Nobel Prize winner shares insight into measures of global poverty

Over the past few weeks, the 11 Nobel Prize laureates were announced. Of these honorary contributors to global society, there was a specific individual whom the international media was particularly interested in: Angus Deaton. Deaton is a professor of economics at Princeton University and was awarded the Nobel Prize in economics this year for his works involving consumption, poverty and welfare.

In 1895, Alfred Nobel—remembered as the inventor of dynamite—drafted his will to give a portion of his fortune to establish special prizes in physics, chemistry, physiology or medicine, literature and peace. The prize in economic sciences was established in 1968 by Sweden’s central bank, Sveriges Riksbank, in memory of Nobel. Since 1901, a total of 900 people and organizations have been awarded Nobel Prizes.

Each year the Nobel Prize is awarded by the Nobel Foundation in Stockholm, Sweden to those whose work contributed to “the Greatest Benefit to Mankind.” The Nobel Prize is regarded as the highest form of international award and encourages continuation of dedicated works that enhance the human experience.

In past years the Nobel Prizes in economic sciences were bestowed upon conservative economists who support the free market and hold critical views of government intervention programs. Mr. Deaton’s works takes a different twist; the Nobel Foundation recognized his dedicated scholarship as something valuable for everyone.

Before being appointed as a Professor of Economics and International Affairs at Princeton, Deaton held teaching positions at Cambridge University and the University of Bristol, Britain. He currently holds both American and British citizenship. On his university profile, Deaton introduces his research as having “focuses on the determinants of health in rich and poor countries, as well as on the measurement of poverty in India and around the world.” According to, Deaton’s research deepened the understanding of consumption—of goods and services—in relation to population welfare. Consequently, his works changed modern microeconomics, macroeconomics, econometrics (application of statistical methods to economic anomalies) and development economics. His new insights in these areas further influenced policy-making and the scientific community.

To be more specific, Deaton was recognized for three achievements he has made over many years of study: a system for estimating the demand for different goods, studies of the association between consumption and income, and measuring living standards and poverty in developing nations using reliable household surveys. Of these achievements, his development of a new method in measuring poverty seems to have caused the most public hype.

In a 2010 speech to the American Economic Association, Deaton highlighted the problems in constructing coherent measures of global poverty. Measures of income don’t offer much insight unless they can be thought of in terms of differences in purchasing power. But it is impossible to assess who has more or less purchasing power when people in different countries face different prices and choose to buy different goods. Given this problem, Deaton makes the radical suggestion that economists just ask people about their well-being instead.

Throughout his studies in these nations, Deaton revealed that information about global poverty can be extracted from analysis of individual household surveys. For a long time, surveys have been regarded as unreliable by many economists. Despite the controversy, Deaton developed detailed questionnaires to supplant gross domestic product statistics as measurements of poverty and welfare. Through the combination of surveys, and theoretical and statistical methods, many poverty-associated factors could be assessed, including living standards, causes of malnutrition and internal sexual discrimination. In developing these tools, Deaton created a valid way to interpret the imperfect data that arises from surveys.

There is something that everyone can take away from this year’s Nobel Prize Laureate in Economic Sciences: In order to combat macro-level problems such as global poverty, it is important to pay attention to the details. Trends in income level or consumption on a national scale may not accurately represent those of individual households. In order to render effective solutions, it is essential to bridge macroeconomics with microeconomics, theory with reality and a nation with its individuals. “I think putting numbers together into a coherent framework always seemed to me to be what really matters,” Deaton said in the New Yorker.

And what really matters to Deaton is that we have a “moral obligation to reduce poverty and ill health in the world.”