Page 29 - Ekonomija i Biznis_noemvri 2015.indd

Angus Deaton, Princeton University Professor, USA, Nobel Prize winner for economics for 2015 РУБРИКА

Unexpected changes in current The growth of income in poor It is important to measure poverty
income do not have only households in India is more directly, by collecting data about
temporary and short term effects, reflected on the growth of the standard of living of poor
but also have lasting, permanent aggregate food consumption, people, rather than to assume
effects, which means that shocks and twice less on the growth of that the income of poor people
on current income change the consumption of calories increases with the same rate as
permanent income as well the average.

holds can make different rank closer to reality, which provides shortcomings of the mathemati-
lists about the importance of a more reliable aggregation per cal model, such as the exclusion
specific goods, an important se i.e. a collection of different of another important factor, be-
question is how to formulate the individual structures of prefer- sides prices and income, rather
mathematical function whose ences in a single structure of a than in the fact that consumers
form would be sufficiently gen- representative consumer. This is do not behave according to the
eral to encompass the subjective important because it facilitates principles of rational choice.
differences in the raking of differ- the interpretation of the statisti-
ent consumers, while being suffi- cal data obtained with an empiri- Consumption can also be re-
ciently representative, i.e. reflect cal examination of the consump- viewed from a point of view of
the behavior of an imagined so tion of households from the real the dynamics, i.e. its changes
called representative consumer. world. Deaton and Muellbauer over time. In such case, income
themselves also apply their mod- is no longer constant: it changes,
Deaton and Muellbauer (1980) el of consumption on the statis- thereby the budget limitation of
set a system of equations which tical data about the households the consumer changes as well.
can determine the optimal struc- in Great Britain. Their analysis The functional dependence of
ture of expenditures for the con- shows that the structure found consumption in regard to chang-
sumption according to separate in the data does not confirm the es of income over time – so called
groups of goods which would assumptions that the theory is consumption function – becomes
be selected by a representative based on. However, Deaton con- part of the macroeconomic anal-
household. Their scientific con- siders that the cause for such ysis ever since Keynes. Deaton
tribution is that they propose a a discrepancy between theory intensively works on this field of
form of mathematical function and empiricism again lies in the analysis of consumption as well.
which is more general, thereby In the 80’s of the 20th century

Deaton’s paradox: it seems that in the real world, con-
sumption shows greater stability that the theory actu-
ally implies

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