The bankrupt state of modern economics is revealed by the most recent pseudo-Nobel prize award:
This year’s Laureates – David Card, Joshua Angrist and Guido Imbens – have shown that natural experiments can be used to answer central questions for society, such as how minimum wages and immigration affect the labour market. …
Another important issue is how the labour market is affected by immigration. To answer this question, we need to know what would have happened if there had not been any immigration. Because immigrants are likely to settle in regions with a growing labour market, simply comparing regions with and without many migrants is not enough to establish a causal relationship. A unique event in the history of the US gave rise to a natural experiment, which David Card used to investigate how immigration affects the labour market. In April 1980, Fidel Castro unexpectedly allowed all Cubans who wished to leave the country to do so. Between May and September, 125,000 Cubans emigrated to the US. Many of them settled in Miami, which entailed an increase in the Miami labour force of around seven per cent. To examine how this huge influx of workers affected the labour market in Miami, David Card compared the wage and employment trends in Miami with the evolution of wages and employment in four comparison cities.
Despite the enormous increase in labour supply, Card found no negative effects for Miami residents with low levels of education. Wages did not fall and unemployment did not increase relative to the other cities. This study generated large amounts of new empirical work, and we now have a better understanding of the effects of immigration.
After all, who ever heard of Miami’s economy in 1980-1984 being in any way different than in the four comparison cities? Surely, the only economic difference among the five cities was Miami’s labor supply shock. Nobody with a Ph.D. in economics has ever noticed that there was a demand shock in Miami in 1980-84.
The economics profession would like to remind everybody that one annoying unmentionable — who has been pointing out for a decade and a half that in 1980 there was a simultaneous demand shock in Miami known as History’s Most Flagrant Cocaine Boom that invalidated Card’s celebrated “natural experiment” by boosting demand in Miami for labor (whether construction workers, maitre d’s, escorts, ethically challenged bankers, drug mules, Jeb Bush, kingpins, or henchmen) — that Scarface, Miami Vice, Cocaine Cowboys, and Narcos were not published in peer-reviewed journals, so, as far as we are concerned, they don’t exist: ergo, nyaah-nyaah-nu-nyaah-nyaah, we economists have our fingers stuck in our ears so we can’t hear you!
The study was utterly idiotic, as it purported to prove that there was no decline in labor prices due to a massive increase in the labor supply, which it did through the application of the Ricardian Vice and ignoring the simultaneous increase in the demand for labor that was fueled by the cocaine industry.
But that’s what passes for the best of mainstream economics today.