Economists David Card, Joshua Angrist and Guido Imbens won the 2021 Nobel Prize in Economics.
This Monday, October 11th, three economists won the Nobel Prize in Economics for working on ‘natural experiments’, or studies in real-life situations. Unlike in medicine or other sciences, economists can’t conduct controlled clinical trials, so these three economists have been recognized for using real-life situations to study impacts on the world. More specifically, they pioneered these ‘natural experiments’ to show real-world impacts of government policies such as minimum wage increases in the US fast-food sector and migration from Castro-era Cuba.
The Royal Swedish Academy of Sciences said the three had “completely reshaped empirical work in the economic sciences”.
The winners: David Card
Professor Card was awarded the prize “for his empirical contributions to labour economics”. He is a 65 year old Canadian, who is currently working at the University of California, Berkeley.
His experiment, for which he was recognized the prize, regarded the impact on the fast-food sector of a minimum wage increase in New Jersey in the early 1990s. He studied what happened when New Jersey raised its minimum wage back in the 1990s from $4.25 to $5.05, using restaurants in bordering Pennsylvania as a comparison group. His findings proved wrong the conventional thought in economics that such increases should always lead to job losses, since an increase in wage is usually associated with an increase in unemployment rate as well. Furthermore, his work on the topic has been used to push for the legislation for a $15 minimum wage in the United States.
He also studied the impact of migration from Castro-era Cuba to Miami, and found no negative wage or labour effects for Miami residents with low levels of education – fighting against the misconception of ‘the Cubans are taking all of our jobs’. The Royal Swedish Academy of Sciences said that his studies from the early 1990s “challenged conventional wisdom”.
The winners: Joshua Angrist and Guido Imbens
Together with Card, Professor Angrist and Professor Imbens were awarded “for their methodological contributions to the analysis of causal relationships”.
Professor Angrist is a dual US and Israeli citizen and is currently working at Massachusetts Institute of Technology, while Dutch-born Professor Imbens works at Stanford University.
They worked out the methodological issues that allow economists to draw solid conclusions about cause and effect, even where they cannot carry out studies according to strict scientific methods. They showed that precise conclusions about cause and effects could be drawn from solved methodological problems.
The prize is officially known as the Sveriges Riksbank Prize in Economic Sciences. Unlike the other awards, it was not instituted by Alfred Nobel, but it was established by Sweden’s central bank and is awarded in memory of Nobel.
Professor Card will receive one half of the 10 million Swedish Kronor ($1.1 million), and the remaining prize money will be split between Professor Angrist and Professor Imbens. It is the last prize announced each year.
“Most old-fashioned economists are very theoretical, but these days, a large fraction of economics is really very nuts-and-bolts”Professor David Card
“Their research has substantially improved our ability to answer key causal questions, which has been of great benefit to society”Professor Peter Fredriksson, Economic Sciences Prize Committee chair
Credits for the cover image: © Nobel Prize Outreach 2021 Ill. Niklas Elmehed.