angus deaton

A conversation with Angus Deaton about RCTs

The interrogator is Timothy N. Ogden, here is one bit from Deaton:

Something I read the other day that I didn’t know, David Greenberg and Mark Shroder, who have a book, The Digest of Social Experiments, claim that 75 percent of the experiments they looked at in 1999, of which there were hundreds, is an experiment done by rich people on poor people. Since then, there have been many more experiments, relatively, launched in the developing world, so that percentage can only have gotten worse.  I find that very troubling.

If the implicit theory of policy change underlying RCTs is paternalism, which is what I fear, I’m very much against it.

The conversation is interesting throughout.  Tim indicates:

This is a chapter from the forthcoming book Experimental Conversations, to be published by MIT Press in 2016. The book collects interviews with academic and policy leaders on the use of randomized evaluations and field experiments in development economics. To be notified when the book is released, please sign up here.

The book will contain an interview with me as well.

Angus Deaton wins the Nobel

Angus Deaton of Princeton University wins the Nobel prize. Working with the World Bank, Deaton has played a huge role in expanding data in developing countries. When you read that world poverty has fallen below 10% for the first time ever and you want to know how we know— the answer is Deaton’s work on household surveys, data collection and welfare measurement. I see Deaton’s major contribution as understanding and measuring world poverty.

Measuring welfare sounds simple but doing it right isn’t easy. How do you compare the standard of living in two different countries? Suppose you simply convert incomes using exchange rates. Sorry, that doesn’t work. Not all goods are traded so exchange rates tend to reflect the prices of tradable goods but a large share of consumption is on hard-to-trade services. The Balassa-Samuelson effect tells us that services will tend to be cheaper in poorer countries (I always get a haircut when in a poor country but I don’t expect to get a great deal on electronics). As a result, comparing standards of living using exchange rates will suggest that developing countries are poorer than they actually are. A second problem is the cheese problem. Americans consume a lot of cheese, the Chinese don’t. Is this because the Chinese are too poor to consume cheese or because tastes differ? How you answer this question makes a difference for understanding welfare. A third problem is the warring supermarkets problem. Two supermarkets each claim that they have the lowest prices and they are both right! How is this possible? Consumers at supermarket A buy more of what is cheap at A and less of what is expensive at A and vice-versa for B. Thus, it would cost more to buy the A basket at store B and it would also cost more to buy the B basket at store A! So which supermarket is better? Comparing standards of living across countries isn’t easy and then you want to make these comparisons consistently over time as well! Deaton, working especially with the World Bank, helped to construct price indices for all countries that measure goods and services and he showed how to use these to make theoretically appropriate comparisons of welfare. Deaton’s presidential address to the American Economic Association in 2010 covers many of these issues.

I see Deaton’s work on world poverty as a tour de force, he made advances in theory, he joined with others to take the theory to the field to make measurements and he used the measurements to draw attention to important issues in the world.

Earlier in his career, Deaton developed tools to bring theory to data on consumption. A key contributions is the Almost Ideal Demand System. We all know that demand curves slope down which means that a fall in the price of the good in question increases the quantity demanded but in fact economic theory says that the demand for good X depends not just on the price of good X but at least potentially on the prices of all other goods. If we want to estimate how a change in policy will influence people’s choices we need to allow demand curves to interact in potentially many ways but we still want to constrain those reactions according to economic theory. In addition, economic theory tells us that an individual’s demand curve slopes down but it doesn’t necessarily imply that the aggregation of individual demand curves must slope down. Aggregation is tricky! The Almost Ideal Demand system, due initially to Deaton and Muellbauer, in 1980 and further developed since then shows how we can estimate demand systems on aggregates of consumers while still preserving and testing the constraints of economic theory.

The study of consumption leads naturally to the study of savings, consumption in future periods. Here we have Keynes’s famous propensity to consume theory (consumption is a fraction of current income), Milton Friedman’s permanent income hypothesis (consumption is a fraction of estimated lifetime income), Modigliani’s Life Cycle Hypothesis (borrow young, save when middle aged, dissave when old). Robert Hall, building on the work of Ramsey, showed in the 1970s that rational expectations implies the famous Euler equation that bedevils graduate students, which shows that suitably discounted changes in marginal utilities should follow a random walk. Deaton played a big role in testing the new theories, mostly finding them wanting.

Deaton’s book, The Great Escape, on growth, health and inequality is accessible and a good read. A controversial aspect of this work is that Deaton falls squarely into the Easterly camp (Deaton’s review of Tyranny of Experts is here) in thinking that foreign aid has probably done more harm than good.

Here is Deaton on foreign aid:

Unfortunately, the world’s rich countries currently are making things worse. Foreign aid – transfers from rich countries to poor countries – has much to its credit, particularly in terms of health care, with many people alive today who would otherwise be dead. But foreign aid also undermines the development of local state capacity.

This is most obvious in countries – mostly in Africa – where the government receives aid directly and aid flows are large relative to fiscal expenditure (often more than half the total). Such governments need no contract with their citizens, no parliament, and no tax-collection system. If they are accountable to anyone, it is to the donors; but even this fails in practice, because the donors, under pressure from their own citizens (who rightly want to help the poor), need to disburse money just as much as poor-country governments need to receive it, if not more so.

What about bypassing governments and giving aid directly to the poor? Certainly, the immediate effects are likely to be better, especially in countries where little government-to-government aid actually reaches the poor. And it would take an astonishingly small sum of money – about 15 US cents a day from each adult in the rich world – to bring everyone up to at least the destitution line of a dollar a day.

Yet this is no solution. Poor people need government to lead better lives; taking government out of the loop might improve things in the short run, but it would leave unsolved the underlying problem. Poor countries cannot forever have their health services run from abroad. Aid undermines what poor people need most: an effective government that works with them for today and tomorrow.

One thing that we can do is to agitate for our own governments to stop doing those things that make it harder for poor countries to stop being poor. Reducing aid is one, but so is limiting the arms trade, improving rich-country trade and subsidy policies, providing technical advice that is not tied to aid, and developing better drugs for diseases that do not affect rich people. We cannot help the poor by making their already-weak governments even weaker.

Here is Tyler’s post on Deaton.

Addendum: Chris Blattman offers a very good perspective and appreciation.

The Economics Nobel Prize winner is Angus Deaton

A brilliant selection.  Deaton works closely with numbers, and his preferred topics are consumption, poverty, and welfare.  “Understanding what economic progress really means” I would describe as his core contribution, and analyzing development from the starting point of consumption rather than income is part of his vision.  That includes looking at calories, life expectancy, health, and education as part of living standards in a fundamental way.  I think of this as a prize about empirics, the importance of economic development, and indirectly a prize about economic history.

Think of Deaton as an economist who looks more closely at what poor households consume to get a better sense of their living standards and possible paths for economic development.  He truly, deeply understands the implications of economic growth, the benefits of modernity, and political economy.  Here is a very good non-technical account of his work on measuring poverty (pdf), one of the best introductions to his thought.

He brought a good deal of methodological individualism to the field of consumption studies, most of all by using household surveys more than macroeconomic data.

I think of this as a prize for “a whole body of work” rather than for one or two key papers.  David Leonhardt has a good NYT summary of some his work and its deep underlying optimism about the situation of the poor in the global economy.

Here is the popular version of the Committee statement, here is the more detailed version (pdf), an excellent overview.

Deaton was born in Scotland but has taught at Princeton for some time.  Here is Deaton on Wikipedia.  Here is Deaton’s home page.  Here are some recent working papers, he even has published in Review of Austrian Economics, an interesting review of Bill Easterly on experts.  Here are previous MR mentions of Deaton, there are many of them.  Here is Deaton on Google Scholar.  Here is a Russ Roberts EconTalk with Angus Deaton.  I think of Deaton as someone who is relatively willing to share himself with the world, let’s hope the Prize doesn’t ruin that openness.  Here is 21 minutes of Angus on YouTube, on his core ideas.

He is married to Princeton economist Anne Case, a notable scholar in her own right and sometimes a co-author with Deaton.  Here are their co-authored papers, many dealing with South Africa.

Deaton has long had a special working relationship with India and South Africa.  Here are his key pieces on measuring poverty and poverty reduction in India.  Here is his work on the Indian health survey.  Here is his 2010 AER piece on how to measure poverty globally in a consistent manner, by the way he suggests that asking people should be part of the answer.

He also has written on gender discrimination within the family in developing nations.  Some of his work has helped direct our attention to the viability of cash transfers as a way of fighting poverty.

At first, say circa 1980, he was known for his work in developing Almost Ideal Demand Systems for analyzing consumer expenditures; much of this early work was with Muellbauer.  That made a big splash, but it was more of a theoretical and technical advance than what was to follow.  One message was that studies based on the idea of a “representative consumer” were likely to prove misleading.

It is interesting to note the trajectory of his career, as Alex noted on Twitter.  He first did theory, then filled in the numbers and did empirics, applying the theory.  Eventually he took theory + empirics and used it to tackle some of the big issues of poverty and development.

Here is his long survey piece on foreign aid and growth.  He favors the move away from project evaluation, is skeptical of instrumental variable methods, and believes that RCTs need to be supplemented with a better theoretical understanding of mechanisms.  He knows a lot about many, many topics.

I do not know him, but he is described by many as a colorful character.  Dani Rodrik has strong praise for Deaton as a teacher.

Here are short, popular essays by Angus Deaton; you can call that the “what he really thinks page.”  He is critical of the Republican war against ACA and connects that topic to Downton Abbey.  He argues for regional price indices for the United States.  He discusses American inequality and why it is often ignored as an issue.  He warns against the creeping regulation of science.  And he considers why the Stern report had a greater impact in the UK than in America.

I very much liked Deaton’s recent book The Great Escape, which focuses on how modernity revolutionized standards for consumption.

This award is no surprise at all and he has been on the short list for a while.  Is it a slight surprise that Deaton won this prize on his own?  Many thought he would be paired with Anthony Atkinson, but I see Deaton as worthy of a stand-alone prize and Atkinson’s chance has not passed him by.  In any case, Tirole was a stand-alone prize too, so maybe in that regard there has been a shift in the Swedish regime.

Last but not least here is Alex’s post on Deaton.

What I’ve been reading and browsing

1. Camilla Townsend, Fifth Sun: A New History of the Aztecs.  I read this one straight through, it does more to bring the Aztecs (a misnomer, by the way, as it is technically the name of the military alliance…a bit like referring to “NATO people”) to life than any other book I know.

2. Daniel M. Russell, The Joy of Search: A Google Insider’s Guide to Going Beyond the Basics.  I don’t need this, but I suspect useful for many.

3. Thomas O. McGarity, Pollution, Politics, and Power: The Struggle for Sustainable Electricity.  A very useful of the last four decades of transformation in the electricity industry.

4. Norman Lebrecht, Genius & Anxiety: How Jews Changed the World 1847-1947.  An informative and engaging account of what the title promises (you can learn more about Heine and Alkan and Moholy-Nagy).  Nonetheless the author never really addresses the question of why that period was quite so remarkable for Jewish achievement, relative to the rest of world history.

5. Edmund Morris, Edison.  Lots of impressive research, but this book didn’t have the emphasis on innovation and institutions that I was looking for.

There is also Anne Case and Angus Deaton, Deaths of Despair and the Future of Capitalism.

People expect happiness improvements that don’t quite arrive

Among the young, expectations for future well-being run far ahead of reported well-being today. The gap diminishes with age, and in the rich countries, the lines cross around age 65 after which the future is expected to be worse than the present. Except for this, people appear to be perpetually optimistic about their futures even though this optimism is perpetually frustrated by actual outcomes.

…This (unjustified) optimism seems to happen everywhere in the world…

That is from a new paper by Angus Deaton.

Saturday assorted links

The Baffling Politics of Paid Maternity Leave in India

Policy makers and intellectuals in India are well informed about politics and intellectual developments in the United States and Europe. Among this group, for example, one can easily strike up a conversation about say Angus Deaton on RCTs versus structural econometric modelling. The similarity in the conversation extends far beyond the scientific, however, in ways that I sometimes find baffling.

When I gave a lecture at a local university, for example, I apparently shocked the students when I said matter-of-factly:

India would be a better country if it were richer and more unequal.

I think India’s extreme poverty makes this obviously true in a utilitarian sense, i.e. better for Indians, but it wasn’t so obvious to the students some-of-whom discussed inequality in terms that could easily have been duplicated at Berkeley. The inequality conversation has jumped the pond in ways that seem to me to be completely inappropriate.

Writing in the Times of India, Rupa Subramanya gives another example, a bill for paid maternity leave that has just passed the Indian parliament (waiting only on the president’s signature). As I pointed out earlier, by far the majority of Indians are self-employed and in the informal sector. The very idea of paid maternity leave, therefore, is bizarre. Is the right hand to pay the left?

As Subramanya writes, even fewer women than men work in the formal sector:

[W]omen’s labour force participation in India is 25% or less, as variously estimated by the International Labour Organisation (ILO) and from India’s National Sample Survey Organisation (NSSO) data. What is more, estimates by MLE and ILO suggest that less than 5% of female workers aged 15-49 are in the formal or organized sector. What this implies is that effectively those covered by paid maternity leave whether the old or the new provision are at best a small number of relatively privileged women working in formal sector jobs. The vast number of women working in the informal sector effectively have no social protections at all, forget about paid maternity leave benefits.

Add to this the well-known reality of poor implementation and even poorer monitoring and the truth is relatively few women benefit from paid maternity leave now, and by definition, therefore, very few stand to gain from the benefits being increased.

…Legislating generous benefits in a still poor country is putting the cart before the horse and is sure to fail. All that will happen are more frustrated women unable to find work, employers unwilling to hire women, and more non-compliance and non-enforcement of existing laws for a state that is already stretched thin trying to do far too many things with too few resources.

So why pass a bill which is so at odds with the real issues facing women on the ground? I think Subramanya is correct:

It’s hard to escape the impression that the main purpose of the increased maternity leave benefits is public relations, either aimed at educated urban women or targeted for international consumption where India is approvingly clubbed with rich countries like Norway and Canada as having the highest paid maternity leave in the world.

New issue of Econ Journal Watch

https://econjwatch.org/issues/volume-14-issue-1-january-2017

Volume 14, Issue 1, January 2017

In Memoriam (.pdf)

Government Propaganda Watch: Three investigations of economic discourse and research issued by governments and government agencies:

Classical liberal economic thought in Italy, since 1860: Alberto Mingardi contributes the 13th article of the “Classical Liberalism in Econ, by Country” series.

Econ 101 Morality: J. R. Clark and Dwight Lee tell teachers to embrace a moral purpose and to teach students where their instincts came from and why instincts often mislead.

Must moral judgment involve sympathy? Thomas Brown’s 1820 critique of Adam Smith.

Mitchell Langbert and coauthors rectify a coverage error in their study of faculty voter registration.

EJW Audio

Alberto Mingardi on Liberalism in Italy

Benny Carlson on Swedish Economists

EJW News

Professor Sir Angus Deaton joins EJW Advisory Council.

*Experimental Conversations*

The editor of this truly excellent book is Timothy N. Ogden, the subtitle is Perspectives on Randomized Trials in Development Economics, and the contributors include Angus Deaton, Dean Karlan, Lant Pritchett, David McKenzie, Judy Gueron, Rachel Glennerster, Chris Blattman, and yours truly, with a focus on randomized control trials and other experiment-related methods.  Here is one bit from the interview with me:

I would say that just about every reputable RCT has shifted my priors.  Literally every one.  That’s what’s wonderful about them, but it’s also the trick.  You might ask, “why do they shift your priors?”  They shift your priors because on the questions that are chosen, and ones that ought to be chosen, theory doesn’t tell us so much.  “How good is microcredit?” or “What’s the elasticity of demand for mosquito nets?”  Because theory doesn’t tell you much about questions like that, of course an RCT should shift your priors.  But at the same time, because theory hasn’t told you much, you don’t know how generalizable the results of those studies are.  So each one should shift your priors, and that’s the great strength and weakness of the method.

Now, you asked if any of the results surprised me.  I think the same reasoning applies.  No, none of them have surprised me because I saw the main RCT topics to date as not resolvable by theory.  So they’ve altered my priors but in a sense that can’t shake you up that much.  If you offer a mother a bag of lentils to bring her child in to be vaccinated, how much will that help?  Turns out, at least in one part of India, that helps a lot.  I believe that result.  But 10 years ago did I really think that if you offered a mother in some parts of India a bag of lentils to induce them to bring in their kids to vaccination that it wouldn’t work so well?  Of course not.  So in that sense, I’m never really surprised.

And this:

One of my worries is RCTs that surprise some people.  Take the RAND study from the 1970s that healthcare doesn’t actually make people much healthier.  You replicate that, more or less, in the recent Oregon Medicaid study.  When you have something that surprises people, they often don’t want to listen to it.  So it gets dismissed.  It seems to me that’s quite wrong.  We ought to work much more carefully on the cases where RCTs are surprising many of us, but we don’t want to do that.  So we kind of go RCT-lite.  We’re willing to soak up whatever we learn about mothers and lentils and vaccinations, but when it comes to our core being under attack, we get defensive.

I very much recommend the book, which you can purchase here.  Interviews are so often so much better than just letting everyone be a blowhard, and Ogden did a great job.

What the hell is going on?

Donald Trump may get the nuclear suitcase, a cranky “park bench” socialist took Hillary Clinton to the wire, many countries are becoming less free, and the neo-Nazi party came very close to assuming power in Austria.  I could list more such events.

Haven’t you, like I, wondered what is up?  What the hell is going on?

I don’t know, but let me tell you my (highly uncertain) default hypothesis.  I don’t see decisive evidence for it, but it is a kind of “first blast” attempt to fit the basic facts while remaining within the realm of reason.

The contemporary world is not very well built for a large chunk of males.  The nature of current service jobs, coddled class time and homework-intensive schooling, a feminized culture allergic to most forms of violence, post-feminist gender relations, and egalitarian semi-cosmopolitanism just don’t sit well with many…what shall I call them?  Brutes?

Quite simply, there are many people who don’t like it when the world becomes nicer.  They do less well with nice.  And they respond by in turn behaving less nicely, if only in their voting behavior and perhaps their internet harassment as well.

Female median wages have been rising pretty consistently, but the male median wage, at least as measured, was higher back in 1969 than it is today (admittedly the deflator probably is off, but even that such a measure is possible speaks volumes).  A lot of men did better psychologically and maybe also economically in a world where America had a greater number of tough manufacturing jobs.  They thrived under brutish conditions, including a military draft to crack some of their heads into line.

To borrow a phrasing from Peter Thiel, perhaps men did better in the age of “technological progress without globalization” rather than “globalization without technological progress,” as has been the case as of late.

Here’s a line from Martin Wolf:

Princeton professors Anne Case and Angus Deaton note, in addition, a sharp relative deterioration in mortality and morbidity among middle-aged white American men, due to suicide, and drug and alcohol abuse.

(Addendum: note this correction.)

For American men ages 18-34, more of them live with their parents than with romantic partners.

Trump’s support is overwhelming male, his modes are extremely male, no one talks about the “Bernie sisters,” and male voters also supported the Austrian neo-Nazi party by a clear majority.  Aren’t (some) men the basic problem here?  And if you think, as I do, that the incidence of rape is fairly high, perhaps this shouldn’t surprise you.

The sad news is that making the world nicer yet won’t necessarily solve this problem.  It might even make it worse.

Again, we don’t know this is true.  But it does help explain that men seem to be leading this “populist” charge, and that these bizarre reactions are occurring across a number of countries, not just one or two.  It also avoids the weaknesses of purely economic explanations, because right now the labor market in America just isn’t that terrible.  Nor did the bad economic times of the late 1970s occasion a similar counter-reaction.

One response would be to double down on feminizing the men, as arguably some of the Nordic countries have done.  But America may be too big and diverse for that really to stick.  Another option would be to bring back some of the older, more masculine world in a relatively harmless manner, the proverbial sop to Cerberus.  But how to do that?  That world went away for some good reasons.

If this is indeed the problem, our culture is remarkably ill-suited to talking about it.  It is hard for us to admit that “all good things” can be bad for anyone, including brutes.  It is hard to talk about what we might have to do to accommodate brutes, and that more niceness isn’t always a cure.  And it is hard to admit that history might not be so progressive after all.

What percentage of men are brutes anyway?  Let’s hope we don’t find out.

Place plays a part in helping the poor live longer

There is a new Raj Chetty paper out in JAMA ( with seven co-authors, including David Cutler), and it is garnering a lot of media attention.  Here is to my mind the main result, although it is not being presented as such (NYT here):

The JAMA paper found that several measures of access to medical care had no clear relationship with longevity among the poor. But there were correlations with smoking, exercise and obesity.

I enjoyed the NYC angle from Margot Sanger-Katz:

New York is a city with some of the worst income inequality in the country. But when it comes to inequality of life spans, it’s one of the best.

Impoverished New Yorkers tend to live far longer than their counterparts in other American cities, according to detailed new research of Social Security and earnings records published Monday in The Journal of the American Medical Association. They still die sooner than their richer neighbors, but the city’s life-expectancy gap was smaller in 2014 than nearly everywhere else, and it has shrunk since 2001 even as gaps grew nationwide.

That trend may appear surprising. New York is one of the country’s most unequal and expensive cities, where the poor struggle to find affordable housing and the money and time to take care of themselves.

But the research found that New York was, in many ways, a model city for factors that seem to predict where poor people live longer. It is a wealthy, highly educated city with a high tax base. The local government spends a lot on social services for low-income residents. It has low rates of smoking and has many immigrants, who tend to be healthier than native-born Americans.

Here is the accompanying NYT graphic about “your county.”  Here is Emily Badger and Christopher Ingraham, good graphics too:

The poor live shorter lives in Las Vegas, Louisville and industrial Midwest towns, such as Gary, Ind. Geography also matters much more for the poor than the rich. The health behaviors of the wealthy are similar wherever they live. For the poor, their likelihood of risky behaviors such as smoking depends a great deal on geography, on whether they live in a place where smoking is common or where, as in San Francisco, cigarettes have been shunted out of view.

It’s almost as if health care policy should be local in orientation.  The link to the paper includes three comments, including one by Angus Deaton.

Swiss conference on randomized control trials

Working conference on ethics of randomized trials in development economics and health policy: An opportunity for graduate students and young scholars; application deadline March 11

Applications are invited for participating in a five day working conference and summer school on ethical issues posed by randomized trials in development economics and health policy, to be held June 20-24 at the beautiful Brocher Foundation villa in Hermance, Switzerland.  Participants will include Angus Deaton, Joshua Angrist, Michael Marmot, Will MacAskill, and yours truly.

The application deadline is March 11, 2016. Further information is available here.  For remaining questions, please email [email protected]

Be there or be square!