## A Wide-Angle View of Inequality

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**Canonical URL:** [A Wide-Angle View of Inequality](https://www.imf.org/-/media/files/publications/fandd/article/2023/september/book-reviews-angus-deaton.pdf)

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### Book overview and authorship
- Title: ECONOMICS IN AMERICA — An Immigrant Economist Explores the Land of Inequality
- Author: Angus Deaton
- Publisher details as presented: Princeton University Press, Princeton, NJ, 2023, 280 pp., $24.95
- Basis: Deaton’s writings for a general audience organized around the theme of inequality in America.
- Perspective: Deaton writes as an immigrant economist from the Cambridge (England) tradition, who moved to the United States in the 1980s and won the 2015 Nobel Prize.

### Central concerns and framing of inequality
- Core theme: rising inequality in incomes, a gulf between “elites” and the general population, and worsening social outcomes for those left behind by globalization, policy, and technological advancement.
- Specific social outcome noted: rising mortality among less-educated workers, described previously with Anne Case as “deaths of despair.”
- Intergenerational dimension: inadequate attention to climate change is viewed as a form of inequality because it neglects the welfare of future generations.
- Broader welfare lens: Deaton argues the economics profession should widen its view of welfare—beyond income and wealth to encompass meaningful work, family, and community—reflecting Adam Smith’s intent.
- Equity vs. efficiency: Economists should balance a tendency to focus on efficiency with more attention to equity and to government’s potential role in addressing inequality.

### Markets, competition, and pre-distribution
- Theoretical point: Emphasis on Kenneth Arrow’s notion that markets must be competitive—not merely “free”—to deliver socially acceptable outcomes.
- Market failures highlighted: monopolies and monopsonies can artificially raise prices or reduce wages, producing outcomes that consistently penalize certain population segments.
- Pre-distribution focus: Policymakers should focus not just on redistribution but on “pre-distribution” factors (education, health) that influence how markets determine income distribution before taxes and transfers.

### Policy prescriptions and sectoral analysis
- Education and health: Priority on factors such as education and health to influence market-determined income distribution.
- Minimum wages: In some circumstances, higher minimum wages can boost low-income workers’ well-being without reducing employment.
- Health care market failures:
  - Asymmetric information about prices and procedures impedes market competition.
  - Overreliance on market forces can lead to high health care inequality and prices and low quality compared with other rich countries.
  - Deaton urges government intervention to reduce health care costs and poverty and to ensure more reliable retirement benefits.
- Pensions:
  - Preference for communal over individual financing and provision of pensions.
  - Rationale: market risks are high; most people lack the wherewithal to manage risks; miscalculation or bad luck can have catastrophic consequences.
- Domestic and international poverty:
  - Governments should pay attention to poverty at home—owing to obligations to their own citizens who pay taxes, work, and serve—and to poverty abroad.
  - Aid is not seen by Deaton as a durable solution.

### Social and labor-market frictions
- Adjustment to shocks: Deaton notes that real-world adjustment to shocks is harder than policy discourse often assumes.
- Structural inequalities: Educational and racial inequality are highlighted as stark features of the social landscape.
- Labor-market barriers:
  - Workers displaced by global forces or technology often struggle to find work because of college degree requirements.
  - The prohibitive cost of housing in large cities exacerbates difficulties for displaced workers.
- Social safety net: Described as frayed, producing greater hardship for the relatively poor and less educated.

### Criticisms and assessment
- Critique of economics: Deaton’s criticisms of the economics profession may strike some as sweeping and may overlook intellectual and policy flexibility developed during and after the global financial crisis.
- Specific mention: Policy flexibility including work by the IMF under then-economic counselor Olivier Blanchard is noted as part of that post-crisis evolution.
- Overall reviewer judgment: The book is informative (wide range of subjects), compelling (Deaton’s authority and experience), and enjoyable (Deaton’s flair for writing).

*Review by Vivek Arora, Deputy Director of the Independent Evaluation Office of the IMF; Finance & Development, September 2023.*

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_Source: https://www.imf.org/-/media/files/publications/fandd/article/2023/september/book-reviews-angus-deaton.pdf_