The Deaton Review: the IFS inequalities project

The Institute for Fiscal Studies (IFS) launched a 5-year project yesterday to consider inequality. Funded by the Nuffield Foundation, the review is to be chaired by Nobel Laureate Sir Angus Deaton. Its formal title is Inequalities in the twenty-first century.

Deaton says that the use of the term inequalities rather than inequality is deliberate, highlighting the breadth of ambition of the project. This is helpfully reflected in the launch document’s initial consideration of not just income inequality, but also inequalities of health, in family life, between genders, between generations and of geography. Oddly, there is no in-depth discussion of wealth inequality, which is in many ways more pernicious than income inequality. One hopes this is more a reflection of a wish to ensure things other than purely financial measures were given due weight than an ignoring of this crucial issue. Certainly the word wealth is mentioned several times even if it is not discussed.

From this blog’s perspective particularly welcome is that fairness is considered specifically. As the launch document rightly states: “There is ample evidence that people’s perceptions of inequality depend on what they think is fair.”

In this context, it is highly significant that Deaton declares that the review is aiming to understand what bothers people about inequality rather than just spend time considering datapoints loved by economists. He also clearly shares this blog’s view that democratic capitalism is under threat, because of inequalities (he says), or because of unfairness (in my view).

The launch document goes on to say: “to understand whether inequality is a problem, we need to understand the sources of inequality, views of what is fair and the implications of inequality as well as the levels of inequality”. Perhaps tellingly it leaves the following question hanging: “what if inequalities derived from a fair process in one generation are transmitted on to future generations?”.

This is an ambitious project. We will watch with interest.