BY JAMES SIMONS
A British born economist who graduated from Cambridge University has been awarded the Nobel Prize for economics thanks to his pioneering work into what determines poverty and how people make their consumption decisions.
The Royal Swedish Academy of Sciences said Mr Deaton was awarded the prize “for his analysis on consumption, poverty and welfare”.
Deaton is the first Brit to win the Nobel Prize in economics since Clive Granger 2003 won it 12 years ago. He joins a select list of academics who have won the SKr 8m (£630,000) prize, including his predecessor, Jean Tirole .
“[His research] shows an impressive breadth in its approaches: Basic theory; statistical methods for testing theories; in-depth knowledge of the quality of existing data; and extensive work on producing new kinds of data.”
The economics guru used creative statistical techniques to understand factors that influence people’s shopping habits, and made recommendations on how governments can improve on economic development. He used a number of equations to form a relationship between the decisions made by people in consumption and the income they earn. Building on the work of fellow Nobel Prize winner, Franco Modigliani and Milton Friedman in order to understand how income changes influence consumption changes. He seemed to be showing how increases in income influences consumption.
Born in Scotland Deaton attained his bachelors, Masters, and P.H.D at Cambridge University in 1975, and was subsequently a professor at Bristol University before moving to Princeton University in America. In 2007, he was elected president of the American Economic Associate and won the 2011 BBVA Foundation of Frontiers Award of Economics Finance and Management for his fundamental contributions to the theory of consumption and savings, and the measurement of economic well being.
Having also authored several books it is safe to conclude that he knows too well how income influences consumption. The long and short of his wisdom is probably that we must not spend far more than we earn, and even when income goes up, we should save wisely.
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