Krugman Wins Economics Nobel

Source New York Times

Paul Krugman, a professor at Princeton University and an Op-Ed page columnist for The New York Times, was awarded the Nobel Memorial Prize in Economic Sciences on Monday.

The prize committee lauded Mr. Krugman for “having shown the effects of economies of scale on trade patterns and on the location of economic activity.”

Mr. Krugman, 55, is probably more widely known as a perpetual thorn in George Bush’s side from his perch as an Op-Ed page columnist for nearly a decade. His columns have won him both strong supporters and ardent critics. The Nobel, however, was awarded for academic — and less political — research that he conducted primarily before he began regularly writing for The Times.

He has developed models that explain observed patterns of trade between countries, as well as what goods are produced where and why. Traditional trade theory assumes that countries are different and will exchange only the different kinds of goods that they are comparatively better at producing; this model, however, was not reflected in flow of goods and services Mr. Krugman saw in the world around him. He set out to explain why worldwide trade was dominated by a few countries that were similar to each other, and why a country might import the same kinds of goods that it exported.

In his model, companies sell similar goods, with slight variations. The companies get more efficient at producing their goods as they sell more. Consumers like variety, so they pick and choose goods from among these producers in different countries. He developed this work further to explain what effect transport costs, which obstruct trade, should have on migration patterns. He helped explain under what conditions trade would lead to concentration or decentralization of populations.

Mr. Krugman’s models have been praised for their simplicity and practicality — features economists are often criticized for ignoring.

“Krugman’s trade models became the standard in the economics profession both because they fit the world a bit better and because they were masterpieces of mathematical modeling,” said Edward L. Glaeser, a professor at Harvard University who also studies economic geography. “His models’ combination of realism, elegance and tractability meant that they could provide the underpinnings for thousands of subsequent papers on trade, economic growth, political economy and especially economic geography.”

Mr. Krugman has been writing his Op-Ed page columns for The Times since 1999. In recent years, in his column and a related blog on nytimes.com, he has frequently and unrelentingly criticized Bush administration policies.

While he has earned a loyal fan base, a number of economists have attacked Mr. Krugman for politicizing his work.

“Much of his popular work is disgraceful,” said Daniel Klein, a professor of economics at George Mason University who earlier this year wrote a comprehensive review of Mr. Krugman’s body of Times columns. “He totally omits all these major issues where the economics conclusion goes against the feel-good Democratic Party ethos, which I think he’s really tended to pander to especially since writing for The New York Times.”

In an interview on Monday, Mr. Krugman said he did not expect his award to have much effect on how colleagues and his popular readership — whether they be fans or foes — regard him.

“For economists, this is a validation but not news. We know what each other have been up to,” Mr. Krugman said. “For readers of the column, maybe they will read a little more carefully when I’m being economistic, or maybe have a little more tolerance when I’m being boring.”

He also said that he did not expect his critics to let him off any more easily because of his new accolade.

“I think we’ve learned this when we see Joe Stiglitz writing,” Mr. Krugman said, referring to the winner of the economics Nobel in 2001. “I haven’t noticed him getting an easy time. People just say, ‘Sure, he’s a great Nobel laureate and he’s very smart, but he still doesn’t know what he’s talking about in this situation.’ I’m sure I’ll get the same thing.”

In 1991 Mr. Krugman received the John Bates Clark medal, a prize given every two years to “that economist under 40 who is adjudged to have made a significant contribution to economic knowledge.” He follows several Clark medal recipients who have gone on to win a Nobel, including Mr. Stiglitz. Given his body of work and his Clark medal, Mr. Krugman said, he had been tentatively expecting to one day join the ranks of Nobel laureates.

“To be absolutely, totally honest I thought this day might come someday, but I was absolutely convinced it wasn’t going to be this day,” Mr. Krugman said. “I know people who live their lives waiting for this call, and it’s not good for the soul. So I put it out of my mind and stopped thinking about it.”

Mr. Krugman continues to teach at Princeton. This semester he is teaching a small graduate-level course on international monetary policy and theory, covering such timely subjects as international liquidity crises. While Monday’s award was officially given for Mr. Krugman’s work on international trade theory, his dissertation, as well as some of his more recent academic work, was on international finance and monetary theory.

“I like to call myself an economics ambulance chaser,” Mr. Krugman said. “This one’s especially convenient,” he said, referring to the current financial crisis.Monday’s award, the last of the six prizes, is not one of the original Nobels. It was created in 1968 by the Swedish central bank in Alfred Nobel’s memory. Mr. Krugman was the sole winner of the award this year, which includes a prize of about $1.4 million.

Still, his collaborators and mentors in his international trade research — some of whom were considered competing candidates for the prize — extended their praise throughout the day on Monday.

“He’s my best student,” said Jagdish Bhagwati, an economics professor at Columbia University who, despite opposition from fellow academics, helped Mr. Krugman publish one of the seminal papers for which he received his Nobel. “Lots of people are saying to me, ‘Why didn’t you get it?’ Given the fact that I didn’t get it, this is the next best thing.”