Economics

Facts seem to support a progressive agenda

In April 2021, America’s 158 year-old National Academy of Science awarded membership to Canadian born economist David Card in recognition of his “distinguished and continuing achievements in original research.

This week, Swedish trustees awarded Dr. Card a one-half share of the 2021 Nobel Prize in Economic Sciences.

The award was for his years of empirical contributions to labour economics.

Using natural experiments, David Card has analysed the labour market effects of minimum wages, immigration and education. His studies from the early 1990s challenged conventional wisdom, leading to new analyses and additional insights. The results showed, among other things, that increasing the minimum wage does not necessarily lead to fewer jobs. We now know that the incomes of people who were born in a country can benefit from new immigration, while people who immigrated at an earlier time risk being negatively affected. We have also realised that resources in schools are far more important for students’ future labour market success than was previously thought.

David Card’s Nobel Prize carries with it a cash prize of more than C$700,000 but the economist may experience greater satisfaction from credibility the award lends to his findings. Those conclusions challenged conventional wisdom and have been steadily disputed by “useful idiots” of the evil geniuses who control economies of the world.

Paul Krugman, also a Nobel Prize winner in economics, wrote about Card’s work:

The most famous example is the research that Card conducted along with Alan Krueger on the effects of minimum wages. Most economists used to believe that raising the minimum wage reduces employment. But is this true? In 1992 the state of New Jersey increased its minimum wage while neighboring Pennsylvania didn’t. Card and Krueger realized that they could assess the effect of this policy change by comparing employment growth in the two states after the wage hike, essentially using Pennsylvania as the control for New Jersey’s experiment.

What they found was that the increased minimum wage had very little if any negative effect on the number of jobs, a result since confirmed by looking at many other instances. These results make the case not just for higher minimum wages, but for more aggressive attempts to reduce inequality in general.

Krugman has often been targeted for the social consciousness he articulates. Plutocrats would rather he was not publishing conclusions like this:

Overall, then, modern data-driven economics tends to support more activist economic policies: Raising wages, helping children and aiding the unemployed are all better ideas than many politicians seem to believe. But why do the facts seem to support a progressive agenda?

The main answer, I’d argue, is that in the past many influential people seized on economic arguments that could be used to justify high inequality. We can’t raise the minimum wage, because that would kill jobs; we can’t help the unemployed, because that would hurt their incentives to work; and so on. In other words, the political use of economic theory has tended to have a right-wing bias.

Categories: Economics

1 reply »

  1. It was wonderful that they won.

    If low wages were the answer to economic growth, India and other countries in Asia, Central america would be in much better shape than they are now. when people have no money to spend, because of low wages, no extra jobs are created.

    When some argued higher wages reduced jobs or caused businesses to fail, what they were really saying is that did not have a good business plan. There plan was based on people who made so little they lived in poverty. If that is some one’s idea of a business plan, then they ought not to be in business.

    Higher wages reduces child poverty. People tend to forget children who live below the poverty line have parents who are paid ‘shit’ wages by employers who think that is just fine. Its not. To end child poverty, governments and corporations need to pay attention to these Nobel winners.

    Like

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