American economists David Card, Joshua Angrist, and Guido Imbens will receive the Nobel Prize in Economics in 2021. Card won the Labor Economics Research Prize, while Angrist and Imbens were honored for their contributions to the study of causality, according to the award’s website.
“This year’s laureates… provided a unique perspective on the labor market and showed how natural experiments may be utilized to draw conclusions about cause and effect.” According to a committee press release, “their approach has been extended to other areas and revolutionized empirical research.”
Natural economic experiments are conducted with the participation of people. These experiments are designed to mimic laboratory conditions as nearly as possible. Nature or other factors outside the researchers’ control may have an impact on their involvement. The main distinction between them and traditional experiments is that researchers do not interfere with the process, but instead just observe and assess it.
Using natural experiments, David Card investigated the impact of the minimum wage, immigration, and education on the labor market. His research was completed in the early 1990s. They demonstrated, for example, that raising the minimum wage does not necessarily result in a reduction in employment. It also discovered that the school’s resources are “far more important to students’ ultimate labor-market success” than previously thought.
Natural experiments, on the other hand, yielded difficult-to-interpret findings. In the mid-1990s, Joshua Angrist and Guido Imbens addressed this problem by demonstrating how valid conclusions about cause and effect may be derived from natural experiments.
“Cardom’s examination of society’s main issues, as well as Angrist and Imbens’ methodological contributions, have shown that natural experimentation is a rich source of knowledge.”
“Their research has substantially improved our ability to answer basic questions about causation, which has profoundly benefitted society,” said Peter Fredriksson, chairman of the Nobel Committee for Economic Sciences.
In 2020, Stanford University’s Paul Milgrom and Robert Wilson were awarded the Nobel Prize in Economics. They were honored for their contributions to the development and implementation of auction theory. Scientists have developed new auction forms as an example of how basic research may lead to breakthroughs.
