Canadian Nobel winner David Card has led a credibility revolution in economics

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The damn pandemic! It even kept the Nobel gossip down.

Every fall since 1969, the year the first Nobel Prize for economics was awarded, October is when the gossip starts buzzing: Who’s going to win it this year? The economics department at Princeton University used to stage a betting pool. Its faculty members have won 23 of them. But this fall, professors around the world were working from home, and prize chatter was barely audible.

Still, it was the Nobel, the big one, the Oscar for brainiacs. No other award for economics comes remotely close on the academic status tree. What economic subspecialty would the Nobel committee deem important this time around? Would it be a macro year? No, that was 2018. Maybe environmental economics? Would the winner be an American, a European, an African, an Asian? Don’t think no one’s counting.

This fall had none of that fizz. Still, no one was especially surprised last Monday, when the Nobel Committee announced that the 2021 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel had been granted to David Card, a Canadian-born labour economist at the University of California, Berkeley, for his “empirical contributions to labour economics.” Or that the other half of the prize had been won by two of his occasional collaborators, Joshua Angrist (MIT) and Guido Imbens (Stanford) for their “methodological contributions to the analysis of causal relationships.”

“I think‚” says Dwayne Benjamin, a former student of Prof. Card’s who is now a vice-provost and professor of economics at the University of Toronto, “it was really a question of when, not whether.”

All of which is now being duly celebrated. Prof. Card has granted 50 media interviews this week alone. It’s too bad about the buzz blanket of COVID-19, though. Prof. Card might be the most radically progressive economist to have received the Nobel Prize in decades. His win is already getting under the skin of his enemies.

David Card – sturdy, modest, glasses, straightforward, ready laugh, gold silk Windsor-knotted tie, blue blazer for the Zoom announcement of the Nobel win from Berkeley last Monday – grew up on a dairy farm outside Guelph, Ont. He rose every morning in high school at 5:30 to help his father milk 30 cows. (His mother, in her 80s, still works the farm with David’s brother.) He then headed off to Queen’s University to be a physicist, but “I wasn’t going to be a very good physicist.”

Instead, he was lured to Princeton by Orley Ashenfelter, one of the first labour economists to encourage the use of empirical methods. Prof. Ashenfelter was fond of quoting a famous line in The Wealth of Nations, in which Adam Smith notes that employers rarely get together without discussing how they can keep wages low. That established the Ashenfelter team’s quietly subversive tone.

Prof. Ashenfelter wanted his new graduate student to investigate whether training programs for disadvantaged workers or people who’ve been unemployed had any effect. There were many such programs in Canada, but they were notoriously difficult to study to any clear conclusion – until the young team arranged the study like a scientific experiment, and used computers and what Prof. Card calls “fancier econometric statistical methods” to analyze the data they collected. The U.S. Department of Labor was impressed enough to offer some funding.

A few years later, David Card saw an opportunity for a sharper investigation. From May to September of 1980, Fidel Castro had kicked 125,000 Cubans out of their country, forcing them to make their way by boat to Miami – the famous Mariel Boatlift. Prof. Card realized he was looking at a rare natural scientific experiment of a kind economists rarely get to study in messy real life: He could evaluate the effect of the arrival of the immigrants on job opportunities for local workers living in Miami. The marielitos increased Miami’s unskilled labour force by 7 per cent.

But after studying the data from multiple statistical angles, Prof. Card discovered the newcomers had zero effect on either the wages or the unemployment rate of comparable workers in Miami. This was not what classical economic theory led anyone to expect, and the economist attracted huge criticism: The Mariel paper was for many years the most cited paper in economics. Some of Prof. Card’s competitors in the business are still trying to prove, 40 years later, that he misinterpreted the data.

A few years later, he struck again, this time with his career-long collaborator, Alan Krueger, another Ashenfelter acolyte at Princeton. (The dashing Prof. Krueger was later named chair of Barack Obama’s White House council of economic advisers. He died by suicide in 2019, to the shock of the entire profession.)

Card & Krueger, as they were known, liked to read a lot, and eclectically. Prof. Krueger, for instance, had a subscription to The New England Journal of Medicine, hardly standard economist fare. They noticed that on April 1, 1992, New Jersey planned to hike its minimum wage from US$4.25 to US$5.05 an hour; meanwhile, a few miles away on the other side of the border with Pennsylvania, the minimum wage was staying at US$4.25.

It was another naturally occurring experiment, with that rarest of all things in real-life economic situations, a built-in control group. The young geniuses set out to find any data they could. They surveyed employees and owners at 410 fast-food restaurants in New Jersey and eastern Pennsylvania before the wage increase, then again afterward. Then they started poring over data.

Here again, classical economic theory predicted what seemed obvious and logical: Raise the minimum wage and jobs disappear. (It’s the same argument Doug Ford recently used to resist raising the minimum wage in Ontario.) But Card & Krueger, try as they might – and they were very rigorous – found (Hello, Mr. Ford. Are you still there?) no hint that the rise in the minimum wage reduced employment. In fact, under certain real-life conditions, boosting the minimum wage actually increased employment.

Another commandment of holy economic dogma had fallen. “The so-called conventional wisdom in a lot of these areas,” Prof. Card says, “is in fact much more complicated or ambiguous than is sometimes pretended to be the case in undergraduate textbooks.”

This time, the knives came out extra-sharp. The minimum wage, after all, was one of the first pieces of individual economic relief that had been passed as U.S. federal law. Prof. Card remembers the day after the study’s publication as “probably … the worst day of my life.”

He walked into the mailroom at Princeton’s economics department and discovered every mail slot contained the same envelope. “I thought, that’s weird. And it’s this letter from a group that lobbies on behalf of the restaurant industry. And they got this guy to do a study to whack on me and Alan. Then they sent a copy to everybody in the whole economics profession.”

Prof. Card adds that The New York Times has not called him for a direct comment since he won his Nobel last Monday. “But they called that guy, who wrote the report that criticized Krueger’s and my work, and quoted him.”

Prof. Ashenfelter’s merry band of data-hungry labour economists were rocking the increasingly shaky foundations of their profession. “There was a strong belief that economics was a field that did not lend itself to experimental methods,” Craig Riddell, professor emeritus at UBC’s Vancouver School of Economics and a frequent collaborator of Prof. Card’s, recalls of the Pre-Card Time of Darkness. “I remember being told, as an undergrad, that economics was similar to astronomy: You can’t hold one planet fixed while you study the movements of other planets.”

Economists had been spouting theory and logic instead of data and results. Armed with growing computer power and ingenious new baskets of data, Card & Co. started what is now known, and has often been cited, as the credibility revolution in economics. “With careful attention to research design and causal inference that has spread from labour economics to many other subfields in economics,” Prof. Riddell adds.

Prof. Card, of course, being the irascible wild Card, has other explanations for the traditional willingness of economists to buy into the status quo. “I think partly it’s that most economists were from rich families, and never worked as teenagers, and haven’t had experience in real jobs in the market,” he says. “Not all economists, of course. Many labour economists come from somewhat more regular background. But huge numbers of economists have never actually done anything. They don’t really have much contact with real-world situations.”

He still asks his graduate students – he’s renowned for the number of accomplished economists he has mentored – about their family backgrounds, which ones are the offspring of doctors and professors. “Many, many people who get a PhD, their parents have PhDs,” Prof. Card has found. “It’s part of this intergenerational lack of mobility. People at the top are going to come from the top.”

The dairy farm in Ontario saved him from a similar fate. “Yeah,” he says, “I’ve probably milked more cows than most economists.”

Profs. Card and Kreuger were famous for breaking the rules and working through the night in the Princeton economics library every fortnight or so. “Being a professor, especially of labour economics, is not very glamorous,” Prof. Card says. “I’ve probably worked 65 hours a week my entire life. We spend a lot of time with computer programs. It doesn’t look like Robertson Davies at the high table.”

“Economics is still a very young science,” professor Thomas Lemieux, another Card collaborator, now at UBC, points out. “People have been speculating about things for a long time. But to do real experiments with real data, economics had to get much more rigorous, and David Card has been responsible for that.”

“He has the work ethic of a farmer,” says Abigail Payne, a former Card student and co-author who now teaches at the University of Melbourne. “But he is also humble. We all have egos. But he’s not one of the guys walking around like a peacock.”

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Over the past 30-odd years (his CV is 14 single-spaced pages long) the good professor has amassed a reputation as a careful researcher with an eye for a testable thesis, and as a crisp writer with a nose for a good story. “The new wave is far more driven by data than before,” Dr. Benjamin says, citing the credible carefulness with which Prof. Card draws – or often refuses to draw – causal relationships between correlatives. “But everyone also wants narrative.”

His research papers – shockingly readable in an incomprehensible, jargon-strangled profession – have created a foundation of evidence for any number of economic initiatives, many at the forefront of progressive politics.

Prof. Card has drilled down into wage growth among educated immigrants in Canada; into why women get stuck in low-paying firms; into the question of whether teenaged friends influence each other to undertake risky behaviours, such as having sex (the answer is yes, they certainly do); into affirmative action (it works); into the causal relationship between unexpected losses by home NFL teams on TV, on the one hand, and domestic violence toward girlfriends and wives on the other (a 10-per-cent increase).

But it’s his more recent work on the economics of education that, he suspects, will be his most lasting contribution. In 2015, to cite just one study, Prof. Card and his fellow researcher discovered that kids in Grade 2 in an undisclosed city were selected for gifted programs almost entirely on the basis of parent-teacher meetings and referrals. The result was that minority students and underprivileged kids were under-represented in gifted programs.

But if you then tested every student for giftedness as a matter of course, as happened in the city in question – without lowering the standard of what qualified as gifted – the minority and underprivileged differential evaporated. It’s just a research paper, but it’s a huge conclusion.

Then there was Prof. Card’s successful defence, as an expert witness in 2018, of Harvard University’s admissions procedure after it was accused of discriminating against Asian-Americans. The case is already considered a classic in a bizarre genre. The lawsuit was brought by conservatives who wanted to defeat the U.S. Supreme Court precedent that permits the consideration of race as one factor in a college application.

With the Harvard case now headed to the Supreme Court, Prof. Card should be causing controversy for some time to some.

Prof. Card made his reputation and his living in the United States. His Berkeley salary was US$344,325 in 2015, according to public records, and he’s probably in line for a raise. But his sympathies often revert north to the country of his birth.

The economist who championed the use of data and science in economics is becoming more and more concerned about data becoming inaccessible, especially in the United States. Data abounds these days, “but it’s not like everybody can get it,” Prof. Card says. “Google has all the data in the world. But you don’t see any papers using Google data. Amazon has all the data in the world, but there’s no papers using Amazon data.” Statistics Canada went through a dark period when the government made war on the agency. “But I think now they’re maybe coming back,” he says.

More to the point, Prof. Card says, “very highly connected people might have slightly better access to data than less-connected people. And I think that’s actually not good for the field. It was a more egalitarian field in the 1980s and 90s. But that’s what happens in our world. Data access comes and goes.”

And where are we on the pendulum at the moment, in a world that features artificial intelligence and machine learning as well as anti-vaxxers and people who believe, against all factual evidence, that the last U.S. presidential election was stolen?

“I think we’re probably facing some dangers,” Prof. Card admits. “We’ve got all these strange people in politics now. You know, Trump-like people. Some of them are in Canada as well. And they don’t see the value of research. Because normally, research isn’t working out for them. If somebody is doing research on poverty, that’s not really good for the more conservative types. Nothing that you’re going to find is going to help their cause. For the same reason a lot of conservatives think we shouldn’t be collecting data on race.”

For the first time in a long conversation, the famous optimism of David Card cracks, just a little. “I think that’s very depressing,” says the 2021 winner of the Nobel Prize for economics. “I think that’s why I’m much less optimistic that scientific knowledge and research will change anything. They certainly won’t change anything in the near future.”

That’s not to say he plans to stop conducting open-eyed, independent, unbiased experiments into the ways we tell ourselves we ought to be living. It may be dark outside. But those cows still need to be milked.

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