Paul Krugman wins Econ Nobel

[Puppycow]

NY Times Columnist and Princeton Econ Professor Paul Krugman wins the Nobel prize in Economics

Since the Nobel has become politicized in recent years, it's a little hard to tell if it's really because of his scholarly work or because he is a critic of the Bush administration. I like Krugman myself, but after the recent pattern of choosing mostly shrill anti-Americans to recieve Nobel prizes, I look at this with a slightly jaundiced eye.

 

[SaulOhio]

It just goes to show how corrupt mainstream economic thinking has become. I know of two specific instances where Krugman made arguments, and presented the very evidence needed to refute him in the article. He is unable to recognize a contradiction when he sees it.

There was one article he wrote about the California electric utilities crisis. He was supposedly criticizing the free market economists who claimed that the crisis was not caused by a free market, since the industry had not been deregulated. In order to prove that there was a free market, and that the industry had been deregulated, he named three regulations imposed by the "deregulation". Nuts. He couldn't recognize a free market to save his life.

On Social Security, the free market argument is that the "trust fund" is like a bunch of IOUs the government has written to itself. All the money is in the form of treasury bonds which have to be repaid out of future taxes. Krugman argued that the trust fund is secure, that its not like a pile of IOUs, because there is a law requiring the governemnt to repay treasury bonds. Its like making a stronger promise to repay the IOUs! Idiocy!

That Krugman won a Nobel prize with his nonsense just shows how low the standards for mainstream economics have gotten.

 

[dudalb]

Yeah, I am a little suspicious of this myself,since Krugman did not have high a reputation even among other liberal economists.

 

[Skeptic Ginger]

Did any of you even bother to find out what the prize was for before drawing your evidence-lacking conclusions which fit your political views?

http://nobelprize.org/nobel_prizes/economics/laureates/2008/press.html

 

[SaulOhio]

skeptigirl: OK. I just read it. I have no quarrel with anything said on that page. All of it is perfectly ordinary economics. Thats the problem. Its ordinary. Nothing new. Of course, that page just gives a brief summary of the work he did, so I can't fully judge if there is anything original there, but if there is, why didn't they mention it.

Concepts such as economies of scale, an international division of labor based on comparative advantage, and urbanization linked to industrialization and manufacture are nothing new.

And there is nothing there to change my mind about Krugman, that he's a hack, a sellout to the liberal MSM establishment, and a mediocrity.

Here's what a COMPETENT economist says in response to one of Krugman's articles:

California Screaming, Under Government Blows (Kugman's article was simply titled California Screaming)

Incredibly, the fiasco is being blamed on deregulation and the establishment of a free market in electric power. See, for example, the disgraceful article "California Screaming" by Paul Krugman in The New York Times of December 10, 2000. The Times’ lead in to this article, which accurately conveys its tenor, is "California’s blind faith in markets has led to an electricity shortage so severe that the governor has turned off the lights on the official Christmas tree."

Clearly, it is necessary to review the facts that have caused California’s fiasco, in order to arrive at a rational judgment of its nature. This review will establish that the actual cause of the fiasco is not at all the free market but rather, from beginning to end, destructionist government policy, in large part inspired by environmentalist fanaticism. Assertions, such at that of The New York Times, which was just quoted, will be shown to constitute a literal contradiction in terms.

 

[Skeptic Ginger]

Are you saying you read the summary or did you follow the link to the actual paper describing the decision?

Scientific background on the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2008

Krugman has published a large number of important articles and monographs in the fields of both trade and geography. In particular, he made the initial key contributions. He wrote the first article in the trade theory, soon followed by another influential paper that extended his initial analysis (Krugman, 1979a and 1980). Further, Krugman (1991a) is commonly viewed as the starting point of new economic geography. In fact, the seeds of the new economic geography can already be found in his 1979 (a) article which, in its final section, argues that patterns of migration can be analyzed within the same framework as the new trade theory. While this article had an immediate impact on the trade literature, it would take more than ten years for the final section, on migration and agglomeration, to have an influence on the geography literature – kindled by Krugman himself, in the 1991 (a) paper.

In what follows, we discuss Krugman’s contributions to trade and geography. We begin by considering the key common elements – economies of scale, monopoly power, and demand for variety – of both theories, using the setting of Krugman’s 1979 (a) paper. We then examine, separately and in more detail, his work on trade and geography, with special emphasis in each case on how Krugman’s research transformed the literature.

You seem to be annoyed because you don't like Krugman's assessment of the current economic crisis. The prize was awarded based on decades of Krugman's work. It was not based on anything related to his political views or current criticisms of the economic crisis. In addition, this award was determined months ago and the paper I've linked to here explains the award was based on Krugman's work from 1979 to 1991.

A large literature has emerged from the basic analysis in Krugman (1991b).

Conclusion

By having integrated economies of scale into explicit general equilibrium models, Paul Krugman has deepened our understanding of the determinants of trade and the location of economic activity. His seminal papers published in 1979 (a) and 1980 were instrumental to the development of the new trade theory, and his 1991 (a) paper inspired the new approach to economic geography. His monographs, co-authored with Helpman and with Fujita and Venables, demonstrate the richness of the new theories.

I suggest the OP makes an unsupported claim that the Nobel prizes are based on some liberal political agenda. I think such bias is demeaning of the prestige one has earned in winning a Nobel Prize.

I have seen no evidence submitted in this thread supporting the OP claim that, "the recent pattern of choosing mostly shrill anti-Americans to recieve Nobel prizes", is the least bit factual.

 

[jimtron]

It just goes to show how corrupt mainstream economic thinking has become. I know of two specific instances where Krugman made arguments, and presented the very evidence needed to refute him in the article. He is unable to recognize a contradiction when he sees it.

There was one article he wrote about the California electric utilities crisis. He was supposedly criticizing the free market economists who claimed that the crisis was not caused by a free market, since the industry had not been deregulated. In order to prove that there was a free market, and that the industry had been deregulated, he named three regulations imposed by the "deregulation". Nuts. He couldn't recognize a free market to save his life.

On Social Security, the free market argument is that the "trust fund" is like a bunch of IOUs the government has written to itself. All the money is in the form of treasury bonds which have to be repaid out of future taxes. Krugman argued that the trust fund is secure, that its not like a pile of IOUs, because there is a law requiring the governemnt to repay treasury bonds. Its like making a stronger promise to repay the IOUs! Idiocy!

Could you please link to one of these articles, or provide the date?

 

[SaulOhio]

You seem to be annoyed because you don't like Krugman's assessment of the current economic crisis.

I don't even know what Krugman is saying about the present economic crisis.

And nothing else you posted shows me that he contributed any new ideas. Can you name me any particular new ideas he contributed? Maybe he did, but nothing so far convinces me he has.

I do know that Krugman wouldn't recognize a free market if it fell on him, based on the works I cited.

I do still think that George Reisman is more deserving of a Nobel, for his synthesys of the utilitarianism of Austrian economics and Objectivist ethics, helping to clarify how the moral and the practical foundations of capitalism are in harmony with each other.

 

[jimtron]

SaulOhio, could you please link the article you mentioned earlier:

There was one article he wrote about the California electric utilities crisis. He was supposedly criticizing the free market economists who claimed that the crisis was not caused by a free market, since the industry had not been deregulated. In order to prove that there was a free market, and that the industry had been deregulated, he named three regulations imposed by the "deregulation". Nuts. He couldn't recognize a free market to save his life.

 

[SaulOhio]

Sorry. Accidental double-post

 

[SaulOhio]

SaulOhio, could you please link the article you mentioned earlier:

I wish I could. I have searched for it in the past, but only saw in in a local paper once, maybe an abbreviated version of it. I remember writing a letter to the editor about it, making the same criticisms I did here. But I have found a similar article here:

One way in which California didn't fully deregulate was that while prices in the wholesale market were decontrolled, the prices charged by utilities continued to be fixed by the state. This meant that even when power shortages sent wholesale prices sky high, homes and businesses had no financial incentive to conserve electricity. The history of retail price control is a little odd; it was actually a temporary measure intended as a sweetener for the utilities, a way to let them earn some extra profits in the face of what were expected to be falling wholesale prices. As it turned out, however, the rigidity of retail prices made it harder for the state to cope with its crisis.

But would it really have made a big difference if those prices had not been fixed? All the evidence suggests that to reduce demand enough to eliminate today's shortages retail electricity prices would have to rise enormously -- and that such a rise would be politically unacceptable. In fact, in San Diego the original retail price freeze ended before the crisis struck. But when prices suddenly tripled last summer, a firestorm of public outrage forced the imposition of new controls.

here, he presents the very evidence Reisman uses to prove that the market was not free, but he seems to dismiss it because it was a "sweetener" for the utilities, and were later re-imposed because of public pressure. Do any motives for imposing price controls change the fact that they ARE controls? Does the fact that they were imposed because of public outrage at energy prices mean they are consistent with a free market?

And Krugman entirely ignores the most important regulations preventing the increase of supply in electricity: the environmental regulations.

 

[dudalb]

I get a feeling that Saul Ohio thinks that only Libertarian economists are deserving of the Nobel prize.

 

[SaulOhio]

No. I believe ones that make serious contributions to the field of economics, and know the difference between a regulated market and a free one do.

 

[Skeptic Ginger]

....And nothing else you posted shows me that he contributed any new ideas. Can you name me any particular new ideas he contributed? Maybe he did, but nothing so far convinces me he has.....

Can you cite your credentials and/or critique the prize paper I linked to which explains the reason for the award in detail? How can you make the asinine claim I provided no convincing sources when I provided the 18 page report "Compiled by the Prize Committee of the Royal Swedish Academy of Sciences" which included 4 & 1/2 additional pages of citations supporting the award of the prize? All that has been said to counter the award documentation were some completely unsupported assertions that a few people in this thread don't like the politics of the Nobel committee.

 

[lomiller]

No. I believe ones that make serious contributions to the field of economics, and know the difference between a regulated market and a free one do.

Given that you start with a politically motivated concept of what constitutes a contribution to the field of economics, and even what constitutes a free market there is no meaningful difference.

Make no mistake, your version of markets, where an absence of regulation allow a small number of wealthy individuals to run the market like a feudal fiefdom is considerably less free then a well regulated modern market.

 

[SaulOhio]

Given that you start with a politically motivated concept of what constitutes a contribution to the field of economics, and even what constitutes a free market there is no meaningful difference.

So what is my politically motivated concept of a contribution?

And what is the problem with my definition of a free market? Not that I gave one, so here it is:

A free market is one in which property rights are protected by the government, where anyone is free to own anything they can acquire honestly, use it as a means of production to create any product or service they choose, and sell it to anyone willing to buy at whatever price and on whatever terms the buyer and seller can agree on voluntarily.

Make no mistake, your version of markets, where an absence of regulation allow a small number of wealthy individuals to run the market like a feudal fiefdom is considerably less free then a well regulated modern market.

Show me an example of a well regulated modern market, please. The one we've got now sucks. People are losing their jobs, energy prices are fluctuating, retirement accounts are losing their value, banks are collapsing all over the world, and governments are promising to save us all by taxing us more and giving our money to the bankers who made so many bad loans.

 

[qwints]

So what is my politically motivated concept of a contribution?

And what is the problem with my definition of a free market? Not that I gave one, so here it is:

A free market is one in which property rights are protected by the government, where anyone is free to own anything they can acquire honestly, use it as a means of production to create any product or service they choose, and sell it to anyone willing to buy at whatever price and on whatever terms the buyer and seller can agree on voluntarily.

Those are your problems. What mechanisms do you use to prevent fraud, insider trading, market manipulation, inequalities of information and compulsion through necessity?

I think your biggest problem is a failure to distinguish between normative and positive economics. Your second biggest is a willful ignorance to what the other posters and the Nobel committee said. Before Krugman, economists tended to explain the distribution of industry a theory of competitive advantage (which you learned about in your high school economics class.) Krugman put forth a new model with greater explanatory power.

 

[Skeptic Ginger]

Could you please respond to post #14, SaulO?

 

[SaulOhio]

Skeptigirl: I didn't ask you to provide a source. All you need to do is summarize the basic points of his actual contribution. What I have seen is the claim that he used the ideas of others to analyze patterns of trade. What were his conclusions? If he had something significant to add, it shouldn't be hard to explain, or at least name, what his new contribution is.

 

[Francesca R]

You (SaulOhio) seem to think that because the prize was awarded this year, the contribution from Krugman to the field of economics arrived this year too. And when you say "it's nothing new", that's because Krugman wrote about it decades ago, and you're assuming that someone else did.

What you're doing is displaying your ignorance.