Source: Forbes
Angus Deaton was awarded the Nobel Memorial Prize in Economics today for his research on consumption spending, income and poverty. The research that justifies the award is fairly technical, but Deaton has also written and talked about issues of poverty and development in a fairly accessible way.
Here’s how to learn more about his work:
- 9 minutes of reading: Alex Taborrok’s summary of Angus Deaton’s research.
- 21 minutes on YouTube: Angus Deaton talking about Health, Wealth and the Origins of Inequality.
- 60 minutes of audio: Russ Roberts interviewing Angus Deaton on EconTalk.
Business leaders can learn a few things from Deaton. First, aggregates can obscure what’s really happening. For example, aggregate income can appear to be on a very stable trend line at the same time that households are experiencing very volatile income. Diving down into your data can be very valuable.
Second, we don’t know as much as we think we do. On the recent slowing of the pace of economic growth in past decades, Deaton says that we don’t really know what’s behind it. And Deaton knows more than 99.99 percent of economist on the subject. Similarly, I’ve seen many executives impose policies based on casual guesswork more than on evidence.
Third, institutions or core values are very important. Deaton criticizes the traditional approach to foreign aid as trying to end poverty by technical solutions. Instead, he says that governance needs to improve. The business analogy is that a manager can’t just roll up sleeves and figure out an answer; the manager needs to find a way for the workers to routinely solve problems themselves.