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3 U.S.-based economists win the Nobel Memorial Prize in Economics

RACHEL MARTIN, HOST:

Three economists are sharing this year's Nobel Prize for their work on so-called natural experiments, including how changes in the minimum wage affect the labor market. NPR's Scott Horsley is here with details. Hey, Scott.

SCOTT HORSLEY, BYLINE: Good to be with you, Rachel.

MARTIN: Tell us about the winners.

HORSLEY: David Card is one of the winners. He's originally from Canada, now a professor at Berkeley. Joshua Angrist, who's a native of Ohio and now teaches at MIT. And Guido Imbens, who was born in Holland and now does his research at Stanford. Card will receive half the prize, which is worth 10 million kroner, and Angrist and Imbens will split the other half.

MARTIN: And Card was recognized in part for his studies on the minimum wage. What did he find?

HORSLEY: Yeah, this really upended conventional wisdom. Economists had always thought there was a trade-off, and when you raise the minimum wage, some workers would get more money, but others would lose their jobs. Card looked at fast-food restaurants in New Jersey and Pennsylvania. One state had raised the minimum; the other had not. And it turned out that trade-off was smaller than people had thought. Small changes in the minimum wage did not lead to a big loss of jobs.

MARTIN: So I understand this research was based on a policy split between neighboring states, and there are other examples where economists can take advantage of a natural experiment. What did the Nobel Committee say about that?

HORSLEY: Yeah, the gold standard in a lot of the natural sciences is a randomized trial - you know, you put fertilizer on one field, don't put fertilizer on another and see which field the corn grows tallest in. But in social sciences like economics, it's often impractical or unethical for researchers to conduct that kind of experiment. But when you have a policy change like we saw in New Jersey and Pennsylvania, that creates a natural experiment. And Eva Mork of the Nobel Prize Committee says that creates a lot of opportunities for economists to do interesting research.

(SOUNDBITE OF ARCHIVED RECORDING)

EVA MORK: Natural experiments are everywhere. So thanks to the contributions of the laureates we researchers are today able to answer key questions for economic and social policy, and thereby the laureates' work has greatly benefited the society at large.

HORSLEY: We've seen natural experiments just in the last year or so with some states cutting off supplemental unemployment benefits early while others kept them in place, and that's given researchers an opportunity to look at how those benefits were affecting the labor market or different jurisdictions taking different approaches to mask mandates and social distancing. Professors Angrist and Imbens were recognized for their methodological work, which has helped researchers know how to tease out cause and effects from these natural experiments.

MARTIN: And I understand we have some tape. Professor Imbens got the congratulatory wake-up call very early this morning, right?

HORSLEY: (Laughter) Yeah, very early. You might've thought they would've called the guy on the East Coast, but no, they - (laughter).

MARTIN: Really.

HORSLEY: They called Professor Imbens out on the West Coast about 2 o'clock his time this morning. One of the reporters who was covering the announcement asked if he knew what he was going to do with the money (laughter). He said, no, he hadn't given any thought to that. It works out to just over a million dollars for the three economists. But he was also asked what he was doing when he got the call. He said, well, I was sleeping.

(LAUGHTER)

HORSLEY: And at first, he said, I was stunned.

(SOUNDBITE OF ARCHIVED RECORDING)

GUIDO IMBENS: And I was just absolutely thrilled to hear the news, in particular kind of hearing that I got to share this with Josh Angrist and David Card, who are both very good friends of mine.

HORSLEY: In fact, Professor Angrist was actually the best man at Professor Imbens' wedding. One note, Rachel, we should say - the committee took note of the fact that Card's groundbreaking work on the minimum wage was a cooperative project with the late Princeton economist Alan Krueger, who sadly died back in 2019.

MARTIN: NPR's Scott Horsley with this Nobel news. Thank you.

HORSLEY: You're welcome.

(SOUNDBITE OF KEITH MANSFIELD'S "EXCLUSIVE BLEND") Transcript provided by NPR, Copyright NPR.