The Nobel Prize in Economic Sciences 2021


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Jibran Raja, UK; Ahmad Daniyal Arif, UK

The Nobel Prize has been the pinnacle of academic achievement in economics. Though not included within the original prizes established by Alfred Nobel’s will, its winners have included some of the most influential economic minds, such as Friedrich Hayek and Amartya Sen. The 2021 edition was jointly awarded to David Card, (receiving a half share of the overall prize), and Joshua Angrist and Guibo Imbens, (receiving a quarter share each).

For Canadian-American David Card, an economics professor at the University of California, Berkeley, the prize recognises ‘his empirical contributions to labour economics’, which directly challenge the neoclassical model of labour markets, particularly the assumption that a rise in labour costs result in a corresponding rise in aggregate unemployment. For instance, surveying fast-food restaurants in New Jersey and Pennsylvania, Card and the late Alan Krueger demonstrated that restaurants in New Jersey where the minimum wage grew (from $4.25 to $5.05) increased and grew employment. On the other hand, there was no growth in the minimum wage in Pennsylvania, and likewise, Card found no corresponding growth in relative employment.

Additionally, Card also studied the role of immigration in labour markets. For instance, in a 2005 paper, he argues that there is ‘scant’ evidence that immigration harmed the employment prospects of lower-skilled native workers and added that second-generation immigrants are often outstripping their native counterparts in terms of educational and economic prosperity. Furthermore, Card studied the ‘Mariel Boatlife‘, when in 1980, 125,000 Cubans expelled by Fidel Castro’s regime through the port of Mariel settled in the United States. This paper discussed how Florida absorbed this influx without exploding unemployment or plunging wages. All these findings are invaluable for policymakers considering adverse effects of policy oriented towards worker welfare.

The other winners of the prize, namely Israeli-American Joshua Angrist (a professor at MIT) and Dutch-American Guido Imbens (a professor at Stanford), were also credited ‘for their methodological contributions to the analysis of causal relationships’. Notably, in 1991, Angrist co-authored a paper (again with the late Alan Kreuger) demonstrating that the time of year of a student’s birth could have a causal effect on the quality of education and earnings since older students can drop out of school despite not having spent as much time in education as their younger counterparts. Through the 1990s, Angrist continued to author such papers, often alongside Guido Imbens. For instance, in 1995, the pair published a paper demonstrating how the two-stage least squares regression model could be used to estimate the ‘average causal effect’ for variable treatments, such as years of schooling. Therefore, the pair made ground-breaking contributions to the field of cause and effect in economics.

Significantly, all these economists characterised a shift in economic science, from a discipline dominated by theory to a science based upon experimentation, more in tune with the so-called ‘hard’ sciences, such as physics or biology. This shift will perhaps prove fruitful for future policymakers seeking greater empirical grounding for economic policy.

About the Authors:

Jibran Raja is a third-year student of Philosophy, Politics, and Economics at King’s College London. He also serves as the President of the Ahmadiyya Muslim Student Association (AMSA) at King’s College London.

Ahmed Danyal Arif is a French economist by education and currently working in London. He has a Master’s degree in Economics and Politics. After working for the French tax administration system, he published two books in French: Islam & Capitalism: For an Economic Justice (2016), and Economic History of the Islamic World: From Pre-Islamic Arabia to the Umayyad Dynasty (2019). He currently serves as the Editor for the Economics Section in The Review of Religions.