Moneybox

Alan Krueger Was the Rare Economist Whose Work Improved the Lives of Millions

Alan Krueger.
Alan Krueger, former chairman of the Council of Economic Advisers, on May 8, 2015, in New York City.
Andrew Toth/Getty Images for GLG

On Monday, the world learned that Alan Krueger, the James Madison Professor of Political Economy at Princeton University and one of the most influential economists of our time, had passed away at the age of 58. Shortly after hearing this incredibly tragic news, a friend asked me, “So when did you first meet Alan?” At first, I could not remember—it felt like it must have been ages ago. We even shared a common doctoral adviser, Richard Freeman from Harvard University. So I went back through my correspondence with Alan and found that we actually first met in person fairly recently—at the 2011 Society of Labor Economists conference in Vancouver, where we chatted about a paper I presented measuring the impact of minimum wages on turnover. I found this quite surprising, because the truth is that I have felt Alan’s intellectual presence during much of my adult life. Indeed, very few people have had as much of an impact on the fundamental way I approach economic research as Alan has. And in many ways, my case is hardly remarkable.

Alan was instrumental in the push to make economics an empirical science, something that has touched every corner of the discipline. You may not closely follow research on the minimum wage, the returns to education, monopsony in the labor market, the economics of rock and roll, or any of the other specific areas where Alan made incredibly important contributions. But if you believe that economics as a discipline should seek to answer questions about how the economy works through credible research and without ever substituting dogma for evidence, you owe an enormous debt to Alan Krueger.

For many freshly minted economists today, the idea of focusing on transparent research designs to seek causal evidence comes as second nature. However, this was not the case when I started studying economics in the early 1990s. The “credibility revolution” in economics was a contentious, hard-fought struggle to push the discipline in a different direction. This may seem surprising to some people—after all, why would anyone not want reliable evidence?

As Alan knew, the credibility revolution was deeply contentious, and still is to a certain degree. “The idea of turning economics into a true empirical science, where core theories can be rejected, is a BIG, revolutionary idea,” he wrote to me on Twitter just last year. Alan’s intellectual bravery was in his willingness to let the evidence lead us where it might, without subservience to received wisdom. And perhaps no other work exemplifies this as much as his 1995 book with David Card, Myth and Measurement, which sent shockwaves throughout the economics community.

In that book, the authors forcefully argued that the evidence that minimum wages led to job losses—assumed wisdom up to that point—was surprisingly weak. Their own case study—already published in the American Economic Review—compared fast-food restaurants in New Jersey and Pennsylvania after a minimum wage increase in New Jersey. They found that, if anything, employment rose in New Jersey following the minimum wage hike. This was consistent with other research Alan had conducted with the Harvard economist and his long-term collaborator, Lawrence Katz. But Myth and Measurement was much more than this. It provided a vast array of empirical evidence on broader labor questions and then went on to argue that the totality of evidence pointed toward the inadequacy of the simple supply-and-demand model for understanding the low-wage labor market. Instead, they argued that employers have some power to choose wage policies, rather than being totally dictated by unseen market forces: They could pay a little bit more to improve their ability to recruit and retain workers, even as it would mean higher labor costs. They called this the dynamic monopsony model and argued that it better fit the data than simple supply and demand.

Overall, the book was an effort to use the best available evidence to test the core theory of the labor market. And it was a brave thing to do, going against established opinion in economics at the time. Indeed, the reaction from some parts of the profession was incredibly hostile. However, it also brought new energy into the discipline. The idea that evidence can be used to test different theories of how the economy works was exhilarating to me as an undergraduate reading Myth and Measurement in the mid-1990s, and it drew me into the field. And this was true for many others.

It has been an eventful quarter century since Myth and Measurement was published. My view is that its main findings have stood the test of time quite well, and accord with the weight of evidence from subsequent research. However, even if one disagrees on the evidence regarding minimum wages and employment, what is beyond dispute is that Myth and Measurement was enormously influential and put forward a generative research program. First, it helped catapult the “quasi-experimental” research design—an approach that focuses on using plausibly exogenous policy variation and careful attention to constructing control groups—into the forefront of economic analysis. Second, it helped open the door to considering a broader set of models of the labor market; in other words, it helped push economics in the direction where we consider the core theory to be falsifiable, and not something derivable from deduction alone. And if the blossoming of the literature on imperfect competition in the labor market in recent years is a guide, Myth and Measurement has been a tremendous success.

Alan made many other contributions, both methodological and substantive, that have pushed economics forward. A common theme connecting much of his research is the combination of his intellectual curiosity and his ability to glean evidence from surprising sources. In 1991, along with his Princeton colleague Orley Ashenfelter, he visited the 16th Annual Twins Day Festival in Twinsburg, Ohio, to collect data on identical twins with different levels of education. This was an ingenious way to control for ability differences that could confound the rate of return to education. His paper with another Princeton colleague, Alex Mas, used tread separations of Firestone tires produced in the aftermath of a contentious strike involving replacement workers to show the importance of labor relations on product quality. His work with Stacy Dale from Mathematica Policy Research used information about what other colleges a student applied to in order to account for unobserved factors that could affect one’s wages. Doing so produced a surprising finding: In many cases, going to an elite university led to little change in someone’s earnings. And his earlier work with Josh Angrist (now at Massachusetts Institute of Technology) used quirks like the quarter of birth or the Vietnam-era draft lottery to estimate the causal effect of education on earnings. These papers have led to volumes of follow-up work, including studies that have disagreed with some of their findings. But that is exactly the way science progresses, and Alan helped push us in that direction.

Alan was not only a creative scholar, but also an engaged public servant. He served first as the chief economist of the Department of Labor in the Clinton administration, and then as the chief economist of the Department of the Treasury and the head of the Council of Economic Advisers in the Obama administration. He believed in an evidence-driven approach to policymaking, and in the power of public policy to improve the lives of ordinary Americans.

The last time I saw Alan was in October, at a conference in Sundance, Utah, on the subject of monopsony in the labor market. He was presenting new research co-authored with his Princeton colleague Orley Ashenfelter on no-poaching agreements. In many ways, the arc of this research crystallizes Alan’s incredible impact on the world and his brand of publicly engaged scholarship. Alan and Orley found that a surprisingly high share (58 percent) of franchisers’ contracts at companies like McDonald’s, Burger King, H&R Block, and Jiffy Lube had “no-poaching of workers agreements,” which limited competition for workers, presumably keeping wages low. In the very same month that their working paper was released (July 2018), attorneys general in 10 states and the District of Columbia announced a probe. And in the same month, at least seven franchise chains agreed to drop their poaching bans. (Republican Sen. Marco Rubio has advanced a federal proposal to address the issue.) By the very act of documenting these anti-competitive practices, Alan helped change them for the better.

It is hard to think of many other instances when social science research has had such an immediate, tangible benefit to millions of people. But it is not hard to believe that when it did happen, it involved Alan Krueger. Alan was truly one of a kind, and will be sorely missed.