Krugman, Former MIT Prof., Wins Nobel in Economics
Paul Krugman PhD ’77, a professor at Princeton University and an Op-Ed page columnist for The New York Times, was awarded the Nobel Memorial Prize in Economic Science on Monday. Krugman was formerly a professor at MIT and used to teach 14.02 (Principles of Macroeconomics).
The prize committee cited Krugman for his “analysis of trade patterns and location of economic activity.”
Krugman, 55, is probably more widely known for his Op-Ed columns in which he has been a perpetual thorn in George W. Bush’s (and now John McCain’s) side. His columns have won him both strong supporters and ardent critics.
The Nobel, however, was awarded for the academic — and less political — research that he conducted primarily before he began writing regularly for The Times.
“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 said in an interview on Monday. “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.”
Krugman won the prize for his research, beginning in 1979, that explained patterns of trade among countries, as well as what goods are produced where and why.
Traditional trade theory assumes that countries are different and will exchange only the kinds of goods that they are comparatively better at producing — wine from France, for example, and rice from China. This model, however, dating from David Ricardo’s writings of the early 19th century, was not reflected in the flow of goods and services that 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 one another, and why a country might import the same kinds of goods it exported.
In his model, many companies sell similar goods with slight variations. These companies become more efficient at producing their goods as they sell more, and so they grow. Consumers like variety, and pick and choose goods from among these producers in different countries, enabling countries to continue exchanging similar products. So some Americans buy Volkswagens and some Germans buy Fords.
He developed this work further to explain the effect of transportation costs on why people live where they live. His model explained under what conditions trade would lead people or companies to move to a particular region or to move away.
Krugman’s work has been praised for its simplicity and practicality — features economists are often criticized for ignoring.
“Some people think that something deep only comes out of great complexity,” said Maurice Obstfeld, an economics professor at the University of California, Berkeley, who wrote a textbook on international economics with Krugman. “Paul’s great strength is to take something very simple and make something new and very profound.”
Krugman applied his skill at translating complex ideas into clear, entertaining prose to his New York Times columns, which he began writing in 1999. In recent years, in his column and a related blog on nytimes.com, nearly everything about the Bush administration — from health care policy to Iraq to “general incompetence” — has been the object of his scorn.
Along the way, Krugman has come in for criticism himself from both economists and lay readers.
“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 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.”
But he has equally fervent fans of his popular work.
“I praise today’s prize as being deserving and even overdue, but more than that I reproach the Pulitzer committee, which owed him at least a couple of prizes in the past,” said Paul Samuelson, a previous winner of the Nobel Prize in economics. “Paul Krugman is the only columnist in the United States who has had it right on almost every count from the beginning.”
Krugman said he did not expect his award to have much effect on how colleagues and his popular readership — whether they be friends or foes — regard him.
“For economists, this is a validation but not news,” he said. “We know what each other has been up to.
“For readers of the column,” he added, “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 said he did not expect the prize to silence his critics, given the treatment of another outspoken laureate, the 2001 winner Joseph Stiglitz. Stiglitz has been both praised and criticized for his writings on whether globalization in its current form has been beneficial.
“I haven’t noticed him getting an easy time,” Krugman said. “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.”
Krugman first gained a popular following while writing about economics for Slate magazine in the 1990s. He frequently weighed in on contemporary free trade debates related to his research.
“He was appalled by the monster he created,” said Michael Kinsley, the founding editor of Slate who hired Krugman. “He’d come up with this theory about why sometimes free trade wasn’t the best policy, and suddenly everyone was citing it as an argument against free trade, while he thinks it applies once in a blue moon.”
While Krugman’s popular writing is now more politics-focused and his research more concentrated on international finance, he has occasionally returned to his interest in trade. In the last year he has written several times about the negative results of free trade, both in his column and in a paper he wrote for the Brookings Institution about whether trade with poor countries increases inequality within developed nations like the United States.
In 1991 Krugman received the John Bates Clark medal, a prize given every two years to “that economist under forty who is adjudged to have made a significant contribution to economic knowledge.” He follows a long list of Clark medal recipients who have gone on to win a Nobel, including Stiglitz and Samuelson.
Krugman, who grew up on Long Island and has a bachelor’s degree from Yale and a doctorate from MIT, has been teaching at Princeton since 2000. This semester, he is teaching a graduate-level course in international monetary theory and policy. He often teaches all-freshman seminars on issues related to economics.
Krugman joins another Princeton economist, albeit one of different ideological leanings, who is in the news recently: Ben S. Bernanke, the chairman of the Federal Reserve who, coincidentally, offered Krugman his Princeton post. Bernanke and Krugman were fellow grad students at MIT in the 1970s. Their era at MIT produced several other economists who went onto prestigious careers in public policy, including Olivier Blanchard and Kenneth Rogoff, the current and former chief economists at the International Monetary Fund.
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. 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.
“Lots of people are saying to me, ‘Why didn’t you get it?’” said Jagdish Bhagwati, an economics professor at Columbia University who helped Krugman publish one of his seminal papers when other academics thought it was too simple to be true. “Given the fact that I didn’t get it, this is the next best thing.”