Guido Imbens (Geldrop, The Netherlands, 59 years old) will never forget the early morning of October 11, 2021. At 2:15 a.m. he received a call from Stockholm with the news that he had been awarded the Nobel Prize in Economics together with David Card and Joshua Angrist. He couldn’t sleep a wink anymore. Neither he nor his family. A team from Stanford University, where he is a professor, came to his house and recorded some videos in which he tells his children what his work consists of. That is, what is behind the reason for which he was awarded: his “methodological contributions in the analysis of causal relationships”. One of those studies minimized, for example, the impact of universal basic income on the job market after studying the behavior of US citizens who won the lottery.
Ask. In other words, if I win the lottery, he thinks I’ll continue going to the newsroom…
Answer. Yes, because much of what he does gives him a lot of satisfaction. To this is added that, unless he received a large amount, that money would not be enough to cover all his needs for the rest of his life. In my study, I found that the effects of winning the lottery are relatively modest.
Q. And what does that have to do with universal basic income?
R. Those results led me to conclude that a universal basic income would not substantially change the number of people who would work. Let me explain: when studying the consequences of the universal basic income, it is necessary to see if it can discourage employees from working. That is, we wanted to know if the people who received that guaranteed income would continue working or would stop working. And what we found is that there would be some consequence, but not a very big one, because the workforce would only decrease by about 6-7%.
Q. So it’s feasible.
R. It is in the sense that it does not imply that everyone stops working because there are other motivations. A large part of the debate has always been about admitting that universal basic income would be good from an inequality standpoint, but warning that it would create disincentive effects for work. And the study suggests those consequences are not particularly important.
Q. Is econometrics the laboratory of economic sciences?
R.. I grew up in the Netherlands and was motivated by the work of my compatriot [Jan] Tinbergen, who advised politicians trying to predict the consequences of government actions. He tried to evaluate the plans of the Administrations in a systematic and non-partisan way. And he did it in an incredibly effective way, bringing credibility.
Q. And has this trend to evaluate public policies continued?
R. Yes, keep progressing. Institutions continue to search for new credible ways to evaluate policies. In the last 20 years there has been much more experimentation to find the causal effects of new policies, which has also been supported by more observational studies.
P. Even so, governments focus a lot on the economic impact of their policies, but not on the causal effects. Because they are important?
R. We want to distinguish correlation from causation. And that in economics is sometimes complicated. For example, if we look at the effect of education on the labor market in terms of wages, those who went to college earn more than those who did not. But of course, people don’t decide to go to college or not by raising. Perhaps those who go come from the higher socioeconomic groups, or perhaps they are more intelligent. So, if the government now wants to make access to university cheaper, we are interested in knowing how many more people would have access to that education and, therefore, would have a better performance in the workplace.
Q. Does this mean that, once the effects of a certain policy have been studied, it can be considered validated?
R. Yes and no. We have better evidence of its causal effects. But these are always subject to the limitations of the context in which they were studied. In medicine, these effects are more stable than in the social sciences. But the economy changes, the context changes, human interactions change, and the causal effects of various interventions may also change over time. We can have a study, for example, prepared in a particular context that concludes that raising 10% of the minimum wage in a certain place has no consequences for employment. And we can be pretty sure that that conclusion was correct for that particular context. But if the economy changes and unemployment is high, that conclusion may change as well.
Q. Precisely David Card, another of the winners, argued that the increase in the minimum wage has no consequences on employment. In Spain there has been a great debate about it. What do you think?
R.. In the particular context in which Card and [Alan] Krueger studied the impact of the minimum wage, those estimates were valid. In that case, an increase in that salary did not change the job very much. But that doesn’t mean that in a different economy that’s going to be true as well. Perhaps the minimum wage is higher or lower, the unemployment rate is different, labor institutions too… Studying that is not the same as checking whether aspirin will work in Spain and the United States, because human physiology is very similar . The economies are not, they are different. And even within a country those conclusions do not necessarily have to remain stable. Those things need to continue to be studied on an ongoing basis. And the same is true of universal basic income.
Q. In Catalonia, it was proposed to put 40 million euros on the table to carry out a pilot test on basic income. Is this type of evidence carried out by the public treasury useful?
R.. It’s difficult, because part of the effects are long-term. Whether or not people change their behavior depends on whether they believe that policy is permanent or temporary. Contrary to what happens with medicines, you cannot do double-blind studies, because people know that they are being treated in a particular way and that they are being observed. What you need is an accumulation of evidence, ideally from different studies, to complement the evidence that the pilot tests give you.
Q. How can institutions integrate these methods without jeopardizing the privacy of citizens?
R. In the case of the study on what individuals would do if they won the lottery, we accessed the Social Security data with a letter of consent. Clearly, this is very sensitive information to obtain, and many countries have legitimate privacy concerns. For us, it is very difficult to establish links between various sources. But the possibility of doing so would have an incredible impact for social policies. We need to be able to find a balance to be able to exploit that data to improve policy.
Q. Big tech also has a lot of citizen data. Do you work with them?
R.. Yes. I live in Silicon Valley and have fairly easy access to those companies. Facebook, Google or Apple are just a bike ride away from where I live. I talk to people from those companies and they work on fascinating things. There is a lot of interest in collaborating, but again, there are a lot of concerns about privacy issues.
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