Back in the late nineteen-nineties, I was working on a piece about the stock market and consumer spending, both of which were surging. Looking for a respected economist to provide a pithy quote backing up my thesis that rising stock prices were driving individual spending decisions, and that the stock-market bubble was likely to end badly, I called Angus Deaton, the Scottish-born Princeton University professor who has just been awarded this year’s Nobel Prize for economics.
I chose Deaton because, from my days as an economics student, I was familiar with some of his academic work. In 1980, with John Muellbauer, who is now a professor at the University of Oxford, he co-authored a book called “Economics and Consumer Behavior,” which, even today, I sometimes consult to check how much my brain has atrophied. In this instance, though, I had called the wrong man. Instead of a pithy quote, I received a lengthy lecture on the difficulty of estimating the so-called wealth effect, the perils of drawing conclusions about individuals from aggregate statistics, the lopsided nature of wealth distribution in the United States, and much else besides. As I recall, Deaton concluded by saying that he would need to see a good deal more data before reaching any conclusions about how the stock market was impacting the rest of the economy.