Paul Krugman

Paul Krugman
Nationality	United States
Academic career
Field	Macroeconomics
School or tradition	New Trade Theory
Influences	John Maynard Keynes
Contributions	International Trade Theory, New Trade Theory

Paul Robin Krugman (Template:Pron-en), born February 28, 1953, is an American economist, columnist, intellectual, and author. He is a professor of economics and international affairs at Princeton University, a centenary professor at the London School of Economics, and an op-ed columnist for The New York Times. In 2008, Krugman won the Nobel Memorial Prize in Economics "for his analysis of trade patterns and location of economic activity." Krugman is known in academia for his work in international economics, including trade theory, economic geography, and international finance.

Biography

Krugman was born into a Jewish family, grew up on Long Island in New York, and graduated from John F. Kennedy High School in Bellmore. He is married to Robin Wells, a fellow professor at Princeton, his second wife. They have no children.

Krugman says that his interest in economics began with Isaac Asimov's Foundation novels, in which the social scientists of the future use "psychohistory" to attempt to save civilization. Since "psychohistory" in Asimov's sense of the word does not exist, Krugman turned to economics, which he considered the next best thing.

Economics career

Krugman earned his B.A. in economics from Yale University in 1974 and his Ph.D. from the Massachusetts Institute of Technology (MIT) in 1977. From 1982 to 1983, he spent a year working at the Reagan White House as a staff member of the Council of Economic Advisers. He taught at Yale University, MIT, UC Berkeley, the London School of Economics, and Stanford University before joining Princeton University in 2000 as professor of economics and international affairs. He is also currently a centenary professor at the London School of Economics, and a member of the Group of Thirty international economic body as well as the Council on Foreign Relations.

When Bill Clinton came into office in 1993, he considered Krugman for a leading post; Krugman was flown out for a meeting in Arkansas. Krugman's outspokenness was reported to be "the main reason the Clinton administration didn't offer him a job." Krugman says he would not have been interested in such a job; he told Newsweek, "I'm temperamentally unsuited for that kind of role. You have to be very good at people skills, biting your tongue when people say silly things." In his New York Times blog, Krugman repeated that statement, saying that he was "temperamentally unsuited to politics".

Nobel Memorial Prize

Krugman was awarded the Nobel Memorial Prize in Economic Sciences, the sole awardee for 2008. This award, created in 1968 by the Swedish central bank in Alfred Nobel’s memory, includes a prize of about $1.4 million and was awarded to Krugman for his work associated with New Trade Theory. In the words of the prize committee, "By having integrated economies of scale into explicit general equilibrium models, Paul Krugman has deepened our understanding of the determinants of trade and the location of economic activity."

Academic contributions

Paul Krugman has done extensive work in international economics, including work on international trade, economic geography, and international finance. According to the Research Papers in Economics project, he is among the 50 most influential economists in the world today. Krugman's International Economics: Theory and Policy, co-authored with Maurice Obstfeld is a standard introductory textbook on international economics. He also writes on economic topics for the general public, sometimes on international economic topics but also on income distribution and public policy.

International trade theory

As the Nobel Prize Committee explains, Krugman's main contribution is to analyze the impact of economies of scale in international trade. Prior to Krugman's work, trade theory (see David Ricardo and Hecksher-Ohlin model) emphasized trade between countries with very different characteristics, such as a poor country exporting agricultural goods to a rich country in exchange for industrial products. However, in the 20th century, an ever larger share of trade occurred between countries with very similar characteristics. The Nobel committee, for example, mentions Sweden exporting Volvo cars to Germany while Germany exports BMW cars to Sweden.

Krugman's explanation of trade between similar countries was proposed in a 1979 paper in the Journal of International Economics. He assumes that consumers prefer a diverse choice of brands, and that production favors economies of scale. Consumers' preference for diversity explains the survival of different versions of cars like Volvo and BMW. But because of economies of scale, it is not profitable to spread the production of Volvos all over the world; instead, it is concentrated in a few factories and therefore in a few countries (or maybe just one). This logic explains how each country may specialize in producing a few brands of any given type of product, instead of specializing in different types of products.

Most models of international trade nowadays follow Krugman's lead, incorporating economies of scale in production and a preference for diversity in consumption. This way of modeling trade has come to be called New Trade Theory.

When there are economies of scale in production, it is possible that countries may become 'locked in' to disadvantageous patterns of trade. Nonetheless, trade remains beneficial in general, even between relatively similar countries, because it permits firms to save on costs by producing at a larger, more efficient scale, and because it increases the range of brands available and sharpens the competition between firms. Therefore, Krugman has usually been supportive of free trade and globalization, and critical of industrial policy. (He writes on p. xxvi of his book The Great Unraveling that "I still have the angry letter Ralph Nader sent me when I criticized his attacks on globalization.")

On a lighter note, in 1978, Krugman wrote The Theory of Interstellar Trade, a tongue-in-cheek essay on computing interest rates on goods in transit near the speed of light. He says he wrote it to cheer himself up when he was "an oppressed assistant professor".

Economic geography

If trade is largely shaped by economies of scale, as Krugman's trade theory argues, then those economic regions with most production will be more profitable and will therefore attract even more production. That is, Krugman's trade theory implies that instead of spreading out evenly around the world, production will tend to concentrate in a few countries, regions, or cities, which will become densely populated but also have higher levels of income. This forms the basis of Krugman's theory of economic geography, which he began to develop in a 1991 paper in the Journal of Political Economy.

International finance

In addition to his work on international trade, Krugman has also been influential in the field of international finance economics. In 1979 he published a model of currency crises in the Journal of Money, Credit, and Banking showing that fixed exchange rate regimes are unlikely to end smoothly: instead, they end in a sudden speculative attack. Krugman's paper is considered one of the main contributions to the 'first generation' of currency crisis models.

Krugman predicted problems with the fixed exchange rates in East and Southeast Asia, and Thailand's economic policies before the 1997 East Asian financial crisis, and also criticized investors such as Long-Term Capital Management whose profits depended on the maintenance of fixed exchange rates prior to the 1998 Russian financial crisis. He also advocated aggressive fiscal policy to counter Japan's economic depression in the 1990s, arguing that the country was mired in a Keynesian liquidity trap.

Income distribution

In the 1990s, Krugman increasingly focused on writing books for a general audience on issues he considered important for public policy. In The Age of Diminished Expectations and The Conscience of a Liberal, he wrote in particular about the increasing US income inequality in the "New Economy" of the 1990s. He attributes the rise in income inequality in part to changes in technology, but principally to a change in political atmosphere which has been widely manipulated by Movement Conservatives.

Other contributions

In the early 1990s, Krugman helped popularize the argument made by Laurence Lau and Alwyn Young, among others, that the growth of economies in East Asia was not the result of new and original economic models, but rather of increased capital and labor inputs, which did not result in an increase in total factor productivity. His prediction was that future economic growth in East Asia would slow as it became more difficult to generate economic growth from increasing inputs.

Author and journalist

Krugman wrote first for Fortune and Slate, later for The Harvard Business Review, Foreign Policy, The Economist, Harper's, and Washington Monthly. Krugman said that to answer what he called Pop Internationalism, "I would have to write essays for non-economists that were clear, effective, and entertaining."

Since January 2000, Krugman has contributed a twice-weekly column to the Op-Ed page of the New York Times, which has made him, in the words of the Washington Monthly, "the most important political columnist in America... he is almost alone in analyzing the most important story in politics in recent years — the seamless melding of corporate, class, and political party interests at which the Bush administration excels." In 2007, he began supplementing his Times column with a blog. In introducing it, he wrote, "Many of the posts will be supplements to my regular columns; I’ll be using this space to present the kind of information I can’t provide on the printed page – especially charts and tables, which are crucial to the way I think about most of the issues I write about."

In September, 2003, Krugman published a collection of his columns under the title, The Great Unraveling. Taken as a whole, it was a scathing attack on the Bush's administration's economic and foreign policies. His main argument was that the large deficits generated by the Bush administration—generated by decreasing taxes, increasing public spending, and fighting a war in Iraq — were in the long run unsustainable, and would eventually generate a major economic crisis. The book was a best-seller.

In 2007, Krugman published The Conscience of a Liberal, a book detailing the history of wealth and income gaps in the United States in the 20th century. The book describes how the gap between rich and poor declined greatly in middle of the century, and then widened in the last two decades to levels higher even than in the 1920s. Most economists (including Krugman) have regarded the late-20th century divergence as resulting largely from changes in technology and trade, but Krugman writes that government policies played a much greater role than commonly thought, both in reducing the gap in the 1930s through 1970s and in widening it in the 1980s through the present. He rebuked the Bush administration for implementing policies that greatly widened the gap between the rich and poor. Krugman proposed a "new New Deal", which included placing more emphasis on social and medical programs and less on national defense. The book was praised in The New York Review of Books.

He is also a passionate and articulate speaker, regularly sharing his insights on global economic events at many high profile events worldwide such as the World Business Forum.

Subprime mortgage crisis

In 2008, amid the subprime mortgage crisis in the US, Krugman predicted that housing prices would drop 25% overall and up to 50% in locations such as Miami or Los Angeles. Krugman has appeared several times as a guest on MSNBC, particularly since the onset of the economic crisis in September 2008. He has repeatedly expressed his view that Alan Greenspan and Phil Gramm are the two people most responsible for causing the crisis. As early as 2005 Krugman was critical of Greenspan's reluctance to regulate the mortgage and related financial markets, and his shifting positions on the impending housing bubble.

Political views

Krugman is a self-described liberal. His choice of the book title "The Conscience of a Liberal" is a play on Barry Goldwater's "Conscience of a Conservative". Krugman has explained that he views the term "liberal" in the American context to mean "more or less what social democratic means in Europe". He was an ardent critic of the George W. Bush administration and its foreign and domestic policy.

Krugman has sometimes advocated free markets in contexts where the American left condemns them, by writing against rent control, and that "sweatshops" are an inevitable reality. He has likened the opposition against free trade to the opposition against evolution via natural selection. Unlike many economic pundits, he is regarded as an important scholarly contributor by his peers. He has written over 200 scholarly papers and 20 books—both academic and non-academic.

Krugman has written in opposition to increasing farm subsidies, ethanol mandates and subsidies/tax breaks, manned NASA space flights, and has written against some aspects of European labor market regulation.

He has, however, declared himself an ardent supporter of the welfare state. His appointment in the Reagan Administration, he has reiterated in an autobiographical essay, was not expected or fitting. "It was, in a way, strange for me to be part of the Reagan Administration. I was then and still am an unabashed defender of the welfare state, which I regard as the most decent social arrangement yet devised."

Krugman has been a prominent critic of the Obama administration's economic policies, in particular its efforts to prop up the US financial system, which he considers unsustainable in its present form.

Criticism

Daniel Okrent, a New York Times ombudsman, criticized Paul Krugman for "the disturbing habit of shaping, slicing and selectively citing numbers in a fashion that pleases his acolytes but leaves him open to substantive assaults." Okrent has also said that "when someone challenged Krugman on the facts, he tended to question the motivation and ignore the substance." Throughout his career as a columnist, Krugman has been highly critical of what he regards as dubious economic ideas, such as: strategic trade and its main exponents, Robert Reich, whom he called "offensive" and Lester Thurow whom he called "silly"; protectionism, with attacks on Pat Buchanan on the Right and Ralph Nader on the Left; a return to the gold standard as promoted by editorial writers in the Wall Street Journal; and especially supply-side economics, which he described as economic "snake oil" in Peddling Prosperity. He has frequently been criticized in turn by exponents of these ideas; the journalist James Fallows spoke of his "gratuitous spleen," and Clinton Administration Undersecretary of Commerce Jeffrey Garten complained that "He behaves like someone with a massive chip on his shoulder." Krugman's critics have also accused him of employing what they called a "shrill" rhetorical style.

A November 13, 2003 article in The Economist reads: "A glance through his past columns reveals a growing tendency to attribute all the world's ills to George Bush…Even his economics is sometimes stretched…Overall, the effect is to give lay readers the illusion that Mr Krugman's perfectly respectable personal political beliefs can somehow be derived empirically from economic theory."

Robert Barro has criticized Krugman's work frequently and Krugman has referred to him as "boneheaded". A blog article by Krugman noting that the argument for short-run protectionism (during conditions of a liquidity trap and without a coordinated global policy response) "needs to be taken seriously" due to the 2008-2009 world economic recession, even if protectionism would be "second-best", drew strong criticism from Barro, who accused Krugman of hypocrisy.

Economist Daniel B. Klein published during 2008 a paper in Econ Journal Watch (of which he is the chief editor) that reviews and criticizes Krugman's columns for the New York Times. Klein contends that Krugman's "social-democratic impetus sometimes trumps people's interests, notably poor people's interests... Krugman has almost never come out against extant government interventions, even ones that expert economists seem to agree are bad, and especially so for the poor." Examples cited by Klein of policies on which, he says, economists are agreed, but which Krugman has failed to support include school vouchers, abolition of the Food and Drug Administration and abolition of occupational licensing. On the other hand, Klein lists these examples of government interventions that Krugman's columns have opposed: "rent control; US agricultural subsidies; international trade; [...] ethanol mandates and subsidies/tax breaks; NASA manned-space flight; European labor-market restrictions; and the Terry Schiavo case."

Economist William L. Anderson has argued that Krugman's economic views are politically partisan and consistently promote a socialist agenda. Donald Luskin of the National Review is another frequent critic of Krugman. He has argued that that "Krugman’s liberal agenda always takes precedence over economic principle."

Enron

Krugman was one of several economists who served on a panel that offered Enron executives briefings on economic and political issues. He did this in early 1999, before New York Times rules required him to resign when he accepted an offer to be an op-ed columnist in the fall of 1999. Krugman later stated that he was paid $37,500 for the consulting that required him to "spend four days in Houston", and that the fee was "rather low compared with my usual rates".

When the story of Enron's corporate scandals broke, critics accused him of having a conflict of interest and the job of having been a bribe to control media coverage, charges he denies forcefully, referring to it as "a game of gotcha" and "tabloid journalism." He states that the payment from Enron did not "cause me to write anything I would not have written otherwise." For one thing, he says, he was not a journalist at the time: "when Enron approached me there was no hint that a Times connection lay in my future. As soon as I shook hands with the Times, I resigned from that board." Further, his "normal fee for a one-hour business speech in Boston or New York was $20,000 - more if the speech involved long-distance travel. The Enron board required that I spend 4 days in Houston"; thus the sum involved was not large, in his view. He says that in columns written before and after the scandal, he disclosed his past Enron relationship when he wrote about the company. He was critical of the company: he was one of the first writers to argue that deregulation of the California energy market had led to market-manipulation by energy companies (in a column in the New York Times on December 10, 2000 called "California Screaming"); Enron was the largest in this market - "I have been criticizing Enron since January 2001, long before everyone else started bashing the company."

He writes in The Great Unraveling that:

I was no more perceptive than anyone else; during the bull market years [of the late 1990s] some people did send me letters claiming that major corporations were cooking their books, but - to my great regret - I ignored them. However, when Enron - the most celebrated company of its time, lauded as the very model of a modern business enterprise - blew up, I immediately saw the implications: if such a famous and celebrated company could have been a Ponzi scheme, it was very unlikely that the rest of U.S. business was squeaky clean. In fact, it quickly became clear, the bubble years were both the cause and effect of an epidemic of corporate malfeasance. (p. 26)

Awards

• 1991, American Economic Association, John Bates Clark Medal. Since it was awarded to only one person, once every two years (prior to 2009), The Economist has described the Clark Medal as 'slightly harder to get than a Nobel prize'.
• 1995, Adam Smith Award of the National Association for Business Economics
• 2000, H.C. Recktenwald Prize in Economics, awarded by University of Erlangen-Nuremberg in Germany.
• 2002, Editor and Publisher, Columnist of the Year.
• 2004, Fundación Príncipe de Asturias (Spain), Prince of Asturias Awards in Social Sciences.
• 2004, Doctor of Humane Letters honoris causa, Haverford College[1]
• 2008, Nobel Memorial Prize in Economics, formally The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel - for his contributions to New Trade Theory. He became the twelfth John Bates Clark Medal winner to be awarded the Nobel Memorial Prize.

Published work

Academic books (authored or coauthored)

• The Spatial Economy - Cities, Regions and International Trade (July 1999), with Masahisa Fujita and Anthony Venables. MIT Press, ISBN 0262062046
• The Self Organizing Economy (February 1996), ISBN 1557866988
• EMU and the Regions (December 1995), with Guillermo de la Dehesa. ISBN 1567080383
• Development, Geography, and Economic Theory (Ohlin Lectures) (September 1995), ISBN 0262112035
• Foreign Direct Investment in the United States (3rd Edition) (February 1995), with Edward M. Graham. ISBN 0881322040
• World Savings Shortage (September 1994), ISBN 0881321613
• What Do We Need to Know About the International Monetary System? (Essays in International Finance, No 190 July 1993) ISBN 0881650978
• Currencies and Crises (June 1992), ISBN 0262111659
• Geography and Trade (Gaston Eyskens Lecture Series) (August 1991), ISBN 0262111594
• The Risks Facing the World Economy (July 1991), with Guillermo de la Dehesa and Charles Taylor. ISBN 1567080731
• Has the Adjustment Process Worked? (Policy Analyses in International Economics, 34) (June 1991), ISBN 0881321168
• Rethinking International Trade (April 1990), ISBN 0262111489
• Trade Policy and Market Structure (March 1989), with Elhanan Helpman. ISBN 0262081822
• Exchange-Rate Instability (Lionel Robbins Lectures) (November 1988), ISBN 0262111403
• Adjustment in the World Economy (August 1987) ISBN 1567080235
• Market Structure and Foreign Trade: Increasing Returns, Imperfect Competition, and the International Economy (May 1985), with Elhanan Helpman. ISBN 0262081504

Academic books (edited or coedited)

• Currency Crises (National Bureau of Economic Research Conference Report) (September 2000), ISBN 0226454622
• Trade with Japan : Has the Door Opened Wider? (National Bureau of Economic Research Project Report) (March 1995), ISBN 0226454592
• Empirical Studies of Strategic Trade Policy (National Bureau of Economic Research Project Report) (April, 1994), co-edited with Alasdair Smith. ISBN 0226454606
• Exchange Rate Targets and Currency Bands (October 1991), co-edited with Marcus Miller. ISBN 0521415330
• Strategic Trade Policy and the New International Economics (January 1986), ISBN 0262111128

Economics textbooks

• Economics: European Edition (Spring 2007), with Robin Wells and Kathryn Graddy. ISBN 0716799561
• Macroeconomics (February 2006), with Robin Wells. ISBN 0716767635
• Economics (December 2005), with Robin Wells. ISBN 1572591501
• Microeconomics (March 2004), with Robin Wells. ISBN 0716759977
• International Economics: Theory and Policy, with Maurice Obstfeld. 7th Edition (2006), ISBN 0321293835; 1st Edition (1998), ISBN 0673521869

Books for a general audience

• The Return of Depression Economics and the Crisis of 2008 (December 2008) ISBN 0393071014
• The Conscience of a Liberal (October 2007) ISBN 0393060691
• The Great Unraveling: Losing Our Way in the New Century (September 2003) ISBN 0393058506
  • A book of his New York Times columns, many deal with the economic policies of the Bush administration or the economy in general.
• Fuzzy Math: The Essential Guide to the Bush Tax Plan (May 4, 2001) ISBN 0393050629
• The Return of Depression Economics (May 1999) ISBN 039304839X
  • Considers the long economic stagnation of Japan through the 1990s, the Asian financial crisis, and problems in Latin America.
  • The Return of Depression Economics and the Crisis of 2008 (December 2008) ISBN 0393071014
• The Accidental Theorist and Other Dispatches from the Dismal Science (May 1998) ISBN 0393046389
  • Essay collection, primarily from Krugman's writing for Slate.
• Pop Internationalism (March 1996) ISBN 0262112108
  • Essay collection, covering largely the same ground as Peddling Prosperity.
• Peddling Prosperity: Economic Sense and Nonsense in an Age of Diminished Expectations (April 1995) ISBN 0393312925
  • History of economic thought from the first rumblings of revolt against Keynesian economics to the present, for the layman.
• The Age of Diminished Expectations: U.S. Economic Policy in the 1990s (1990) ISBN 026211156X
  • A "briefing book" on the major policy issues around the economy.
  • Revised and Updated, January 1994, ISBN 0262610922
  • Third Edition, August 1997, ISBN 0262112248

Selected academic articles

• (1996) 'Are currency crises self-fulfilling?' NBER Macroeconomics Annual 11, pp. 345–78.
• (1991) 'Increasing returns and economic geography'. Journal of Political Economy 99, pp. 483–99.
• (1991) 'Target zones and exchange rate dynamics'. Quarterly Journal of Economics 106 (3), pp. 669–82.
• (1991) 'History versus expectations'. Quarterly Journal of Economics 106 (2), pp. 651–67.
• (1981) 'Intra-industry specialization and the gains from trade'. Journal of Political Economy 89, pp. 959–73.
• (1980) 'Scale economies, product differentiation, and the pattern of trade'. American Economic Review 70, pp. 950–59.
• (1979) 'A model of balance-of-payments crises'. Journal of Money, Credit, and Banking 11, pp. 311–25.
• (1979) 'Increasing returns, monopolistic competition, and international trade'. Journal of International Economics 9, pp. 469–79.

External links

Informational

• New York Times Paul Krugman index of columns
• Paul Krugman's The Conscience of a Liberal Blog
• KrugmanOnline.com features books by Paul Krugman, a custom search engine, and aggregated content from the web.
• Paul Krugman's page on Academia.edu
• The Unofficial Paul Krugman Archive contains nearly all his pre-Times Select articles
• Paul Krugman (MIT) archives of his Slate and Fortune columns plus other writings 1996-2000
• Template:Worldcat id
• IDEAS/RePEc
• Open Directory Project - Paul Krugman directory category
• Paul Krugman Speaker Biography on the World Business Forum website where he is a speaker for the 2009 event

Critical

• "The Partisan" - review of Krugman's The Conscience of a Liberal from The New York Review of Books (payment required)

Media

• Video: "Hey, Paul Krugman (A song, A plea)" by Jonathan Mann (via rockcookiebottom.com)
• Video: Open Mind Interview, 2002: Part One, 2002,Part Two
• Audio: The New Class War In America featuring Amy Goodman, Paul Krugman, Greg Palast and Randi Rhodes recorded on June 13, 2006 at The New York Society for Ethical Culture, mp3 format, Video: alternate
• Video: Paul Krugman speaks at the World Affairs Council - Sept. 2007
• Audio: Interview by Paul "Dr. Beardy" Krugman on Liberadio(!) with Mary Mancini and Freddie O'Connell, October 22, 2007
• Video: The Conscience of a Liberal (November 3, 2007) - lecture from Mr. Krugman's 2007 book tour.
• Video of debate/discussion with Paul Krugman and Mario Cuomo on Bloggingheads.tv

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