The calendar marks, year by year, at the beginning of October, a period in which journalists have to go after explaining certain scientists, writers, global characters in general who have done so important to deserve the Nobel Prize. The justifications of the entities, Swedish or Norwegian, that grant the laurel, for their choices are usually very succinct and little explanatory.
It is a rush to unravel and then explain in popular language the contribution of the winners to the progress and well-being of Humanity. It is no different in the case of the Nobel Prize in Economics – in fact, a recognition that piggybacks on the real prize from the beginning of the 20th century, created in 1968 by the Swedish Central Bank. Those advertised, known to the academic community, almost always need to be presented to the general public.
With the 2021 laureates, 88 have been awarded in the 53 years of the Nobel Prize in Economics. Of this total, three out of four are Americans or based in the United States. Only two women won the laurel – the American Elinor Ostrom and the Franco-American Esther Duflo.
The 2021 winners were, once again, researchers from American schools. The three winners are in their 60s, experts in econometrics – the use of statistics and mathematics in evaluating theories and solving economic problems – and exponents of “evidence-based economics”, one of the rising lines, but not consensual or uncritical in current cutting-edge economic research.
David Card, a Canadian living in the United States, received half the award for his “empirical contribution to labor economics”, an area he teaches at the University of California, Berkeley. The other half of the award, given for contributions to the study of causal relations in economics, was shared by the American Joshua Angrist, from MIT (Massachussets Institute of Technology), and Guido Imbens, a Dutchman also based in the United States, professor of econometrics at the University of Stanford.
The search for evidence in economics, with the application of the most common principles in research in medicine or biology, had already been awarded the Nobel Prize in 2019, when Esther Duflo and her husband, Abhijit Banerjee, both from MIT, and Michael Kremer, were awarded from Harvard University. The three transposed the idea of random experiments – clinical trials, with the application of the active ingredient under study to one group and placebos to another – in the effort to define policies to combat poverty.
Angrist was Duflo’s advisor and, together with Imbens, researches causal relationships in economic events, based on natural experiments, of which Card is a pioneer, with impactful works already in the early 90s of the last century, in the area of economics of the Work. Along with Alan Krueger, who died in 2019, Card showed, through field research, that the increase in the minimum wage that occurred in the state of New Jersey resulted in an increase in employment, not a reduction, contrary to what conventional theory taught.
The finding had great repercussions, earning attacks from colleagues, as Card himself later reported. Coinciding with the evolution of computational technologies for capturing, organizing and analyzing mass data, the research by Card and, subsequently, by Angrist and Imbens, contributed to the development of a promising line of empirical research in economics.
Today, there is a huge international network of researchers in economics, generally econometricians, developing field work with the objective of supporting public policies. These studies derive from the “credibility revolution” that field studies, with control groups, brought to economic knowledge.
Despite the advances they represent, natural experiments in economics suffer criticisms that do not originate only from the ideological contestation of the breaks in theoretical paradigms that they usually produce. One of the most common criticisms, asks to what extent the evidence found in a given place or situation would be valid for other contexts and regions.
“What works in India would work in Brazil and what is worth to 100 people would be worth to ten million?” Angus Deaton, the 2015 Scottish-American Nobel Prize in Economics in a famous 2016 article. Deaton voiced the doubts of a legion of critics or skeptics.
However, as Paul Krugman, the popular columnist for the New York Times newspaper, he also the Nobel Prize in Economics 2008, highlighted in his Twitter account, what led to the award of the three economists this time was more the research methods that developed the than the conclusions they reached. However, research under the umbrella of the “credibility revolution” does not cease to be relevant.
The conclusions, in fact, depend on varied circumstances, not always subject to control, but the method allows testing, even partially, the dominant economic theories. They are, therefore, important tools for defining, in particular, public policies. They also help to challenge the theoretical dogmas of economics.
In his Twitter account, Krugman drew attention to the fact that the application of natural experiments to economic issues indicates the need for government intervention. “When people like me say that progressives are the realists and the ‘centrists’ are living in the past, one reason is that modern empirical research often undermines free-market orthodoxy,” commented Krugman.
It seems valid, from all this, to extract that the tools of evidence-based economics constitute an important advance in economic thinking and applied economics, but they cannot be taken as a panacea. The risk would be to fall into that well-known logic, according to which, if the only tool you have is a hammer, everything will end up looking like nails.