Tanvi Misra is a staff writer for CityLab covering immigrant communities, housing, economic inequality, and culture. She also authors Navigator, a weekly newsletter for urban explorers (subscribe here). Her work also appears in The Atlantic, NPR, and BBC.
Princeton’s Angus Deaton argues that the isolated rich often ignore, and even exacerbate, economic inequality.
Princeton University economist Angus Deaton received this year’s Nobel Prize in Economics because his work elevates the understanding of individual and household consumption and is key to devising policies aimed at boosting economic growth and reducing poverty, the Royal Swedish Academy of Sciences, which gives out the award, said in a press release.
Deaton’s vast body of research spans topics from the inequality within and between countries to the intersection of poverty and health, and also includes reviews of household poverty surveys. Here’s University of Michigan economist Justin Wolfers, writing in The New York Times Upshot blog, on why Deaton deserved to win:
More than any other economist I know, he understands that to get the big picture right, you’ve got to get all the small details right, too.
In its quest for the small details, Deaton’s work has often encountered a stumbling block in the form of rich, gated communities. His research in the 2000s, for instance, reviewed how poverty and consumption were measured around the world and found that people living in these communities often refused to participate in data-gathering surveys. Without data on gated income and consumption patterns, economists may not get an accurate sense of overall economic growth and the extent of inequality.
Here’s Deaton in a 2005 paper, explaining this phenomenon:
[I]n rich countries, the probability of response is negatively related to almost all measures of socioeconomic status, and though survey organizations in poor countries can usually collect data in very poor areas (albeit under difficult conditions), it is often impossible to penetrate the gated communities in which many rich people live.
People who live in these gated communities also appear in Deaton’s big picture of economic inequality. According to The Guardian, the Nobel winner recently decried “the trend for the world’s richest people to divorce themselves from government control by living inside gated communities and buying their own healthcare and police protection.”
Because these communities are spatially isolated from the negative health and social outcomes associated with poverty, they take no pains to solve the problem of inequality—and in some cases may even exacerbate it. Here’s an excerpt of Deaton’s argument from his 2013 book The Great Escape: Health, Wealth, and the Origins of Inequality, via Vox:
The very wealthy have little need for state-provided education or health care… They have even less reason to support health insurance for everyone, or to worry about the low quality of public schools that plagues much of the country. They will oppose any regulation of banks that restricts profits, even if it helps those who cannot cover their mortgages or protects the public against predatory lending, deceptive advertising, or even a repetition of the financial crash. 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.
In other words, those at the top of the proverbial ladder tend to “pull up the ladders” behind them, so that the next wave of people can’t climb up, Deaton explained in a 2014 talk at the Royal Society of Arts. “I think that’s happening in the United States today,” he said in that lecture. “Extreme inequality is becoming a very negative force.”