Christopher Hayes writes in the Nation:
Mafia is probably a tad hyperbolic, but there is undoubtedly something of a code of omertà within the discipline. Just ask … David Card. … Card, a highly esteemed economist at the University of California, Berkeley, caught flak for his heresy not on trade but on the minimum wage. In 1994 he conducted a study to see whether an increase in the minimum wage in New Jersey had the negative effect on employment that basic neoclassical theory would predict. He found it didn’t. In fact, his regression analysis showed that, controlling for other factors, New Jersey gained fast-food jobs after increasing its minimum wage, compared with Pennsylvania, which hadn’t raised wages. The paper attracted a tremendous amount of attention and criticism, and Card himself largely abandoned working on the minimum wage. In a 2006 interview, he explained his decision to leave the topic behind this way: “I’ve subsequently stayed away from the minimum wage literature for a number of reasons. First, it cost me a lot of friends. People that I had known for many years, for instance, some of the ones I met at my first job at the University of Chicago, became very angry or disappointed. They thought that in publishing our work we were being traitors to the cause of economics as a whole.”
Of course, Card’s other famous study, the one of Miami in 1980-85 claiming that immigration doesn’t lower wages, is wildly popular with many of the same free market economists and open borders pundits who hate the conclusion of his minimum wage study.
The problem with economics these days is not so much the various models as that economists believe that having models lets them get away without knowing much about the real world.
For example, Card’s comparison of wage trends in Miami in 1980-85 relative to four other cities is pretty useless because that was the peak of the Scarface – Miami Vice cocaine boom in that city, so ceteris wasn’t at all paribus. Now, anybody who watched TV in the 1980s should know that, but economists never seemed to notice it when discussing Card’s study.
Worse, economists seldom seem to care that they are often ignorant about the realities that they so confidently pronounce upon.
(Republished from iSteve
by permission of author or representative)