Monday, October 13, 2008

Krugman Wins Economics Nobel

From the New York Times:

He has developed models that explain observed patterns of trade between countries, as well as what goods are produced where and why. Traditional trade theory assumes that countries are different and will exchange only the different kinds of goods that they are comparatively better at producing; this model, however, was not reflected in flow of goods and services Mr. 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 each other, and why a country might import the same kinds of goods that it exported.

In his model, companies sell similar goods, with slight variations. The companies get more efficient at producing their goods as they sell more. Consumers like variety, so they pick and choose goods from among these producers in different countries. He developed this work further to explain what effect transport costs, which obstruct trade, should have on migration patterns. He helped explain under what conditions trade would lead to concentration or decentralization of populations.

Mr. Krugman’s models have been praised for their simplicity and practicality — features economists are often criticized for ignoring.

“Krugman’s trade models became the standard in the economics profession both because they fit the world a bit better and because they were masterpieces of mathematical modeling,” said Edward L. Glaeser, a professor at Harvard University who also studies economic geography. “His models’ combination of realism, elegance and tractability meant that they could provide the underpinnings for thousands of subsequent papers on trade, economic growth, political economy and especially economic geography.”

Click here for the rest.

Okay, raise your hand if you followed the above excerpt...

...I'm raising mine, but I fully admit that it's simply a tiny overview of the work that snagged Paul Krugman his Nobel Prize. That is, I'm sure that if I actually started reading his scholarly work in depth, I would have to stop a few pages in, befuddled as anybody--I'm much more comfortable with his twice weekly column in the New York Times. But that's one of the things that makes Krugman so extraordinarily important: he's as great as anybody who's ever worked in the field, as today's award fully illustrates, but has the ability to make extremely dense material understandable to laymen such as myself. I bet a good undergraduate macroeconomics course with him teaching would be kickass.

Of course, as observed by the above excerpted article, Krugman won for his work in trade theory, rather than for his journalistic work. But, like I said, that only makes his columns more compelling because they come from one badass economist. On the other hand, Milton Friedman, Grand Wazoo of the free market theory that's got the credit markets all fucked up right now, got a Nobel in economics, too, so it seems like they give these things out to pretty much anybody.

Whatever. Krugman's great, and I'm glad I post his stuff all the time.

Interesting trivia I learned today during an interview he did on PBS's The News Hour: Krugman was inspired to become an economist by reading Isaac Asimov's Foundation Trilogy, which I read when I was in college; it seems that Asimov's fictional academic field Psychohistory, which, as expressed by Wikipedia, "combines history, sociology, and mathematical statistics to make (nearly) exact predictions of the collective actions of very large groups of people," fascinated him, as it did me. I didn't become an economist, myself, but the books did make me much more interested in economics, which is the closest thing we've got to Psychohistory in the real world.

As an economist, we already know Krugman's a geek, a cool geek, but a geek nonetheless. Now we know he's a science fiction fan, which makes him a double geek. Yeah yeah, I know, I'm a geek, too.

Congrats, Krugman!