Angus Deaton, the economics of well-being and the politics of poverty

Angus Deaton has been awarded the Nobel Prize for Economics in 2015. I am not one to go gaga over Nobel Laureates – or the Nobel Prize itself -nor do I have a liking for economics or economists in particular. However, I do take interest in Angus Deaton’s work that led to him receiving the prize. And yes, thanks to the Nobel Committee for bringing it to public notice. Much of Deaton’s work evidently comes from a deep understanding of the psychology of human deprivation. He has made observations (like the eponymous Deaton’s paradox, in which it is found that consumption curves tend to smoothen in the face of greater unpredictability of income levels) that tend to make little economic sense on a collective basis, but which can be explained if the individual is studied. He has collaborated with Daniel Kahneman, a Nobel winning psychologist, who has made important discoveries regarding human behaviour and factors influencing decision-making.

Angus Deaton is mainly concerned with individual consumption of goods and services, and with the intricate patterns connecting consumption and happiness. He argues -and one feels rightly so- that the governmental ritual of collecting information about income levels and assets, especially in case of those people who are understood to be poor, is seriously insufficient in providing any idea about individual sense of happiness and fulfilment. His work has taken him to many parts of the world where poverty is high, and much of his work is based on his experiences in India. He has found that the conventional indices of economic progress tends to be simplistic and misleading, as different people have different preferences, and tend to spend, or want to spend, accordingly. This leads to different and complex deprivation patterns among individuals, which are not revealed by averaging and general poverty indicators (such as the poverty line), which only serve academic and political purposes.

The most important assertion by Prof Deaton, in my view, is that the current poverty situation is the result of hundreds of years of conflict, inequality and social inequities. It is through this process that the rich have become richer, and the poor poorer. As the 19th century French anarchist Pierre-Joseph Proudhon said, “Property is theft!” So is poverty. And poverty tends to pass on to successive generations so much that it could be mistaken as a genetic trait. Indeed, Deaton has had to reject the nonchalant idea of some Indian economists and policy-makers that short height amongst poor children is something genetic, rather than an indicator of malnutrition and poverty: “..arguments about the role of genetics is residual: if we cannot think of anything else [we assume that] it must be genetics.” Evidence, however, suggests something else.  It is assumed that the “poor” people are happy with the “help” they get from philanthropists and NGOs, and of course, from the government. However, they have aspirations and ambitions of their own, as Deaton has found, and they cannot realize them because of their socioeconomic station in life, and because the government isn’t too keen on providing them with an enabling atmosphere.

Philanthropy looks good on the surface, and for the social image of the relatively well – off, but that makes it a competitive affair that does little for the target individual. By “helping” the poor people, you make them even more indebted, in addition to the overwhelming burden of poverty that they are already carrying. Indeed, the business of philanthropy needs poverty to exist for its own survival. The hypocrisy of philanthropy of the filthy rich actually comes alive in Deaton’s observation: “The very wealthy have little need for state-provided education or health care… 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…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 well-being of everyone else.” Governmental projects in this regard are more about announcements and big projects, than any serious concern and work. They have more to do with “meeting targets”, so that they can make themselves look better on the world stage. Hence, a poverty line threshold of 32 rupees (or around US$ 0.5) a day is deemed defensible. The poor person is just a stain on the nation’s reputation that they want to wish away, if not wash away.

All this is not to say that all philanthropy is some kind of gross affectation. Nor is the government entirely apathetic towards the poor person as a rule. It’s difficult enough to tackle poverty as it is. One likes to think that ambitious programmes and movements undertaken to eradicate poverty are more often well – intentioned than not, but obviously they are inadequate. The poor person does not yearn for the pity of the more well-off, nor do they care much about who represents their electorate. They want an enabling atmosphere, where they have the freedom to make their own informed choices. Policies in this regard have been flawed at best and shambolic at worst, but Deaton says there is hope yet, because things have improved over time. However, a lot of work remains to be done, he says. Data about individual consumption patterns need to collected and more needs to be done in order to address individual concerns. This obviously makes the whole endeavour more cumbersome, but in order to make the society more equitable and more happy, which is what a democratic welfare state is supposed to be all about, this is what needs to be done, according to Deaton.

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One thought on “Angus Deaton, the economics of well-being and the politics of poverty

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