Ten Questions: Angus Deaton
Understanding What Makes People Tick
By Terri Akman

Angus Deaton, 70, has spent his life trying to understand people, but through an economic lens. The Princeton University professor has been credited with improving the data used to shape public policy. His diverse research has covered wealth and poverty, consumer consumption, middle-aged mortality, household surveys, and health and happiness. Known for making complicated economic theories understandable to the average person, Deaton was recently awarded the 2015 Nobel Memorial Prize in Economic Sciences.

Economically, how does life today compare with earlier times in history?
People tend to live in a world in which they think it’s going to hell in a hand basket. You read in the newspapers that a lot of terrible things happen. I found out that in the last 250 years, the world has gotten to be an amazingly better place. People used to die as children and not live to a ripe old age. Now people who are barely able to get by are driving around in nice cars. That’s not true for everybody, of course, and it’s true a lot more for some than others, but there’s been this immense progress over the last 250 years.

You researched the relationship between happiness and income. What did you discover?
We asked people the question, “Did you experience a lot of happiness? It’s not really about how your life is going, but was there some time during the day yesterday when you felt very happy?” We looked at the proportion of people who experienced happiness yesterday and looked at their income to see whether people who have higher incomes were more likely to be happier on the previous day. The answer is yes, they are, until about $75,000 a year. After that it doesn’t seem to make very much difference. We interpreted that to mean if you’re at the point where you spend your whole life worrying about money, it’s hard to do things like going out with a friend or going out to dinner. Those are the things that make people say they experienced a lot of happiness yesterday.

The Nobel committee said your work has helped governments determine how different social groups react to specific tax changes. Can you give an example of this?
Imagine a situation in which a government is thinking about increasing the gas tax. A lot of people think increasing the gas tax, which hasn’t gone up for a long time, would be a very sensible way to finance construction which is badly needed in the United States. One of the things you’d need to know is if you increase the gas tax, by say 15 or 20 cents a gallon, what effect would that have on how many miles people drove or how many cars they bought or things like that. So understanding what’s going to happen with a change in tax or price is a very important part of public policy.

In that example, what could happen with raising the gas tax?
What you would most obviously expect is that people would buy less gasoline, so the big question is how much. But also, if they buy less gas they might spend more on train fares or airplanes, or they might decide to put better insulation into their house or put the money in other fields. There are a lot of things that could happen, and it’s been a problem in economics for a long time to try to figure that out.

Where does your interest in economic development come from?
There are a lot of very poor people in the world, and these people live off very little. Maybe we should try to figure out what is possible to do so we might help them or they might help themselves. We want to understand the process whereby countries that are not wealthy can make that transition from being poor to being rich.

Your current research focuses on health in rich and poor countries. In a nutshell, what have you learned? 
If you look at a place like India, for instance, there’s an enormous amount of malnourishment. So if you took some kids under 5 to the doctor, the doctor would look them up on the growth chart and say, “You’ve got to do something before they fall off the bottom of the growth chart.” At the same time, the economy in India is growing quite rapidly, probably the fastest growing economy in the world today. You’ve got this very odd thing going on where you would have thought this economic growth would allow people to buy more food and the malnourishment would be going away. We discovered that calorie per capita consumption in India has actually been falling for quite some time, and we don’t really understand what that’s about.

You and your wife, Anne Case, are working together on a study regarding suicide and places where people tend to be happy. What have you learned?
We wondered whether it was true that places where people tend to be happy are places where suicide rates are low. That turns out not to be true. In particular, suicides tend to be very high along the Rocky Mountains, and also people report themselves to be very happy with their lives along the Rocky Mountains. We don’t really know what that’s about.

In situations where you get this data and it doesn’t make sense to you, what do you do with that?
You play with it and try to figure out what it is. Sometimes you succeed and sometimes you don’t. My life is littered with puzzles I couldn’t solve. But that’s a good thing in some ways, because when you find these puzzles you tell other people about it. Then it’s open to other people to see if they can solve that problem.

Beyond prestige, the Nobel Prize comes with $1 million. Can you share what you might do with the money?
I’ve just taken retirement from Princeton, and I’m going to have to live for quite a few more years on that money and what other I’ve put away. Hopefully I’ve got another 15 or 20 years to spend it. It doesn’t seem like so much money.

What do you want your legacy to be?
That’s hard. I’ve done my work because I was curious and I find interesting things to work on, so I wasn’t aiming to leave a legacy behind. But I do think that some of the puzzles, some of the unsolved problems, would be a good legacy.

January 2016
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