UC Berkeley economist David Card received his 2021 Nobel Prize in a ceremony Wednesday and used the august occasion to encourage others in his field to embrace innovative research design that engages real-world human issues.
In a brief, videotaped lecture, the influential scholar mounted an explanation — and a defense — of research methodology that he and other labor economists advanced to challenge decades of conventional economic scholarship. Such innovations were essential, Card said, to make economic research more transparent, more verifiable and more useful to policymakers.
The interest in real-life dynamics among some labor economists “evolved out of the realization that what we had been doing before was not working,” he said. Rather than rely solely on theoretical models to understand economic dynamics, a more empirical approach “can provide convincing evidence that sometimes gets economists thinking differently about a problem — albeit slowly and with no guarantee of success.”
On Oct. 11, the Nobel committee announced that Card had won the Nobel Memorial Prize in Economic Sciences for research on immigration, minimum wages and other issues that dramatically shifted understanding of the social and economic forces that shape inequality. He was awarded half the prize, with the other half shared by economists Joshua Angrist of MIT and Guido Imbens, a former Berkeley economist now at Stanford University.
Winners typically would receive the award at an elegant ceremony in Stockholm. But with the COVID-19 pandemic surging, the Nobel Committee opted for a remote ceremony: Karin Olofsdotter, the ambassador of Sweden to the United States, presented the Nobel medals and diplomas to Card and Imbens, along with 2021 physiology or medicine laureates David Julius and Ardem Patapoutian, in Irvine, California.
Other 2021 laureates received their honors Monday (Dec. 6) in a ceremony at the National Academies of Science in Washington, D.C.
Card’s lecture was a guided tour of economic methodology in recent decades, and the streams of economic thought that led him to focus in the early 1990s on “natural experiments” — studies of real-life conditions often based on sudden changes in the economic environment.
The results called into question the assumptions embraced by leading economists at top-tier institutions.
According to conventional wisdom, a wave of thousands of mostly low-skilled Cubans into the Miami labor market after the Mariel boatlift should have led to lower wages and higher unemployment — but it didn’t. When New Jersey enacted a higher minimum wage than neighboring Pennsylvania, the assumptions held that New Jersey employers near the border would shed jobs. But according to research by Card and his colleague, the late Alan B. Krueger, employment didn’t fall — and in some cases, employers increased hiring.
A backlash from the old guard — and eventually, vindication
Such counterintuitive findings provoked a fierce backlash among a cadre of establishment economists — in part, Card said in his lecture, because the research design “was so easily explained to non-specialists.”
He continued: “The findings were widely criticized by many economists — including Nobel Prize winners like Gary Becker, Merton Miller and James Buchanan. Buchanan wrote: ‘No self‐respecting economist would claim that increases in the minimum wage increase employment. Such a claim … becomes equivalent to a denial that there is even minimal scientific content in economics, and that, in consequence, economists can do nothing but write as advocates for ideological interests.’”
Buchanan’s position “has always struck me as illogical,” Card said, “but it was very widespread.”
Becker, Miller and Buchanan are all deceased, and as the years have passed, the work by Card and Krueger has been validated in the U.S. and internationally, and their approach to economic research has become widely accepted.
The successful challenges to economic orthodoxy has had international influence and earned the praise of the Nobel judges.
“The economic laureates have introduced and applied new methods in their field,” said Dan Larhammar, president of the Royal Swedish Academy of Sciences, at the ceremony. “This has allowed correlations to be turned into understanding of causation, leading to important new and surprising insights. All these achievements not only bring new knowledge and deeper understanding, but already allow us to improve our societies in multiple ways and to take wiser decisions.”
The innovation in research design pioneered by Card, Angrist and Imbens “has become dominant within economics and has spread to the other social sciences and also to medicine,” added Per Johansson, a member of the committee that evaluated this year’s Nobel candidates in economics. “As a result, researchers’ ability to ask questions of substantial importance has improved tremendously, to the great benefits of the society.”
Card, 65, a native of Ontario, Canada, is Berkeley’s sixth economist to win the Nobel Prize in economics and the campus’s 26th Nobel laureate overall. His predecessors are Oliver Williamson (2009), George Akerlof (2001), Daniel McFadden (2000), John Harsanyi (1994) and Gérard Debreu (1983). Imbens, one of Card’s two co-winners, was a member of Berkeley’s faculty from 2002 to 2006, as a professor of economics and of agricultural and resource economics, before he left for Harvard University and then Stanford.