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Paul Krugman — Nobel prizewinner

Paul Krugman of Princeton University (and the New York Times) has been awarded the Nobel Memorial Prize in Economic Sciences for his work on trade and geography (pdf of the basis for the decision). Among other interesting things, I think this is the first time that a Nobel (or as near as dammit) has been awarded to an active blogger. His first post today reads, in full:

A funny thing happened to me this morning …

Coverage and first reactions: New York Times economics blog, Reuters, Bloomberg and far and away the most thorough, economics blogger Tyler Cowen at Marginal Revolution.

I pretend to no great insight into economics, but friends and one-time colleagues so blessed have long said that Krugman’s work is worthy of such honour. Quite a few, though, have also expressed the idea that his journalism, which has grown ever more trenchant — some would say shrill — as the Bush presidency has gone on, might effectively disqualify him. Apparently not. The tally of nobellists on the Democratic side of the election just rose by one. From a recent column: “Barack Obama seems well informed and sensible about matters economic and financial. John McCain, on the other hand, scares me.”

The prize is awarded for Krugman’s comparatively early work on trade and location, which can be seen as a fundamental analysis of some of the merits of globalization: “His work had a profound effect on what we know about international economics. Trade economics needed an analytical breakthrough as people were relying on old-fashioned models until he took them on,” Krugman collaborator Tony Venables told Bloomberg. But it’s one of his later titles that currently has a timely feel about it: “The return of depression economics” (1999). Here’s the summary of the argument as it appeared in Foreign Affairs

Many economists hate to admit it, but today’s economic turmoil shares some uncanny — or downright scary — similarities with the prelude to the Great Depression. Many policymakers seem to have unlearned the basic lesson of that calamity: boost demand in the face of an economic slowdown and reduce the volatility of capital flows. Rigid adherence to anti-inflationary policies will only deepen the crises in emerging markets. As the IMF continues to insist on fiscal austerity and many governments instinctively resist capital controls, a wider recession looms. With a distinct whiff of the 1930s in the air, we had better refresh our memories and relearn the basics of Depression economics.

Here’s a critical review of the book by Krugman-fan Brad Delong of Berkeley. On the current economic calamities, Krugman is at the moment being what I suppose passes for guardedly optimistic: this morning told Reuters “We’re going to have a recession and perhaps a prolonged one but perhaps not a collapse.” On his blog last night he wrote:

I asked plaintively for policy makers, at least once, to exceed expectations in this crisis instead of falling short — and it seems that the eurozone governments have delivered, more or less adopting the British plan.

And I should have given props to the British government, which vastly exceeded expectations last week — and has effectively shown the world the way forward.

Krugman’s work does not come within the purview of natural science; but it does engage with science fiction. Check out the magnificent jeu d’esprit “The Theory on Interstellar Trade” (pdf)

Abstract: This paper extends interplanetary trade theory to an interstellar setting. It is chiefly concerned with the following question: how should interest charges on goods in transit be computed when the goods travel at close to the speed of light? This is a problem because the time taken in transit will appear less to an observer travelling with the goods than to a stationary observer. A solution is derived from economic theory, and two useless but true theorems are proved.

This is the sort of thing that one should expect from a man who was inspired to get into economics by reading Asimov’s Foundation trilogy. (I wish I’d known that when I wrote this) (Hat tip: Making Light)

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    Dennis said:

    You said, “Quite a few, though, have also expressed the idea that his journalism, which has grown ever more trenchant — some would say shrill — as the Bush presidency has gone on, might effectively disqualify him”

    This is a joke right? On the contrary… lambasting Bush and any Republican is the first step towards getting a Nobel. Just ask Gore, Carter, etc…

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