Alan Krueger, a master-economist for our age

19th April, 2019

Written for and first published in the Financial Times on 22 March 2019.

At the start of John Maynard Keynes’s obituary of Alfred Marshall comes a question: why is it so hard to be a good economist? Keynes’s answer was that “the master-economist must possess a rare combination of gifts . . . no part of man’s nature or his institutions must lie entirely outside his regard.”

This week the profession is mourning another great economist. Alan Krueger killed himself last weekend at the age of 58. What would be a bewildering blow under any circumstances is heavier still because the professor was an authority on happiness and pain.

He discovered, for example, that prime-age men who had quit the labour force were twice as likely as employed men to take painkillers. He studied how unemployed people spend their hours, and showed that actively searching for work was an intensely sad task.

With Nobel laureate Daniel Kahneman, he collected evidence on happiness that remains my benchmark for social scientists’ ability to shed light on wellbeing. Prof Kahneman once warned me that expert advice can go only so far. Much happiness and sadness is genetically determined: “We shouldn’t expect a depressive person to suddenly become extroverted and leaping with joy.” Those words are much on my mind this week.

Yet Krueger’s life invites us to reflect on what economists at their best can achieve. The most obvious fact to note about his career is its breadth. He studied pollution, inequality, social mobility, terrorism, the gig economy, and the music industry.

This is a vivid illustration of the versatility of the economist’s tools, but Krueger used them to make a lasting mark. The most famous example, with his colleague David Card, was a study of the impact of minimum wages on jobs. It stands to reason that every increase in a minimum wage will destroy marginal jobs, hurting some of the most vulnerable people in the workforce.

Profs Card and Krueger, however, weren’t content to stick with the theory. They wanted to know how big the effect was. This is a tough problem. While minimum wages might cause unemployment, a booming job market might influence politicians to raise the minimum wage, so cause and effect are tangled together. Their research, therefore, looked at fast-food industry jobs in two neighbouring states: New Jersey and Pennsylvania, only one of which had raised the wage floor. They found the rise hadn’t dented employment at all.

Not every economist was convinced, and by itself that result might have been a fluke. But the pair had developed a powerful method that could — and would — be repeated. Economists are now far more willing to allow that minimum wage increases can make sense.

Perhaps just as important, economists now believe that evidence can complement or even overturn theory. Economics was once theory-driven for a reason: the data was patchy and controlled experiments were rare. It was almost unheard of to produce evidence that was credible enough to outweigh theory.

Krueger was at the heart of what became known as the credibility revolution in economics: the idea that evidence could be powerful enough to make a difference — and that economists should gather and analyse it with that aim in mind. In a tweet last year, he declared: “The idea of turning economics into a true empirical science, where core theories can be rejected, is a BIG, revolutionary idea.”

However, while voraciously curious, Krueger had no interest in clever studies for their own sake. (Even his whimsical investigation of the music business, fuelled by personal enthusiasm, teaches broader economic lessons. “I think Taylor Swift is an economic genius”, he said.) In general, he wanted to answer the big questions about human wellbeing.

His work on the gig economy is a case in point. With the rise of companies such as Uber it became clear that many workers were putting in highly irregular hours. He promptly started surveying workers about whether they relished the flexibility or suffered from the insecurity. He showed that these contingent work arrangements weren’t new — the Uber workforce was the new tip of a long-hidden iceberg. He chased down the answers to questions other people were only beginning to ask.

“He wouldn’t speculate,” says Betsey Stevenson, who, like Krueger, is a labour economist who held senior positions in the Obama administration. “He would gather the data.”

That data could then be used to influence policy, as he showed during three stints working for the US government, including as the chairman of President Obama’s Council of Economic Advisers. He was also admired as a generous mentor of other economists: his influence goes well beyond his publications.

Were Keynes to be writing about the “master-economist” today, his list of requirements might have changed little: intensely curious about the human experience; energetic in gathering the data; willing to let the evidence change his or her views; a persuasive writer; determined to influence policy to improve the world. Nobody could have matched up better than Alan Krueger.


My book “Fifty Things That Made the Modern Economy” (UK) / “Fifty Inventions That Shaped The Modern Economy” (US) is out now in paperback – feel free to order online or through your local bookshop.

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