Paul Krugman's Nobel Prize and Trade, Development and Geography

Princeton University economist Paul Krugman was awarded this year's Nobel Prize in Economics “for his analysis of trade patterns and location of economic activity.” This topic and Krugman's work turns out to be incredibly central to the study of economic development, as we will be discussing in class precisely this week (in Eco 330) and next (in Eco 730). Here is Freakonomics blogger Justin Wolfers with more detail on some of his contributions, and his more recent public profile as a New York Times columnist:

Krugman’s accumulated scientific writings amount to an astonishing contribution. As an international economist, he has been working the same intellectual fields as giants like Ricardo, Samuelson, and Ohlin.

Before Krugman, it was hard to believe that there was a lot more to be learned about trade theory, and the profession had moved on to what many believed were more fertile fields.

Krugman’s insights helped bring trade theory into closer connection with data on how trade flows actually work. The same insights he brought to understanding patterns of international trade have also breathed new life into urban economics, which focuses on understanding the pattern of economic activity across space.

More than any other recent Nobelist, Krugman is no stranger to the general public. I’m sure that his other role as a New York Times columnist and an outspoken critic of the Bush administration will be the lede in discussions of this prize. But the prize is given for scientific research, and economists of all political stripes agree that Krugman’s economic writings are Nobel-worthy.

I would add that many of us are returning to re-read Krugman's papers on speculative attacks, Balance of payments crises, and debt-overhangs, to try to formulate models to understand the present crisis. For his more opinionated writings (but good stuff on the present crisis) read his blog.

For more on Paul Krugman's contributions to economics, read here.

Update:  Paul Krugman appeared on PBS' News Hour tonight and in used his reknowned conciseness to summarize the work for which his nobel was awarded. 

JIM LEHRER: ...The Nobel Committee said the prize was for your theory on international trade. Explain that.

PAUL KRUGMAN: Before the late 1970s, international trade was a theory about countries that are different. One country, you know, some place is tropical, another place is temperate, so the tropical country is going to produce coffee, the temperate place is going to produce wheat, and that was how you thought about international trade.

A lot of us were groping toward saying, you know, that's only part of the story. There's a lot of almost arbitrary specialization between countries. You know, somebody gets a head start. Somebody starts producing a product before someone else.

And then just the logic of specialization -- once you've got -- there are advantages to producing things on a large scale -- lead to countries producing different things, lead to international trade.

... there was a huge blank spot. We couldn't understand before why the United States and Canada were doing so much trade, why France and Germany were shipping seemingly similar goods back and forth, why you were sending Peugeots from France to Germany and Volkswagens from Germany to France.

And the theory told you why that was happening. And then it has, to some extent, shaped policy, because it tells you why, for example, integrating the European economy is so important, the advantages of being able to have 15 economies that are doing slightly different things, so that each of them is doing it at an adequate scale, instead of having this fragmented marketplace.

So I think it's helped with the policy, but mostly, you know, it's scientific work. We're trying to understand, why does the world work the way it does?