Three Economists Win Nobel For Their Research On How Real Life Events Impact Society
By Scott Horsley
Three U.S.-based economists will share this year’s Nobel Memorial Prize in Economic Sciences for their innovative work with “natural experiments” – events or policy changes in real life that allow researchers to analyze their impact on society.
David Card of the University of California at Berkeley will receive half the prize, worth 10 million Swedish kronor, or about $1.1 million, the Royal Swedish Academy of Sciences said on Monday. Joshua Angrist of the Masschusetts Institute of Technology and Guido Imbens of Stanford University will share the other half.
Controlled experiments are common in science and medicine: they allow, for example, to test new drugs by carefully selecting participants and controlling vital aspects to ensure objectivity.
But they are harder in social sciences where it can often be impractical or unethical to conduct randomized trials – unless a real-life event or policy change happens that allow researchers to conduct what are called “natural experiments.”
“Natural experiments are everywhere,” said Eva Mork, a member of the prize committee. “Thanks to the contributions of the laureates, we researchers are today able to answer key questions for economic and social policy. And thereby the laureates work has greatly benefited society at large.”
The impact of the minimum wage
Card was recognized in part for his groundbreaking work in the early 1990s with the late Princeton economist Alan Krueger, which challenged conventional wisdom about minimum wages.
Economists had long assumed that there was a tradeoff between higher wages and jobs. If the minimum wage went up, it was thought, some workers would get higher pay but others would be laid off.
But when Card and Krueger looked at the actual effect of higher wages on fast food workers, they found no significant drop in employment.
They reached this conclusion by comparing fast food restaurants in New Jersey, which raised its minimum wage, with restaurants in neighboring Pennsylvania, which did not.
Studying cause-and-effect in real life
Meanwhile, Angrist and Imbens were recognized for methodological research that helps tease out cause and effect from these accidental case studies.
During the pandemic, natural experiments have allowed researchers to study the effects of mask mandates, social distancing policies, and supplemental unemployment benefits.
Imbens said he was “stunned” to get the congratulatory wake-up call at about 2 a.m. in California.
“I was absolutely thrilled to hear the news,” Imbens told reporters. “In particular hearing that I got to share this with Josh Angrist and David Card, who are both very good friends of mine.”
He noted that Angrist was best man at his wedding.
Imbens said he had no idea how he would spend his share of the prize money.