A pulsating powerhouse, Israel clocks up a Noble Prize Bar Mitzvah bringing her tally to 13 with Joshua Angrist co-winning for economics

By David E. Kaplan

Not bad for such a tiny nation.

And to those eyebrow-raisers kvetching, “Hmnn….. but Angrist lives in the US,” this writer sides with the wife.

Following the announcement that Israeli-American economist Joshua Angrist was awarded together with David Card and Guido Imbens the 2021 Nobel Prize for economics prize, Angrist’s wife, Mira, told Israel’s Channel 12,  she and her husband are Israelis “with every bone in their bodies.”

She explains “We met in the Hebrew University of Jerusalem after he made aliyah… our lives are run between Israel and Boston… We’re very excited right now.”

So are Israelis and justifiably so!

Miniscule Israel has long punched far above its demographic weight when it comes to the Nobel Prize. “There are not many countries who have won so many Nobel prizes,” said the late Shimon Peres, Israel’s President at the time, himself a Nobel laureate who shared the Peace Prize together with then Israeli Prime Minister Yitzchak Rabin and Yasser Arafat in 1994.

Noting Israel’s stunning trajectory, it is little wonder that as of October 2021, NINE of the TEN Israeli Nobel laureates since 2002, have been for either chemistry or economics. Over the same period, vastly larger countries with larger economies failed to outperform the small Jewish State. Israel’s surge as a pulsating powerhouse shows how it belts way above its weight.

With a souring hi-tech and cyber based economy, Israel is revered today as “The Startup Nation” – the appellation derived from Dan Senor and Saul Singer’s bestseller by the same name – which examines how a young nation with a small population was able to achieve rapid outstanding economic growth. Today, Israel is the envy of many foreign countries and understandably why. Israel has the second-largest number of startup companies in the world after the United States, and the third-largest number of NASDAQ-listed companies after the U.S. and China.. Driven by gumption and grit and abundant ‘chutzpah’, the Start-Up Nation is as much for this writer – amusingly yet profoundly – the  ‘Up-StartNation’ – cherishing its yesterdays but gung-ho about its tomorrows.

It’s only Natural

Covering in their studies the fields of  ‘education’, the ‘labour market’ and ‘immigration’, Angrist and his co-winners were awarded the 2021 Nobel economics prize for pioneering the use of “Natural Experiments”, which are real-life situations that economists study and analyse to determine cause and effect relationships.

It was fascinating to learn – although I assume less pleasing to some US politicians and businesses  –  that Angrist’s colleague and Nobel co-winner, Canadian David Card had successfully in 2019 dispelled some serious erroneous economic beliefs, notably, that an increase in the minimum wage would destroy jobs as it would make it more expensive for companies to do business.

Together with the late Alan Kruger, they compared the labour markets on both sides of the border between the US states of New Jersey – where the minimum wage had been increased – and Pennsylvania, where it had not. Their research showed that in that context, the minimum wage increase had no downward effect on the number of employees. Their finding went against the prevailing theory that assumed that an increase in the minimum wage would destroy jobs.

Despite endless jokes about economists such as “Economists have predicted six of the last two recessions” or “Economists were invented to make astrologers look good”, they do get plenty right, and since the new millennium, Angrist is the third Israeli to win the Nobel Prize for economics. The other two were Daniel Kahneman in 2002 and Robert Aumann in 2005 and their experiences and insights on the road to Stockholm remain eternally illuminating.

Calculated Risk

Although Israeli Daniel Kahneman received in 2002 the Nobel Prize for Economics he was a  psychologist who had never “taken a single economics course.”  The Tel Aviv-born Kahneman was recognized for changing the way economists grapple with decision-making, particularly during periods of uncertainty.

Kahneman explained the nature of his research to the peculiarity of people who are prepared to risk much more to get back money lost than they are to make the same amount. “For instance, if a gambler is losing steadily, the risks he would take to try to win back his losses and break even, are about twice as great as the risks he would take to gain the same amount of money had he been winning all along.”

Go figure!

Top Of His ‘Game’

How prescient these words of  Israeli Nobel 2005 for economics Nobel Laurette, Robert Aumann, who also was not an economist but a mathematician:

  “Science is exploration, exploration for the sake of exploration, and for nothing else. We must go where our curiosity leads us; we must go where we want to go. And eventually, it is sure to lead us to the beautiful, the important, and the useful.”

This “exploration’ led Aumann to Stockholm where together with Thomas Schelling, they shared the 2005 Nobel Prize for Economics for their work on conflict and cooperation through game-theory analysis. Professor at the Center for the Study of Rationality at the Hebrew University of Jerusalem, Robert Aumann titled his acceptance speech “War and Peace” honouring Leo Tolstoy who he lamented did not receive a Nobel Prize but “like me, also had a long white beard.” War, unlike the popular view, “is not irrational – it is very rational, and we have to understand that to try preventing it.”

“For me, life has been – and still is – one tremendous joyride, one magnificent tapestry.”

Highlighting the “good times”, Aumann cited:

 “The excitement of research, of groping in the dark and then hitting the light. The satisfaction of teaching, of meeting someone at a party who tells you that the course in complex variables that he heard from you twenty-five years ago was the most beautiful that he ever heard. The exhilaration of climbing on an almost vertical rock face; the beauty of a walk in the woods with a four-year-old grandchild, who spots and correctly identifies a tiny wild orchid about which you told him last week; dancing with your wife at your child’s wedding; unraveling an intricate passage in the Talmud with your eighteen-year-old granddaughter; slipping on a ski slope; tumbling two hundred meters down, and then going back and doing the same slope again – this time without slipping, or seeing the flag of Israel fluttering in the wind, right next to that of Sweden, from the roof of the Grand Hotel in Stockholm.”

Well, that blue and while flag will again be “fluttering” in Stockholm, despite some in the Israeli media focusing less on the achievement and more on the issue than Angrist lives mainly today in the USA. What a loss for Israel they write, instead of what a win for all mankind.

Through decades of research, Angrist and his colleagues have demonstrated that many of society’s big economic questions can be answered. Through their methodology of using “natural experiments” – situations arising in real life that resemble randomised experiments – we now have a considerably better understanding of how the labour market operates than we did 30 years ago.

Why is this important?

Because if we are to make good decisions, we must understand the consequences of our choices and this applies to individuals as well as public policy makers. For example, young people who are making educational choices, says Angrist, want to know how these might affect their future income. Choosing to go to “an expensive private college,  does that change your life course in the form of higher earnings?” Also, how much more would people earn if they chose to study longer? Will adding extra years of study improve one’s personal financial situation either through higher salary or  inspiring entrepreneurial ambition?

All this was less important to some in the Israeli media making more of Angrist living in the US. The Jerusalem Post went so far on its front page with an article “A dent in the Aliyah message” The sweet and less sweet in a Noble Prize”, where the writer compares Angrist leaving Israel for greener pastures to the biblical Abraham who makes Aliyah to Israel but leaves shortly afterwards because of a famine.

Big deal. Angrist relocated back to the USA to become an Associate Professor in MIT’s Economics Department and  by his own admission he did so “for more pay”. In other words the economist took a decision for sound economic reasons. The world today is a global village so no big surprise here.

Furthermore, what these articles neglected to consider in their critique, was that Angrist’s return to the US was way back in 1996, long before Israel’s economic miracle and the surge ahead in the hi-tech industry. It is a different Israel today with different opportunities. Even Angrist himself says that the reports on his leaving for financial reasons stemmed from a 2006 Jerusalem Post article on Israel’s brain drain at the time, no longer the situation today. Speaking with Israeli media, Angrist said he was proud to have won the prize as an Israeli and played down reports that he had left Israel because of low wages.

“Israel has a very respectable place in science and I am proud to contribute to that,” he told Channel 13 news.

Since Angrist’s relocation back to the States in 1996 for greener pastures, today Israel is the “greener pasture”. How else would you explain that  Israeli tech investment shattered all records in the first half of 2021 with Israel leading the  world in funding growth with a 137% year-over-year increase in the first half of 2021, reaching $10.5 billion.

With this new economic reality, this writer advocates less focus on Abraham leaving because of famine thousands of years ago and more on the 2020 Abraham Accords which has Israel increasingly integrating into the Middle East and Arab world with infinite economic opportunities. Israel today with her Arab partners is leading the way of showing the potential impact of peace on economics.

Now that will be monumental material for a future Nobel Prize, whether for ‘economics’ or ‘peace’.

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