Posts Tagged ‘keynesianism’

Paul Krugman, Neo-Keynesian economist and controversial NY Times columnist, has won this years Nobel prize in economics (or more accurately the “Nobel Memorial Prize in Economic Sciences”).

A round-up of reactions follows.

Jonathan Adler writes at Volokh:

This morning, the 2008 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel was awarded to Princeton economist Paul Krugman “for his analysis of trade patterns and location of economic activity.” The award was bestowed for his academic work — which many have suggested was Nobel-worthy for some time — not his political commentary, though the latter may have played a role. […] [I] want to make clear that I believe Krugman’s Nobel is well-deserved. He is clearly among the most important economists of his generation.

Tyler Cowen gives a great summary of Krugman’s work at Marginal Revolution:

Krugman is very well known for his work on strategic trade theory, as it is now called.  Building on ideas from Dixit, Helpman, and others, he showed how increasing returns could imply a possible role for welfare-improving protectionism.  Krugman, however, insisted that he did not in practice favor protectionism; it is difficult for policymakers to fine tune the relevant variables.  Boeing vs. Airbus is perhaps a simple example of the argument.  If a government can subsidize the home firm to be a market leader, the subsidizing country can come out ahead through the mechanism of capturing the gains from increasing returns to scale. […] I am most fond of Krugman’s pieces on economic geography, in particular on cities and the economic rationales for clustering.  He almost single-handedly resurrected the importance of “location theory,” an all-important but previously neglected branch of economics.

Libertarian/Anarcho-Capitalist economist Bryan Caplan writes, also at Marginal Revolution:

There are lots of good reasons to be annoyed with Paul Krugman. (Like here, here, and here). But as a cock-eyed optimist, I’m very happy to have him around. Think about it: The world’s most famous left-wing economist:

1. Blames European unemployment on labor market regulations that hold wages above the market-clearing level. (The Accidental Theorist, Part 1)

2. Publicly and articulately advocates free trade without hemming or hawing. (Pop Internationalism)

3. Identifies anti-globalization activists as the enemies of the world’s poor. (The Accidental Theorist, Part 3)

4. Titles an essay “In Praise of Cheap Labor: Bad Jobs at Bad Wages Are Better than No Jobs at All” (The Accidental Theorist, Part 3)

5. Points out that if you oppose Big Government, you should favor cutting Social Security, Medicare, and other popular programs. (“The Lost Fig Leaf”) Sure, he’s hoping to scare us away from libertarian rhetoric, but there’s no use running away from the truth.

I can’t imagine Paul Samuelson doing any of the above, much less Galbraith. At least in economics, the intellectual climate hasn’t been as good as it is now for a century.

Daniel Davies is happy:

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.

For the record, I don’t much agree with Krugman’s overall poltical/economic philosophy. (No surprises here, for I am a libertarian and he a Neo-Keynesian.) I also think that his NY Times column is bad, especially when he delves into politics. However, while I have not read any of his academic papers, I see no reason to suspect that the prize is not well-deserved. The Econ Nobel is one area where winners can hold radically different views as long as their papers are worthy, and Krugman’s award is a continuation of that tradition. So, congratulations.

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