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And we're going to talk about
one more thing before we stop.
I've just talked about a vast
empirical literature in how
people understand the effects
of wages on labor supply.
Well, how do they do it?
Well, you could say, look, we
can just look at how you earn
a higher wage than you do.
And we'll ask, do you work
harder than you?
And we'll say, the guys who earn
higher wages work harder.
If guys who earn higher wages
work harder, that means labor
supply slopes up.
If guys who earn higher wages
don't work harder, that means
labor supply slopes down.
What's wrong with that?
Yeah.
AUDIENCE: Those who are getting
paid more probably are
getting paid because they
want to work harder.
PROFESSOR: Yeah.
Maybe you guys are different.
Maybe you're talented,
and you're not.
And maybe because you're
talented, maybe you're driven,
and you're not.
And because you're driven, you
work harder and get paid a
higher wage.
So I'm not learning anything
about the causal effect of the
wage on your labor supply.
I've just documented a
correlation between wage and
labor supply.
How can we get the causal effect
of your wage on your
labor supply?
Well, once again, ideally
we'd run an experiment.
We'd assign you a higher wage.
We'd find someone
just like you.
Not you, you're not driven.
We find someone just like you.
No offense.
You know I'm joking.
We'd find someone just like you
and, randomly, by a flip
of a coin, assign them
a lower wage.
And we'd see how your labor
supply differed.