Tuesday, October 14, 2008
If you've read here before, you know that I think Paul Krugman is an excellent economist ... and a lousy political observer. If I thought about it, I could probably name a hundred other economists that fit that description. A few of them might be better economists than Krugman, but I doubt that list would reach ten.
A commenter wrote me asking what I thought of his selection to receive the Nobel prize. He was almost certainly a longshot winner (take a look at the three links of odds on winning in Tyler Cowen's post; only one mentions Krugman, at about 15-1.) I wondered how individuals are selected, so I looked it up. The relevant part
Prizes have been awarded for a specific contribution (such as new analytical methods in finance and econometrics), two or several specific contributions (such as the Prizes to Friedman and Modigliani) and for life-time contributions (such as the Prize to Samuelson, Kuznetz and Allais). Life-time contributions have dominated, although the classification is ambiguous since life-time contributions may have consisted of specific themes (such as in the case of Leontief). When considering what should be regarded as a "worthy" contribution, it is probably correct to say that the selection committee has looked, in particular, at the originality of the contribution, its scientific and practical importance, and its impact on scientific work. To provide shoulders on which other scholars can stand, and thus climb higher, has been regarded as an important contribution. To some extent, the committee has also considered the impact on society at large, including the impact on public policy.They indicate that "netting out" bad research is not part of the process, so all the things we might disagree with Krugman about are not part of the record the Nobel Committee looked at.
His prize is rather obviously in the first category: "for his analysis of trade patterns and location of economic activity." This is a single analysis. Basically, before Krugman trade theory was simply a matter of factor endowments. To take an example I use in class, in the old trade theory we had manhole covers made in India and in Michigan. India had cheap labor, so focused on making them using a technology that used lots of labor. In Michigan capital was comparatively cheaper, so the covers were made in a more automated process that minimized labor. Trade patterns were based on who had more labor or more capital, more land and natural resources, etc. Krugman changed all that. Some people have tried to say it's both trade and economic geography, but I read both as coming out of a single research agenda, one of many he's had. (I consider his work on international finance equally excellent, perhaps because I spend more time reading international finance than trade theory.)
I'm of two minds about the prize. Does he deserve to win a Nobel? Based on the previous paragraph and the work that has flowed in both local economic development and trade theory, you'd have to say it's a seminal work that advanced understanding. Just because others might have cleared the hurdle to receive the Nobel with more room to spare than Krugman is not a reason to deny it to him. In a world experiencing economic stress and concerns that globalization might have contributed to our economic problems today, giving the prize to someone who champions free trade is not a bad thing.
But if you wanted to recognize trade theory, as Amity Shlaes said on Dennis Prager's program today, why not award Jagdish Bhagwati now, and wait for Krugman until the Bush Administration he has long criticized is a distant memory? In some sense it may reduce the value of the prize to Krugman; we know the prize accelerated Joe Stiglitz into a sharp critic of the international order, but I doubt Krugman could become any more vociferous than he already is, and unlikely as well to confer any greater legitimacy than a longtime place on the Times' editorial page has.
UPDATE: I just read Russ Roberts. Again, he's already a columnist at the New York Times. Thinking at the margin, how much bigger does the Prize make his soapbox? Sorry, Russ, but that train has already left the station.