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3 economists have been awarded the Nobel for their work on 'natural experiments'

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During the pandemic, we've heard a lot about how clinical trials work. Some people get a vaccine while others get a placebo. Researchers then compare the groups to see how effective the treatment is. In economics, that kind of controlled experiment is not practical or ethical, but economists have found ways to solve those issues, and three of them are sharing in this year's Nobel Prize. NPR's Scott Horsley reports.

SCOTT HORSLEY, BYLINE: Textbook economics suggests when you raise the minimum wage, some workers lose their jobs. But an accidental experiment in the 1990s upended that conventional wisdom. New Jersey raised its minimum wage, while neighboring Pennsylvania did not. By comparing employment in fast food restaurants on both sides of the state line, economist David Card and the late Alan Krueger showed higher wages did not cost jobs. It was a milestone of empirical research, although Card jokes minimum wage has barely budged for another decade.

DAVID CARD: And so we always assumed that our work had completely stopped all progress of minimum wage.

HORSLEY: Other economists took notice, though, and so has the Nobel Prize Committee, which is honoring Card and others for their use of natural experiments in which otherwise similar people are exposed to different policies or events. During the pandemic, for example, economists have looked at states' varied approaches to mask mandates and emergency unemployment benefits. Card says in a country with widely divergent political views, there's no shortage of research opportunities.

CARD: I do sometimes tell graduate students that crazy political regimes have a lot of disadvantages, but one advantage is that they do create very good conditions for trying to do a causal analysis.

HORSLEY: Card who teaches at Berkeley, shares the Nobel Prize with two other economists, Joshua Angrist of MIT and Guido Imbens of Stanford. They created a framework that helps researchers sort out cause and effect in these experiments. The Nobel committee says the three men's work has completely reshaped empirical research and shown that it's possible to find answers even without a controlled clinical trial. Scott Horsley, NPR News, Washington.

(SOUNDBITE OF TRENT REZNOR AND ATTICUS ROSS' "PAINTED SUN IN ABSTRACT") Transcript provided by NPR, Copyright NPR.