On April 4, the Global Development and Environment Institute (GDAE) awarded the 2014 Leontief Prize to two leading economists who have deepened our understanding of the nexus between economic and social objectives. Dr. Angus Deaton of Princeton University has focused his research on health, economic development, and household behavior. Dr. James K. Galbraith of the University of Texas at Austin has worked to improve our measurement and understanding of inequality in the world economy.
Speaking to an audience of more than 100 in the auditorium at Tufts’ Fletcher School, GDAE Co-Director Bill Moomaw opened the event with background on GDAE and the Leontief Prize. The annual award, in memory of Nobel Prize-winning economist Wassily Leontief, recognizes economists who combine innovative theoretical work, rigorous academic research, and real-world applications of their findings to the challenges of socially and environmentally sustainable development. He noted that this year’s award honors two economists who have distinguished themselves over years of diligent and creative work to extend the frontiers of economics in areas of great importance, health and inequality.
GDAE Co-Director Neva Goodwin then introduced both awardees, and stressed the importance of their work, noting that, “there is a growing awareness of how unequal wealth can translate into unequal political voice and power.” She detailed the work and accomplishments of both recipients, and offered her congratulations. (Watch Dr. Goodwin’s introductions of Dr. Deaton and Dr. Galbraith)
The Great Escape: Health, Wealth, and the Origins of Inequality
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.
Watch Dr. Deaton’s lecture
World Inequality: What we learned and why it matters
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.
Watch Dr. Galbraith’s lecture
To close the event, the awardees participated in a lively conversation with the audience regarding the role of government and corporations in inequality.
Watch the Question & Answer Session
Interview with Angus Deaton
Interview with James K. Galbraith