FOREIGN AID ¬CRITIC WINS NOBEL PRIZE
Studied spending, consumption by poor
LONDON • A Scottish economist who has fiercely criticized western aid to the developing world has been awarded the 2015 Nobel Prize in economics for his pioneering work measuring poverty around the globe.
Angus Deaton became the 47 th recipient of the Nobel Prize, for three decades of research analyzing living standards in the developing world.
The Cambridge-educated academic and Princeton professor will receive a cash prize of eight million Swedish kronor ($1.25 million) from the Royal Swedish Academy of Sciences.
“Mr. Deaton’s work has helped transform the fields of microeconomics, macroeconomics and development economics,” said the academy.
The decision to award the prize to an economist whose work has influenced public policy on aid and poverty was widely praised.
“He’s an economist’s economist,” said Dani Rodrik, a Harvard economist.
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,” Rodrik said.
In his most recent book, The Great Escape, Deaton argued that foreign aid from western governments has done more harm than good to developing nations.
“The idea that global poverty could be eliminated if only rich people or rich countries were to give more money to poor people or to poor countries, however appealing, is wrong,” he wrote in 2013. “These simplistic beliefs are based on a misdiagnosis of what it is that is keeping people poor.”
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.
“His view is that we don’t have these ready-made solutions, and money is not going to be the answer to many things,” Rodrik said.
Committee member Jakob Svensson said Deaton introduced the “Almost Ideal Demand System,” now a standard tool governments use to study how a change in economic policy — say, an increase in sales taxes on food — will affect different social groups and how large the gains or losses will be.
Ingvild Almas, associate professor at the Norwegian School of Economics, said the Indian government has changed how it measures and addresses poverty thanks to research from Deaton and others.
“Deaton found that there were a lot more poor people in rural areas of India than previously thought,” she said. “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.”
U.S. economist Tyler Cowen said Deaton was “a brilliant, excellent selection.” He described him as an “economist who looks more closely at what poor households consume to get a better sense of their living standards and possible paths for economic development.”
Deaton, 69, who holds both U.S. and British citizenship, said he was “surprised and delighted” albeit a little “sleepy” when he received the call from Stockholm at his U.S. home yesterday morning.
Born in Edinburgh in 1945, Angus Deaton is the son of
A misdiagnosis of what it is that is keeping people poor ‘The idea that global poverty could be eliminated if only rich countries were to give more money to poor countries is wrong.’ — Nobel winner Angus Deaton
a Yorkshire miner who later became a civil engineer. He fulfilled his father’s dream by gaining a scholarship to study at the prestigious Fettes College in Edinburgh, aged 13.
“My father believed in education, and he liked to measure things,” wrote Deaton in 2011. “He was determined that I should be educated properly, and set his heart on sending me to Fettes College … whose annual fees were well in excess of his salary.”