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reality's well-known prog "bias"

PKrug Twitter just now

A few thoughts on today's economics Nobel, which was of course richly deserved (and it's truly tragic that Alan Krueger isn't able to share in it, as he surely would have)

This was a prize more for methods than for conclusions; the laureates were leaders in the "credibility revolution" in economics, the exploitation of natural experiments to sort out causation and the effects of policy

Since the prize was about methodology — not even about the facts as much as about how to determine those facts — you might think it wouldn't be relevant to current policy debates. However ...

it turns out that post-credibility-revolution (PCR?) research is highly relevant to debates on minimum wages, aid to children, and unemployment benefits. And in general this research supports more government intervention

Thus the Card-Krueger approach to the minimum wage, which exploits the natural experiments that take place when individual states hike their minimums, finds substantial income gains with little if any loss of jobs

The now-large literature on aid to children exploits the natural experiments provided by the gradual rollout of food stamps, discontinuous increases in Medicaid, and so on to assess the benefits of such aid — and finds that they are huge

Most recently, the ups and downs of expanded unemployment benefits, plus the decision of some but not all states to cut off these benefits early, lets us assess the impact of UI on employment — and such studies find little effect

Why does the new methodology seem, more often than not, to support center-left policies? One reason is that conventional wisdom in economics tends to overstress incentive effects and market competition, bc that's what we understand

In other words, the field tends to suffer from 101ism, the urge to interpret the world in terms of what you learn in the first few chapters of the textbook. Empirical evidence, however, often finds that the complexity of the real world resists 101ism

I'd add that much our political world loves to emphasize incentives and all that, because hyping the potential incentive effects of taxes and benefits can help justify high inequality. Empirical evidence serves as a reality check against this bias

So although the work honored by this prize isn't at all political, it has political implications. (The truth tends to do that)
When people like me say that progressives are the realists and "centrists" are living in the past, one reason is that modern empirical research fairly often undermines the free-market orthodoxy that dominated our political scene not long ago

So it's a highly relevant prize after all. And once again, richly deserved.


  • Yes, I was especially impressed by the empirical studies which determined virtually no negative side effects resulting from increases in minimum wage. But certain quarters are still spouting that nonsense, aren't they?
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