"[M]uch of today's empirical work on the effects of minimum-wage legislation is in fact highly theoretical."
"The data never speak for themselves."
--W. Allen Wallis, the statistician and economist who was pals and colleagues with Milton Friedman, George Stigler, and George Shultz.
Don Boudreaux has an excellent post today on theorizing about the minimum wage. An economics professor had written him about his various posts on the harmful effects of the minimum wage. Boudreaux writes:
I opened an e-mail from a correspondent (an assistant professor of economics) who coincidentally expressed to me his wish that I would be more "humble in face of the facts about the minimum wage." This correspondent upbraided me for what he takes to be my stubborn, ideologically driven refusal to admit that "the facts prove" (his words) that minimum wages do not have the negative employment effects that standard economic theory predicts. Not surprisingly, this correspondent recommended that I read more carefully the works of Arindrajit Dube - a scholar whose research does indeed offer up evidence that, contrary to standard theory's prediction, minimum-wage legislation does not harm low-skilled workers.
Pretty devastating, right? After all, Dube has the facts to prove that the minimum wage does not harm low-skilled workers.
Well, not quite. Boudreaux writes:
These are just two samples among many possible ones that I could give here. Google the authors' names and find their papers related to the minimum wage. Read those papers. You'll see that they are largely devoted to theorizing about how best to empirically measure the consequences of minimum-wage legislation.
I am not criticizing the authors of these papers. Quite the contrary. I applaud them. Thinking straight about how to do good empirical work is both important and difficult. My point, instead, is that much of today's empirical work on the effects of minimum-wage legislation is in fact highly theoretical. For this reason alone (although other reasons can also be cited) it is simply naive to insist that empirical research alone can settle the matter of the effects of minimum-wage legislation. It is uninformed and, frankly, deeply unscientific to accuse those who use theory to question whatever position you take about the effects of minimum-wage legislation as being unwilling to look at the data or as elevating theory above 'the facts.'
Nicely said. The whole post, which is not long, is worth reading.