When David Card recently won the Nobel Prize in Economics (and two other economists), I thought Paul Krugman would be involved because Card and the late Allen Kruger together, Wrote an economic study nearly thirty years ago This allegedly refutes standard economic theory about the effects of a binding minimum wage. Krugman did not disappoint.
Just like his MO, Krugman carefully selected his information, and then went on to claim that Carder-Kruger’s research and other studies that seem to refute how economic theory is usually applied should “support a policy shift to the left”. At least in terms of government policy. This is another way Krugman claims that opportunity cost is irrelevant and may be wrong.No, he did not make that statement itself, But there is no other way to explain his remarks. So, let’s get started.
For many years, Krugman has believed that whenever economic theory clashes with the wish lists of left-wing politicians and activists, such economic theory is wrong and, if honest, may be evil.This gives Krugman another reason to hate the Austrians. They are a priori In their economic analysis methods, this also gave the Austrians another opportunity to point out Krugman’s mistakes and downright fallacies.
This year’s Nobel Prize was awarded to economists who are engaged in what we call “empirical” economics, that is, they study statistical analysis obtained from the data they collect to “test” economic hypotheses, such as the law of demand. Krugman wrote:
Economists usually cannot conduct controlled experiments-all we can do is observe. The trouble with trying to draw conclusions from economic observations is that many things happen at any given time and place.
Economist David Henderson-he is clearly no Krugman’s biggest supporter-Wrote something like Wall Street Journal:
Why is natural experiment important? One of the most difficult problems in economic research is figuring out whether the relationship between two variables is causal or coincidental.
The Austrian economist can point to the opening remarks in his classic work of 1871, Principles of Economics, Which says: “Everything obeys the law of causation.” When economists collect data, they often try to figure out what is the cause and what is the result, but they often mistakenly reverse the relationship.For example, I read in some economics books that inflation is a general increase in the prices of goods and services, but in fact, price increases are Influence Inflation is the devaluation of currency when the government increases supply.
Therefore, it is important to understand causality when conducting economic analysis, especially when economic analysis predicts government policy actions.For example, during the Great Depression, the Herbert Hoover and Franklin D. Roosevelt administrations believed that price drop Yes reason Businesses closed down, and in fact, it was the economic downturn that caused prices to fall. (I should add Austrians think the price drop is helpful Brings economic recovery after the collapse of a credit-driven, unsustainable boom. Therefore, the New Deal did everything it could to end the depression by igniting inflation and cartelizing the American economy; of course, their actions would only prolong the downturn and put the “Great Depression” in the “Great Depression”. )
It is not surprising that Krugman and Henderson have different interpretations of the results of the Card-Kruger study. Krugman claimed that they “refuted” or at least challenged standard economic theories about employment and wages. In addition, “…Just to increase the minimum wage, but to more actively reduce overall inequality.”
Not surprisingly, Henderson has a more detailed and in-depth description of the Card-Krueger paper and its claims:
Card and Krueger conducted a famous natural experiment to study the employment situation of fast food restaurants in New Jersey and Pennsylvania before and after the minimum wage increase in New Jersey and Pennsylvania, but Pennsylvania did not. Contrary to expectations, the number of jobs in fast-food restaurants in New Jersey rose slightly relative to the number of jobs in Pennsylvania. On this basis, they challenged the standard supply and demand model of the impact of the minimum wage. Unfortunately, the data for Mr. Card and Mr. Kruger are not so good—they collected them by calling restaurants. (Emphasis mine)
University of California Irvine economist David Neumark and Federal Reserve economist William L. Wascher used restaurant wage data to find out the expectations of most economists: The increase in the minimum wage in New Jersey resulted in the employment rate of New Jersey restaurants relative to Pennsylvania. Employment in restaurants has declined. In response, Mr. Card and Mr. Kruger updated their analysis and concluded that “the increase in the minimum wage in New Jersey has no effect on the total number of employment in the fast food industry in New Jersey.” In their 2008 “Minimum Wage In the book, Newmark and Mr. Wascher pointed out that if this were the initial conclusions of Mr. Card and Mr. Kruger, “there would be much less room for doubts about the standard competitive model of the labor market.” Indeed.
This account is more than just one Methodology Among academic economists, because it is the core of the argument Krugman is making-ironically, the explanation of the research that Krugman and other economists use to drive minimum wage growth and other government interventions Also debunked their own analysis. It cannot be claimed that the uncertain results of a study in a region can be quickly concluded all Therefore, standard economic analysis by using economic theory is invalid.
Although this is not an article about the Card-Krueger research, the research and its consequences have been transformed into something that allegedly debunks market theory. Krugman and others have also claimed that we can know the answer to economic questions only in research After the staff completes the research. In addition, if experience is order-in fact, if only The order of the day-then it is impossible to infer the results that Card and Kruger allegedly found in New Jersey to cover all The labor market, but this is exactly what Krugman and others are doing. The intellectual inconsistency is incredible.Economics has changed from a prudent science to a battering hammer for politicians and their academic allies (such as Krugman). They believe that the only factor that hinders economic success is any The policy they want is political will.
We are seeing intellectual power at work. In this case, a person can overwhelm any opposition by having “numbers on our side.” Please note that if someone is to say that the New Jersey minimum wage study is a comprehensive decision on whether the labor market follows standard economic theory, then Neumark-Wascher’s paper seems to bear the sky, because its data reflects actual employment results, not Non-binding telephone survey. If someone is to claim that “science is important,” the reliability of the data seems to be the most important.
Moreover, even if Krugman admits that the Kader-Kruger study produced uncertain results, it is difficult for it to become the standard for completely overturning all economic analysis that produces results that progressives do not like. For Krugman, if he likes the results of a study and can be used to promote progressive policy measures, then economic theory is irrelevant. However, if studies such as Neumark and Wascher are to affirm standard economic theories while questioning the effectiveness of progressive policy initiatives, then the study is right-wing and intellectually worthless.
In order to “prove” his position on the minimum wage issue, Krugman pointed out Working Papers from the University of California, Berkeley As he mentioned, several other papers “prove” that expanding the welfare state can improve human health. However, David Henderson cites another study that looked at the health outcomes of Oregon’s Medicaid expansion, and the results may meet Krugman’s expectations:
Amy Finkelstein of the Massachusetts Institute of Technology and other health economists used natural experiments in Oregon to evaluate the health effects of Medicaid. The state government has set up a lottery for people who want to get Medicaid. Economists have reason to believe that there will not be much difference between winners and winners. As a result, they followed everyone up a lot and found that receiving Medicaid “has no statistically significant improvement in the physical health results measured in the first two years.”
Does this mean that Medicaid will not improve anyone’s health prospects? Does this mean that Finkelstein is just a right-wing lackey? Does this mean that all Medicaid programs should be cancelled, or should they be expanded? The significance of these studies is indeed in the eyes of readers and advocates.
There are reasons why economists such as Ludwig von Mises and Murray Rothbard are pessimistic about studying economics through duel research. At best, this type of research can give us a rough idea of the impact of government policies in following and violating economic assumptions. For example, we know the historical record of rent control and other price controls, but progressive politicians are advocating for the implementation of such policies, and when someone warns them of the inevitable results, progressives will respond with a series of bullying and verbal abuse.
Frankly speaking, Krugman’s dishonesty is breathtaking. He claimed that because some economists conducted a study with questionable data, the study did not “prove” that the increase in the minimum wage caused a large number of employment losses. The result told us that politicians should actively increase the minimum wage because of this. The policy has no cost and only provides positive benefits. (After all, if there is no consistent and universal economic law, then the opportunity cost does not exist.) In other words, he claims that the results of regional studies should always If the promoted policy is considered to be gradual, it is generally applicable.
That is self-contradictory. If someone claims that there are really no universal laws of economics and that the relationship between supply and demand is irrelevant, then the results of stylized research cannot be universally applied, especially research that uses data that can be easily manipulated.
It is not possible to declare that the scientific method is valid and invalid at the same time, and this is exactly what Krugman did. Given his obvious influence, then we should bow our heads like honest people and declare that “it must be the case.” If Krugman even refuses Accepting the basic scientific method, then, in Mises’s words, what he was doing was nothing but economic metaphysics.