What India should learn from Angus Deaton

A day before the Nobel Prize in Economic Sciences was announced, Mint listed three Indian economists—Avinash Dixit, Jagdish Bhagwati and Partha Dasgupta—who have for long been contenders but have not won the prize. Although the decision of the Royal Swedish Academy of Sciences this week will only prolong their wait, the eventual winner, Angus Deaton, has India connections that should not be ignored.

Deaton is a familiar name for anybody who has followed the heated debates about poverty, inequality and under-nutrition in contemporary India, especially after the 1991 economic reforms. Deaton has taken an active part in these debates, many of which have been featured on the pages of the Economic & Political Weekly, and has edited a fine book that collected some of the best academic work on Indian poverty. On a lighter note, Jean Drèze, his co-author in many papers, seems to be a lucky mascot as far as the Nobel Prize in Economic Sciences is concerned. He has also co-authored numerous works with Amartya Sen, the only Indian to have won the prize so far.

But on a serious note, what is the message Indian policymaking can take from Deaton’s research?

The Nobel Committee has noted Deaton’s contributions in building a bridge between theory and data, and individual and aggregate economic behaviour. His work, according to the committee, has helped economic policy and modern economic research.

One of Deaton’s main efforts has been to disabuse the economics fraternity of the belief that there exists a silver bullet to formulate policies or judge their effects. The fallibility, according to Deaton, is not due to lack of sophistication of technique, but due to the diversity—or heterogeneity, as economists would call it—which prevails in human society. Deaton’s research comes at a time when there is a clear attempt to roll out methods such as randomized control trials as the be-all and end-all of policymaking, in place of older methods such as centralized planning or the World Bank/International Monetary Fund-style structural adjustments that seek to fix the big picture.

Deaton is also an example of how effective policymaking requires that economists do not become prisoners of their own research. He was an active participant in the poverty estimation debate that erupted after the findings of the 55th Round of National Sample Survey data were released in the early years of the previous decade, and he undertook a sophisticated and detailed empirical analysis of NSSO data and price indices to recalculate poverty headcount ratios in India. These rigorous endeavours, however, have not prevented him from critiquing the non-transparent and complicated poverty estimation procedure in place currently and calling for delinking of poverty estimates—which in his own words are mere statistical tools for comparison—from all welfare entitlements.

In his intellectual pursuits, Deaton has joined issue with economists on both the Right as well as the Left ends of the spectrum. His critique of Arvind Panagariya’s thesis explaining less-than-normal heights of Indian children in comparison with those in much poor countries like Sub-Saharan Africa to genetic factors is an example of the former while the debate between Deaton-Drèze and Utsa Patnaik about the growing wedge between calorie intake and poverty headcount ratios is an example of the latter.

As a logical corollary of his arguments, Deaton has been underlining the need for better nutrition-monitoring arrangements in India, and has regularly pointed out the inadequacy of current indicators. The government could pay heed to his advice on this issue and at least release detailed findings of the Rapid Survey of Children, titbits of which have appeared in the media on the basis of leaks.

The majority of today’s economists seek refuge in even more complicated modelling and theory to solve the growing conundrum of mismatch between theory and reality in economics. Deaton is unambiguous in a 2009 paper: “Technique is never a substitute for the business of doing economics”. Deaton’s Nobel should be an occasion to bring back the social in economic sciences.

Should poverty estimates be delinked from welfare entitlements? Tell us at views@livemint.com