(Barron's) - Angus Deaton is calling out his fellow economists. In his new book, the 2015 Nobel laureate challenges ideas many in his profession hold dear. He calls for a re-evaluation of the relentless embrace of markets, efficiency, and even trade. While these have their virtues, they may also be contributing to rising inequality, he writes.
It wouldn’t be the first time Deaton’s work on inequality has made waves. His writing with fellow economist Anne Case on the striking differences in mortality rates between Americans with four-year degrees and those without has provoked a lasting political debate. Deaton is a professor of economics and international affairs at Princeton University.
Barron’s spoke with Deaton by phone on Oct. 5. This transcript of the conversation has been edited.
Barron’s: Your new book is Economics in America: An Immigrant Economist Explores the Land of Inequality. How is inequality manifesting in America today?
Angus Deaton: I sort of wish I’d called the book “inequalities” with an “S” on the end, because it isn’t just about one kind of inequality. In the book, I talk about inequalities by race, for instance. The thing that I’ve been working on most recently with my colleague and wife, Anne Case, is on inequalities between people who have a college degree and people who don’t have a college degree, which seems incredibly relevant in America today. We had a piece in the New York Times recently which shows that people with college degrees are living about as long as people in the most long-lived countries in Europe. But people without a B.A. are living staggeringly shorter and shorter lives. That’s an inequality that really isn’t happening anywhere else and which I think is really terrible and very dangerous.
This divides the third of the population, that is, the educated elite and the other two-thirds who don’t have a B.A. and who are dying in droves. So those are the people who suffered from trade, from globalization, from all these other things. You have different divides at different times, but today that’s one that I don’t think gets enough attention.
What makes American inequality different from inequality in similar economies?
America has always been a champion in terms of material economic inequality, and that has its good sides. It’s the land of opportunity. But it’s also the land of no safety net, or not much of a safety net. So if you don’t manage to grab the opportunities, you can fall a long way. There are spectacular successes, in Big Tech for example, but at the same time the bodies are piling up as people are dying who should not.
What has been economists’ biggest mistake in confronting inequality?
I’m not sure. I think we’re gonna have to work that out. But when you look at how much economists and economic policy makers of the last 40 years have done to make that better, it seems like not very much. So we have to question whether our enthusiastic endorsement of trade, for instance, our enthusiastic endorsement of immigration, our enthusiastic endorsement of technical change—did we get some of that wrong?
I think economists have been a little too persuaded by the virtues of markets. Markets are wonderful, important things that do amazing things, and we couldn’t live without them. But they don’t always get things right. The financial crisis would be another example of something where I don’t think economists did very well in terms of predicting, let alone preventing, it.
How has your perspective as an immigrant informed your views on economics in America?
My first job as an economist was in England, which is a very different sort of place than the United States. It was full of Trotskyists and Communists, and the people on the right were Fabian socialists [who advocated for a more gradual transition to socialism]. I’d actually never really met a conservative economist. That was certainly very different in America. So there’s that big shock of coming here and realizing not everybody thinks the way you might think. I was never a Trotskyist or a Marxist, but there are certain things that I brought with me from those times which I think are becoming important again now.
Also, I grew up pretty poor. My dad was a coal miner. He was born during the last pandemic, the flu pandemic of 1918 in a really tough mining town in England and it’s amazing that he survived that year and then he got tuberculosis during the war. So I was brought up in a way that I have sympathy for people being born quite poor and worked hard to try to get out of that.
When it comes to addressing inequality, what might work?
There are a lot of genuinely difficult issues. We can only really have a good democratic discussion if the facts are independent of our politics. Measuring poverty is really hard. One is it’s actually very hard to get very poor people in distress to fill out forms, or to answer a survey. That leads to a great divergence between the people who take a more ethnographic approach, like sociologists who go and hang out with people and write about their lives, and then when it doesn’t show up in the statistics, they think we’re faking it or some statisticians are faking it. So that’s one issue, just measuring those things is quite hard.
One thing that strikes me is when Ronald Reagan came to power he said, Lyndon Johnson declared war on poverty and poverty won, and that’s because he said the poverty programs made people poorer. Then the Trump guys come along and they say the poverty safety net worked. There are no poor people left because it completely works. And if you look at the official data on those two dates, they’re almost the same. So where are we?
Anne Case, your wife and collaborator, defined the notion of “deaths of despair.” You have written together about that idea. How does that fit into this picture of inequality?
We’ve written a paper about rising mortality in midlife, and we looked at the death rates that were rising most rapidly. Those were suicides, opioid overdoses, and alcoholic liver disease. We were struck by the fact that all three of those are self-inflicted. So Anne christened those “deaths of despair.” You don’t come home and destroy your liver if you’re living a good fulfilling life, don’t take opioids unless there’s something seriously wrong, and you certainly don’t shoot yourself or hang yourself if things are going well.
It’s largely confined to people who don’t have a four-year college degree. That’s a huge inequality, because this pandemic of deaths of despair isn’t falling equally on everyone.
One of the themes in the book is being wary of calling certain economic policies a success too early. What about inflation and monetary policy today? People are calling it “immaculate disinflation.” Do you feel like that’s calling success too early?
I try to stay away from those issues, I’m not a macroeconomist. But one of the things I have observed is the issue of how you do science in economics, because what’s happening in these different debates is people have different models in their heads and they have different experiences from their past. They’ll say things like, the last time the yield spread was reversed, there was a recession. And they have a plausible story as to why that would happen. So they say, that’s what’s happened now.
We’re in a very strange world right now. It’s clear that these episodes have been different from things we’ve seen in the past but we don’t know exactly how. So even the wisest among us doesn’t really know what’s going to happen.
What’s the most important thing that you hope your fellow economists will take from this book?
I think a certain amount of humility is a good thing for economists, and we’ve not necessarily been very good at that sometimes, and that our knowledge is very temporary and very contingent. By contingent I mean that what would work in one place won’t necessarily work somewhere else. And I think we pretend too much that we’re just doing science and politics isn’t a part of it. That was just a mistake.
Thanks, Angus.
By Stevie Rosignol-Cortez
Oct 12, 2023
