(MENAFN - Gulf Times) US-British economist Angus Deaton won the Nobel Economics Prize yesterday for ground-breaking work using household surveys to show how consumers, particularly the poor, decide what to buy and how policymakers can help them.
"By emphasising the links between individual consumption decisions and outcomes for the whole economy, his work has helped transform modern microeconomics, macroeconomics and development economics," the Royal Swedish Academy of Sciences said.
"To design economic policy that promotes welfare and reduces poverty, we must first understand individual consumption choices. More than anyone else, Angus Deaton has enhanced this understanding," it said.
Deaton, 69, is a professor at Princeton University in the United States and described winning the prize as a little like being struck by lightning.
"If you're my age and you've been working for a long time you know this is a possibility," he said on Princeton's website.
"But you also know there are a huge number of people out there who deserve this. That lightning would strike me seemed like a very small probability event. It was sort of like, 'Oh my goodness, it's really happening'."
Deaton was honoured for three related achievements: developing with his colleague John Muellbauer around 1980 a system for estimating the demand for different goods; studies of the link between consumption and income that he conducted around 1990; and work he carried out in later decades on measuring living standards and poverty in developing countries with the help of household surveys.
He is "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", Tyler Cowen, an economics professor at George Mason University in Washington, said on his blog Marginal Revolution.
His research has shown how the clever use of household data can shed light on issues such as the relationship between income and calorie intake - increased income does indeed lead to more calories being consumed. It also showed the extent of gender discrimination within the family - girls are discriminated against when households have to tighten the belt.
"Deaton's focus on household surveys has helped transform development economics from a theoretical field based on aggregate data to an empirical field based on detailed individual data," the Academy said.
Deaton is optimistic about economic progress in the world. In his 2013 book The Great Escape he outlined how overall human welfare - especially longevity and prosperity - has risen spectacularly over time, even though the inequality gap between rich and poor has widened.
Speaking to reporters at the Nobel press conference by video link, Deaton said he believed poverty would continue to decline.
"I do foresee a decrease. I think we've had a remarkable decrease for the past 20-30 years. I do expect that to continue," he said, noting however that there were still 700mn extremely poor people according to the World Bank, "so we are not out of the woods yet".
Deaton said reducing poverty would for example resolve the current migration crisis which has seen more than 630,000 people landing on Europe's doorstep this year.
"What we see is the result of hundreds of years of unequal development ... that left a whole part of the world behind," he said.
"Poverty reduction in poor countries would solve the problem but not in the short term."
Deaton was born in Edinburgh, Scotland, and has taught at Cambridge University and the University of Bristol. He has been a professor of economics and international affairs at Princeton since 1983.
Earlier this year, he was elected a member of the US National Academy of Sciences.
He is the 76th winner of the economics prize, a discipline that has been dominated by Americans since it was first awarded in 1969.
A total of 55 laureates have been US nationals, including those with dual citizenship.
Deaton wins the prize sum of 8mn Swedish kronor ($950,000).
Deaton will receive his prize at a ceremony in Stockholm on December 10, the anniversary of the death of the prizes' creator, Swedish scientist and philanthropist Alfred Nobel.
The economics prize is the only Nobel not originally included in Nobel's last will and testament. It was established in 1968 by the Swedish central bank to celebrate its tricentenary, and first awarded in 1969.
The other prizes have been awarded since 1901.
The economics prize caps this year's Nobel season.
Last week, the two most closely-watched prizes, those for literature and peace, went respectively to Belarussian writer Svetlana Alexievich and Tunisia's National Dialogue Quartet, four civil society groups that helped rescue the only democracy to emerge from the Arab Spring. Page 26