David R. Henderson  

Bio of Paul Krugman

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In 2008, U.S. economist Paul Krugman won the Nobel Prize in Economic Sciences. Krugman, one of the best-known economists in the world, is familiar to the public mainly through his regular column in the New York Times and for his New York Times blog titled "The Conscience of a Liberal." Besides being an original theorist in international trade, economic geography, and macroeconomics, Krugman has been one of his generation's best expositors of good economics. His excellent book Pop Internationalism and his popular articles of the 1990s, many of them in the web publication Slate, make a strong case for free trade.
This is from my bio of Paul Krugman in the on-line Concise Encyclopedia of Economics. Read the whole thing.

One of my projects since publication of the print version in 2007/2008 has been to catch up on bios of Nobel Prize winning economists. There will be more to come.

Because space on the web is not a constraint the same way space in a print version is, the bios that are just on the web, like Krugman's, are often longer than the bios in the print version.

Here's one of my favorite paragraphs:

One of Krugman's most powerful articles is "Ricardo's Difficult Idea." In that piece, Krugman shared his frustration, one that many economists have felt, that the vast majority of non-economist intellectuals do not understand the insight that david ricardo had about free trade almost 200 years ago. Ricardo's insight was that people specialize in producing the goods and services in which they have a comparative advantage. The result is that we never need to worry about low-wage countries competing us out of jobs because the most they can do is change the items in which we have a comparative advantage. Krugman pointed out that, although we can explain Ricardo's insight to our economics students, most non-economist intellectuals are unwilling to take even ten minutes to understand it. But that does not stop them from writing about trade as if they're informed. Krugman singled out Robert Reich's 1983 article, "Beyond Free Trade." The article, wrote Krugman, "received wide attention, even though it was fairly unclear exactly how Reich proposed to go beyond free trade."

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CATEGORIES: International Trade

COMMENTS (6 to date)
Sam writes:

It's amusing to compare what you wrote to what Bob Murphy and Tom Woods would have written.

Tim Worstall writes:

That is a truly great essay. I wonder whether Larry Mishel has ever bothered to read it?

""Many advocates of free trade claim that higher productivity growth in the United States will offset pressure on wages caused by the global sweatshop economy, but the appealing theory falls victim to an unpleasant fact. Productivity has been going up, without resulting wage gains for American workers. Between 1977 and 1992, the average productivity of American workers increased by more than 30 percent, while the average real wage fell by 13 percent. The logic is inescapable. No matter how much productivity increases, wages will fall if there is an abundance of workers competing for a scarcity of jobs -- an abundance of the sort created by the globalization of the labor pool for US-based corporations." (Lind 1994: )

What is so remarkable about this passage? It is certainly a very abrupt, confident rejection of the case for free trade; it is also noticeable that the passage could almost have come out of a campaign speech by Patrick Buchanan. But the really striking thing, if you are an economist with any familiarity with this area, is that when Lind writes about how the beautiful theory of free trade is refuted by an unpleasant fact, the fact he cites is completely untrue.

More specifically: the 30 percent productivity increase he cites was achieved only in the manufacturing sector; in the business sector as a whole the increase was only 13 percent. The 13 percent decline in real wages was true only for production workers, and ignores the increase in their benefits: total compensation of the average worker actually rose 2 percent. And even that remaining gap turns out to be a statistical quirk: it is entirely due to a difference in the price indexes used to deflate business output and consumption (probably reflecting overstatement of both productivity growth and consumer price inflation). When the same price index is used, the increases in productivity and compensation have been almost exactly equal. But then how could it be otherwise? Any difference in the rates of growth of productivity and compensation would necessarily show up as a fall in labor's share of national income -- and as everyone who is even slightly familiar with the numbers knows, the share of compensation in U.S. national income has been quite stable in recent decades, and actually rose slightly over the period Lind describes."

Entirely puts paid to that story the EPI has been peddling for years. That wages haven't risen with productivity. And yes, Mishel and the EPI do use different inflation deflators.

Khodge writes:

Bob readily acknowledges Krugman's Nobel (and John Bates award) credentials and pre-NYT economics writing; it is implied in Bob's use of "contradictions" where Krugman clearly has excellent skills yet has chosen to be a political advocate rather than an economist.

Floxo writes:

Is it the same Paul Krugman that recently wrote this?

"So the elite case for ever freer trade is largely a scam, which voters probably sense even if they don't know exactly what form it's taking."
(9 March 2016)

Krugman and other trade theorists having recently been backing away from their former pro free trade dogma, even to the point of pretending they never really held those views. With the advent of numerical modelling, they have, belatedly, begun to realize that free trade can result in very poor distributional outcomes for a very small gain. Typically, wage earners in a high wage economy are big losers, while the owners of capital are big winners in scenarios where trade is largely driven by differences in factor prices.

The problem with "comparative advantage" is that it sounds like it's a matter of comparing one nation with another instead of comparing one specialty with another.

That means that people think they know what it means but are mistaken.

TMC writes:

"Krugman and other trade theorists having recently been backing away from their former pro free trade dogma" Not sure about other trade theorists, but Krugman has backed off a lot of what he used to believe back when he was an economist. Many critiques of Krugman articles use 'Krugman the economist' arguments against him.

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