September 22, 2020

Forever, Alan Krueger | Economy

Forever, Alan Krueger | Economy

This week has died with only 58 years Alan Krueger, one of the most brilliant and influential economists of the moment. He was a professor at Princeton, a doctor at Harvard -with Lawrence Summers of thesis director- and president of the Council of Economic Advisers in the White House with Barack Obama. As Keynes taught us, we tend to overestimate the influence of vested interests, but the real power is in ideas, and many of those ideas that practical men use are defunct economists.

I had the fortune to meet him in 2017. He was invited by the University of Seville to give a lecture and he came with his wife to spend a week visiting Spain. They had been before and they loved our country. Taking advantage of your visit I invited you to a conference with Jeffrey Sachs in Madrid and I was able to learn from his ideas.

Alan had recovered the empiricist vision that is the origin of economic science from the scholastic school of Alcalá and Salamanca and made use of experimental economics. Economic theory says that an increase in the minimum wage would cause a shift along the demand curve and cause job destruction, keeping everything else constant. Alan studied a rise in the minimum wage in New Jersey and compared the level of employment in fast food restaurants – most with wages close to the minimum – with those in Pennsylvania, where the minimum wage had not gone up. The result of the experiment was that employment grew in New Jersey and fell in Pennsylvania. The demand for employment is mainly determined by the sales of the companies and the necessary condition is that the marginal increase in sales generates profits. Surely in New Jersey the rest of sectors increased their employment, the citizens went more times to the restaurants and needed more cooks, waiters, and the restaurants raised their prices somewhat to maintain the profitability of the capital.

Alan stood out for his humility and intellectual honesty. I assumed the technological revolution as an advance for humanity, defended that we had a problem of measurement but that productivity would end up emerging and that would increase employment and wages. But he was aware that this dynamic was uneven and proposed public policies to reverse it. Its priority was education and guarantee equal opportunities. That the highest salaries are for workers with more merit, not for those with richer parents and access to more opportunities.

He defended the existence of minimum wages, but related to productivity. And at the same time, flexible labor markets so that in a new era of profound changes companies can adapt and survive. Also the need for State intervention to reverse the tendency of capitalism to concentrate on oligopolies, as we see in the great technological leaders.

Alan has left us, but his ideas are still alive. Death is always sad, but especially when it leaves us an economist so brilliant and so young. Rest in peace.


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