There's No Such Thing as an Objective Fact

EconTalk Extra
by Amy Willis
James Heckman on Facts, Eviden... Timothy Taylor on Government v...

In a fascinating and far-ranging conversation with Nobel Laureate James Heckman (who was also one of his teachers), EconTalk host Russ Roberts explored the progress, problems, and limits of econometric analysis--the application of statistics to economic data.

There's a lot to learn this week's episode, and lots to think about as well. We hope you'll use the prompts below to continue our conversation in the comments. As you know, we love to hear from you!

1. Why might there be a difference between measured and real progress? Why is it important to recognize this distinction, and in what additional areas have policy makers failed to account for this?

2. How does Heckman's observation about the composition of women in the labor force affect our assessment of progress made by women relative to men? Is his take a more optimistic or pessimistic one than the norm?

3. What surprised you in Heckman's and Roberts's discussion about the disagreement among economists regarding minimum wage? (Bonus: How does their conversation help illustrate the concept of demand elasticity?)

4. Roberts and Heckman agree that there's no such thing as an objective fact. But Heckman also says that, "...the facts almost never fully speak for themselves, but they do speak." What does he mean by this, and what does it suggest about the success of economic analysis in the policy realm?

Comments and Sharing

TWITTER: Follow Russ Roberts @EconTalker

COMMENTS (2 to date)
Luke J writes:

1) Leaving aside the issue of how much economic activity is not captured (that is, the shadow economy), the disparity between measured and real progress is a matter of scale. Real progress is only applicable on the individual (maybe household) level. Measured progress will be communal on the low end, and often at a much higher level than the individual/household. We do not have the tools to track real progress of every economic participant in a city, much less in a country, so instead we measure progress in a general sense. The mistake is to assume that the general or median level of progress is a good proxy for actual people.

Richard Schwinn writes:

(3) The thing that I found most surprising here and in subsequent minimum wage discussions was the absence of "time".

After explaining that elasticities account for whether workers are made instantaneously better off or worse off (on net) by minimum wages, every discussion should stress the impact of time on elasticities.

To aid the unacquainted, consider what happens to the amount of gasoline purchased tomorrow if the price increases to $10/gal due to a shift in supply. I think most people would agree that their purchases are unlikely to change very much until they have time to find alternative modes of transportation. If prices remain at $10/gal for a few months, I also think that most would agree that their weekly purchases would fall markedly. This implies that demand is inelastic in the short term - yet more elastic over time. Firms face similar incentives in regard to the workers they hire.

In the short run (which may run as much as a decade), minimum wages might help a set of workers. At no point does anyone actually argue that minimum wages increase total market surplus. Ultimately, the more important, and perhaps unanswerable, question is whether workers inevitably become victims of minimum wage policy as time passes and firms search for ways to avoid hiring workers that they would have otherwise hired.

Important disclaimer: I do believe the government can and should play a role in improving the lives of workers. I prefer to remain vague about other policies so that this remains a post on the minimum wage.

Comments for this podcast episode have been closed
Return to top