Monday, October 12, 2015

And Angus Deaton wins the Not Nobel Prize in Economics

WSJ RTE - Angus Deaton wins the Nobel Prize in Economics The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.

There are links there to what he's written over the years. Lot of neat stuff - poverty, economic development, and elasticity of caloric intake in India, for example, or even an article titled On the Behavior of Commodity Prices.

And just so that you can compare him with what clown "economists" like Greg Mankiw sound like, here's an example of what Angus Deaton, the prize-winning economist, has said

In your book you say that inequality perpetuates itself, especially when the very rich have no stake in public health or public education. Can you elaborate on that a bit more?

So that’s the dark side of inequality. On the bright side, if the returns for going to school go up then there’s a big incentive to go to school and that brings you up and that seems terrific. On the other hand if you don’t have the talent to go to school you get left behind and there’s nothing you can do about it. And that sort of inequality doesn’t seem like such a good inequality and the people who don’t have that talent are relatively worse off than they were before. But the really dark side is what you just talked about, which is this issue when you get extreme income inequality and these people that are very very wealthy. They’re so wealthy they hardly need any government. They don’t need government education, they don’t need healthcare, they may not even need the police or the law courts because they can buy lawyers and policemen or whatever. They’re relatively independent of these things that the rest of us really need and so they have no interest in paying taxes. So it’s very much in their interests to undermine the provision of public goods.

You know the government shutdown that recently ended in the United States? The fact that it was fought over the healthcare extension, and the fact that that strategy was developed by wealthiest people in the United States is a very good illustration of the sort of themes I’m talking about.

You are concerned about the future of democracy because of this growing inequality. Can you elaborate on this?

I think it’s worse in the United States that it is in the United Kingdom because of the pervasive importance of money in politics. But the lobbying that’s become very important in the United States is not just the buying of politics, you can do that anywhere. I think it’s much less important in the UK still, but, before Brits get too complacent about “this would never arise here”, it didn’t use to be very important in the United States either. There’s been an enormous increase in it. In fact the real problem from an economist’s point of view is why isn’t there more of it? Because the rewards for lobbying can be ginormous and the cost of lobbying is way smaller than the rewards so why isn’t there a lot more? I think Gordon Tullock was the first to raise that question of why isn’t there more money in politics? That’s the real puzzle. Basically if the rich can write the rules then we have a real problem.

A couple colleagues of mine have recently written books in which they studied voting patterns in the US Congress and matched them up with the preferences of the constituents of those Congressmen. And they’re very closely aligned with the preference of their wealthy constituents and not at all aligned with the preference of the poor constituents. So there’s a real movement of democracy in the direction of plutocracy and that is something to worry about. On the other hand I don’t think the game is over yet. We may or may not already be at half time or something. If you think about the last election in the United States, one of my favourite stories is that, you know the plutocrats really thought they’d won and they had bought enough polls in pleasing direction to believe themselves that Romney was going to win. Apparently you could not park your private jet in Boston because every fat cat in the country who contributed to the Romney campaign had parked there for the victory party, which of course never took place. So that’s a case where the money did not overcome democracy in that way. And so, the more recent crisis is some attempt to come back at that and so there’s an endless battle over those issues going on but I don’t think we’re done yet.

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