14 October 2008


Paul Krugman has won the Nobel Prize for Economics. I don't have an informed opinion of him as an economist, though what I can understand of his thinking seems extraordinarily sensible ... but my opinion of him as a public intellectual could not be higher.

Daniel Davies at Crooked Timber observes:

I can’t help thinking that this is actually Krugman’s reward for being the public voice of mainstream sensible Keynesianism for the last fifteen years, starting with the use of the liquidity trap to explain the Japanese slump, going through his prediction of the Asian crises and onward to today. In which case, well done the Nobel [see note 1 again] committee — Krugman’s NYT column has been more use to the public standing of economists than more or less anything published in the journals.

And, of course, congratulations to Prof. Krugman himself, who might very well have believed that he’d done his professional status irreparable harm by taking such an aggressive line against the government of the day; he now gets the double pleasure of receiving the highest reward in economics, just as all of his detractors see their repuations ruined. There is probably some pithy epithet from Keynes or JK Galbraith to be inserted here on the general subject of honesty being the best politics, but I can’t think of it just at this instant.

DeLong responds:
Time quotes me this morning as saying that Paul is “the best claimant to the mantle of John Maynard Keynes” that we have. And I think I am more right than I knew, for I think that the “pithy epithet” is rather long, and is the opening to the preface to Keynes's Essays in Persuasion:
HERE are collected the croakings of twelve years — the croakings of a Cassandra who could never influence the course of events in time. The volume might have been entitled “Essays in Prophecy and Persuasion”, for the Prophecy, unfortunately, has been more successful than the Persuasion. But it was in a spirit of persuasion that most of these essays were written, in an attempt to influence opinion. They were regarded at the time, many of them, as extreme and reckless utterances. But I think that the reader, looking through them to-day, will admit that this was because they often ran directly counter to the overwhelming weight of contemporary sentiment and opinion, and not because of their character in themselves. On the contrary, I feel — reading them again, though I am a prejudiced witness — that they contain more understatement than overstatement, as judged by after-events. That this should be their tendency, is a natural consequence of the circumstances in which they were written. For I wrote many of these essays painfully conscious that a cloud of witnesses would rise up against me and very few in my support, and that I must, therefore, be at great pains to say nothing which I could not substantiate. I was constantly on my guard — as I well remember, looking back — to be as moderate as my convictions and the argument would permit...
Edward L. Glaeser explains briefly what he actually won the prize for.
Mr. Krugman published two seminal papers in 1979 and 1980 that made sense of the fact that Toyota sells cars in Germany and Mercedes-Benz sells cars in Japan.
Mr. 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. 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.
And let me also offer Dr Krugman's essay Incidents From My Career. Though much of it is opaque to civilians without serious training in economics, the tale it tells of the rhythms of an intellectual career is thoroughly engaging.
I had learned about monopolistic competition from a short course given by Bob Solow in 1976, and I guess the idea of applying the new models to trade had been percolating in my mind ever since. I have, however, a typical pattern in my work: I will have a foggy idea that I play with occasionally, sometimes for years; then some event will suddenly cause the fog to lift, revealing an almost fully developed model. In this case, in January 1978 I paid a visit to Rudi Dornbusch to talk about my work, and prepared a list of possible ideas, including as an afterthought the idea of a monopolistically competitive trade model. When he flagged the idea as interesting, I went home to work on it the next day — and knew within a few hours that I had the key to my whole career in hand. I distinctly remember staying up all night in excitement, feeling that I had just seen a vision on the road to Damascus.

1 comment:

Veleda said...

I was reading about him over the weekend. i like his writing style...and so far what i have read also seems 'sensible'. In terms of advanced economic theory. I haven't had the time to really research and understand his papers on trade economics.

Overall though..good stuff. I added him to my rss feed over the weekend.