by Frank Shostak
Mises.org
This year’s Nobel Prize in economics was awarded to David Card of the University of California, Berkeley, Joshua Angrist of Massachusetts Institute of Technology, and Guido Imbens of Stanford University. The laureates, according to the Nobel Committee have made an important contribution as to how to ascertain cause and effect from observational data.
For instance, how does the imposition of a minimum wage affect employment? In answering these types of questions, economists rely on observational data, but with observational data a fundamental identification problem arises: the underlying cause of any correlation remains unclear.