October 12, 2015 Leave a Comment
Angus Deaton, variously described as a Scotsman, a Briton and a Princeton economist has just been awarded the The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2015, often called the Nobel Prize for Economics. Leaving aside all the acid and vitriol about the the name, its sponsor and the wishes of the Nobel family (and there is plenty of it) this particular prize should be welcome in a world in which growing wealth inequality is seen as a problem by almost everyone.
“I’m passing along the most memorable passage on the topic [of inequality] that I’ve come across lately. It’s from Angus Deaton’s excellent The Great Escape: Health, Wealth and the Origins of Inequality, which I just finished and warmly recommend (I’ve embedded links to the studies and books referenced in the excerpt and footnotes):
“There is much to be said for equality of opportunity, and for not penalizing people for the success that comes from their own hard work. Yet, compared with other rich countries, and in spite of the popular belief in the American dream that anyone can succeed, the United States is in fact not particularly good at actually delivering equal opportunities.
One way of measuring equality of opportunity is to look at the correlation between earnings of fathers and sons. In a completely mobile society, with perfect equality of opportunity, your earnings should be unrelated to what your father earned; by contrast, in a hereditary caste society, in which jobs are handed from one generation to the next, the correlation would be 1.
In the United States, the correlation is 0.5, which is the highest of the OECD countries and is exceeded only by those of China and a handful of countries where there appears to be the least equality of opportunity.
[T]here is a danger that the rapid growth of top incomes can become self-reinforcing through the political access that money can bring. Rules are set not in the public interest but in the interest of the rich, who use those rules to become yet richer and more influential.
To worry about these consequences of extreme inequality has nothing to do with being envious of the rich and everything to do with the fear that rapidly growing top incomes are a threat to the wellbeing of everyone else.”
So, congratulations to Angus Deaton, regardless of what the prize should be called. More perceptive detail on the causes and results of inequality, not only on individuals, groups and classes but on democracy itself is a good thing, if understood and acted upon.