Deaton on health, wealth, poverty, and inequality

by Russ Roberts on November 18, 2013

in Inequality, Podcast

Angus Deaton is this week’s EconTalk guest talking about his book, The Great Escape which I enjoyed very much. Here is an excerpt from our conversation:

Russ: Now, let me raise an issue that we’ve talked about before on this program, that I think you mention in this book very briefly. But to me it’s an important issue that’s been neglected in the inequality data, which is demographics. Most of the demographic change, most of the inequality data that you see, is over households and over families. And when you do that, and you compare people over time, you are taking different snapshots at different points in time when there are dramatic different demographic changes–there have been in the United States certainly in the last 40 years. You are going to mismeasure. You are going to attribute some of the changes in family structure to the economic system. And I suspect that the changes in the world that are delayed or accelerated–the fact that all nations aren’t changing at the same rate in this phenomenon–is because their divorce rate isn’t quite, and their family creation rate is different from ours. Just for an example, the number of households in the United States with no earners or one earner has changed dramatically over the last 30 years.

Deaton: Right.

Russ: That’s going to dramatically affect–there could be economic reasons for that. Some of them have to do with the effectiveness of the economy. But some of them have to do with social changes that have nothing to do with the economy.

Deaton: Right. I agree with that. I talk about that a little. I think that demographic change is a very important part of the increase in family inequality. One of the things that people don’t I think widely know is that if you were to go back into the 1950s or 1960s, the sort of ‘Madmen’ era, as it were, the high-earning men were married to highly educated women. But those highly educated women didn’t work. So the higher earnings the man had, the less likely was his wife to work in the labor force. Although the last 60 years it’s completely reversed, to the point where the high-earning men and women are now married to spouses who are also high-earning men and women. And that has the obvious effect of, in the 1950s that dampened down inequality because the rich people were paired off with people who weren’t earning so much or weren’t earning anything at all, and now you are pairing, you know, a couple of lawyers who are earning $300 grand each, and that’s sort of powering up the top. And the other part which you mentioned is the big increase in, you know, people in one-person families, or one-adult families, who are down at the bottom there. So those changes are just tremendously important. And I think one of the things we’ve realized: it is very important we shouldn’t think of an inequality in terms of a single number. You just have to parse it out in different parts of the income distribution. What’s happening here, what’s happening there, and so on. It’s a very complex picture.

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