Cometh the hour — cometh the Nobel. Paul Krugman didn’t get the prize for his journalism. But he should have. Here’s a chronological list of the highlights of his career.

  1. “New” of strategic trade theory
  2. Economic geography
  3. His writing on financial crises
  4. Economic journalism for Slate — serious lengthy articles explaining economics to the interested layperson
  5. Economic journalism of the NYT op ed kind.

But the list is also in reverse order of significance. Though Krugman got the Nobel for items 1 and 2, I would have given it to him for items 3 to 5. Krugman’s work has got better and better.

His participation in new trade theory was interesting enough. But it wasn’t the first time, and won’t be the last that the discipline was mesmerised by something that turned out to be pretty useless. Strategic trade theory tells us what we already knew (though economists spent a lot of time ignoring it — namely that economies of scale are important in determining the patterns of trade, that in principle countries can intervene to advantage themselves in trade by that it’s difficult, risky and the payoffs are typically not large).

Krugman argued that he and his comrades couldn’t have known that until they tried. Well fair enough, but economists of great standing — like John Hicks and Milton Friedman had already warned that the problem with modelling imperfect competition was that one was forced into making too many ad hoc assumptions to get models to work for them to be much use. That’s exactly what happened.

Things improve with Krugman’s economic geography. Though he often apologises for the informality of his models – and indeed seems less preoccupied with getting them into the best journals – their simplicity means they become useful as heuristics for thinking about policy. Still, his work on financial crises is much more policy useful again.

This reminds me of the debates of the 1920s and 30s. Keynes largely stayed away from the disciplines preoccupation with economies, the modelling of imperfect competition and price theory. Of course his field was monetary economics — but why was that? Keynes had a great intuition. For him there wasn’t much point in economics — as be put it “an easy discipline at which few excel” – unless one could connect some simple but realistic stylised picture of the world with robust policy conclusions. As his mentor Marshall had counselled, avoid long chains of deduction.

And Krugman’s work on financial crises, including some fantastic commentaries on and suggestions for addressing Japan’s malaise were great, really useful economics. And a great preparation for the circumstances in which we now find ourselves.

But for me this is just the preparation for his greatest work as the New York Times’ columnist of the century. How Krugman teaches, writes serious and popular books, textbooks, gives seminars, media interviews and then writes two columns a week – well it’s beyond me. Last week he whipped up a model on the international transmission of the financial crisis. As Dani Rodrik put it on his blog yesterday “His ability to cut to the heart of the matter with just a couple of equations is unparalleled in the profession”.

And to top it off, unlike most political journalists whose subject — they seem to think — is whose spin went over best this week, Krugman’s focus on an actual subject means that when he sees a lie that’s what he calls it. That style meant that he was the one to write the first draft of history when the US Republican Party metastasised into a revolutionary party with no sense of the legitimacy of its political opponents’ in which nothing was off limits if it might advance political ends.

And so Krugman began calling it like it was — with passion but with remarkable accuracy. (True to academic traditions, if he makes a mistake he publicly acknowledges it). As the US government plumbed new depths of routine lying, authorised torture and ‘extraordinary rendition’, exploited its soldiers and dismissed judges whose judgements didn’t please it, Krugman told us about it.

Congratulations Paul.

The Americans have been unlucky that one side of their political system has gone close to psychosis — can you imagine a John Howard addressing a rally at which people chanted that his political opponent was a terrorist and others shouted “Kill him”? But Americans have been lucky that Krugman was the first and foremost to name this toxic and revolutionary state of affairs for what it was.

My only disappointment is that his citation for the Nobel was not for his greatest achievement — to be the best economic journalist since, but probably even including, Keynes.

Peter Fray

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