The Nobel laureate Angus Deaton discusses extreme poverty, opioid addiction, Trump voters, robots, and rent-seeking.
Angus Deaton studies the grand questions not just of economics but of life. What makes people happy? How should we measure well-being? Should countries give foreign aid? What can and should experiments do? Is inequality increasing or decreasing? Is the world getting better or worse?
Better, he believes, truly better. But not everywhere or for everyone. This week, in a speech at a conference held by the National Association for Business Economics, Deaton, the Nobel laureate and emeritus Princeton economist, pointed out that inequality among countries is decreasing, while inequality within countries is increasing. China and India are making dramatic economic improvements, while parts of sub-Saharan Africa are seeing much more modest gains. In developed countries, the rich have gotten much richer while the middle class has shriveled. A study he coauthored with the famed Princeton economist Anne Case highlights one particularly dire outcome: Mortality is actually increasing for middle-aged white Americans, due in no small part to overdoses and suicides—so-called “deaths of despair.” (Case also happens to be Deaton’s wife. More on that later.)
Deaton sat down with me after his speech. We talked about whether poor people are better off here or in low-income countries, the moral ambiguities of companies making money off of Medicaid-financed OxyContin prescriptions, which is the nicest conservative think tank in Washington, what is going on with white people and mortality, and the charms of former-President Obama. The transcript below has been edited for concision and clarity.
Annie Lowrey: In your speech, you said something provocative: That you think you might be better off living below the World Bank’s extreme poverty line in a country like Bangladesh rather than here. I wouldn’t think that would be true.
Angus Deaton: I’ve been struggling with it. There’s this terrific book by Kathy Edin called $2.00 a Day, with Luke Shaefer. Then there’s Matthew Desmond’s book, Evicted, which I was very impressed by. I was trying to think: The World Bank does collect these income numbers—now, they’ve started doing this for the whole world because the [sustainable development goals] are supposed to cover everything—and in the United States, unlike other western countries, there are 3 million people who are under this limit.
Lowrey: I figure the infrastructure—having access to hospitals and roads, having access to education for your kids, to programs like S-CHIP, again for your kids, to clean water…
Deaton: A lot of these programs have been turned into block grants, like [the Temporary Assistance for Needy Families, or welfare, program], and it’s very hard for people to get them. And life expectancy in much of Appalachia is below life expectancy in Bangladesh.
That’s not quite an answer to your question. The trouble is, I don’t know how to value these things. The people on the right consistently value them at what they cost. They say: These poor people are not poor at all because they get all these millions of dollars of Medicaid! But you can’t feed your kids with that. You can’t find a place to live with that.
Part of it is you throw up your hands and say poverty is very complicated and you can’t make these international comparisons! But if you had to choose between living in a poor village in India and living in the Mississippi Delta or in a suburb of Milwaukee in a trailer park, I’m not sure who would have the better life. That’s the point I’ve been pushing.
Lowrey: Have you spent a lot of time in Kentucky or West Virginia or rural Nebraska?
Deaton: No, but I spent five weeks every summer in Montana. And that’s been an eye-opener.
You get these people who are really quite poor, in many cases, who are very right-wing. They’re very anti-government and if you talk to them about why they’re anti-government, you get pretty persuaded pretty quickly. That wolf is eating my cow and I need to get a bureaucrat on the line before I’m allowed to shoot it! And that’s my year’s income! The history of Montana has been of the government giving land grants to people that could not possibly turn it into decent farms. And that destroying their lives. So they don’t see the government as something that’s out there to help them.
Someone asked me the other day when I was giving a talk a really interesting question. They said, “If you abolished the government, would America be more or less equal?” Because there’s all the equality that comes from redistribution but there’s all the inequality that comes from rent-seeking. And it’s not clear to me which one.
Lowrey: Your work with Professor Case does seem to help answer the What’s the Matter with Kansas? question about why people don’t want the government, or trust that the government will make their lives better, because in some cases it hasn’t.
Deaton: It really hasn’t! I was really impressed by Arlie Hochschild’s book too. Did you read that one?
Deaton: Hillbilly Elegy? It’s good, also because he comes at it from a very challenging set of hard-right perspectives, whereas Hochschild has to struggle to get into a position that comes naturally for him. He’s one of them!
Lowrey: If you were to design policies to help with deaths of despair, what would you do?
Deaton: I’d tackle opioids for a start. I mean, that’s the easy bit. I don’t think think a lot of those deaths would have taken place anyway. People who die of opioid overdoses are not trying to kill themselves. It really is this business where if you relapse, you die. And that’s not true for alcohol or other things.
Lowrey: I find the race and opioid abuse data fascinating, that idea folks of color are less likely to get prescribed opioids, so you have a racial division in addiction.
Deaton: We’ve tried to stay away from that. It’s inflammatory and it’s not entirely clear what’s going on. There’s also been an argument that pharmacies in inner cities won’t stock them, maybe because they’re afraid they’re going to get held up. It’s a plausible story too. I don’t know though.
Lowrey: You have made the argument that OxyContin deaths are deaths caused by rent-seeking. Talk me through it.
Deaton: I don’t know if you read Sam Quinones’ book, which is terrific, called Dreamland. It’s a wonderful book and he spent a lot of time in some obscure part of Mexico where a bunch of people had not been selling drugs before and took to selling drugs and had a much better delivery system. Sort of like Walmart of drugs! They’d deliver to your house and give you discounts, and they wouldn’t use guns. At the same time, he’s contrasting this with OxyContin and the pharmaceutical companies. The parallel is that here are two sorts of drug dealers. And one is doing it under the license of the United States government.
A lot of the drugs that were pushed in the early phase were being prescribed to people who were poor enough to be on Medicaid. A lot of these people were addicted to OxyContin—Sam actually describes a town in Indiana where the currency is OxyContin units. They’ve stopped using money and they’re using grams of OxyContin!
Lowrey: It’s not a bad currency, right? Easy to carry around. Stable price. Fluid market.
Deaton: There’s enough of this being prescribed for every American to have a supply for a month! So it’s not like it’s scarce. Nicholas Eberstadt makes this very cute remark about how this gave a whole new meaning to “dependence on government.” It’s a very nice essay. Eberstadt tries to be the nicest of the AEI guys.
Lowrey: AEI is filled with teddy bears!
Deaton: If you talk to Arthur Brooks, it’s all about making the world less poor! I’m not sure whether a lot of his donors buy into that.
To come back to the link, Medicaid is prescribing OxyContin, or paying for it. Eberstadt had said this gave a whole new meaning to “dependency on the government.” These people are dependent and dying, they’re not the beneficiaries! If you follow where the money is coming from, the money is coming from Medicaid to the Sackler family, whose name is on every public building in the land! They’re one of the great families. There’s the Sackler Auditorium, the National Academy of Sciences is all Sackler-ized. And he got rich from inventing direct-to-consumer advertising of pharmaceuticals. His company is now Purdue Pharma, which was in some trouble until they came up with OxyContin. And they said, “Hey, let’s get an FDA approval for heroin!”
That’s something that someone needs to write about: What’s the political economy of the Food and Drug Administration? The argument has always been from the right that it should be abolished because it’s stopping the approval of prescription drugs.
Lowrey: Right, Trump says that.
Deaton: Peter Thiel apparently has argued for that too. But [the Nobel laureate in economics] George Stigler argued a long time ago that one of the worst things about regulation is that it gets captured by the people who are being regulated. My guess is that the FDA is acting pretty much in the interests of the pharmaceutical companies, not the other way around. Or at least that this is an equilibrium that they’re very happy about.
The FDA could say that OxyContin could only be prescribed in hospitals, which is what happens in Britain. But then you are back to political economy.
Lowrey: To jump around a little, I am curious what you make of the secular-stagnation thesis.
Deaton: It just seems to me a huge puzzle that when you talk to all these business people, you talk to CEOs, they all tell you that innovation is so rapid and so terrifying, even for them, never mind their workers. Then, at the same time, it’s not showing up in the productivity statistics. And some people think it’s about measurement, but I don’t think that stands up to scrutiny.
These guys, including Marshall Reinsdorf, who’s one of the best of the measurement guys, said: Okay, we mismeasure, but are we mismeasuring more than before? There’s no evidence at all that it’s worse than it was.
Then there’s the Bob Gordon thesis, which I don’t believe for a minute. That 400-page book! It’s this bizarre argument about non-repeatable innovations. I thought that was the definition of the word! I just don’t understand it.
Lowrey: How do you think about the automation threat versus the offshoring threat? It seems to me that offshoring only happens to a country once. But automation continues, and is coming for everybody.
Deaton: I don’t know. I haven’t thought about it enough. I don’t know. I don’t even know what a robot is. We all talk about robots. But when Bill Gates talks about taxing robots, does he mean taxing the Microsoft software that is doing things that a lot of people used to do?
Lowrey: It struck me as a provocative thing to say that would be impossible to actualize.
Deaton: That’s right. It’s clear that in a lot of people’s heads, a robot is a thing that looks like a human. Like R2D2.
Lowrey: Were you surprised by the Trump win?
Deaton: I was. I think everybody was. I wasn’t as surprised as some.
Lowrey: Have you spoken with anyone on Team Trump?
Deaton: Nope. Is there anyone to speak to?
Lowrey: What was it like meeting President Obama?
Deaton: The Nobel thing is like dying and going to heaven for a while. It’s like being transported to a fairyland. But this was one of the more fairyland parts of the fairyland experience. There were four of us who were U.S. citizens, sitting there in the waiting room. Have you been there? There’s a waiting room outside outside the Oval Office, which has Norman Rockwell drawings of people waiting outside the Oval Office. It’s really cool.
We were in alphabetical order. Word came from within that Anne and I were to go in first. He opened the door himself, and I shook his hand and I said, “I’d like you to…”
And he reached over and he said, “Professor Case needs no introduction to me. I am a great fan of her work.”
When she left she said, “I think I’m in love!” It was just fantastic. He’d read our dead-white-people paper down to the footnotes.
He was careful to pivot and recognize Anne, who was standing in the back of the room. When the paper came out, it was a about week after I won the Nobel prize. The paper is Case and Deaton! The worst of [the press reaction were the stories describing us as] “Nobel Laureate Angus Deaton and his wife who is also a researcher.”
Lowrey: Oh gosh, that must have been infuriating.
Deaton: Some people apologized. A few people just brushed it off. You guys ought to be better than that! I’m sure you are.
Lowrey: I try to be very, very careful.
Deaton: But Obama could not have been nicer. In that situation, it was just fabulous. It was like pouring balm all over her, by talking about the work. And also he recognized very explicitly that of the four of us, three of us were immigrants, and the other one was a son of an immigrant.
Lowrey: What do you make of the current anti-immigrant sentiment, in light of your work?
Deaton: The people who hate immigrants are people who have never met them! People in Los Angeles like immigrants.
I’ll tell you another interesting thing: There’s only one Congressman in all of Congress who called us up to make an appointment to talk to us about the dying white people, because they were in his constituency and he was really concerned about them. Guess who it was.
Deaton: Keith Ellison! I was really impressed.
Lowrey: Your work speaks to this question of whether elites are out of touch with folks in West Virginia who might see their family members dropping dead.
Deaton: I think that’s true, but there’s another part of the story that’s more productive in some ways, which is that those people don’t have much chance to join the elites themselves. There are no trade unions anymore. And there are almost no working-class people in Congress. And the unions aren’t a political force in the way that they once were.
Lowrey: You mentioned that in a world without growth things become zero-sum.
Deaton: It is zero sum! If you have two or three percent of growth a year, there’s not a lot of goodies to be given away without goring someone’s ox. And I think a slow-growth world incentivizes rent-seeking. This rent-seeking didn’t use to take place. NABE would have had its conference in New York, not in Washington! All these business bureaus and trade associations were in New York.
Steve Bannon is apparently really caught up on rent-seeking. But we’ll see if they do anything about it. So far, they just seem to be licensing the rent-seekers.
This story originally appeared on The Atlantic.