Krugman awarded Nobel Prize in Economics

But the accent was authentic, the news momentous. An official at the Royal Swedish Academy of Sciences informed Krugman, an economics professor at the Wilson School and a columnist for The New York Times, that he had been awarded the 2008 Nobel Memorial Prize in Economic Sciences for his theories on international trade.

A short time later, the Academy made the news public at an announcement in Stockholm, where it praised Krugman for showing “the effects of economies of scale on trade patterns and on the location of economic activity.”

After a meeting in Washington, D.C., Monday morning with the Group of Thirty, an international organization of economics and finance experts, Krugman returned to campus for a press conference and champagne reception in Robertson Hall. Sporting a black suit and wearing his trademark black backpack, Krugman arrived in his green Jetta about 15 minutes before the 2:30 p.m. event.

The crowd inside greeted the newest Nobel laureate with a standing ovation that lasted more than a minute.

After recounting for the audience how he heard the news, Krugman told the bevy of well-wishers and press that the work for which he is being recognized is greater than just his own.

“There is something awkward about having an individual get these prizes because there is a collection of people who work together,” the New York native said. “I feel that in some sense I ought to be sharing this with all the others who’ve participated, who made it possible.”

Krugman said the study of international trade is a “collegial effort” and thanked the selection committee for recognizing a field that he said has been transformed over the last 30 years.

“Beyond that — my god ... one Nobel Prize can discombobulate your whole day,” he said. “It’s an incredible honor. It’s stunning. It doesn’t quite settle in.”

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President Tilghman said it was an exciting day for both Krugman and the University — which now boasts 11 Nobel laureates on its faculty — joking that today’s soaring stock market was a “direct response” to the news from Sweden.

“I believe that this prize is going to be greeted very enthusiastically by the many people who have, as I have, learned economics reading that column religiously twice a week in The New York Times,” Tilghman said.

Wilson School Dean Anne-Marie Slaughter ’80 also praised Krugman for being a “boundary crosser” as he balances his work in advanced economics with educating a wide audience in layman’s terms.

The event was briefly interrupted several times by noises from a speakerphone near the podium relaying the event to reporters around the globe, to the irritation of administrators.

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Senior research mathematician John Nash GS ’50, who received the 1994 Nobel in economics, said after the event that he was surprised by Krugman’s selection, adding that he had nominated him in the past.

“I don’t share his political orientation, but I think he’s quite right on trade,” Nash told The Daily Princetonian, adding that he hasn’t had a chance to speak with Krugman yet.

“I sent him a greeting card already on the internet,” he added.

Economics professor Gene Grossman called the announcement “fantastic news.”

“We all knew Paul was going to win,” he told the ‘Prince’ on Monday evening. “We all knew it was a question of when, not if.”

Road to the Nobel

After receiving his bachelor’s degree from Yale in 1974 and his Ph.D. from MIT three years later, Krugman taught at both institutions as well as at Stanford, UC-Berkeley and the London School of Economics before coming to the University in July 2000. He also served on the Council of Economic Advisers under Ronald Reagan from 1982 to 1983.

Throughout his career, Krugman, 55, has studied how economies of scale influence both trade and urbanization around the globe. He proposed that nations could gain a competitive advantage by providing subsidies to certain industries.

Grossman said his colleague was instrumental in challenging the theory that trade was to compensate for a country’s weaknesses and exploit its strengths.

“Paul’s insight ... was that there’s an awful lot of trade in between and among countries that look very similar to one another,” Grossman explained. “Paul’s insight and contribution was that trade would be motivated by economies of scale, that by doing a lot of an activity you could become good at it, that there were benefits to having countries specialize, and that countries that were in every way similar could each be specialized the same ways that people are specialized.”

Krugman analyzed how international trade has come to be dominated by countries that import and export similar products, which enables specialization and large-scale production. That in turn lowers prices and provides for a greater diversity of products. His later research offered an explanation of how trade conditions lead to concentration or decentralization of populations, how individuals choose where to live and why urban areas bustling with economic activity can be surrounded by areas with small populations and little development.

But Krugman is perhaps best known for the twice-weekly column in the Times he has authored since 1999. Over the last few years, Krugman has become increasingly critical of the Bush administration on everything from the war in Iraq to huge tax cuts and the current economic crisis.

After being asked a question about Chinese economic policy on Monday, Krugman said he hadn’t spent much time thinking about China’s current situation.

“I’ve been spending my last few years trying to save my own damn republic,” he said.

During a question-and-answer session, Krugman said that U.S. and international leaders have not done enough to combat the current economic crisis.

“It’s very difficult for anyone except a ministry of finance to come up with solutions in the middle of this kind of thing. And our ministry of finance should have the responsibility,” he explained. “It would be kind of nice if we did have a sophisticated government, but that may change in the near future.”

“I’m feeling more optimistic than I was on, say, Thursday,” he added. “I think we’ve clearly been on the wrong track up until now, but I’m more hopeful now than I was a few days ago.”

He added that he believes the United States’ financial downturn was the result not of what regulators did, but what they failed to do, and that, despite the “stuff in my intellectual toolkit,” he did not foresee all that would follow the housing bubble burst.

“At each stage of this thing, every time you think you’ve hit the bottom, another floor collapses beneath you, and you go down further,” he explained.

Krugman was asked whether he thought his anti-Bush-administration positions may have affected his selection, as some other recent recipients had also been critical of the U.S. government.

“Nobel Prizes are given to intellectuals. I think you’ll find a lot of intellectuals are anti-Bush,” he said to laughter and applause. “I think if you did the crosstabs there, you would find there isn’t any excess representation.”

Krugman said while neither presidential candidate has been taking the lead on proposing solutions to the current crisis, he prefers Sen. Barack Obama (D-Ill.)’s support for regulation to Sen. John McCain (R-Ariz.)’s opposition to it. He also called McCain’s proposal to buy bad mortgages “a really bad idea.”

When asked if he wanted a position in either man’s cabinet, his response was emphatic.

“The answer is no,” he said. “Absolutely not.”

Despite the fame he has garnered as a columnist, Krugman said he still thinks of himself first and foremost as an academic.

“I still think the university is home,” he said. “That’s ultimately who I am. But you do different things. Academics in their 50s have a tendency to try stuff that’s outside of narrow academics.”

Krugman currently teaches ECO 553: International Monetary Theory and Policy I, a graduate seminar with four enrolled students.

Krugman also urged students to not over-think their futures and to “follow what seems interesting,” saying that many people had tried to dissuade him from studying international trade back in the 1970s because it was perceived as a boring topic.

“It’s kind of worked out ok,” he joked.

In addition to his writings as a columnist, Krugman is the author of more than 200 papers and 25 books, including bestsellers “The Great Unraveling” in 2003 and “The Conscience of a Liberal” four years later.

In 1991, while a professor at MIT, Krugman received the John Bates Clark Medal from the American Economic Association, given every other year to the best economist under the age of 40.

The announcement of his award comes less than a week after former Princeton researcher Osamu Shimomura was named the recipient of the 2008 Nobel Prize in Chemistry. Krugman will officially receive his prize, which includes a $1.4 million award, during a Dec. 8 ceremony at Stockholm University.

Economic Nobels at Princeton

The Nobel Prize in Economics was not one of the original Nobels but was established in 1968 by Sveriges Riksbank, Sweden’s central bank, in memory of Alfred Nobel. Krugman’s selection marks the ninth consecutive year that an American has won outright or shared the Nobel in economics.

Krugman is the eighth Princeton faculty member or alumnus to receive the Nobel in economics, a field historically dominated by professors at Harvard and the University of Chicago.

Former Princeton professor Sir Arthur Lewis won the University’s first Nobel in economics in 1979. Psychology professor Daniel Kahneman won the prize in 2002 and Eric Maskin, a visiting lecturer with the rank of professor of economics, won the award in 2007.

Alumni winners include Gary Becker ’51 in 1992, Nash in 1994, James Heckman GS ’68 in 2000 and Michael Spence ’66 in 2001.