The Nobel Prize for economics this year recognizes pivotal research that upended long-standing beliefs about the effects of minimum wage increases and influxes of immigrant workers.
United States-based economists David Card, Joshua Angrist and Guido Imbens were awarded the 2021 Nobel Prize in economics for their pioneering the use of “natural experiments” to understand the causal effects of economic policy and other events.
Natural experiments use real-life situations to work out effects on the world, an approach that has spread to other fields and revolutionised empirical research.
One such experiment by Canada-born economist Card on a minimum wage increase in the US state of New Jersey in the early 1990s prompted researchers to review their view that such increases should always lead to falls in employment.
“Natural experiments are everywhere,” Eva Mörk, a member of the Prize Committee for the Alfred Nobel Memorial Prize in Economic Sciences, told a news conference of the effect the method has had across all the social sciences.
Past Nobel economics prizes have been dominated by US institutes and this was no exception.
Card currently works at the University of California, Berkeley; Angrist at Massachusetts Institute of Technology, Cambridge and Dutch-born Imbens at Stanford University.
“I was just absolutely stunned to get a telephone call, then I was just absolutely thrilled to hear the news,” Imbens said on a call with reporters in Stockholm, adding he was thrilled to share the prize with two of his good friends. Angrist was best man at his wedding.
The prize, formally known as the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, is the last of this year’s crop of Nobels and sees the winners share a sum of 10 million Swedish crowns ($1.14m).
Empirical contributions
Card took half the prize “for his empirical contributions to labour economics”, the academy said.
Angrist and Imbens shared the other half “for their methodological contributions to the analysis of causal relationships”.
The prestigious prizes for achievements in science, literature and peace were created and funded in the will of Swedish dynamite inventor and wealthy businessman Alfred Nobel.
They have been awarded since 1901, though the economics prize – created through a donation from Sweden’s central bank on its 300th anniversary – is a later addition that was first handed out in 1969.
While the economics award has tended to live in the shadow of the often already famous winners of the prizes for peace and literature, laureates over the years include a number of hugely influential economists, such as the Austrian-British Friedrich August von Hayek and American Milton Friedman.
