Bush critic Krugman wins economics Nobel

That said, he hasn’t found much to praise about the Bush administration’s actions during the crisis. In a Times column Monday, Krugman commended British Prime Minister Gordon Brown and Chancellor Alistair Darling, saying they “went straight to the heart of the problem ... with stunning speed” by demanding ownership stakes in banks in exchange for financial aid, while U.S. Treasury Secretary Henry Paulson at first rejected that model

“And whaddya know,” Krugman continued, “Mr. Paulson — after arguably wasting several precious weeks — has also reversed course, and now plans to buy equity stakes rather than bad mortgage securities.”

The Bush administration would not comment Monday on whether Krugman would be invited to the White House, as is custom with American Nobel laureates.

Krugman said he hoped to continue focusing on his research and writing.

“The prize will enhance visibility,” he said, “but I hope it does not lead me into going to a lot of purely celebratory events, aside from the Nobel presentation itself.

“I’m a great believer in continuing to do work,” he said. “I hope that two weeks from now I’m back to being pretty much the same person I was before.”

In awarding Krugman the Nobel, the Swedish academy said his theory helped answer pressing questions and inspired an enormous field of research.

Krugman’s work looked at on how economies of scale — the idea that as the volume of production increases, the cost of making each unit falls — worked alongside population levels and transportation costs to affect global trade. Krugman’s theory was that because consumers want a diversity of products, and because economies of scale make production cheaper, multiple countries can build similar products, such as cars. Sweden builds its own car brands for export and to sell at home, for example, while also importing cars from other countries.

“Trade theory, like much of economics, used to be discussed in the context of perfect competition: thousands of farmers and thousands of customers meeting in a market,” with supply and demand governing prices, said Avinash Dixit, a Princeton economist who specializes in trade theory.

The theory changed as economists realized conditions in the market were imperfect, and that only a small number of companies in certain industries, such as autos, had economies of scale.

“Krugman was the main person who brought all the theory together, recognized its importance to the real world, produced a large expansion of international trade theory to make it more applicable to the modern world,” Dixit said.

Krugman graduated with a bachelor’s degree from Yale in 1974 and received a Ph.D. from MIT in 1977. Besides teaching at Yale and MIT, he also taught at Stanford. He is a native of Bellmore, N.Y., graduating from John F. Kennedy High School.

The last time an economist who was this well-known outside academia won the Nobel was 1976, when Milton Friedman, a University of Chicago professor who starred in a PBS series called “Free to Choose,” took the prize.

The award is the last of the six Nobel prizes announced this year and is not one of the original Nobels. It was created in 1968 by the Swedish central bank in Alfred Nobel’s memory.

The Nobels in medicine, chemistry, physics, literature and economics will be handed out in Stockholm by Sweden’s King Carl XVI on Dec. 10, the anniversary of Nobel’s death in 1896. The Nobel Peace Prize is handed out in Oslo, Norway, on the same date.

At Monday’s news conference, Krugman was asked about China’s economic future. He said he did not have an answer. “I’ve spent the last few years trying to save my own damn republic,” Krugman said.

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