Krugman Wins Economics Nobel

Professor Paul Krugman of Princeton University has won the Nobel Prize in Economics. At a time when world markets are in turmoil due to excessive market fundamentalism, the Swedish Academy has chosen a critic of that approach for this year’s SKr10 million prize. If there is a more deserving economist, one can’t name him.

The Academy noted, “Krugman’s approach is based on the premise that many goods and services can be produced more cheaply in a long series, a concept generally known as economies of scale. Meanwhile, consumers demand a varied supply of goods. As a result, small-scale production for a local market is replaced by large-scale production for the world market, where firms with similar products compete with one another. This kind of trade enables specialization and large-scale production, which result in lower prices and a greater diversity of commodities.”

And what does Professor Krugman think of the world’s current position? "This is terrifying," he said. He figures it’s similar to the Asian financial crisis in the 1990s. “I had never thought that in my lifetime I would see anything that resembles the Great Depression, but this in fact does.” The British bank bail-out, “defined the character of the worldwide rescue effort, with other wealthy nations playing catch-up.” Gordon Brown and his Chancellor, Alistair Darling, “went straight to the heart of the problem . . . with stunning speed.”

As for America, he said, “And whaddya know. Mr. Paulson - after arguably wasting several precious weeks - has also reversed course, and now plans to buy equity stakes rather than bad mortgage securities.” Meanwhile, John McCain is “more frightening now than he was a few weeks ago,” and the Republican Party has become “the party of stupid.”

However, the week-end developments among the G-7 and elsewhere give some basis for optimism. Professor Krugman said, “I’m slightly less terrified today than I was on Friday.” Either the $1.4 million award means he doesn’t have to worry about spending, or maybe his view is simply the result of being a practitioner of the dismal science for so many years.

© Copyright 2008 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

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