even before the recession, their real incomes were no higher than they had been in the late 1970s. Average incomes of the top fifth, by contrast, grew more quickly, at 1.6 percent a year, though not as quickly as those of the top 5 percent, whose average incomes grew at 2.1 percent a year. Once

Leisure time is not counted at all; if people decide to work less, and take more time for things they value more than work, national income and consumers’ expenditure will fall. One reason that French GDP per capita is lower than American GDP per capita is because the French take longer holidays, but it is hard to argue that they are worse off as a result. Nor do we count services that are not sold in the market, so that if a woman works at home to care for her family, it is not counted, but if she works in someone else’s home to care for their family, it is counted, and national income will be higher. If

the top 10 percent of tax units in 2011 commanded 47 percent of all income, with an average income of $255,000. (A tax unit is not identical to a family, nor is income for tax purposes the same as other measures of income, but the overlaps are big enough that these trends are not misleading.)

In the early years, top incomes were derived from capital, and the richest people were what Piketty and Saez call “coupon clippers,” who received most of their incomes from dividends and interest. The fortunes underlying these receipts were eroded over the century by increasingly progressive income and estate taxes. Those who used to live off their (or their ancestors’) fortunes have been replaced at the top by earners, people like CEOs of large firms, Wall Street bankers, and hedge fund managers, who receive their incomes as salaries, bonuses, and stock options. Entrepreneurial

In 2008, there were about 800 million people in the world living on less than $1.00 a day. On average, each of these people is “short” about $0.28 a day; their average daily expenditure is $0.72 instead of the $1.00 it would take to lift them out of poverty.1 We could make up the shortfall with less than a quarter of a billion dollars a day; $0.28 times 800 million is $0.22 billion. If the United States were to try to do this on its own, each American man, woman, and child would have to pay $0.75 each day, or $1.00 a day each if children were exempted. We could cut this to $0.50 a person per day if the adults of Britain, France, Germany, and Japan joined in. Even

One key to African growth is what happens to commodity prices. Many African countries have long been and are still dependent on exports of “primary” commodities, mostly unprocessed minerals or agricultural crops. Botswana exports diamonds; South Africa, gold and diamonds; Nigeria and Angola, oil; Niger, uranium; Kenya, coffee; Côte d’Ivoire and Ghana, cocoa; Senegal, groundnuts; and so on. The world prices of primary commodities are notoriously volatile, with huge price increases in response to crop failures or increases in world demand and equally dramatic price collapses, none of which are easily predictable.

The decade of the 1960s was the postwar golden age, with an average growth rate of more than 4 percent a year, a rate that is high enough to increase incomes by a half in ten years. Growth

After all, millions of people in India live on less than a dollar a day, converted at the PPP exchange rate of about 22 rupees per dollar, and the whole point of these exchange rates is to equalize purchasing power across countries. So if people can live in India on 22 rupees a day—and be far from the worst off—why can’t people in the United States live on a dollar a day?

American family of four could buy enough cheap foods—like bulk rice, oatmeal, beans, and a few vegetables—to survive on $1,460 a year; one recent paper has priced out a “bare-bones” bundle for the United States at around $1.25 a person a day, or $1,825 a year for a family of four.14 Advocates of the validity of the line can also note, correctly, that 22 rupees a day buys a miserable life in India too, and that poor people and their children in India, if not hungry on a daily basis, are among the most malnourished in the world.

The slowdown in growth is likely overstated, because the statisticians miss a lot of quality improvements, especially for services, which represent an increasing share of national output. The information revolution and its associated devices do more for wellbeing than we can measure. That these pleasures are barely captured in the growth statistics tells us about the inadequacies of the statistics, not the inadequacies of the technology or the joys that it brings.

Rising wage inequality is a by-product of this mechanism and plays a key role in raising the supply of skills. So while the inequality is not particularly welcome in its own right, it is part of a system that is raising living standards for everyone.

If the family incentive scheme runs long enough, inequality may be increased even more if the children save part of their allowances. Even if all children save the same share of their allowances, one is regularly adding more to her wealth than the others, and she will get steadily richer than her siblings. Saving will ramp up the inequality in the allowances, and inequality in wealth will soon dwarf the inequality in allowances, just as, in the actual economy, inequality in wealth dwarfs inequality in earnings. This ramping up of inequality will be even faster if the children who are naturally inclined to be tidy are also those who are naturally inclined to save for the future. In the society at large, the same forces are at work if those who are more oriented to the future and have more self-control are the same people who are more able to benefit from education and more likely to accumulate wealth from their education-enhanced earnings. There is a deep conflict between incentives and inequality, in families and in countries.

Economic growth has been the engine of international income inequality.

Necessity may be the mother of invention, but there is nothing that guarantees a successful pregnancy.

The need to do something tends to trump the need to understand what needs to be done.

People who suffer deprivation in terms of material living standards—such as much of the population of sub-Saharan Africa—are generally also the people who suffer deprivation in terms of health; they get to live for fewer years, and they live with the misery of seeing many of their children die.

Inequality is much cited for its baleful impacts. In this book, we see inequality as a consequence as much as a cause; if the rich are allowed to enrich themselves through unfair processes that hold down wages, and raise prices, then inequality will certainly rise. But not everyone gets rich that way. Some people invent new tools, drugs, or gadgets, or new ways of doing things, and benefit many, not just themselves. They profit from improving and extending other people’s lives. It is good for great innovators to get rich. Making is not the same as taking. It is not inequality itself that is unfair but rather the process that generates it.

Indeed, as we shall see, it is a bad mistake to confuse life satisfaction and happiness; the former is an overall judgment about life that comes from consideration, while the latter is an emotion, a mood, or a feeling, which is part of experiencing life.16

Economists focus on income, public health scholars focus on mortality and morbidity, and demographers focus on births, deaths, and the size of populations. All of these factors contribute to wellbeing, but none of them is wellbeing. The

one careful study estimates that the average income of all the inhabitants of the world increased between seven and eight times from 1820 to 1992.

At the same time, the fraction of the world’s population in extreme poverty fell from 84 to 24 percent. This

But on average over all the countries, rich or poor, a fourfold difference in incomes comes with a one-point increase in the evaluation of life.

Most of the private “physicians” visited by the people we talked to in Rajasthan were not qualified doctors but quacks of one kind or another—what in Rajasthan are slightingly referred to as “Bengali doctors.

The explanation for why progress should be so uneven differs from case to case; the reason why poor people are more likely to smoke is not the same as the reason why so many poor children are not vaccinated. These accounts are to come, but for now the point is simply that health progress creates gaps in health just as material progress creates gaps in living standards.

The major credit for the decrease in child mortality and the resultant increase in life expectancy must go to the control of disease through public health measures. At first, this took the form of improvements in sanitation and in water supplies. Eventually science caught up with practice and the germ theory of disease was understood and gradually implemented, through more focused, scientifically based measures. These included routine vaccination against a range of diseases and the adoption of good practices of personal and public health based on the germ theory. The

If everyone were free to migrate from one country to another, wages in rich countries would fall and wages in poor countries would rise, and the world would be a much more equal place. Of course, opposition to lower wages in rich countries is precisely why people are not permitted to migrate at will, and it is why meals and haircuts are so cheap in poor countries. The price of land, like the price of labor, cannot be arbitraged between rich countries and poor countries. Cheap housing in India or Africa cannot be brought up to American prices by simply moving the land across the ocean. The presence of cheap land and cheap labor in poor countries explains why price levels in poor countries are so much lower than in rich countries. The market sets the exchange rate to equalize the prices of steel, gasoline, automobiles, and computers—everything that can be and is part of international trade—but the price level depends on goods and services that cannot be traded. Because those are cheaper in poor places, the poorer the country, the lower are the average prices.

To be able to use rich-country methods of production requires rich-country infrastructure—roads, railways, telecommunications, factories, and machines—not to mention rich-country educational levels, all of which take time and money to achieve. Yet the gaps between rich and poor provide plenty of incentives to make the investment in that infrastructure and equipment, and, as Robert Solow showed in one of the most famous papers in all of economics, average living standards should draw closer over time.4 Why this has not happened is a central question in economics. Perhaps the best answer is that poor countries 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.

Mark Nathan Cohen, whose Health and the Rise of Civilization

Until the early 1970s, the United States was the very model of a modern major economy.

Life is a great escape from deprivation and early death.

Global poverty is a cosmopolitan idea and its measurement must be performed on a cosmopolitan basis.

The part of national income that is available to families, after taxes have been paid and any transfers received, is personal disposable income, which is the second line from the top. It is a good deal smaller than GDP, but the historical picture of growth and fluctuation is very similar. Much the same is true if we look, not at what people get, but at what they spend. This is consumers’ expenditure, the third line. The difference between personal disposable income and consumers’ expenditure is the amount that people save, and the figure shows that the fraction of their income that Americans save has been falling, especially over the past thirty years. We don’t know exactly why this has happened, and there are several possible explanations: it is easier to borrow than it used to be; it is no longer as necessary as it once was to save up to make the deposit on a house, a car, or a dishwasher; Social Security has perhaps reduced the need to save for retirement; and the average American benefited from increases in the stock market and in house prices—at least until the Great Recession.

As we shall see, GDP is a poor indicator of wellbeing, but it is limited even as a measure of income. It includes income generated in the United States that belongs to foreigners; it includes incomes in the form of undistributed corporate profits (which ultimately belong to shareholders) as well as surpluses run by federal, state, and local government.

Daniel Kahneman and Angus Deaton, “High Income Improves Evaluation of Life but Not Emotional Well-Being,” Proceedings of the National Academy of Sciences

The rising cost of medical care has also been important; most employees receive health insurance as part of their overall compensation, and most research shows that increases in premiums ultimately come out of wages.16 Indeed, average wages have tended to do badly when health-care costs are rising most rapidly and to do better when health-care costs are rising more slowly.

The effects of migration on poverty reduction dwarf those of free trade. Migrants who succeed in moving from poor countries to rich countries become better off than they were at home, and their remittances help their families do better at home. Remittances have very different effects than aid, and they can empower recipients to demand more from their governments, improving governance rather than undermining it. Of course, the politics of migration is even tougher than the politics of free trade, even in countries where the urge to help is most strongly developed. A helpful type of temporary migration is to provide undergraduate and graduate scholarships to the West, especially for Africans. With luck, these students will develop in a way that is independent of aid agencies or of their domestic regimes. Even if they do not return home, at least at once, the African diaspora is a fertile (and internal) source of development projects at home.

If democracy becomes plutocracy, those who are not rich are effectively disenfranchised. Justice Louis Brandeis famously argued that the United States could have either democracy or wealth concentrated in the hands of a few, but not both. The political equality that is required by democracy is always under threat from economic inequality, and the more extreme the economic inequality, the greater the threat to democracy.