Exploring “the land of inequality” with a Nobel Prize-winning economist Sir Angus Deaton

[MUSIC PLAYING] DAN RICHARDS: From the Watson Institute for International and Public Affairs at Brown University this is Trending Globally. I'm Dan Richards. This week, we're doing something a little different. We're going to air part of another podcast from the Watson Institute, the Rhodes Center Podcast, hosted by political economist and Watson professor and Trending Globally frequent guest Mark Blyth.

Mark recently had on his show the Nobel Prize-winning economist Sir Angus Deaton. For those of you who don't know Angus Deaton, in Twenty Fifteen, he and his wife and research partner Anne Case published a paper that revealed something startling. In the early two thousands and twenty-tens in the United States, there was an increase in the mortality rates among white middle-aged men and women. For the first time in a century over the course of multiple years, the life expectancy of this demographic declined.

Deaton and Case attributed this to a confluence of factors, including economic stagnation, social isolation, and the opioid crisis. In describing what was happening to this demographic in America, they used a phrase you have probably heard, "deaths of despair." That paper and then their follow-up book, Deaths of Despair and the Future of Capitalism, became central texts as people were trying to make sense of America's fragmented economy and society in the Trump years.

Angus Deaton's newest book is called Economics in America-- an Immigrant Economist Explores the Land of Inequality, part memoir, part critique of the field of economics as he sees it. The book takes a broader view of the issues brought up in Deaths of Despair. In this conversation, Mark And Angus Deaton discuss the book.

They also explore why so many economists ignored the issue of inequality for so long in our society and why in the last decade or so that started to change. And if you want to hear the full unedited version of this conversation, you can listen to it by subscribing to the Rhodes Center Podcast. But without further ado, here are Mark Blyth and Angus Deaton.

MARK BLYTH: Sir Angus, welcome to the podcast.

ANGUS DEATON: Thank you very much. I'm delighted to be here with a fellow Scotsman.

MARK BLYTH: I want to start by asking you, why did you want to write this book? It's a book about your field, but it's also autobiographical. It combines the two. What was the motivation for writing this book?

ANGUS DEATON: Well, I mean, I like to kill two birds with one stone. That always seems like an economical thing to do. So it's sort of a portrait of the profession.

And it's also true that as I've gotten older and maybe this is just what happens to grumpy old men, [LAUGHS] I become a little more skeptical as to whether economists have been going in the right direction and that some of the things that we started with the more philosophical approaches that characterize Smith and Marx and Mill and all the way up to Keynes have been lost and that we've really lost something here and we're taking a too narrow focus of what it means to be an economist and that too narrow focus may actually be doing harm.

MARK BLYTH: One of the areas you write about in terms of what economics has succeeded but they were late to the game. A more recent story at least is inequality. So of course, Piketty had that blockbuster a decade ago.

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DAN RICHARDS: Mark's referring there to the French economist Thomas Piketty, whose Twenty Thirteen book Capital in the Twenty-First Century helped bring wealth inequality into the center of economic debates. But as Mark put it this transition did not happen overnight.

MARK BLYTH: There was a lot of serious work there but it really wasn't a mainstream thing. Now when you go to the big economics meetings, a huge selection of panels and topics are about inequality. Why do you think it took economics a long time to really pivot to this as a research area?

ANGUS DEATON: Well, for a long time there wasn't that much happening. If you take postwar up until about Nineteen Seventy-Two, there wasn't really much increase in inequality. It was pretty flat. And my friend and colleague Alan Blinder wrote his PhD thesis on income inequality and its effects on consumption patterns and he published the results in the Journal of Political Economy, which was one of our top journals and [LAUGHS] you couldn't really find anything.

And there's this famous phrase that studying inequality is like "watching the grass grow." People get bored with that pretty quickly. It wasn't a social problem that was in our faces during that period. There was also one of the dominant schools in economics, the Chicago School.

DAN RICHARDS: Dan here again. And I promise I'm not going to do this too often. But the Chicago School refers to a school of thought in economics that was very influential in the United States in the second half of the twentieth century. It prioritized deregulation of the economy and the removal of government interference in the markets.

One of its most famous advocates was the University of Chicago economist Milton Friedman. And according to Angus Deaton, this school of thought, the Chicago School.

ANGUS DEATON: Even though it would admit the importance of looking at poverty, it never admitted the importance of inequality. Inequality is natural. We're all different. This is the way the world should be. Inequality is not a problem that requires solution and so on.

So for a long time, that was the dominant view. And you will still hear people saying that today. And Milton Friedman said we should abolish the estate tax. He thought we should encourage tax havens so that the government wouldn't get enough money to do bad things. And so the libertarian view, those views are still out there, but they're more of a minority than they were.

The other thing that's happened I think is Piketty and his students have certainly had a big effect here. And two of his-- if you like disciples or students or people who worked with him, Emmanuel Saez and Gabriel Zuckerman at Berkeley have done really sterling work in documenting what's happening to income and wealth inequality in the United States. So I think that's changed quite a bit.

MARK BLYTH: During that period between '75 and into the go-go '90s when we weren't seeing inequality as a social problem but it was certainly rising and we've spoken a little bit about this, there were societies that were dampening down inequality. They weren't necessarily becoming hopelessly inefficient in an open sense-- Scandinavia, et cetera. How did that type of comparative evidence not seem to impact particularly the American view of inequality?

ANGUS DEATON: Well, I think Americans are different. [LAUGHS] And there is this belief in America that's very strong that it's the land of opportunity and that land of opportunity doesn't require a safety net. You don't really have to look after people. You don't have to worry too much about the bottom because everybody has this opportunity.

That's not clearly in the data and that social mobility appears to be if anything somewhat weaker here than it is in other countries. So that factually seems to be false. On the other hand, people can believe what they want to believe. And there is a sense in which people came here to escape from oppressive governments. It's a very strong line here in the US. And I think it affects a lot of things.

One of the reasons why we have a pretend private health care system is because people believe they don't really want the government involved in it and people saying that's socialism [LAUGHS] where it's just policy that many people would approve of. So that's a deep current in America, I think.

MARK BLYTH: Going back to where we started. You talked about narrowness in economics and the need to go back and broaden it. What you call there, I believe-- I think you said, well, that's just an opinion or an interpretation. Surely that's part of what social scientists and economists in particular should offer to go if not beyond the data then to suggest what the consequences of these data are. Would you agree with that?

ANGUS DEATON: Oh, absolutely. But several things have happened in economics in particular and I talk a little bit about this in the book. It has gotten into this state where it won't accept almost any evidence unless it's done by a randomized controlled trial or it's done by some approximation to a randomized controlled trial.

Those methods are very good at looking at very small local narrow things. And these big questions like what is immigration do to society, what does overexpensive health care do to society become essentially unanswerable and so economists sort of walk away from them. And that's been a problem, too. Our stories are much more like the stories that historians tell and political scientists used to tell before they got bitten by this same bug.

[LAUGHTER]

And to some extent not acceptable in my profession anymore.

MARK BLYTH: But nonetheless the world seems to want those types of explanations to help them understand it.

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All right, we're back. In the second half of the interview, Mark Blyth and Angus Deaton turned to Deaton and Anne Case's work explaining the rise of what they called deaths of despair in Twenty-First-century America. What are deaths of despair you ask? Well, Deaton and Case found public health data showing that white middle-aged men and women were dying at faster rates in the two thousands and twenty-tens than they had in the decades prior.

For three years in that period, life expectancy among this demographic went down. That hadn't happened in roughly a century. They attributed this to a variety of factors, including the opioid crisis, economic stagnation, and social isolation. Many of these deaths came from drug overdoses, alcohol-related diseases, and suicides.

And in attempting to make sense of this data they ended up telling a bigger story about America's economy and society and it struck a nerve. As one reviewer of their Twenty Twenty book wrote, "Deaton and Case's deaths of despair framework became a quote, 'Rorschach test for journalists, opinion writers, and even many social scientists for what they believe ails America today.'" It also opened them up to criticism, as you'll hear. All right, back to Mark Blyth and Angus Deaton.

MARK BLYTH: I want to turn now to your work with Anne Case with Deaths of Despair. What turned you on to this? Because it seemed to me as just a consumer of this literature, there have been people doing public health and working on this but no one had grasped the nettle in the way that the two of you managed to and actually bring it to public attention. What was it that turned you on to this and said, oh hang on, there's something going on here and it's really not quite right?

ANGUS DEATON: Pure accident. [LAUGHS] Also, I think not belonging to the public health community was probably an advantage and that we came in with fresh eyes. And the concern that dominated much of the public health literature was the difference in mortality rates between Blacks and whites. And that's still the way health equity is often defined. And there was less attention to educational differences.

At that time when we first discovered there was this important group, this midlife non-Hispanic whites for whom their average mortality rate was going up, we thought we must have made an error because if that were true if that had been true, then everybody would have known about it. So we spent a lot of time checking [LAUGHS] our numbers.

And secondly, we thought, well, if it's true, someone must have written about it. It's got to be there. And so we did a big literature search. And what was in the literature was a certain amount of rejoicing over the gap between Blacks and whites getting smaller justified happiness over that. But no one seemed to have noticed that part of the contribution to that was not just falling mortality rate among Blacks but rising mortality rates among whites.

And we got a lot of pushback. Anne had people yell at her for saying how dare you study mortality of whites. This is just not an important problem.

MARK BLYTH: Wow.

[LAUGHTER]

ANGUS DEATON: So the public health was pretty heavily invested in these racial differences in health. One of the reviews says nowhere in this book will you find a chart showing Black mortality higher than white mortality for all of American history. It's one of the first figures and one of the chapters.

So a lot of people approached this work with what you and I would call blinkers and what Americans called blinders.

[LAUGHTER]

And it was shortly after we published the first piece that the CDC discovered that life expectancy at birth was actually falling and had fallen for a couple of years. So that's changed, but the public health system in this country is very slow to process data. So these things have been going on for a while before you actually find them.

MARK BLYTH: When you talk about it in the book you kind of link it to a broader political current that we call populism, MAGAism, Trumpism, et cetera. It's another symptom in a way of a population that used to be important, or at least important to the economy of the United States and who are increasingly marginalized and Deaths of Despair become, if you will the reaction to that. Do you see the two of these things as tied together?

ANGUS DEATON: Oh, very much so. These are people who've lost political power. They used to have unions. They don't really have unions anymore. The unions in Washington-- we've talked about lobbying already. The unions in Washington spend less than Alphabet spends. That's all the unions taken together.

So there's been a real loss of civic belonging for people without a four-year degree and, of course, the doctors prohibit foreign workers coming and taking their jobs, whereas the people who work in car factories have to live with that all the time. So there's a real sense in which I think we've maltreated those people and the educated elite that's been running the country hasn't done a very good job of recognizing the problems.

And that takes us back to something we talked about at the beginning. It's not just money. It's the loss of community, it's the loss of work, it's the loss of respectability, if you like, the loss of status, all of these things wrapped up. But just to make it clear, that's an interpretation. It's not something in the data and a lot of people object to that.

But as I say that's the story we're telling and not everybody buys into that. The alternative story is just an opioid crisis. We're past that. Now, of course, the deaths are still going up, but there were some bad pharma and then some bad drug dealers and once we get this controlled. And the answer we pose to that is, well, societies don't have opioid crisis unless there's some deep social malaise going on in the first place.

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DAN RICHARDS: According to Deaton there's another thing that contributes to this malaise-- the pervasive idea that in the United States we live in a meritocracy, meaning broadly that if you succeed in this country it is because you earned, it and if you are struggling, well, it's your own fault.

Deaton and many economists and policymakers disagree with this idea and find it a destructive myth that perpetuates inequality. But as Deaton explained the idea of the meritocracy isn't only bad for people who are suffering, it's bad for those who are getting ahead, too.

ANGUS DEATON: I think the meritocracy is extremely corrosive and we were certainly influenced by Michael Sandel, a political scientist at Harvard. I mean, his story, the educated elite are self-satisfied because they did it all for themselves and they think the people who are not so educated blew their chances as it were. And the less educated A, think the game is rigged and they have a sneaking suspicion that the condescension from above [LAUGHS] may be right and they actually did blow it.

And that's a very unstable political situation because people get very angry and they're going to try to pull that house down. So for me, that's the real present danger today. We've built an economy of political structure in which these people have very little and it's not just material. The material they've not been doing very well either, but it's this huge number of people who are dying and are profiting out of that.

So even if you don't feel warmer towards the people [LAUGHS] in your nation, you want to be careful about how you treat those people because if they feel the system is rigged against them they stop believing in democracy because what's it done for them recently. And everything, including you're not going to be doing much in the way of foreign aid if the people at home are coming at you with pitchforks.

MARK BLYTH: One quote from halfway through that really struck me here was on page 95 you said the following about basically the world that we have built over the past 30 years. "In retrospect, it is not so surprising that free markets or at least free markets with a government that permits and encourages rent-seeking by the rich should produce not equality but an extractive elite that predates on the population at large.

That's a very strong line and a pretty strong condemnation of where we've ended up. What brought you to that evaluation because it's not exactly what we'd expect from a quote unquote, "mainstream economist?"

ANGUS DEATON: Well, maybe I'm not a mainstream economist anymore.

MARK BLYTH: Maybe we need to get rid of that word mainstream. I don't actually know what it means, though.

ANGUS DEATON: No, no, no. I think I have all the credentials for a mainstream economist, but a lot of economists might tell you I've gone off the rails. That quote I put it in a slightly-- I found this quote in a book by Andrew Koppelman, who was saying that if you live in a world which been hollowed out or in an economy that's been hollowed out where the state allows gigantic, behemoths, whether you call them trusts or big tech or something.

So you've got this very imperfect world which the US health care system would be an example of it, then you apply libertarian rhetoric to that. All you're really doing is licensing the plunder [LAUGHS] as it were because you say, well, all the health care system may be extracting a lot of money. It shouldn't be extracting, but that's what free markets do and we believe in free markets. And that's a terrible concatenation of things because it's just licensing this plunder.

If you read a lot about opioids [LAUGHS] and see what Purdue Pharmaceutical did, addiction is something that we ought to think very hard about letting corporations do to people because you can make a lot of money by selling addictive drugs and drug dealers have done that for a long time. Purdue Pharmaceutical discovered that, too. But it's all around us. And there are these court cases that were just announced the other day against Meta for selling addictive social media to kids.

The other thing in America now is you can't watch a sports game without being assaulted by betting companies. Cigarette is another obvious example. And our public policy on that has been to bolt the door with lawsuits after the horse has bolted. So telephones, cigarettes, alcohol. I mean, there are huge numbers of people dying of alcohol poisoning. These are very profitable for firms because once they get you hooked they don't have to advertise anymore, you just come begging for more.

MARK BLYTH: You would think that economics would be a little bit more ahead of the curve on this one, though, because you can't have creative destruction. You don't really have to do innovation. You really are just the stationary state firm and you sit back and then you just pull in the pennies, which is not where you want to be. This is not why we embrace capitalism and free markets. In fact, it's a real perversion of it.

ANGUS DEATON: Well, the big tech companies are not all that old and you could argue there was a lot of creative destruction when they got started. And the problem with creative destruction is that the people who win round one then turn around and try to stop anyone else winning round two. And I think it's very important that antitrust authorities do something about that. So that's another thing, which I think it's there in economics is just we've turned a blind eye to it over the past thirty, forty years.

MARK BLYTH: Close to the end of the book, I think it's the penultimate chapter, you directly address did economists essentially caused the financial crisis. What's your take-home on that? Should they be in the dark? Are they guilty?

ANGUS DEATON: I've never accused them of being the only players in this by any manner of means. And I think the influence of Chicago economics was very strong and not just on the right. If it was just one party and the other political party was on board with the unions and trying to break the pie a little more evenly, then that would be better than it's been.

And so you get all sorts of economists who worked for Democratic administrations who were completely convinced that the power of the market-- you didn't have to do too much because the market could look after itself.

And actually, I don't want to harp on Larry Summers, who I admire enormously and I think the book makes that clear. He wrote on a piece in the New York Times after Milton Friedman died which had these famous words "We're all Friedmanites now," and this was written about a year before Lehman Brothers crashed.

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DAN RICHARDS: Thanks to people like Sir Angus Deaton and Anne Case and many others, social and political issues have started to be taken more seriously by economists. Society-wide feelings of frustration, despair, loss of meaning. They might be hard to quantify but that doesn't mean they don't exist and they don't matter and that economists shouldn't try to better understand them.

It's a big change for many people in the field of economics. But Angus saw a promising sign of this change at one of the centers of the economic mainstream, the International Monetary Fund.

ANGUS DEATON: I got an invitation to go and talk about this book down there. And I said to them, do you know what's in the book? And they say yes, we know exactly what's in the book. Why do you think we're inviting you to come and talk about it? So that's a real change.

It's also true that major important politicians have been very much on board with the Deaths of Despair story. So Janet Yellen promoted this. She gave us talking slots. She talked about it herself. Christine Lagarde when she was at the IMF was very enthusiastic and very supportive, too. So the world is changing, I think.

MARK BLYTH: It takes time but you can pivot the battleship eventually.

ANGUS DEATON: Right. It takes a long time.

MARK BLYTH: Perhaps then the code on the whole thing is that economics may be changing but it needs to remember history and it needs to remember sociology.

ANGUS DEATON: Absolutely. And philosophy. What makes people tick is not just money and philosophers have always known that and economists I think have forgotten it.

MARK BLYTH: With that, it's been great to talk to you, Sir Angus. A real pleasure. I really enjoyed the book. I hope tons of people read it and I hope many listen to this podcast, too.

ANGUS DEATON: I hope so, too. Thank you very much, Mark. It's been a lot of fun talking to you.

DAN RICHARDS: If you like this episode and want to listen to a longer version of the conversation, you can follow the link in our show notes or subscribe to the Rhodes Center Podcast wherever you listen to podcasts.

This episode was produced by me, Dan Richards, and Zach Hirsch. If you like Trending Globally, please leave us a rating and review on Apple Podcasts, Spotify, or wherever you listen. And if you haven't subscribed to Trending Globally, please do that, too.

If you have any ideas for guests or topics, send us an email at trendingglobally@brown.edu. Again, that's all one word, trendingglobally@brown.edu. Thanks so much for listening. We'll be back in two weeks with another episode of Trending Globally.

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