The Myopic Empiricism of the Minimum Wage, Bryan Caplan | EconLog | Library of Economics and Liberty
Unlike most opponents of the minimum wage, I admit that David Card and Alan Krueger's famous research on the topic is well-done. How then can I continue to embrace (and teach!) the textbook view that the minimum wage significantly reduces employment of low-skilled workers?
Part of the reason is admittedly my strong prior. In the absence of any specific empirical evidence, I am 99%+ sure that a randomly selected demand curve will have a negative slope. I hew to this prior even in cases - like demand for illegal drugs or illegal immigration - where a downward-sloping demand curve is ideologically inconvenient for me. What makes me so sure? Every purchase I've ever made or considered - and every conversation I've had with other people about every purchase they've ever made or considered.
Another reason why Card-Krueger hasn't flipped my position: Despite my admiration for their craftsmanship, even the best empirical social science isn't that good. I expect true theories to predict the data only two-thirds of the time - and false theories to predict the data one-third of the time. (N.B. Many of the weaknesses in empirical social science are systematic, so the Law of Large Numbers is no salvation). Bayesian upshot: The Card-Krueger findings only slightly reduce my initial high confidence that the minimum wage causes unemployment.
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