Alan Krueger, natural skillBy Blair Morris
September 23, 2019
F EW ECONOMISTS can declare either to have successfully challenged the bedrock beliefs of their field or to have actually altered how federal governments pursue policies that impact millions. Alan Krueger, who passed away on March 16 th, handled both. In research with David Card in the early 1990 s, Mr Krueger revealed, through cautious information analysis, that increases in the minimum wage did not result in reductions in employment, as standard models recommended they should. The research, which the authors summarised in a seminal book, “Myth and Measurement”, released in 1995, drew a scathing preliminary reaction. Critics assaulted their inspirations, information and analysis until permitting, lastly, that the set had a point. Their work changed economics and politics. It likewise exhibited Mr Krueger’s career as both scholar and public servant.
Mr Krueger did not discover as the combative type. He was gracious and generous in individual, and a proficient communicator. That was available in helpful during his time in Washington, as primary financial expert of the Department of Labour when Expense Clinton was president, and in the Treasury and the White House under Barack Obama during the most troubled economic times considering that the 1930 s. He typically wrote for the New York Times and appeared on television. Helping people comprehend what economic experts had discovered was, he believed, part of a financial expert’s job.
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His enthusiasm, however, was the craft of economics. In 1987, as a newly minted P h D, Mr Krueger accepted a position at Princeton University, not far from the New Jersey town where he grew up. From the start he had an interest in comprehending why workers made what they did. However he identified that the concern could not be answered satisfactorily without strenuous and mindful study of data. Mr Krueger subscribed to the New England Journal of Medicine, and appreciated the way each post started by going over the paper’s research style. Economics badly dragged medicine and the physical sciences in making use of mindful empirical work, not least since of the trouble of running experiments on untidy real-world interactions. In the late 1980 s, however, some financial experts were honing methods to study “natural experiments”, in which a more or less random, localised occasion allowed researchers to compare the experiences of affected and unaffected groups, in something of the way that a laboratory researcher may compare treatment and control groups.
Messrs Card and Krueger used the technique to studying the impacts of modifications in the base pay. At the time most economic experts assumed that labour markets were basically competitive. Workers might quickly leave firms that provided them too little; firms needed to accept dominating market salaries and would just hire as numerous employees as made monetary sense. An increase in the base pay, by making labour more pricey, must thus equate directly into lower work. But did it? Starting in the early 1980 s, increases in America’s nationwide minimum wage were infrequent and too little to get rid of the results of inflation. Some states reacted by raising their own minimum rates, developing just the natural experiment Messrs Card and Krueger needed. They studied the result of a rise in New Jersey’s base pay in 1992 on employment in fast-food restaurants, using neighbouring Pennsylvania, which had not enacted an increase, as a comparator. They did not identify any unfavorable result on work.
Though arguments about this research study rumbled on for many years, its effect has been indisputable. It opened the floodgates to a wave of deal with natural experiments. It likewise stirred argument about competition in labour markets, to which Mr Krueger would contribute for the rest of his life. Markets may not be very competitive at all, some economists reckoned, since it is pricey for employees to find and change jobs, or because large firms control markets or conspire to suppress pay. In a talk last August, Mr Krueger cited a stream of current research in arguing that stubbornly weak wage growth is strong proof that workers have too little bargaining power, which the economy is suffering as an outcome. It is incorrect to label such dynamics “market flaws”, he mused. As Mr Krueger pointed out, Adam Smith himself believed labour markets worked that way.
A repertoire complete of tunes
Mr Krueger’s documents explored how factors from education to race to innovation influenced workers’ potential customers, frequently rustling up new information sources at the same time. He drew a link in between America’s opioid-addiction crisis and declining involvement in the labour market, particularly amongst men. He made a routine of going to a celebration for twins with Orley Ashenfelter, a coach and Princeton coworker, to look for subjects for research studies of the impact of education on incomes, using genetic similarities to separate the impact. Mr Krueger’s curiosity was insatiable. He released on an amazing variety of topics. After the attacks of September 11 th 2001, he checked out the factors adding to the decision to end up being a terrorist. In a book in 2007 he argued that political repression, instead of a dearth of economic chance, did most to foment terrorism. He studied the entertainment market, to understand how innovation and globalisation are impacting the economics of popular music (another passion): a book is due out in June.
And, typically in collaboration with Daniel Kahneman, a Nobel laureate who originated the application of psychology to economics, Mr Krueger went into the measurement of subjective well-being, wanting to discover better ways of recording shifts in what matters most in life (see article). The goal of economic development seeks all to help people lead more satisfying lives, and to cultivate its pursuit, governments and scholars need reliable information. It was a message he preached throughout his career. His professional example inspired scores of young scholars, whose work is a monolith to his memory. Both economics and American public life are much poorer for his death.