3 Economists & A Revolution

2021’s economics Nobel laureates freed the discipline from limiting bonds of theory

- Esther Duflo & Abhijit Banerjee

This year’s Nobel prize in economics is probably one where there was the broadest support. It was our favourite pick for this year’s prize, but also that of several people we polled. The influence of the idea that natural experiments are often the best way to make causal claims in the social sciences, is so pervasive that many younger social scientists probably do not know that there was a time when this was not what we did.

Of course, there are grumbles (not at MIT, where Josh Angrist is universally admired, for his seriousness and commitment to the field). One hears that this is a prize for statistics, not economics. This goes back to an old battle inside economics: Economics used to be a field where theory had primacy – we believed what our models told us, and if there was a correlation that fitted the claim, all the better.

Practising economists knew that this was not entirely kosher, that correlation did not have to mean causation: Countries with higher minimum wages like those in Western Europe have higher unemployment than the US, but perhaps it is not because of the minimum wage, but because people in these countries value dignity, and prefer to be unemployed rather than take up a “shit” job. In other words, maybe it is the “selection” of countries that choose high minimum wages that is driving the correlation between high wages and unemployment and not the minimum wage itself.