Atkinson and Public Economics: High Theory Contributing to Concrete Policy Analysis

Tony has greatly contributed to important issues in public finance. His contributions are not only of a theoretical nature, but also his work has been typified by a constant effort to engage with and inform public policy, something that he recognises as a fundamental role for economics and economists. Over many years, Tony’s research has addressed many different aspects of policy on taxation and the welfare state, and has often led and informed emerging debates. His work has influenced national governments, international organisations, and the policies pursued by supranational institutions, notably the EU.

Some of Tony’s early research made fundamental contributions to the normative theory of public finance—how best to design taxes to raise a given amount of revenue (Atkinson and Stiglitz 1972, 1976). (See also his definitive graduate textbook, Lectures on Public Economics, with Stiglitz (1980, republished 2015).) But the contributions to analysis of policy design for which Tony is probably best known are those about the welfare state, and, indeed, this was the subject of his first book (Atkinson 1969a). This research has had an enormous impact, and Tony is recognised as the world-leading scholar in this area.

Tony’s work has ranged across many topics in public economics, including pensions, unemployment benefits, flat taxes and citizen’s incomes, family benefits and means-tested benefits for low-income households, and wealth and wealth taxes. Some of this research is collected in a series of books (Atkinson 1972, 1983, 1989, 1995). Tony was one of the pioneers of tax- benefit microsimulation models that use nationally representative household survey data to calculate tax liabilities and benefit entitlements, and thereby examine the consequences of introducing different combinations of policies (Atkinson and Sutherland 1988). These models are now routinely used in academia and government agencies worldwide. Tony also played an important influential ‘godfather’ role in the development of the pan-European tax-benefit microsimulation model, EUROMOD, that simulates taxes and benefits for every EU member state (Sutherland 2007).

One of the themes of Tony’s research is that welfare states have a potentially positive economic role to play. This is in contrast to most research by economists, which has focused on the potentially adverse effects that welfare states may have on incentives to work and to save. Tony acknowledges these issues, but he also draws attention to the positive roles played by welfare states through income replacement (social insurance) and income maintenance and poverty alleviation. (See, for example, Atkinson and Micklewright 1991;

Atkinson 1999.) The role that political and social institutions can play in countering the impacts of growing inequality, and reducing economic inequalities, is the central topic of Tony’s latest book, Inequality: What Can Be Done? (2015).

This concern for ‘what can be done’ has been a constant theme of Tony’s: it is precisely what motivated his first book, Poverty in Britain and the Reform ofSocial Security (Atkinson 1969a). Tony has related how, just after Christmas 1965, the Daily Telegraph newspaper published an article about Brian Abel-Smith and Peter Townsend’s (1965) The Poor and the Poorest. He got a copy of their book, and it was one of the few he took with him to MIT in 1967. Tony says that this was the book that inspired him to study poverty. Reading it, he formed the view that economists’ analysis did not address sufficiently what to do about it, and he set out to rectify that imbalance in his own work.

Tony has often put his economic understanding into public service, both nationally and internationally. For instance, he was a member of the UK’s Royal Commission on the Distribution of Income and Wealth 1978-1979, and the Retail Prices Advisory Committee, 1984-1990. He chaired the Atkinson Review’ on the Measurement of Government Output and Productivity for the National Accounts (Atkinson 2005b), widely regarded both as a classic piece of analysis and as providing a model for governments and national and international statistical agencies to follow. He was a member of the Conseil d'Analyse Economique, advising the French Prime Minister, 1997-2001, and of the Commission on the Measurement of Economic Performance and Social Progress created by President Sarkozy of France (chaired by Stiglitz and Sen), 2008-2009. Tony was also a member of the European Statistical Governance Advisory Board, 2009-2012.

Without doubt, Tony has significantly influenced the debate on measurement of inequality and poverty within the EU, and he has made major contributions to the development of European thinking about anti-poverty policy. Tony was possibly the first scholar to estimate income inequality in the EU as if it was a single country (Atkinson 1996), whereas in Poverty in Europe, he observed that an EU-wide poverty line would represent ‘a significant move towards viewing the European Union as a social entity’ (Atkinson 1998: 29). He then suggested considering a weighted geometric average of national and EU poverty lines as the poverty cut-off, with the weight assigned to each one being a crucial policy parameter. His report with co-authors on social indicators proposed the so-called Laeken Indicators that were adopted by the EU in 2001—a core set of indicators of poverty and social exclusion against which member states monitor their progress towards agreed EU objectives. (See Atkinson et al. 2002, 2006.) His books, co-edited with Eric Marlier (2010, 2016), are directed at improving EU-SILC, the data that are the sources of the EU social indicators.

The interactions between macroeconomic policy and social inclusion and inequality, with a particular focus on times of financial crisis and austerity, are the subject of advice to the European Commission, written up in two papers (Atkinson 2013a, b). In the Graz Schumpeter Lectures presented in 2012, Tony turned to demonstrate the application of public economics to analysis of public finance problems in this age of austerity, emphasising that not all austerity packages are the same and there is considerable leeway in their design (Atkinson 2014). More importantly, he restated his lifetime concern that economists often tend to forget the extent to which the conclusions reached from their analysis depends critically on specific modelling assumptions: ‘[Economists are too often prisoners within the theoretical walls they have erected and fail to see that important considerations are missing’ (ibid.: 84). He followed the remarks with a long list of the elements missing in contemporary debates about austerity.

Tony’s commitment to the view that a primary role of economics is to illuminate possible solutions of urgent social problems is neatly exemplified by his coordination of a research project, sponsored by the United Nations University World Institute for Development Economics Research and the United Nations (UN) Department of Economic and Social Affairs, aiming to respond to the UN General Assembly’s call for a rigorous study on ways to increase external finance for developing countries, particularly to meet the Millennium Development Goals (Atkinson 2004). His subsequent work in this area has advanced both the theory and the empirical analysis of one form of finance—charitable giving of development aid and its links with governments’ official development assistance (Atkinson 2009; Atkinson et al. 2012). This picks up a thread from earlier work on the optimal tax treatment of charitable donations (Atkinson 1976).