Re: Card/Krueger Revisited

[Peter J. Boettke]

Finis Welch and Kevin Murphy wrote a reply in the American Economic Review
just after the original paper was published -- it might have been in a
papers and proceedings.  Also there were some studies by a guy at Michigan
State who pointed out the troubles with the questions that were asked (I
believe his stuff was first published as NBER working papers), which lead to
a mismeasurement on the disemployment issue.  Also Finis Welch wrote a
review in Industrial and Labor Relations Review (or whatever the exact title
is of the journal) of the book which is quite harsh.

I don't think the issue is one of pure "faith" in markets and sloppy
thinking.  For the general reader I do suggest one look at Glen Whitman's
review essay on the issue in Critical Review.  The multiple margins on which
people react to changes in the situation is what could have been highlighted
in their study, but to quickly abandon the professional consensus on minimum
wage laws because of this study was a rush to judgement of the worst sort.
Where did the adjustments take place if not in the numbers employed?  If
there was no effect, wouldn't that be a result which would be highly
doubtful?  Remember the cold fusion controversy --- the physicist didn't
believe the results, fought against the results, and you know what  --- they
were right to resist it turned out. The chemists didn't measure correctly.

I am surprised that Bryan does find the Card/Krueger study so compelling ---
genuinely surprised Bryan :) -- and the arguments to the contrary by Welch,
Murphy, et. al. did seem persuasive to me at the time of the controversy
when I read them.  I am puzzled by the persistent claim of good empirical
work by Bryan and others when one of the things that Welch has complained
about from the beginning was the inability to (a) get the data from them,
and (b) replicate the results.

Of course, Card and Krueger were not as bad as Robert Reich -- who tried to
use their work for his policy purposes.  But, nevertheless, they were not
innocent babes either.  It is perhaps wrong to call them "whores" as
Buchanan did in the Wall Street Journal, but some other name along those
lines might fit.

Pete



Alex Tabarrok wrote:

>If Card/Krueger is such a bad study where is the locus classicus of a
> reply?  I have heard for years of a Finis Welch reply but have never
> seen anything published.  Where indeed is the reply to their book which
> includes a lot more questioning the miniumum wage than their paper?
>
>I don't happen to believe their result (and where I was educated (and
> Bryan teaches) Card and Kruger are known as "whores for the political
> classes" ).  Nevertheless, I get annoyed when the detractors have
> nothing more substantive to say.  Faith in the discipline or perhaps
> faith in discipline makes me demand better.
>
>Card and Krueger is indeed an original and clever study and if it had
> turned out the other way I have no doubt John and others would be
> hailing it as the definitive paper on the minimum wage.
>
> Alex
> --
> Dr. Alexander Tabarrok
> Vice President and Director of Research
> The Independent Institute
> 100 Swan Way
> Oakland, CA, 94621-1428
> Tel. 510-632-1366, FAX: 510-568-6040
> Email: [EMAIL PROTECTED]

--

Peter J. Boettke, Deputy Director
James M. Buchanan Center for Political Economy
Department of Economics, MSN 3G4
George Mason University
Fairfax, VA 22030
703-993-1149
fax 703-993-1133
email: [EMAIL PROTECTED]
homepage: http://www.gmu.edu/departments/economics/pboettke

Editor
Review of Austrian Economics
Department of Economics, MSN 3G4
George Mason University
Fairfax, VA 22030

Re: Card/Krueger Revisited

[Chris Auld]

On Tue, 3 Oct 2000, Alex Tabarrok wrote:

>If Card/Krueger is such a bad study where is the locus classicus of a
> reply?  I have heard for years of a Finis Welch reply but have never
> seen anything published.  Where indeed is the reply to their book which
> includes a lot more questioning the miniumum wage than their paper?

The paper I obliquely referred to yesterday is:

Kennan, J. (1995) "The Elusive Effects of the Minimum Wage," JEL 33:4.

There's also a whole sequence of papers by Neumark and Wescher.
However, if I recall correctly, Card and Krueger published a later piece
(circa 1998?) that addressed many of the points critics brought up.

The key critical point, in my mind anyways, is that they didn't find
that the minimum wage increased employment.  They found is had no effect,
whereas in the "control" State employment increased.  If there are 
unobserved differences between the two States, that would reconcile
the result and suggest the effect of the minimum wage was small, rather
than positive.  The other point is that, essentially, n=2 -- despite
the fact there are lots of restaurants, they aren't really using any
more information than is in aggregate employment in the two States
before and after the minimum wage change.  Large panel studies, while
having other problems, tend to find small negative effects on 
employment.


>I don't happen to believe their result (and where I was educated (and
> Bryan teaches) Card and Kruger are known as "whores for the political
> classes" ).  

"whores for the political classes"  ???  Care to elaborate?


>Card and Krueger is indeed an original and clever study and if it had

Well,  Kennan points out that a very similar study was published
in 1915.

None of this should be taken to infer that I think Card and Krueger
deserve the derision that another list member has poured on them.  I
don't, however, think they gave us compelling evidence demonstrating 
perverse effects of minimum wages.  


Chris Auld  (403)220-4098
Economics, University of Calgary
Calgary, Alberta, Canadahttp://jerry.ss.ucalgary.ca/>
 

Re: Card/Krueger Revisited

[fabio guillermo rojas]

>Card and Krueger is indeed an original and clever study and if it had
> turned out the other way I have no doubt John and others would be
> hailing it as the definitive paper on the minimum wage. 
> 
> Alex 

Why is the response to Card/Krueger to completely trash it? Given the fact
that it seems to be a competent study, why not argue that there might
be some intervening variable that makes the demand for labor
insensitive to price, at least for low-skilled labor? 

-fabio

RE: Card/Krueger Revisited

[Schone, Barbara]

I am usually a lurker on this list but thought I would comment on the
minimum wage issue since I did follow the debate at one time.  There has
been considerable (and substantive) dialogue on the Card/Krueger work.  In
my opinion, the best starting place is the body of research by Neumark and
Wascher.  

Although I don't buy their findings, I do think the Card and Krueger work is
important --  because of the methodology they used (I believe it is one of
the first studies that started economists'  interest in using natural
experiments) and because of the results.  Given the findings, though, I do
wonder how the study would have been received had it been written by less
prominent economists.

Barbara


Barbara Schone, Ph.D.
Agency for Healthcare Research and Quality
2101 E. Jefferson St., Suite 500
Rockville, MD  20852
(301) 594-2059
(301) 594-2166 (fax)
note new e-mail: 



-Original Message-
From: Alex Tabarrok [mailto:[EMAIL PROTECTED]]
Sent: Tuesday, October 03, 2000 3:31 PM
To: [EMAIL PROTECTED]
Subject: Re: Card/Krueger Revisited


   If Card/Krueger is such a bad study where is the locus classicus of a
reply?  I have heard for years of a Finis Welch reply but have never
seen anything published.  Where indeed is the reply to their book which
includes a lot more questioning the miniumum wage than their paper?

   I don't happen to believe their result (and where I was educated (and
Bryan teaches) Card and Kruger are known as "whores for the political
classes" ).  Nevertheless, I get annoyed when the detractors have
nothing more substantive to say.  Faith in the discipline or perhaps
faith in discipline makes me demand better.

   Card and Krueger is indeed an original and clever study and if it had
turned out the other way I have no doubt John and others would be
hailing it as the definitive paper on the minimum wage. 

Alex 
-- 
Dr. Alexander Tabarrok
Vice President and Director of Research
The Independent Institute
100 Swan Way
Oakland, CA, 94621-1428
Tel. 510-632-1366, FAX: 510-568-6040
Email: [EMAIL PROTECTED]

Re: Card/Krueger Revisited

[Alex Tabarrok]

   If Card/Krueger is such a bad study where is the locus classicus of a
reply?  I have heard for years of a Finis Welch reply but have never
seen anything published.  Where indeed is the reply to their book which
includes a lot more questioning the miniumum wage than their paper?

   I don't happen to believe their result (and where I was educated (and
Bryan teaches) Card and Kruger are known as "whores for the political
classes" ).  Nevertheless, I get annoyed when the detractors have
nothing more substantive to say.  Faith in the discipline or perhaps
faith in discipline makes me demand better.

   Card and Krueger is indeed an original and clever study and if it had
turned out the other way I have no doubt John and others would be
hailing it as the definitive paper on the minimum wage. 

Alex 
-- 
Dr. Alexander Tabarrok
Vice President and Director of Research
The Independent Institute
100 Swan Way
Oakland, CA, 94621-1428
Tel. 510-632-1366, FAX: 510-568-6040
Email: [EMAIL PROTECTED]

Re: Card/Krueger Revisited

[DismalScientist]

B. Caplan wrote:

Think again.  C/K followed up with a whole book on empirical research on the minimum 
wage, and they have made a major impact.  And while their study was not perfect, I'd 
put it at the 90th percentile of quality for empirical work.  There has been a lively 
followup debate, but I don't think anyone "won" (if by "won" one means that a new 
consensus emerged that the minimum wage clearly had negative employment effects).

_

For those on the List who have a little extra space in their personal library, the 
title of the Card Krueger offering (now in paperback) is Myth and Measurement: The New 
Economics of the Minimum Wage.  I have to confess that I don't have the book on my 
shelf (although I was forced to read much of it - forced by a course syllabus), 
primarily because I try to follow the Stiglerian rule that any book worth reading is a 
book worth owning.   

To suggest that their work had a major impact is an understatement.  Rarely has there 
been such a clear case of bad economics driving bad politics.  The Beltway was abuzz 
with Card/Krueger data for a far longer time than the average shelf life of most 
economics in Washington. However, to dismiss their study's shortcomings with a blanket 
comparison to the 90% of mediocrity that comes out of academia . . . well, I can't 
think of a more back handed book recommendation than that.  In addition, I wasn't 
aware that a new consensus formed around the negative effects of the hermetically 
sealed minimum wage.  The old consensus was there all along . . .and I think remains 
firmly there.  

Of course I acknowledge that I may in fact be biased and too intent on preserving the 
core underpinnings that I once thought all economists held dear: the benefits of free 
trade and the negative employment effects of the minimum wage.  Before you know it, 
someone is going to come along and suggest that demand curves slope downward.

Oops, sorry, that already happened.

J. Morrison
New York, NY
   

Re: Card/Krueger Revisited

[DismalScientist]

To the List:

I want to amend my earlier words that appeared to criticize the merits and accuracy of 
the Card/Krueger work on the negative employment benefits of the minimum wage.  A 
fellow armchair member just informed me offlist that our List owner is a product of 
Princeton University and that my comments could be construed as an indictment of their 
world-class academic tradition.

I stand corrected.  The Card Krueger study and follow up book were a much-needed 
addition to the body of work surrounding the minimum wage.  The empirical work in 
support of their findings, while called into question by a few reactionary critics, 
was well above average in terms of quality and coverage. I for one hope to add their 
book to my personal library, a library complete save for this one monumental work.

My apologies to the List.

J. Morrison
New York, NY

Re: The M.B.A. - why bother?

[michael gilson de lemos]

You'll have to do field research. I'll be glad to talk to you privately once
your project matures.

There are also a lot of rules of thumb in different industries in hiring and
promotion you might look at.

Best Regards,
MG
From: Pat McCann <[EMAIL PROTECTED]>
To: <[EMAIL PROTECTED]>
Sent: Tuesday, October 03, 2000 10:23 AM
Subject: Re: The M.B.A. - why bother?


> As an undergraduate economics major investigating the

[Fwd: [Fwd: RU-486]]

[Bryan Caplan]

Alex had trouble posting this.  Anyone else have similar troubles?
-- 
Prof. Bryan Caplan   [EMAIL PROTECTED]
http://www.gmu.edu/departments/economics/bcaplan

  "We may be dissatisfied with television for two quite different 
   reasons: because our set does not work, or because we dislike 
   the program we are receiving.  Similarly, we may be dissatisfied 
   with ourselves for two quite different reasons: because our body 
   does not work (bodily illness), or because we dislike our 
   conduct (mental illness)."
   --Thomas Szasz, *The Untamed Tongue*


Bryan,
   I sent the attached last week and again earlier today but it simply
doesn't want to post!  Arrghhh!

Alex
-- 
Dr. Alexander Tabarrok
Vice President and Director of Research
The Independent Institute
100 Swan Way
Oakland, CA, 94621-1428
Tel. 510-632-1366, FAX: 510-568-6040
Email: [EMAIL PROTECTED]


   I find myself in the strange position of defending the FDA!  The
delay in approving RU-486 (mifepristone) has more to do with the
politics of abortion than the usual politics of delay at the FDA -
although abortion politics has worked through the FDA.  Under George
Bush, for example, the FDA actually banned RU-486 from the country in
1989.  Clinton allowed it in but no big drug firm, including the French
manufacturer Roussel-Uclaf (a subsidiary of the German firm Hoechst A.G.
- you can understand why *they* didn't want the publicity) could be
found to sponsor the drug and conduct the required clinical trials.  The
French manufacturer actually stopped making the drug in 1988 because of
anti-abortion activism until the French Health Minister ordered them to
continue production (they dropped production in 1997 and gave the patent
rights to the New York based non-profit, the Population Council). 
Finally a firm was found to manufacture the drug in the US but until
recently it has had trouble passing FDA manufacturing inspections. 

Alex
-- 
Dr. Alexander Tabarrok
Vice President and Director of Research
The Independent Institute
100 Swan Way
Oakland, CA, 94621-1428
Tel. 510-632-1366, FAX: 510-568-6040
Email: [EMAIL PROTECTED]

Re: Card/Krueger Revisited

[Bryan Caplan]

[EMAIL PROTECTED] wrote:
> 
> In response to the Card/Krueger study that came out of Princeton:
> 
> I was under the impression that the work that Card and Krueger completed after 
>narrowly studying employment patterns in fast-food restaurants in California, Texas, 
>New Jersey had been largely dismissed, if not discredited.  For a while their study 
>had been mentioned by the Clinton Administration in policy forums, particularly by 
>Robert Reich, who had a long professional relationship with both researchers.  After 
>the dust cleared from the debate, I don't think Card/Krueger is mentioned seriously 
>anymore - even by its one-time paraphrasers.  

Think again.  C/K followed up with a whole book on empirical research on
the minimum wage, and they have made a major impact.  And while their
study was not perfect, I'd put it at the 90th percentile of quality for
empirical work.  There has been a lively followup debate, but I don't
think anyone "won" (if by "won" one means that a new consensus emerged
that the minimum wage clearly had negative employment effects).

I think still they're wrong, but it's because of strong priors, not
weaknesses in their study.  And I also think that empirical evidence on
price controls more generally should be counted here, rather than
treating the minimum wage as a hermetically-sealed single topic.

-- 
Prof. Bryan Caplan   [EMAIL PROTECTED]
http://www.gmu.edu/departments/economics/bcaplan

  "We may be dissatisfied with television for two quite different 
   reasons: because our set does not work, or because we dislike 
   the program we are receiving.  Similarly, we may be dissatisfied 
   with ourselves for two quite different reasons: because our body 
   does not work (bodily illness), or because we dislike our 
   conduct (mental illness)."
   --Thomas Szasz, *The Untamed Tongue*

Re: The M.B.A. - why bother?

[Pat McCann]

As an undergraduate economics major investigating the MBA as an option, al
this is very interesting to me. I only ask that you provide citation if
available, so I can do further research. In a related question, what is
the opinion of list members of programs like international commerce at
mason  or
international political economy at fordham? My goals are simple, I want to
work in development and I want to make vast fortunes, are these programs
at all conducive to that?

On Mon, 2 Oct 2000, michael gilson de lemos wrote:

> In my experience, outside of specialized consultants, many consulting firms
> hire preferentially philosophy/history  majors with knowledge of  languages
> and supervisory experience. Sales and community experience is helpful. MBAs
> are for scutwork, as they say, and you're supposed to pick up engineering
> background unless you are a specialist.
> 
> Persons with knowledge of opera who enjoy country music are considered way
> ahead of the pack as business and economic analysts, whatever the
> background. Most other requirements are there to satisfy government
> mandates, dazzle customers or mislead those who do not have the background
> and are trying to get hired. There are even standards based on hobbies an
> interests that are used for hiring, as these tend to be quite revealing when
> all other factors are constant.
> 
> Alexander Proudfoot, for many years the top implementation consulting firm,
> hired top persons exclusively based on their ability to apply the philosophy
> of Gracian, Sun-Tzu, various Samurai thinkers  and Lao-tse to business
> situations in interesting ways,  Aristotle's Physics was required reading
> for top persons. Top marks to anyone on the list who figures out  why all
> this must be so.
> 
> The NYT is 70 years behind the curve and why are academics assuming they
> understand that it has any understanding of how consultants act?
> 
> For many years a major firm used a device called a consensor on those with
> academic training or government backgrounds. This device  was like the
> electronic  voting devices on TV that averaged responses. They were asked a
> set of questions on how to solve a problem. Those that did not follow the
> pack were hired, especially if they knew opera.
> 
> Many consulting firms, however, exist that do not follow such standards as
> they are in the business of justifying decisions already taken. For them
> MBA's and other degrees are a signaling device and are so called quite
> openly, also "union cards."
> 
> Best Regards,
> MG
> Sent: Saturday, September 30, 2000 10:15 PM
> Subject: The M.B.A. - why bother?
> 
> 
> >
> > Business schools have been criticized for being pure credentialing
> > agencies. The New York Time ran an article today about how consulting
> > firms are hiring non-MBA's. usually people with graduate degrees
> > in any field. In house studies show that MBA do just as well
> > as non-MBAs.
> >
> > The article is:
> >
> > http://www.nytimes.com/2000/10/01/business/01MBAS.html
> >
> > Question 1: What took firms so long to realize this? Did they just
> > depend on the MBA as an easy signal (smart, business oriented) until
> > the stream of MBA's started to get diverted to the internet start ups?
> >
> > Question 2: In a competitive market for labor, what value does the
> > MBA degree have? The NYT article reports that non-MBA pick up what they
> > need in a few weeks. Is there any value added?
> >
> > -fabio
> >
> 
>