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Tuesday, October 13, 2015

Angus Deaton is Nobel laureate in Economics 2015

Economics is complicated, confounding  and interesting subject.  Angus Deaton, a Princeton economist,  has been awarded the Nobel Memorial Prize in Economic Science on Monday for improving the measurement of basic economic indicators like wealth and consumption, particularly in developing nations.Professor Deaton, a British and American citizen, is best known among economists for his insight that learning about the specific economic circumstances and choices of individual people, rather than relying on typical measures of larger groups, could produce a better perspective on the workings of the economy as a whole.

“To design economic policy that promotes welfare and reduces poverty, we must first understand individual consumption choices,” the Royal Swedish Academy of Sciences said in a statement announcing the prize, the last of this year’s crop of Nobels. “More than anyone else, Angus Deaton has enhanced this understanding.”

The Nobel Memorial Prize in Economic Sciences ( or the SverigesRiksbank Prize in Economic Sciences in Memory of Alfred Nobel), commonly referred to as the Nobel Prize in Economics, is an award for outstanding contributions to the field of economics, and generally regarded as the most prestigious award for that field. It is not one of the prizes that Alfred Nobel established in his will in 1895, but instead was established 73 years later by a donation to the foundation from Sweden's central bank, the SverigesRiksbank, on the bank's 300th anniversary.Winners are announced with the Nobel Prize winners, and receive the award at the same ceremony. Laureates in the Memorial Prize in Economics are selected by the Royal Swedish Academy of Sciences like the Nobel laureates in Chemistry and Physics, but not by its Nobel Committee. It was first awarded in 1969 to the Dutch and Norwegian economists Jan Tinbergen and Ragnar Frisch, "for having developed and applied dynamic models for the analysis of economic processes."

Economists are applauding the decision to recognise Edinburgh-born microeconomist Angus Deaton for his analysis of consumption, poverty, and welfare.The problem is not so much that there is a Nobel prize in economics, but that there are no equivalent prizes in psychology, sociology, anthropology. Economics, this seems to say, is not a social science but an exact one, like physics or chemistry – a distinction that not only encourages hubris among economists but also changes the way we think about the economy. It creates the impression that economists are not in the business of constructing inherently imperfect theories, but of discovering timeless truths.

As reported in US media, in 1997 economists Myron Scholes and Robert Merton were awarded Nobel prize for their formula on safe but lucrative trading strategy ~an  year later, Long-Term Capital Management lost $4.6bn (£3bn)in less than four months; a bailout was required to avert the threat to the global financial system. Markets, it seemed, didn’t always behave like scientific models.

Professor Deaton, the new Nobel laureate  has been at the forefront of a revolution made possible by computers: the use of detailed economic data to produce more accurate conclusions about broad economic trends. He has worked both to improve measurement techniques and to use those tools to pose basic questions about improving human welfare.In an interview on Monday, Professor Deaton said he had focused on the developing world because “there’s a real moral urgency to understanding how people behave and what we should or might be able to do about it.”He said the circumstances of his upbringing also played a role. “I grew up in Edinburgh,” he said. “It was a cold, messy and miserable place to grow up and I dreamed of going to tropical, colorful, hot countries.”

Professor Deaton is best known for refining the tools that economists use, emphasizing the importance of careful statistical analysis of choices by individual households.“Suppose you wanted to understand the effect of a subsidy on rice on the well-being of farmers,” said DaniRodrik, a professor of political economy at Harvard. “He has produced an approach that you can actually use with household data to trace through the effect of something like this on the well-being of different farmers.”

Janet M. Currie, a former student of Professor Deaton’s and now his boss as chairwoman of the economics department at Princeton, said Professor Deaton’s work had shown the danger of simplifications such as measuring poverty by counting how many people live on less than $1 a day.

Professor Deaton, 69, said he was “pretty sleepy” when he got the phone call Monday morning telling him that he had won. He said his wife answered the phone at 6:10 a.m. and then handed it to him, telling him it was an important call from Stockholm.“I was surprised and delighted,” he said. “It was wonderful to hear the voices of my friends on the committee.”

In case, you feel that it is confounding – read from the first again !!
With regards – S. Sampathkumar

13th Oct 2015.
Collated from various sources including : dailymail; bbc; NY Times; atlantic; Guardian

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