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Published on Tuesday, October 14, 2008 by Inter Press Service

Nobel Honours Man Who Told Bush to "Please Go Away"

by Wolfgang Kerler

NEW YORK - Paul Krugman, a professor at Princeton University who is best known for his New York Times columns -- frequently involving scathing assaults on the policies of the George W. Bush administration -- was awarded the 2008 Nobel Memorial Prize in Economic Sciences for his research on international trade and economic geography.

[Princeton economics and international affairs professor Paul Krugman listens during his introduction as the 2008 Nobel prize winner in economics at a new conference on the campus of Princeton University in Princeton, New Jersey, October 13, 2008. (Tim Shaffer/Reuters)]"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," Krugman, a 55-year-old U.S. national, said in an interview with The Times Monday.

The Royal Swedish Academy of Sciences, which administers the award, said it was bestowed on Krugman "for his analysis of trade patterns and location of economic activity".

"This was definitely a 'real world' pick and a nod in the direction of economists who are engaged in policy analysis and writing for the broader public," Tyler Cowen, professor of economics at George Mason University, commented on his weblog "Marginal Revolution".

Krugman found new ways to explain what goods are produced where, and how capital and labour are distributed over countries and regions.

Most of the discussion going on on the Internet after the announcement of the prize committee, however, was not about Krugman's scientific achievement, but about the strong positions he took as a columnist, author and blogger.

Krugman served as an advisor to Bill Clinton's presidential campaign, and for a short time was a consultant to former president Ronald Reagan.

Back in 2000, a year after he joined The New York Times, Krugman spent a great deal of effort "trying to alert readers to the blatant dishonesty of the Bush campaign's claims about taxes, spending and Social Security", as he wrote in a column this year.

A staunch critic of the Iraq war, he has repeatedly cautioned against a potential victory for John McCain, the Republican contender in the Nov. 4 U.S. elections.

Just recently, Krugman stressed that "the Obama campaign is wrong to suggest that a McCain-Palin administration would just be a continuation of Bush-Cheney. If the way John McCain and Sarah Palin are campaigning is any indication, it would be much, much worse." Many observers are now wondering if the decision of the Swedish prize committee is sending a political message as well.

With recent publications, Krugman has influenced the arrangement of the federal plan to spend 700 billion dollars to cushion U.S. credit markets -- a topic he is long familiar with as his dissertation was on international finance.

Krugman received his B.A. from Yale University in 1974 and his Ph.D. from the Massachusetts Institute of Technology (MIT) in 1977. He went on to teach at Yale, MIT and Stanford, and is now a professor at Princeton University in New Jersey, where he gives a course on international monetary policy and theory.

Starting with a short article published in the Journal of International Economics in 1979, Krugman has lifted the theory of international trade to a new level. His theory explained the increasing trade between countries that produce the same kind of goods -- a phenomenom that has grown since World War II.

While traditional theories were based on differences among countries that make them specialise and trade with other countries, Krugman found an explanation why, for example, a car-producing country is not only exporting cars but also importing them.

First, it is about economies of scale: Because mass production diminishes the per unit price of production, it is lucrative for companies to produce many units of a specific good -- and therefore develop their own brand.

Second, it is about consumers' lust for diversity, especially in highly industrialised rich countries: They simply want to chose between a large number of brands.

So while one country may produce luxury cars, another one may build smaller vehicles. And due to lower prices and greater product diversity, wealth and prosperity are increasing for people in both countries.

With his "new economic geography", Krugman later showed that the distribution of work and capital across regions depends on the trade-off between utilising economies of scale and saving on transport costs. Today's process of urbanisation can be explained with Krugman's theory.

The domination of already successful, large countries can also be explained through his findings as economics of scale, lower prices and diversity of products are easier to achieve there.

Krugman is the ninth U.S. laureate of the Nobel Memorial Prize in Economic Sciences in a row -- a prize that does not date back to Alfred Nobel, who died in 1896, but was created by the Swedish central bank in 1968.

He is also among a number of Nobel laureates who received the John Bates Clark medal, a renowned prize for young economists under age 40, which he won in 1991.

 

© 2008 Inter Press Service
Posted in Economy/Trade,

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