A trio of economists, Card, Angrist, and Imbens, won the Nobel Prize in 2021 for a natural experiment that showed that a commonly held belief about the relationship between the minimum wage and unemployment wasn’t always true. That seems reasonable to me — economics is basically about human psychology, and psychology sometimes gets strange. One strange psychological aspect of some economists, though, is that they have the notion that economics is as robustly mathematical and predictable as physics, and questioning the reliability of economics is heresy. Some economists were furious about an experiment that called their assumptions into question.
Their research didn’t conclude that an increase in the minimum wage would boost employment in every circumstance. Far from it.
But it challenged the view that an increase in the minimum wage would always lead to unemployment.
However, their findings weren’t welcomed by the establishment.
In fact, they sparked an emotional debate in the economics profession.
American economist James Buchanan, a Nobel Laureate himself (in 1986), was scathing of the suggestion that a core “law” of economics might not be universal after all.
“The inverse relationship between quantity demanded and price is the core proposition in economic science, which embodies the presupposition that human choice behaviour is sufficiently relational to allow predictions to be made,” Mr Buchanan told the Wall Street Journal in 1996.
“Just as no physicist would claim that “water runs uphill,” no self-respecting economist would claim that increases in the minimum wage increase employment.
“Such a claim, if seriously advanced, becomes equivalent to a denial that there is even minimal scientific content in economics, and that, in consequence, economists can do nothing but write as advocates for ideological interests.
Cool. Keep in mind, Buchanan is defending economics with that statement.
Also worth keeping in mind: Buchanan was a Libertarian with a capital L, a senior fellow of the Cato Institute, and has been called The Architect of the Radical Right. But as we all know, conservative politics is totally apolitical, so his strong advocacy for ideological interests doesn’t count.
An additional comment: it turns out that considering evidence counter to dogma is the behavior of whores.
“Fortunately, only a handful of economists are willing to throw over the teaching of two centuries; we have not yet become a bevy of camp-following whores.”
He sounds like a fun guy.