Economics is not a Natural Science - Get over it.

in #nobel2 months ago

image.png

https://www.wsj.com/articles/natural-experiments-lead-economics-nobel-prize-11633986097

As expected David R. Henderson provides a much better evaluation of the work of Monday's Nobel prize winning economists than all the others I have read so far. In particular, none of the other reviewers bothered to note updates to the original Card-Krueger minimum wage study which credibly overturned its results.

For what its worth, I think these "field studies" are a welcome addition to the tools of economic research, but one must be very wary when evaluating the results. They are not natural experiments. They are revealing historical episodes. Unlike natural experiments they cannot establish eternal universal laws (the law of gravity, Boyle's law). For example, Card-Krueger's follow up study which revealed that the minimum wage in that instance did not affect (un)employment, while plausible (it had minimal effect on the amount of labor demanded), it does not and could not support challenging the conclusion that setting a minimum wage above the market wage will, in general, reduce employment (and certainly will not increase it).

The evidence for this is huge and overwhelming - again not mentioned in the reviews. Many people will use this award to conclude otherwise. These field studies also do not establish anything about the size, as opposed to the direction of the effects investigated, because that depends on the particular historical circumstances in both the control and the affected group.

When discussing the minimum wage, economist Steven Landsburg once commented on the appropriate reaction to a study that purported to show that minimum wages do not reduce employment - if someone presented you with a study that purported to show that the laws of arithmetic did not work, would you wonder what was wrong with the study or would you wonder why people still believed the laws of arithmetic?

Sort:  
 2 months ago Reveal Comment