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David Card. Photo illustration: Annelise Capossela. Photo of David Card: Jonathan Nackstrand/AFP,  UC Berkeley via Getty Images

David Card, Joshua Angrist and Guido Imbens won the economics Nobel this week, not so much for what they discovered but for how they discovered it.

Why it matters: While fellow laureates Esther Duflo, Abhijit Banerjee, and Michael Kremer are famous for designing experiments to quantify the effects of economic interventions, this year's winners try to find natural experiments that shed light on whether economic theory is actually true.

Card's most famous paper, comparing unemployment in New Jersey and Pennsylvania, showed that economic theory was wrong about the minimum wage — that raising it could have little or no effect on unemployment, in the real world.

  • Other natural experiments found by the winners involved things like the lottery number individuals received in the Vietnam War draft, or — in the case of a paper that Alex Tabarrok calls "one of the most beautiful in all of economics" — the month that people were born in, which has a small but significant effect on how much education they receive.

The bottom line: If economics has any claim to being a science, it has to be falsifiable. Card, in falsifying at least one economic theory, arguably helped make his subject a science.

Go deeper

Felix Salmon, author of Capital
Oct 14, 2021 - Economy & Business

How the minimum wage lost relevance

Data: BLS via RSM US; Chart: Axios Visuals 

The federal minimum wage is now just 28% of average hourly earnings. That's just half its level in 1968, when the ratio was 54%.

Why it matters: The federal minimum is so low — well below the living wage in all states — that it has at this point lost most of its power as an anchoring mechanism.

Ben Geman, author of Generate
2 hours ago - Politics & Policy

Biden's carbon emissions-cutting pledge faces tough climb

Image from the Rhodium Group study "Pathways to Paris." Courtesy of the Rhodium Group.

The verdict is in: President Biden's U.S. emissions-cutting pledge isn't a fantasy, but the path to meeting it is very difficult and relies on forces outside of White House control.

Driving the news: The Rhodium Group just released an analysis of policy combinations that could close the gap between the current U.S. trajectory and Biden's vow under the Paris Agreement to cut emissions in half by 2030.

Felix Salmon, author of Capital
Updated 2 hours ago - Economy & Business

Johnson & Johnson pulls the trigger on Texas talc gambit

Illustration: Aïda Amer/Axios

It's official: Johnson & Johnson has invoked a Texas legal loophole in an attempt to protect the bulk of its corporate assets from claims that its baby powder caused ovarian cancer and mesothelioma.

Why it matters: It's the biggest and boldest invocation yet of the so-called Texas two-step defense. But it's still not clear whether it's going to work.

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