Nobel Prize winner Angus Deaton, and the value of mundane economic scholarship

Sexy economic "theories" often aren't nearly as valuable as slowly grinding through actual real-world data

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The Scottish-born, Princeton-based economist Angus Deaton — the winner of this year's Nobel Prize in economics — has made many important contributions in many areas of economics. And it seems he's not getting the prize for one particular breakthrough, as, say, Paul Krugman did for his contributions to international trade theory, but rather for his entire body of work.

But let's focus on one of Deaton's accomplishments. One of the most fascinating aspects of his scholarship is Deaton's meticulous work on measuring poverty, consumption, and welfare in developing countries. As Alex Tabarrok points out, measuring standards of living in poor countries is hard, and it's not just the fact that data is often hard to come by. (Deaton was one of the people who pioneered the use of surveys to get reliable data in countries where official data is iffy.) The traditional way to measure living standards across countries is to use exchange rates. But this method is very crude, because most of the goods that people consume (especially in developing countries) aren't traded across borders. Services in developing countries tend to be very cheap, which means that the same dollar might actually buy more goods and services for the average family in a developing country than you would guess by pricing an average basket of goods and looking at how much it costs in that country versus another.

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Pascal-Emmanuel Gobry

Pascal-Emmanuel Gobry is a writer and fellow at the Ethics and Public Policy Center. His writing has appeared at Forbes, The Atlantic, First Things, Commentary Magazine, The Daily Beast, The Federalist, Quartz, and other places. He lives in Paris with his beloved wife and daughter.