The Nobel Prize in Economics goes to the pioneers of “natural experiments”
STOCKHOLM, Oct. 11 (Reuters) – Economists David Card, Joshua Angrist and Guido Imbens won the 2021 Nobel Prize in Economics on Monday for their pioneering “natural experiments” aimed at showing real economic impacts in areas ranging from the U.S. sector to fast food to the Cuban migration of the Castro era.
Unlike medicine or other sciences, economists cannot conduct tightly controlled clinical trials. Instead, natural experiments use real-life situations to study impacts on the world, an approach that has spread to other social sciences.
“Their research has dramatically improved our ability to answer key causal questions, which has been of great benefit to society,” said Peter Fredriksson, Chair of the Economics Prize Committee.
Previous Nobel Prize winners in economics have been dominated by American institutions and this was no exception. Born in Canada, Card currently works at the University of California at Berkeley; Angrist at the Massachusetts Institute of Technology; and Imbens born in the Netherlands at Stanford University.
QUESTIONS ABOUT CAUSE AND EFFECT
Card’s experiment on the impact on the fast food industry of an increase in the minimum wage in the US state of New Jersey in the early 1990s has led to revisiting the misconception that such increases should always lead to a decline in employment.
Another studied the impact of a decision by Fidel Castro in 1980 to allow all Cubans who wished to leave the country to do so. Despite a heavy migration to Miami, Card found no negative effects on wages or work for Miami residents with low levels of education.
“Many important questions are about cause and effect. Will people become healthier if their incomes increase.… Do blockages reduce the spread of infections?” Nobel Prize winning panelist Eva Mörk said.
“This year’s winners have shown that it is still possible to answer these broad questions about cause and effect and how to do it is by using natural experiments.”
Mörk, professor of economics at Uppsala University, noted that the pandemic created the possibility of a good natural experiment on educational outcomes due to the varying disruptions caused to children of different school years but of which the hours of birth in some cases were only separated by hours.
“So here, nature has given us an experience that allows us to answer questions that would not have been possible to answer otherwise,” she said.
The committee noted that natural experiments were difficult to interpret, but that Angrist and Imbens had, by the mid-1990s, solved methodological problems to show that precise conclusions about cause and effect could be drawn.
“I was absolutely stunned to receive a phone call, then I was absolutely delighted to hear the news,” Imbens said on a call with reporters in Stockholm, adding that he was delighted to share the award with two of his good friends. Angrist was a witness at her wedding.
The prize, officially known as the Sveriges Riksbank Prize in Economics in Memory of Alfred Nobel, is the latest in this year’s Nobel Prize crop and sees the winners split a sum of SEK 10 million ( $ 1.14 million).
The prestigious prizes for achievement in science, literature and peace were created and funded by the will of Swedish inventor of dynamite and wealthy businessman Alfred Nobel.
They have been awarded since 1901, although the Economics Prize – created through a donation from the Swedish central bank on the occasion of its 300th anniversary – was a later addition that was first awarded in 1969.
While the Economics Prize has tended to live in the shadow of the often already famous winners of the Peace and Literature Prizes, winners over the years have included a number of extremely influential economists, such as the Austrian-British Friedrich August von Hayek and American Milton Friedman.
($ 1 = 8.7275 Swedish kronor)
Reporting by Niklas Pollard and Simon Johnson in Stockholm and Mark John in London; additional reporting by Johan Ahlander in Stockholm, Terje Solsvik in Oslo, Lindsay Dunsmuir in Edinburgh and Peter Szekely in New York; Editing by Alex Richardson
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