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2015 Nobel Prize In Economics Goes To Princeton Professor

STEVE INSKEEP, HOST:

The 2015 Nobel Prize for economics has been awarded to a Princeton professor who developed ways to measure poverty around the world. His name is Angus Deaton, and he's a dual-citizen of the United States and the UK. We're going to talk about him with NPR's Jim Zarroli.

Hi, Jim.

JIM ZARROLI, BYLINE: Hi.

INSKEEP: OK, so I'm already interested because if you want to fix a problem, first, you have to identify it. And it sounds like this is the guy who was trying to measure poverty so you could attack it. Who is he?

ZARROLI: Yeah, that's one of the big things he does. Deaton was born in Edinburgh. He's a Cambridge graduate. Since 1993, he has been teaching at Princeton's hugely influential economics department. And his work touches on a lot of issues - like poverty, income inequality, gender discrimination - that are very much on the minds of people today all over the world. And it's had an impact on how we measure some of these things, which can be very difficult to do. The committee says his work bridges theory and data and helps us understand how individual behavior affects broader economic trends.

INSKEEP: What are some of the things he set out to learn that were a little fuzzy or a lot fuzzy before?

ZARROLI: Well, the committee cited three things. The first, they said, was design of a demand system. And to explain that, they said, you know, when you look at something like a change in monetary or fiscal policy or, you know, when a government decides to raise taxes, how do you know who is affected by that and what will happen to them? And Deaton came up with a way to measure this in 1980, and it has become a standard tool in economics and fiscal policy. It helps us compare living standards around the world. He also looked at the link between consumption and income. Macroeconomic policy tends to depend on aggregate levels, in other words, how large populations behave.

But if you look at how individuals behave, it can be very different, which is something called the Deaton paradox after Angus Deaton. He developed a way to measure this, which has had a real impact on modern economics. And then finally, he came up with a way to measure poverty more accurately. I mean, you can have data that says, you know, millions of people are below the poverty line, but it doesn't really tell you about, you know, how they live, what they eat, what they consume, what their health conditions are like. And he came up with a way to measure these things, and it's really had a profound impact on economics.

INSKEEP: So when you have been doing stories about the possible impact of tax cuts or what poverty rates are, are you effectively citing his work, even if you haven't said his name?

ZARROLI: Yeah, I haven't - yeah, I think everybody who covers economics, everybody who studies it has been affected by the ways that he came up with to measure poverty, measure income inequality. His work has been really used all over the world.

INSKEEP: So what did he have to say when he spoke with reporters about getting this Nobel honor?

ZARROLI: He talked briefly to reporters over the phone. He was asked at one point, you know, poverty has been decreasing around the world for years, did he think that trend would continue? He said it would. But he also said he wasn't a blind optimist. He said, look at conditions in India, for instance.

(SOUNDBITE OF ARCHIVED RECORDING)

ANGUS DEATON: In India, where, again, there's been a lot of progress, something like half of the children are still way, way undernourished. And so while I expect things to get better, you have to keep remembering that we're not out of the woods yet and that for many, many people in the world, things are very bad indeed.

ZARROLI: Yeah, things are very bad indeed, he says. He was also asked about the refugee crisis in Europe right now. He said, this has its roots in many years of unequal development around the world. People are looking for a better life, and they're putting pressure on boundaries between countries. Deaton says poverty reduction will solve the problem but not for a long time.

INSKEEP: Jim, thanks as always.

ZARROLI: You're welcome.

INSKEEP: That's NPR's Jim Zarroli telling us about Angus Deaton, who has received the Nobel Prize for economics in 2015. Transcript provided by NPR, Copyright NPR.