I am finally settled into my new job in a place that is very, very far from where I grew up, and ready to pick up blogging again. And what better time to return than with the Nobel Prize in Economics?
The thing to understand about the prize is that it is as a rule given to work that is reasonably well-known but is deemed to be deserving of more attention. I had read Deaton’s popular work, The Great Escape and cited it in my senior thesis in economics, but I had to check my works cited to be sure of that. This is the committee’s way of saying you should have read it too, and that people in econ should pay more attention to his technical papers. (Guess what I’ll be reading in the weeks to come, because I’m a ginormous nerd!)
I suspect that Deaton was selected in order to combat the focus on macroeconomics that has followed The Great Recession. Deaton is very critical of aggregation on the grounds that it tends to get rid of details that can tell you why individual circumstances vary. The rush to look at GDP and market trends following the downturn has been less careful about this. Even Picketty’s Capital in the 21st Century accepted aggregation as a premise. The committee is reminding us to look at the details of circumstance driving poverty, inequality, and wealth.
A cursory look at Deaton’s work makes me think he is a bit zealous—aggregation can be useful in its simplicity. He likely recognizes this in a wider sense. There has been a tendency to exaggerate the claims of Nobel winners. Last years winners proved that market bubbles do not exist in a certain, well-defined sense and yet their findings were covered as if they argued that bubbles did not exist at all. (This was compounded by sloppy interviews by the winners, but economists do not get Ph.D.s for their public speaking.) Deaton’s skepticism of aggregation and the policies it recommends—aid, stimulus, and welfare—deserve scrutiny. But like every winner, this will include deciding against some of his ideas.
What we have is a good example of a pretty standard Nobel win: an economist doing solid work with a worthwhile if not airtight theme that deserves to be taken more seriously.