Krugman Wins Nobel for Economics
Tuesday, October 14, 2008
Paul Krugman occupies two spheres in the American intelligentsia. In one, he is a New York Times op-ed columnist known for his barbed opinions about President Bush's policies. In the other, he is a Princeton University economist famous for his research on international trade and finance.
Yesterday, it was Krugman the academic who was awarded the Nobel Prize for his study of international trade and the effects of globalization. In announcing the prize, the Royal Swedish Academy of Sciences cited in particular Krugman's work nearly 30 years ago in advancing a theory on trading patterns and why certain countries produce what they do.
Perhaps owing to Krugman's columnist perch, he was barely asked about his research yesterday during a news conference. Instead, he was asked about the U.S. government's $700 billion financial system bailout, about the causes of the credit crisis, and even about whether he would consider taking a cabinet post in the next presidential administration. (He said no thanks.)
He noted that he was naked and about to shower when his phone rang with the news from Stockholm.
Krugman has been fiercely critical of Bush administration policies in his columns for the Times. Yesterday, when asked a question about China, he said: "I've been spending my last few years trying to save my own damn republic."
Some economists questioned whether Krugman's politics may have somehow swayed the Swedish Academy. Its selections in the past have been viewed as politically motivated, and Krugman's selection came just weeks before a U.S. presidential election in which Bush's legacy is playing no small role.
Krugman is still, at age 55, relatively young in economist years.
"They could have waited and nobody would have asked that question," said Tyler Cowen, a professor of economics at George Mason University who has closely followed Krugman's research. "It's fair speculation that in part they are making a political statement. Krugman does deserve it, though. It's not only a political statement."
Robert Solow, a 1987 Nobel laureate in economics and Krugman's former professor at Massachusetts Institute of Technology, said, "I don't think it's true for one minute. I wouldn't be surprised if next year it was a conservative who wins. I really think that it's pure coincidence and there is no reason at all to suppose his columns had any role in this choice."
Tore Ellingsen, a member of the prize committee, told the Associated Press in Sweden yesterday, "We disregard everything except for the scientific merits." Krugman, too, played down the influence of politics, saying a lot of intellectuals simply happened to be critical of the Bush administration.
The Swedish Academy praised Krugman's work in explaining how a theory of trade dating back to the 1800s had become less applicable. The theory suggested that trade could be defined by initial differences among countries. Some should specialize in industrial products because they have more labor, others in agricultural because of their location. Then they should trade with each other.
But that doesn't explain why, for instance, Sweden would come to both make cars and import them -- why countries that dominate trade have similar conditions and trade similar products. Krugman thinks that's because consumers prefer a diversity of products.
"It becomes advantageous for a country to specialize in manufacturing a specific car, and to produce it for the world market, while another country specializes in a different brand of car," the Swedish Academy wrote in a commentary that explained Krugman's work. "This allows each country to take effective advantage of economies of scale, thereby implying that consumers worldwide will benefit from greater welfare due to lower prices and greater product diversity, as compared to a situation where each country produces solely for its own domestic market, without international trade."
Solow, Krugman's former professor, said he had for years thought his former pupil would be awarded a Nobel Prize. In 1991, Krugman won the John Bates Clark Medal, given every two years to the best economist under age 40. But as the Times column took on more importance in Krugman's life, taking him away from more traditional academic work, "I expected he would miss out," Solow said. "I was very pleased that the Swedish Academy looked back and decided this body of work was really worth a prize, as I think it was."
Krugman's win, which includes a $1.4 million prize, marks the ninth consecutive year that an American has solely won or shared the economics prize. The award for economics was not among the original five established by Alfred Nobel's will in 1895. Those were awards for physics, chemistry, physiology or medicine, literature, and peace. The first economics prize was awarded in 1968.