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The value of economic science


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Diario de Navarra

Anastasia Terskaya

Lecturer at School in Economics

Miguel Ángel Borrella Mas

Professor at School of Economics

The award Nobel Prize of Economics 2021 has been awarded to economists David Card (University of California, Berkeley) for "their empirical contributions to the Economics of work"; and to Joshua D. Angrist (Massachusetts Institute of Technology) and Guido W. Imbens (Stanford Graduate School of Business) for "their methodological contributions to the analysis of causal relationships".

Among the many contributions to the field of labor Economics , David Card has contributed to topics as diverse as immigration, wages, unemployment and Education. These topics are undoubtedly very topical for the Economics of many countries -including Spain-, not least because of the high level of unemployment observed recently. One of his most influential articles has shown that, contrary to what was widely believed, an increase in minimum wages does not necessarily decrease the levels of employment. This article is the most famous example of the application of the "differences-in-differences" method of causal analysis, a very common method for evaluating the effects of the introduction of reforms based on comparing the results of a given policy before and after its implementation (first difference) in places where it has been implemented and where it has not (second difference).

David Card's numerous articles have also contributed to the topic of the Education, demonstrating in a robust way that resources invested in schools have a large positive impact on the labor market. Finally, thanks to this economist's research , we now know that the wages of people born in a country can increase due to the arrival of new immigrants.

The other half of award has gone to Joshua D. Angrist and Guido W. Imbens, who demonstrate in their numerous papers how to identify the causal effect in various real-life situations, which we economists call natural experiments. One of the most famous articles by Angrist and Imbens teaches that, under some assumptions, one can identify the causal effect using instrumental variables, which are auxiliary variables used in the absence of experiments. This method has become one of the most famous in causal analysis and has helped to answer in a robust way many, many questions, such as: how does Education affect wages?

Although the saying "correlation does not imply causation" is generally accepted, what is really important is to know what it implies. The contributions of these three authors serve, therefore, to highlight the importance of rigorous research in the field of Economics. This generation of scientific knowledge allows us to continue fighting against commonly established beliefs based mainly on feelings, ideology or intuition, placing economic science as a basis for decision-making in fields as important as Education, immigration or the labor market.