Noah Smith argues that something he refers to as the recent “empirical revolution” in economics is challenging “a ton of standard, common theories.” These include:
1. If you slap some quick supply-and-demand graphs on the board, it looks like minimum wages should harm employment in the short term. But the data shows that they probably don’t.
2. If there’s any sort of limits to mobility, then simple labor demand theory says that a big influx of immigrants should depress the wages of native-born workers of comparable skill. But the data shows that in many cases, especially in the U.S., the effect is very small.
3. A simple theory of labor-leisure choice predicts that welfare should make recipients work less. But a raft of new studies shows that in countries around the world, welfare programs barely reduce observable work effort.
4. Most standard econ theory doesn’t assume the existence of social norms. But experiments consistently show that social norms (or morals, broadly conceived) matter to people.
I’d only add that some of us have been teaching these and many other challenges to mainstream economics for a very long time. That’s because we were fortunate to learn theories other than those of mainstream economics, which we have then used in our own teaching of economics.
We teach our students that mainstream, neoclassical economics is one story about the economy. And, we also teach them, there are many other stories—based on different entry points and logics, and which arrive at conclusions very different from those of mainstream economics.