Poverty & its measurement

Angus Deaton's economics Nobel has lessons for India

The award of the Nobel Memorial Prize in Economic Sciences to Angus Deaton of Princeton University is an honour that is, in many ways, overdue. It is an honour not just to Prof Deaton but to the field of empirical development economics, which has a good case for being the area of social science that has transformed the most lives for the better in the past few decades. Indeed, it is also worth pointing out that the work for which this Nobel has been awarded has more of an India component than pretty much any other similarly honoured - including even that of Amartya Sen. The Nobel committee said that Prof Deaton was being awarded the prize "for his analysis of consumption, poverty and welfare"; on his own website, Prof Deaton mentions "the measurement of poverty in India and around the world" as his key current research interest.

Prof Deaton's interventions in the policy debate in India, often in the form of much-read papers in The Economic and Political Weekly co-authored with Jean Dreze, focused on examining the causes and consequences of poverty and especially of malnourishment and stunting. Professors Deaton and Prof Dreze took issue with those who worried that an apparent decrease in the number of calories eaten by Indians since liberalisation meant that they had gotten poorer instead of richer - an approach they called "calorie fundamentalism". They pointed out that this could be part of India's "nutrition transition" from cereal-dominated diets to more diversified diets, a claim buttressed by the fact that the data suggested "cereal intake is lower at higher income levels". Prof Deaton himself has looked hard at other politically sensitive issues in India - one paper found that the food component of the consumer price index or CPI understated food inflation between 1999-2000 and 2004-05 by as much as 70 per cent, thanks to the over-weighting of cereals in the then CPI.

The biggest lesson from such interventions for the Indian policy sphere is surely how deeply grounded they are in the data. Prof Deaton literally wrote the book on survey data - his 1997 Analysis of Household Surveys remains the gold standard on the subject. He was doing "big data" long before it became a buzzword. Quality policy analysis requires more, better and frequent data and the production and dissemination of such should once again be a priority for the Indian state. Prof Deaton would go further; looking at the largest possible data sets was, for him, a recognition of the wide-ranging impact of policy intervention. He had little time for the "randomised controlled trials" methods that have become popular in development economics of late, in which a sharp answer to a clearly-defined policy question is derived under very specific, controlled circumstances. This, in his opinion, could never replace the careful and nuanced interpretation of big data sets when it came to the interpretation of policy - and it was, indeed, undemocratic. Unlike many economists, Prof Deaton never thought the profession knew more than the people. The only correct judge of economic policy, for him, was a democratic mandate. Perhaps that, too, is something worth learning.