Economics Nobel Prize winners disagree, yet again
Half of the 2021 Nobel Prize in economics went to David Card. 1/4 of this prize went to Joshua Angrist. Professor Card won this prize due to his work on the effects of minimum wages. Dr Card, and his coauthor the late Alan Krueger, used New Jersey’s minimum wage increase as a natural experiment, to see how this policy affects employment growth. According to Card and Krueger minimum wage increases don't necessarily prevent job growth. Card and Krueger authored the famous 1994 New Jersey minimum wage study. According to Card and Krueger, a 1992 increase in the New Jersey minimum wage raised employment in New Jersey, relative to Pennsylvania.
The 1994 New Jersey minimum wage study has serious defects. Card and Krueger did publish a follow-up study, in the year 2000.
Sharing a Nobel Prize does not imply sharing a common point of view. Doctor Angrist coauthored a book on statistical techniques in economics. Here is what he and Jorn Pischke wrote about the abovementioned follow up study by Card and Krueger.
“administrative data show a slight decline in the employment from February to November 1992 in Pennsylvania, and little change in New Jersey over the same time period. However, the data also reveals substantial year to year employment variations in other periods. These swings often seem to differ substantially in the two states… So Pennsylvania may not provide a very good measure of counterfactual employment rates in New Jersey in the absence of a minimum wage change.” quoted from Mostly Harmless Econometrics, page 293
The main point of this year's economics Nobel Prize is that we can learn much from natural experiments, if natural conditions allow for valid comparisons. Doctor Angrist is an expert on uses of natural experiments in economics. He is correct in pointing out the weakness of David Card’s analysis. It is therefore ironic that questionable analysis by Dr Card resulted in twice as much credit for him in this year's prize.
The Nobel Prize committee has recognized achievements by economists who disagree before. This committee awarded half of its 1974 prize to socialist economist Gunnar Myrdal, the other half to anti socialist economist Friedrich Hayek, each for their monetary analysis. Reasonable economists disagree on many issues in economics. Some issues in economics are in fact difficult to sort out. The monetary issues that Hayek and Myrdal examined decades ago are still matters of contention among economists. The statistical issues surrounding the 2021 Nobel Prize in economics have been largely sorted out. Yet, it seems that the worst idea has somehow risen to the top this year.
I think it would be fair to note, that the reason Card is given half the prize is pretty clearly in recognition of Krueger, who would have received it were it not for his suicide.
David Card in an unworthy recipient of the Noble prize for Economics.
His 1994 New Jersey study is bad and his South Florida study of the Mariel Boat Lift influx of Cuban refugees is even worse. His thesis is that the increased immigration didn't hurt employment or wages, but he ignored the tremendous increase in the illegal drug trade that happened simultaneously, invalidating his analysis.
Funny, he could have simply watched Miami Vice on TV or seen Scarface at the movie theaters to understand what was really going on in Southern Florida at the time.