Paul Krugman
Paul Krugman is a Neo-Keynesian economist, Nobel laureate, scholarly, creator, and media feature writer, known for his work on international trade theory and economic topography. Considered one of the world's most powerful economists, Krugman is prestigious for rethinking existing speculations of international trade and either establishing or helping to establish several new trains in international economics, from New Trade Theory (NTT) and New Economic Geography (NEG) to models of financial crises and exchange rate developments. In 2008, Krugman was the sole beneficiary of the Nobel Memorial Prize in Economic Sciences "for his analysis of trade patterns and location of economic activity."
Krugman has shown on the resources of Yale, Massachusetts Institute of Technology (MIT), Princeton, Stanford, and the London School of Economics. At the Graduate Center of the City University of New York (CUNY), he has served starting around 2015 as both Distinguished Professor of Economics and Distinguished Scholar in the Stone Center on Socio-Economic Inequality.
As an Op-Ed journalist for The New York Times starting around 2000, Krugman's blog, The Conscience of a Liberal, has spread the word about him well for a broad crowd for his blunt perspectives on economic and political issues. All through his career, he has been a productive and various writer, with a long rundown of publications going from hits on economics and politics for an overall crowd to textbooks and scholarly papers on macroeconomics, exchange rate theory, international development, international trade, and economic geology. As of March 2022, he is the writer or manager of 27 books and more than 200 scholarly papers in professional journals.
Education and Early Career
Brought into the world in 1953 to a working class family in Albany, N.Y., Krugman earned a B.A. in Economics (summa cum laude) from Yale University in 1974 and a Ph.D. in Economics from the Massachusetts Institute of Technology (MIT) in 1977. At MIT, his advisor for his thesis, Essays on Flexible Exchange Rates, was Rudiger (Rudi) Dornbusch, a German economist who assumed a critical part in characterizing the field of international economics in the twentieth century.
Early scholarly jobs included Assistant Professor of Economics at Yale University (1975 to 1980) and Associate Professor of Economics at the Massachusetts Institute of Technology (MIT) (1980 to 1984). From 1984 to 2000, he filled in as Professor at both MIT and Stanford University and educated at the London School of Economics, where he holds the title of Centenary Professor. After MIT and Stanford, Krugman burned through 15 years (2000 to 2015) as Professor of Economics and International A\ufb00airs at Princeton University; upon his retirement in 2015, he was given the title of Professor Emeritus. In 2015, he joined the staff of the City University of New York as Distinguished Professor of Economics and Distinguished Scholar in the Stone Center on Socio-Economic Inequality.
Of note, during his tenure at MIT, he left for one year (1982 to 1983) to fill in as the Chief Staffer for International Economics on President Ronald Reagan's Council of Economic Advisers.
Nobel Prize for New Model of International Trade
At the point when Krugman received the 2008 Nobel Prize for "his research on international trade and economic geology," the Nobel Committee refered to his initial work that "presented an altogether new theory of international trade." The Nobel announcement proceeded: "By having shown the effects of economies of scale on trade patterns and on the location of economic activity, his thoughts have given rise to a broad reorientation of the research on these issues."
New Trade Theory
In the late 1970s, toward the beginning of his tenure at Yale, Krugman was all the while thinking about which course to take in his research. During a discussion with Rudi Dornbusch, his former Ph.D. advisor at MIT, he began to develop New Trade Theory (NTT) as an alternative to more established hypotheses that make sense of international trade patterns as founded on comparative advantage: the ability of a country to deliver a specific product at a lower opportunity cost than its trading partners, due to various natural resources and different factors.
In the Journal of International Economics in 1979, Krugman distributed "Expanding Returns, Monopolistic Competition, and International Trade," an article that introduced his contentions and models for New Trade Theory (NTT) interestingly. The 2008 Nobel Committee refered to this 1979 article as representative of the significance of Krugman's contribution to the analysis of foreign trade, as follows: "The fundamental thought is somewhat plainly obvious, yet the step from speculation to a severe and strong theory is significant — and this was exactly the step Krugman took."
As Krugman made sense of it, prior models of international trade anticipated trade between countries with very unique comparative advantages, for example, a country with a high agricultural output trading with a country with a high industrial output to exchange totally different products. In any case, Krugman and his kindred economists had been noticing real-world trade patterns with developing deviations from the patterns anticipated by these traditional models — especially the way that, since World War II, increasingly more international trade was going on between comparable countries with comparative advantages to exchange comparable products. For instance, the U.S. furthermore, Germany have been trading vehicles, drugs, medical equipment, and industrial machinery with one another for quite a long time.
The trigger for Krugman's New Trade Theory was his understanding that there are critical factors that decide international patterns of trade in the modern period that the old economic models missed: 1) that consumers incline toward brand diversity and 2) that production favors economies of scale, i.e., cost advantages that enterprises gain by increasing to efficient, high-yield production. (The higher the output, the lower the fixed cost per unit.)
As per Krugman's NTT, when the consumer preference for different brands is figured into the model, the way that numerous comparable products are traded to and fro between comparable countries turns into an anticipated outcome.
An extra contention that Krugman makes in NTT is that the preference for economies of scale makes sense of another outcome that economists had been not able to foresee with traditional models: the way that countries with a high domestic demand for a specific product likewise will generally increase their foreign sales of a similar product.
As per NTT, the source of this home market effect is that the preference for economies of scale not just drives specialization on specific products that are in high demand in the home market, where economies of scale can be attained, yet in addition results in overflows that drive higher sales of those products in foreign markets. Albeit the home market effect had first been conjectured by Swedish economist Staffan Linder, Krugman's NTT model was quick to formalize a pattern that trade models dependent just upon comparative advantage had never anticipated: the critical connection between domestic market size and export growth.
In his NTT model, Krugman's expansion of transportation costs as a key part of the home market effect demonstrated that it checked out not exclusively to concentrate production in one location yet additionally to find production in an area with a high demand for the products. These perceptions would add to his subsequent work on New Economic Geography (NEG).
New Economic Geography
In the decade after the 1979 publication of his research on New Trade Theory, Krugman started to grow his original model to foresee what goods are delivered where as well as why labor and capital will generally concentrate in certain countries and locales and not in others.
In "Expanding Returns and Economic Geography", distributed in the Journal of Political Economy in 1991, Krugman orchestrated this later research into a subsequent theory: New Economic Geography (NEG), which makes sense of why — as opposed to spread evenly around the world — enterprises that have accomplished economies of scale in manufacturing will generally be bunched in specific districts and countries, for instance, Silicon Valley.
Notwithstanding the home market effect that Krugman had modeled before, NEG distinguished another geographic peculiarity — agglomeration — as one of the major benefits of achieving economies of scale. Agglomeration effects are the benefits of having companies and individuals in various (however related) organizations situated close to one another in industrial clusters with strong neighborhood markets for the products.
Since the benefits are at the regional level — for instance, large labor pools, lower transportation costs, and opportunities for information sharing — agglomeration can be considered economies of scale that are outer to any one company yet internal to a geographic area. The home market effect, agglomeration, and all related positive effects then communicate to make a positive feedback loop that drives further economic growth inside those specific districts or countries.
Finance and Macroeconomics
Since the 2008-2009 financial crisis and the Great Recession, the research Krugman has done all through his career on international currency crises, exchange rate instability, and the progress of financial shocks has been highly persuasive. For instance, as a graduate student at MIT, Krugman constructed a model for the foreign exchange market and distributed a much of the time refered to paper on currency crises that is viewed as one of the primary contributions to the original of currency crisis models,
In response to the global financial crisis of 2008, Krugman composed a casual paper called International Finance Multiplier, in which he said that the justification for the unforeseen speed and fast contagion of the crisis was that highly leveraged financial institutions (HLIs) participated in cross-border investment lost vigorously in one market and became undercapitalized, which forced them to sell off assets across the board — driving down prices and coming down on other HLIs in a cascade effect. When Krugman announced this article on his blog, it was examined on economics writes and refered to in scholastic papers very quickly.
Krugman has habitually been refered to for his description of Japan's Lost Decade to act as an illustration of the risks of liquidity traps that spread financial crises into the real economy.
Krugman is a leading advocate of expansionary monetary policy to support inflation and aggressive fiscal policy to help aggregate demand. In 2016, he expressed: "All that about recent experience proposes that the world desperately needs fiscal expansion to support demand and — that our sole dependence on central banks isn't working." For instance, on his blog in 2015, Krugman highlighted a positive correlation between government expenditure and economic growth from 2010 to 2013.
Media Influencer and Political Commentator
All through his career, quite possibly of Krugman's most critical achievement has been his ability to compose and talk about economics in clear, open language intended to contact a wide crowd. In spite of his amazing scholarly family, he succeeds at conveying complex thoughts without utilizing "conditions, obscured graphs, and economic jargon that main individuals with PhDs in economics could comprehend." in such manner, he has received high recognition for "his combination of logical brightness and etymological office" that "reviews Milton Friedman or John Maynard Keynes."
Despite the fact that Krugman has stated that he is a liberal on political issues, prior to 2000, he was portrayed in the media as "not a hardliner" and "philosophically visually challenged" in view of the way that "he savages the stock siders of the Reagan-Bush period with a similar happiness as he does the strategic traders of the Clinton administration." However, as the political climate in the U.S. became progressively sectarian after 2000, Krugman has been scrutinized for "push(ing) the limits" of impartial journalism with obtrusively insulting assaults on his conservative political enemies.
In 2020, even an individual economist and journalist who depicted him as "a stunning scholar" who has been "powerfully right" on "the big inquiries of the past 15 years" condemned him for "simply deriding enemies" and stated that, as "a remarkably gifted pundit," Krugman "ought to essentially try to join residents around common understandings."
The Bottom Line
The 2008 Nobel Prize Committee refered to Krugman's initial work that "presented a completely new theory of international trade (and economic geography}" and gave "rise to a broad reorientation of the research on these issues."
The trigger for Krugman's New Trade Theory was his understanding that there are critical factors that decide international patterns of trade in the modern period that old economic models missed: 1) that consumers lean toward brand diversity and 2) that production favors economies of scale,
All through his career, Krugman has received high commendation for his ability to compose and talk about economics in clear, open language intended to contact a wide crowd.
Krugman assumed an unmistakable part in the resurgence of Keynesian economics in the wake of the Great Recession.
Highlights
- In 1979, Krugman composed a paper that earned him the 2008 Nobel Prize in Economic Sciences for introducing a completely new theory of international trade.
- The significance of Krugman's New Trade Theory (NTT) and New Economic Geography (NEG) is that — in contrast to more seasoned speculations — they effectively anticipated patterns of international trade in the twentieth century.
- Considered one of the world's most powerful economists, Krugman is likewise a well known editorialist and the creator of blockbusters on economic and political issues for an overall crowd.
- Krugman is a U.S. economist, Nobel laureate, scholastic, creator, and media reporter, known for his work on international trade theory and economic topography.
FAQ
What Are Krugman's Politics?
At the point when gotten some information about his politics, Krugman said: "I see myself as both… liberal and progressive. It's not too not quite the same as what might be called a social liberal in Europe — you have faith in a fair estimated welfare state, you accept that we are our siblings' guardians."
What Are Krugman's Global Affiliations?
From the get-go in his tenure at Princeton, Krugman joined the Group of Thirty (G30), an independent, international collection of corporate, financial, and scholarly leaders who meet two times every year to examine global economic and financial issues and the outcomes of choices made in the public and private sectors.In expansion to the G30, Krugman is a Fellow of the Econometric Society and a Research Associate of the National Bureau of Economic Research.As perhaps of the most very much regarded economist in the world, he has filled in as a consultant to the Federal Reserve Bank of New York, the World Bank, the International Monetary Fund, and the United Nations as well with respect to several countries, including Portugal and the Philippines.
What Books Inspired Krugman?
At the point when asked which five books have roused him the most, Krugman refered to a science fiction novel, Foundation Trilogy (by Isaac Asimov), and a philosophical composition, An Enquiry Concerning Human Understanding (by David Hume) as well as three works of art in the field of Economics: The General Theory of Employment, Interest and Money (by John Maynard Keynes), Essays in Persuasion (by John Maynard Keynes), and Essays in Economics (by James Tobin).
