The award announcements says that one-half of the award is given to David Card “for his empirical contributions to labour economics,” while the other half is given jointly to Joshua D. Angrist and Guido W. Imbens “for their methodological contributions to the analysis of causal relationships.”
All three are involved in what Angrist and Jörn-Steffen Pischke dubbed the “credibility revolution” in empirical economics. As Alex Tabarrok puts it,
Almost all of the empirical work in economics that you read in the popular press (and plenty that doesn’t make the popular press) is due to analyzing natural experiments using techniques such as difference in differences, instrumental variables and regression discontinuity.
The Leamer critique caused economists to largely abandon ordinary multiple regression and to instead employ more credible research designs, such as natural experiments.
Leamer in 2010 pointed out that the newer methods also come with limitations. But, alas, he was bypassed by the Nobel committee.
Noah Smith goes way overboard in praise of the new laureates. He makes it sound as though the results that David Card and Alan Krueger claimed about the minimum wage were only controversial because they were surprising. But they were also controversial because they were wrong.
Card’s supposed “natural experiment” proof that immigration has no effect on wages in the destination country is also wrong (the “proof” is glaringly wrong, the hypothesis is at most unsubstantiated):
https://www.unz.com/isteve/david-card-wins-econ-nobel-for-not-noticing-what-else-happened-in-miami-in-1980/
Card’s work on immigration also missed the “Miami Vice” effect of the cocaine boom on Miami. The interesting “natural experiment” is how the Nobel committee can give a prize to someone whose seminal works are wrong.
‘Wrong’ is such a harsh word. I had hoped the social sciences were beyond that primitive concept. Just say “full of valuable insights” and no one gets hurt.
“full of valuable insights”?
Are they really so valuable as to deserve a Nobel?
That time when we all re-discovered that “follow the science” is much more complicated, messy and iterative than others would like for us to believe…
Is “science” the new religion?
It is perhaps more insightful to say that science is no more settled or easily interpreted than religion is….
Leamer was probably passed up because he’s at UCLA. The first step in the committee’s vetting process is to pull names from the faculty directories of Stanford, Berkeley, MIT, Harvard and a few others for their list of potential award recipients.
I think it’s worth distinguishing between methods that you can use to persuade yourself, and methods you can use to persuade an intellectually honest person on the “other side”.
This class of techniques lends itself to too many “researcher degrees of freedom” to be very effective for the second, more important problem. (And I agree with other commenters here that Card has a sufficiently awful track record of abusing these degrees of freedom that it’s reasonable to treat a Card paper using this approach as evidence *against* the proposition it claims to support — because why isn’t the paper using a less abusable approach instead?) But if you know you aren’t “cheating”, you can use it to sanity-check some of your own beliefs.
Whether by natural experiments or pure theorizing, I get the impression that authors of economics papers first write the abstract and conclusion and then perform the study.
Arnold, I’d be more interested in your reaction to the Krueger/Angrist study purporting to use how when in the year one is born affects when one can drop out of high school as a natural experiment of the value of schooling (they found schooling has significant positive effects on income). It was mentioned in the Marginal revolution post on the prizes. Given your support for the null hypothesis I was interested in your thoughts.