A new book by Nobel prize-winning economist Angus Deaton"feels like an existential crisis," writes Fast Company, "as he questions his own legacy — and wonders whether policies prescribed by economists over the years have unintentionally contributed to inequality" in America. Angus Deaton: People who have a four-year college degree are doing pretty well. But if you go to the people who don't have a college degree, horrible things are happening to them... The opportunities are getting bigger and bigger, but the safety net's falling further and further away. . . I think of it as much broader than income inequality: People without a BA are like an underclass. They're dispensable...
Fast Company: Why has Europe been able to avoid so many of these rises in inequality and "deaths of despair" and the U.S. hasn't?
Deaton: Anne [Case, my wife] and I wrestled with that in our book Deaths of Despair. One reason is that we don't have any safety net here... The other story is we've got this hideous healthcare system... we're spending [almost] 20% of GDP. There's no other country that spends anything like that. That money comes out of other things we could have, like a safety net and a better education system. And it's not delivering much, except the healthcare providers are doing really quite well: the hospitals, the doctors, the pharma companies, the device manufacturers. Not only does it cost a lot, but we fund it in this really bizarre way, which is that for most people who are not old enough to qualify for Medicare, they get their health insurance through their employer...
Fast Company : The theme of your new book seems to be something of an existential crisis for you as an economist. How much are economists to blame for some of these issues?
Deaton: [...] I think there are some broad things that we didn't do very well. We bent the knee a little too much to the Chicago libertarian view, that markets could do everything. I'm not trying to say that I was right and everybody else was wrong. I was with the mob. I think we thought that financial markets were much safer than they'd been in the past, and we didn't have to worry about them as much. That was dead wrong. I think we were way overenthusiastic about hyperglobalization. We had this belief that people would lose their jobs but they'd find other, better jobs, and that really didn't happen. So there are a lot of things that I think are going to be seriously reconsidered over the next years.
But he admits economists are short on solutions for economic inequality. "When they say, 'Well, what would work'" there's this uncomfortable silence where you feel foolish. Everybody's quoting [former Italian philosopher and politician Antonio] Gramsci [saying that] the old system is broken but the new system is struggling to be born. No one really knows what it's going to look like."
The book is titled Economics in America: An Immigrant Economist Explores the Land of Inequality. But in the interview Deaton still remains hopeful about America, calling it "a very inventive place," and noting that in the field of economics "there's always hope and there's always change; economics is a very open profession, and it changes very quickly."