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Nobel prize winner. And Krugman won it his way: He never retreated into the academy, never jealously insulated his expertise and insight from controversy because that would be safest for his reputation. Lots of folks seem to think that engagement with the public sphere puts a ceiling on academic achievement, and some had even said to me that Krugman had made himself too controversial to ever win a Nobel prize. They were wrong, and I hope more economists and assorted academics now follow Krugman's model of deploying their expertise for the benefit of an interested public.That said, Krugman won for his work on international trade theory, not his columns or his irreplaceable blog posts throughout the course of the financial crisis. The best explanation of Krugman's academic work that I've seen is that IMF profile from 2006, which has a nice section on his breakthrough:
The idea of increasing returns has been around in economics at least since Adam Smith, as has the inference that competition and international trade are affected by it: in particular, increasing returns are incompatible with the assumption of perfect competition that forms a basis of traditional trade theory. Krugman was one of the first economists to incorporate increasing returns and imperfect competition explicitly in trade models...Krugman's increasing returns papers were powerful partly because they explained a simple but uncomfortable fact about international trade: in the postwar period, a large and increasing share of trade occurred not between rich and poor countries but among the rich, and involved countries importing and exporting similar goods like cars, machines, and cereals, the so-called phenomenon of two-way trade. Such trade between countries with similar endowments is difficult to reconcile with traditional trade theory. But increasing returns showed that countries could specialize in different varieties of goods, leading countries to simultaneously export and import different varieties of similar goods.There's a lot more, so read the whole thing. And when you're done, stop by Krugman's blog -- yes, the Nobel prize winner's blog -- and drop him a note of congratulations.
