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October 12, 2021

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Trio win economic Nobel for 鈥榥atural experiments鈥

Source: Agencies | 00:00 UTC+8 October 12, 2021 | Print Edition

Economists David Card, Joshua Angrist and Guido Imbens won the 2021 Nobel economics prize yesterday for pioneering “natural experiments” to show real-world economic impacts in areas from minimum wage increases in the US fast-food sector to migration from Castro-era Cuba.

Unlike in medicine or other sciences, economists cannot conduct rigidly controlled clinical trials. Instead, natural experiments use real-life situations to study impacts on the world, an approach that has spread to other sciences. “Their research has substantially improved our ability to answer key causal questions, which has been of great benefit to society,” says Peter Fredriksson, chair of the Economic Sciences Prize Committee.

Past Nobel Economics prizes have been dominated by US institutions and this was no exception. Canada-born Card currently works at the University of California, Berkeley; Angrist, a dual US and Israeli citizen, at Massachusetts Institute of Technology; and Dutch-born Imbens at Stanford University.

One experiment by Card on the impact on the fast-food sector of a minimum wage increase in the US state of New Jersey in the early 1990s upended conventional wisdom in economics that such increases should always lead to job losses. His work on the topic, often in collaboration with prominent economist, Alan Krueger, who died in 2019, has been used as empirical evidence to push for legislation, including by the Biden administration, for a US$15 minimum wage in the United States.

Another studied the impact of a move by Fidel Castro in 1980 to allow all Cubans who wished to leave the country to do so. Despite high ensuing migration to Miami, Card found no negative wage or labor effects for Miami residents with low levels of education.

“It’s about trying to get more scientific tie-in and evidence-based analysis in economics,” Card, who initially thought his friends were playing a practical joke when he got the call from Sweden, told Berkeley’s website. “Most old-fashioned economists are very theoretical, but these days, a large fraction of economics is really very nuts-and-bolts.”

Nobel panelist Eva Mork said this year’s laureates showed “it is still possible to answer these broad questions about cause and effects and the way to do that is to use natural experiments.”

The prize is the last of this year’s crop of Nobels and sees the winners share a sum of 10 million Swedish crowns (US$1.14 million).

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