2014 Leontief Prize

2014 Leontief Prize
Awarded to Angus Deaton & James K. Galbraith

Dr. Deaton began his lecture noting Wassily Leontief’s critical view of the mathematization of economics, and he argued that researchers should focus on understanding the underlying phenomenon represented by data. His lecture summarized his recent book, The Great Escape: Health, Wealth, and the Origins of Inequality, by using the life story of his own father, who moved from poverty and poor health to relative wealth. He acknowledged that his father’s success, and any individual’s ability to climb the ladder, depends on a combination of luck, talent, and hard work. He argued that health inequality does not have to mirror income inequality; for example the childhood mortality in England in 1918 is roughly equal to that of Sub-Saharan Africa now, while the former was far wealthier then than the latter is today. In concluding his talk, he stated “The inequality that often comes with progress in health and living standards is itself a threat to the future…I think that climate change and inequality are the two great threats to our future.” He proposed that the appropriate response to inequality is individual participation and political activism.

Dr. Galbraith’s presentation focused on the macroeconomics of inequality on the world scale. He discussed examples of changes in income inequality in a variety of countries. For example, inequality across provinces in China peaked in the early 2000s, and has been declining since as the growth of advanced sectors has become more diffuse throughout the country.  Europe experienced a sharp decline in inequality following the 2008 financial crisis, due to depreciation of stocks held primarily by the affluent, but European inequality has since begun to rise again. Dr. Galbraith argued that as the share of the income accruing to the financial sector goes up, inequality rises, and when that share decreases, inequality decreases, but the public is not necessarily better off if the decrease is due to an economic downturn. Relying on the financial sector to generate growth poses two major difficulties: instability and an increasing concentration of wealth. In response to questions, Dr. Galbraith suggested that possible policy remedies for inequality included the estate tax and closing tax loopholes, rather than large increases in tax rates, which can encourage greater tax evasion.