Economic vision | The 2021 Nobel Prize in Economics

With important issues in the pipeline such as the reopening of the northern border and the threatening inflationary pressures that are occurring in the economies of the United States and Mexico; Since the previous publication, we agreed to comment on this occasion about the recognition of the Nobel Prize in Economics 2021, to three American economists.

As always, and apart from the Literature and Peace prizes, the recognition of the Nobel prizes in its four scientific categories: Medicine, Physics, Chemistry and Economics, was awarded to academic scientists from prestigious universities, who now achieved the three best academies American.

On this occasion, it was won by David Card, from the University of California, Berkeley; to study whether increases in minimum wages would cause more people to lose their jobs. Furthermore, by virtue of their experiments and real-world observations, outside their university offices, Joshua D. Angrist of the Massachusetts Institute of Technology and Guido W. Imbens of the highly regarded Stanford University in California empirically tested theories about how additional higher education improves workers’ earnings.

For several decades, these three economists have been investigating in real life the behavior of the labor factor, the most important of the factors of production. For example, Professor Card has challenged the conventional theory that increasing wages also worsened unemployment, and through real-world experiments he has shown that this is not the case. It is also showing that hiring undocumented workers does not cause those who do have documents to earn less.

These investigations that were made on workers in the real world, and in jobs such as fast food businesses such as McDonald’s or the Taco Bell, are revolutionizing the investigations of the science of economics, towards the use of the most realistic methodologies. applied and more relevant to serve society.

As the famous economist Paul Krugman, also a winner of the Nobel Prize in Economics, states that successful natural and real-life experiments, such as the application of better wages, or the hiring of undocumented workers, tend to support policies economics and labor more oriented to the left of current economic thought.

This is precisely what Krugman and other colleagues are calling the “Credibility Revolution,” and that is the transformation of the way economists use information and methodologies to test their theories.

David Card, Californian pioneer of the credibility revolution, and who did a lot of research on minimum wages, departing from the previous methodologies of isolating the effects of an economic policy, under the classic assumption that “everything else remains constant”; now, together with other colleagues, he successfully uses the empirical approach called natural experiments.

The demonstration that increases in minimum wages in the United States do not cause increases in unemployment or inflation, justifies strategies to increase wages, and apply more aggressive policies aimed at reducing socioeconomic inequalities that have been seriously aggravated in Mexico, in the United States and around the world.

So this novel revolution in economic thought shows that those hypotheses (causing inequalities) were wrong, that the increase in wages caused unemployment, or that aid to the unemployed reduces their incentives to work, or that aid to the old do not increase aggregate consumption, etc.

In short, this valuable contribution to society of the Nobel laureate Professors Card, Imbens and Angrist, together with the influential world-renowned economist, Paul Krugman, is an alternative dilemma from those old erroneous theories without scientific empirical support, ( wrong), which were currents of classical economic thought that supported the hypotheses of conservative right-wing technocrats, and that also suggested theoretical apologies that justified inequities in economic systems. Hopefully this new Credibility Revolution will contribute to the implementation of better salary and employment strategies.

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Economic vision | The 2021 Nobel Prize in Economics