David Warsh: Pinning things down using history
SOMERVILLE, Mass.
In Natural Experiments of History, a collection of essays published a decade ago, editors Jared Diamond and James Robinson wrote, “The controlled and replicated laboratory experiment, in which the experimenter directly manipulates variables, is often considered the hallmark of the scientific method” – virtually the only approach employed in physics, chemistry, molecular biology.
Yet in fields considered scientific that are concerned with the past – evolutionary biology, paleontology, historical geology, epidemiology, astrophysics – manipulative experiments are not possible. Other paths to knowledge are therefore required, they explained, methods of “observing, describing, and explaining the real world, and of setting the individual explanations within a larger framework “– of “doing science,” in other words.
Studying “natural experiments” is one useful alternative, they continued – finding systems that are similar in many ways but which differ significantly with respect to factors whose influence can be compared quantitatively, aided by statistical analysis.
Thus this year’s Nobel Prize in Economic Sciences recognizes Joshua Angrist, 61, of the Massachusetts Institute of Technology; David Card, 64, of the University of California, Berkeley; and Guido Imbens, 58, of Stanford University, “for having shown that natural experiments can answer central questions for society.”
Angrist, burst on the scene in in 1990, when “Lifetime Earnings and the Vietnam Era Draft Lottery: Evidence from Social Security administrative records” appeared in the American Economic Review. The luck of the draw had, for a time, determined who would be drafted during America’s Vietnam War, but in the early 1980s, long after their wartime service was ended, the earnings of white veterans were about 15 percent less than the earnings of comparable nonveterans, Angrist showed.
About the same time, Card had a similar idea, studying the impact on the Miami labor market of the massive Mariel boatlift out of Cuba, but his paper appeared in the less prestigious Industrial and Labor Relations Review. Card then partnered with his colleague, Alan Krueger, to search for more natural experiments in labor markets. Their most important contribution, a careful study of differential responses in nearby eastern Pennsylvania to a minimum-wage increase in New Jersey, appeared as was Myth and Measurement: The New Economics of the Minimum Wage (Princeton, 1994). Angrist and Imbens, meanwhile, mainly explored methodological questions.
Given the rule that no more than three persons can share a given Nobel prize, and the lesser likelihood that separate prizes might be given in two different years, Krueger’s tragic suicide, in 2019, rendered it possible to cite, in a single award, Card, for empirical work, and Angrist and Imbens, for methodological contributions.
Princeton economist Orley Ashenfelter, who, with his mentor Richard Quandt, also of Princeton, more or less started it all, told National Public Radio’s Planet Money that “It’s a nice thing because the Nobel committee has been fixated on economic theory for so long, and now this is the second prize awarded for how economic analysis is now primarily done. Most economic analysis nowadays is applied and empirical.” [Work on randomized clinical trials was recognized in 2019.]
In 2010 Angrist and Jörn-Staffen Pischke described the movement as “the credibility revolution.” And in the The Age of the Applied Economist: the Transformation of Economics since the 1970s. (Duke, 2017), Matthew Panhans and John Singleton wrote that “[T]he missionary’s Bible today is less Mas-Colell et al and more Mostly Harmless Econometrics: An Empiricist’s Companion (Angrist and Pischke, Princeton, 2011)
Maybe so. Still, many of those “larger frameworks” must lie somewhere ahead.
“History,’’ by Frederick Dielman (1896)
That Dale Jorgenson, of Harvard University, would be recognized with a Nobel Prize was an all but foregone conclusion as recently as twenty years ago. Harvard University had hired him away from the University of California at Berkeley in 1969, along Zvi Griliches, from the University of Chicago, and Kenneth Arrow, from Stanford University (the year before). Arrow had received the Clark Medal in 1957, Griliches in 1965; Jorgenson was named in 1971. “[H]e is preeminently a master of the territory between economics and statistics, where both have to be applied in the study of concrete problems.” said the citation. With John Hicks, Arrow received the Nobel Prize the next year.
For the next thirty years, all three men brought imagination to bear on one problem after another. Griliches was named a Distinguished Fellow of the American Economic Association in 1994; he died in 1999. Jorgenson, named a Distinguished Fellow in 2001, began an ambitious new project in 2010 to continuously update measures of output and inputs of capital, labor, energy, materials and services for individual industries. Arrow returned to Stanford in 1979 and died in 2017.
Call Jorgenson’s contributions to growth accounting “normal science” if you like – mopping up, making sure, improving the measures introduced by Simon Kuznets, Ricard Stone, and Angus Deaton. It didn’t seem so at the time. The moving finger writes, and having writ, moves on.
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Where are the women in economics, asked Tim Harford, economics columnist of the Financial Times the other day. They are everywhere, still small in numbers, especially at senior level, but their participation is steadily growing. AEA presidents include Alice Rivlin (1986); Anne Krueger (1996); Claudia Goldin (2013); Janet Yellen (2020); Christina Romer (2022), and Susan Athey, president elect (2023). Clark medals have been awarded to Athey (2007), Esther Duflo (2010), Amy Finkelstein (2012), Emi Nakamura (2019), and Melissa Dell (2020).
Not to mention that Yellen, having chaired the Federal Reserve Board for four years, today is secretary of the Treasury; that Fed governor Lael Brainerd is widely considered an eventual chair; that Cecilia Elena Rouse chairs of the Council of Economic Advisers; that Christine Lagarde is president of European Central Bank; and that Kristalina Georgieva is managing director of the International Monetary Fund, for a while longer, at least.
The latest woman to enter these upper ranks is Eva Mörk, a professor of economics at Uppsala University, apparently the first female to join the Committee of the Royal Swedish Academy of Sciences that recommends the Economics Sciences Prize, the last barrier to fall in an otherwise egalitarian institution. She stepped out from behind the table in Stockholm last week to deliver a strong TED-style talk (at minutes 5:30-18:30 in the recording) about the whys and wherefores of the award, and gave an interesting interview afterwards.
David Warsh, a veteran columnist and an economic historian, is proprietor of Somerville-based economicprincipals.com, where this column originated.