Measuring and Understanding Behavior , Welfare , and Poverty

The work cited by the Prize Committee spans many years, covers areas of economics that are not always grouped together, and involves many different collaborators. Yet, like the committee, I believe that the work has an underlying unity. It concerns wellbeing, what was once called welfare, and uses market and survey data to measure the behavior of individuals and groups and to make inferences about wellbeing. Often, little more than counting is involved, as in the estimation of the fraction of the population whose spending is below a cutoff, or the calculation of the fraction of newborn children who die before their first birthday. Measurement, even without understanding of mechanisms, can be of great importance in and of itself—policy change is frequently based on it—and is necessary if not sufficient for any reasoned assessment of policies, including the many that are advocated for the reduction of national or global poverty. We are wise to remember the importance of good data, and not to neglect the challenges that measurement continuously poses. More ambitiously, estimation of behavior can elucidate mechanisms and causes, and help to make predictions about the effects of policy, providing a guide to policy improvement. Indeed, the analysis of consumer behavior with a view to measuring wellbeing has long been a basic task of economists. Although, as directed by the Committee, this article is about my own work, I shall try to set the work in the context to which it belongs, allowing myself liberal use of hindsight.