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The three Nobel Prize winners in economics show that science is happening all around us—if we’re willing to look.
David Card, Joshua Angrist, and Guido Imbens, US-based economists who shared the prize awarded yesterday, helped pioneer the use of “natural experiments” to conduct studies on real-life situations as if they had happened in a tightly controlled lab.
Here’s one example: Card is most famous for his and Alan Krueger’s 1993 study on the effects of minimum wage on employment. They compared fast food jobs in New Jersey, which had just raised its minimum wage from $4.25 to $5.05, to fast food restaurants in neighboring Pennsylvania. The idea was that NJ and PA are generally pretty similar, so any observed differences in the labor market could lead to important conclusions about raising the minimum wage.
What did they find? That NJ’s higher minimum wage did not hurt job growth…and may have even increased employment. This shocked most experts at the time.
Bottom line: Natural experiments are now ubiquitous in economics research, but only because these Nobel Prize recipients showed what was possible. —NF