How to win the Nobel prize by a whisker

Tim Harford writes in FT few fascinating analytics see some of those below: 

“The Nobel memorial prize in economics is typically awarded to researchers who have jointly advanced some important method or idea. When the 2008 prize was awarded to Paul Krugman alone, for his contributions to trade theory and economic geography, other candidates who might have shared the prize – but didn’t – must have counted themselves one small step further away from receiving the call from Stockholm.    

Among them are Jagdish Bhagwati, Krugman’s teacher and champion, and a giant in the field of international trade; and Elhanan Helpman, who wrote an influential book with Krugman on the new trade theory. 

Economies of scale push towards larger and larger companies. Logically, a monopolist should be the lower-cost provider. The tension between economies of scale and competition is obvious. 

Yet while obvious, it is hard to model mathematically in a useful way. Dixit and Stiglitz resolved the problem by observing that consumers have a taste for variety as well as a taste for low prices. In the market for cars, for instance, Volvos compete with Fords and Ferraris. It would be cheaper if there was only one model of car; it would be nicer if there was an infinite variety. Somewhere in the middle is the equilibrium where economies of scale are balanced by customers’ desire for variety. 

The elegant mathematics of the Dixit-Stiglitz model was new, even if the tension it described was as old as Smith’s Wealth of Nations. Krugman described it is as “beautiful”. It quickly became a workhorse, pulling economists to new frontiers of trade theory, growth theory and economic geography. Dixit later said he and Stiglitz had not realised the model would have so many uses – “obviously, otherwise we would have written all those subsequent papers ourselves!” 

That is typically generous of a man who has often praised others, especially Krugman. He once told young economists that a good place to have ideas was in front of the shaving mirror. Krugman has a beard. Imagine, quipped Dixit, how much he could have achieved if he shaved!” 

Demise of liberals in India....

I have been reading about the so called Indian liberals writings (both as individuals and organizations). What was quite interesting was that many of them were moved beyond the belief of the ‘liberal idea’ particularly with the victory of US elect President Obama election.

But it is not surprise but happy to note what Sauvik Chakraverti writes in the Indefenceofliberty that the “….. this year's Nobel prize in Economics, awarded to Paul Krugman, whom I consider to be a dangerous Keynesian. And there are others like me. If we did not have the freedom to criticize this award, if the Nobel prize was awarded by a "ministry of truth," all dissenting voices would be stifled”. 

Gandhi-Nehru Clark Medal @2075!

Bibek Debroy says that “There won’t be any such dispute over Krugman: the question was timing. (Since Krugman has worked on trade theory, this probably diminishes Jagdish Bhagwati’s chances further.)”

The possibility of such “diminishes” is (will be) less than what Debroy think.

Why mind you?

On Krugman’s Nobel Prize Sumen Bery writes in Business Standard “one cannot help but feel that politics has entered the Nobel selection process a little more than is healthy”.

Yes in his same article, there is a different issue “that it is not the job of monetary policy to nip asset bubbles in the bud. In their view it is impossible to spot a bubble in advance; the role of monetary policy is instead to protect the real economy once the bubble bursts”.

Mad dance on Krugman’s Nobel Prize

Is it their time to dance on Nobel fraud? Of course may be in political and ideological mode but not intellectual mode. I have nothing to do with Krugman Nobel Prize winnings but feel strongly how governments support feed people in the world?

Read more here

Let’s see few people’s comments on his prize.

The Economic Times editorial says that “A glance at the Nobel prize winners in economics since 1980 shows that with the exception of Joseph Stiglitz and, of course, Amartya Sen, there is hardly any name that is likely to ring a bell even with a relatively informed audience in India. 

Part of the reason, of course, is that the awards are given for esoteric work that few understand. But the major reason is that none of the awardees were able to connect with the average public; and on concerns they relate to, a prime example being the on-going financial crisis”. But “it is doubtful his name would have rung a bell beyond the narrow circle of economists”.

Second Mr Niranjan Rajadhyaksha says in Mint that “It is tempting to see the clear failure of global financial markets to do their main job—efficiently transferring money from risk-averse savers to risk-taking entrepreneurs—as a failure of the market economy. It could just be a hop, skip and jump from here to a more general rolling back of economic reforms”. It is uttered vague that as an honest observer of any particular economy or sector should say who is responsible.

He also conclude that “Krugman made a case for rethinking the way the world economy is run, much like his intellectual hero John Maynard Keynes did in 1930”. Not so, read here an excellent narrative.

Saubhik Chakrabarti says that “Parenthetically, let’s hope that the Nobel to Krugman for his trade theory, which is recognised by his peers as absolutely first class, doesn’t rule out for ever, given the prize committee’s alleged quota system, recognition for the other great trade theorist of our time, Jagdish Bhagwati. There’s something different about Krugman, though, different from Sen, Stiglitz, Friedman, Bhagwati. And it’s a disturbing difference”.

Not surprisingly he says you “Read Krugman and you get the sense that he will sacrifice almost anything, logic included”.

Business Standard editorial says “f writing newspaper columns merited Nobel prizes, Indians would have many more of them”.

The financial express column Dhiraj Nayyar says “Not surprisingly this group has cornered a comfortable majority of Nobel Prizes over the last three decades” and “Paul Krugman won the 2008 Nobel Prize primarily for his work on new trade theory. The new theory modified the old trade theories by relaxing the assumption of constant returns to scale in production (in a perfect market) and incorporating the idea of the existence of increasing returns to scale (in an imperfectly competitive market). New trade theory backed by the rigour of mathematical modeling laid a new foundation for the possibility of government intervention in trade—if economies of scale exist it would be impossible for a newcomer to challenge an existing firm without subsidy or government protection”.

But there is anomaly in sayings new comers will be impossible to enter suppose the new comer has advanced technology to cope up?

Trade matters

There are economists who praise but by questioning the fundamental fallacies with one’s analysis. But here is two economists too born in India do nothing in questioning the Paul Krugman’s trade analysis.

Arvind Panagariya says that “Countries gain from trade not only because larger market allows them to better exploit scale economies, but also because consumers can access a larger variety of products. And even identical economies can gain from trade through scale economies and a larger variety of products”.

Arvind Subramanian writes that “the Nobel prize may well secure a lasting legacy” but fails to understand that the road to Krugman Nobel is socialism!

See here other post

Liberal’s around the world

Now Paul Krugman wins Nobel Prize in Economics but did he qualify for that? Or did he consider as liberal as the several other news paper writes? Or any one considers he is an economist?

Here is one William L. Anderson writes that:

“So, Krugman continues to peddle his snake oil, but today he gets to do it as the Nobel Laureate instead of just another partisan hack. Nonetheless, having a Nobel will enhance his stature as a guy who supposedly knows something. However, just as the peace prize does not make Al Gore a man of peace, neither does the Nobel Prize in Economics make Paul Krugman an economist. As I wrote five years ago:
… since my own writings have been extremely critical of the Bush Administration and both political parties, it does not bother me to read Krugman's anti-Republican rants. What does bother me is that the man pretends to be something he clearly is not: an economist.
That is correct. Let me say it again. Paul Krugman is not an economist. His colleagues in the economics profession and the editorial board of the Times may call him an economist, but that does not make him one.

This is harsh criticism, I realize, so I must explain my views in full. Yes, Krugman has a Ph.D. from MIT in economics, but his writings, both popular and academic, demonstrate that he does not believe in laws of economics. Instead, like most folks with socialist leanings, he believes that the state is both omniscient and omnipotent and simply by fiat can eliminate those pesky little problems caused by scarcity”.

The dogma of socialism still persists not only in India or other developing countries but also in US.

Paul Krugman wins the Nobel Prize!

Paul Krugman wins the 2008 Nobel Prize in Economics "for his analysis of trade patterns and location of economic activity"
First I got to know from Freakonomics See more here

"Paul Krugman, a professor of economics and international affairs at Princeton since 2000, has won the 2008 Nobel Prize in economics.Krugman, the only winner this year, was recognized "for his analysis of trade patterns and location of economic activity."In addition to teaching and conducting research at Princeton, Krugman writes a column for The New York Times."It's deeply gratifying," said Krugman early this morning. "There is so much shock involved that I can't really sort out. I think it will take a few days before I can assess it."Princeton President Shirley M. Tilghman said, "Paul Krugman has had a significant impact on both economics and public policy, and we are delighted by this recognition of his work." Anne-Marie Slaughter, dean of the Woodrow WIlson School of Public and International Affairs, added, "Paul Krugman has been at the cutting edge of research on the most important phenomenon of our time: policymaking in the face of rapid and seemingly inexorable globalization. At the same time, he is one of our most visible faculty members in the public sphere, actively engaging critical public policy debates. We congratulate him heartily, honoring him as the school's second Nobel laureate in economics in only six years."Daniel Kahneman, a professor of psychology and public affairs, was awarded the Nobel Prize in economics in 2002.More information, including the time and location of a press conference and reception for Krugman, will be posted as it becomes available".

There is also a range of comments to winning prize

Princeton University's Paul Krugman Wins Nobel Economics Prize
By Simon Kennedy and Rich Miller

Oct. 13 (Bloomberg) -- Princeton University Professor Paul Krugman, known as much for his criticism of George W. Bush's policies as for his academic work, won the Nobel Prize in economics for his theories on world trade.
Krugman, 55, was honored ``for his analysis of trade patterns and location of economic activity,'' said the Royal Swedish Academy of Sciences, which selects the winners. His work showed how economies of scale influence trade and urbanization.
While Krugman found broader fame with his newspaper columns attacking Bush, he gained his reputation in economics by arguing countries could gain a competitive advantage through subsidies to key industries. His research helped explain how the development of large-scale production for the world market has attracted more people to cities and led to higher wages.
``This award is clearly for Paul Krugman the economist, not for Paul Krugman the journalist or political critic,'' said Robert Solow, a 1987 Nobel laureate who once taught Krugman. ``What's remarkable about Paul is he manages to do everything. He's a contributor to fundamental economic theory and a top- ranked journalist.''
In a brief telephone interview after the award was announced, Krugman said ``it's a total surprise.''
The Princeton economist's academic work analyzed how world trade came to be dominated by countries that both import and export similar products -- automobiles, for example.
``This kind of trade enables specialization and large-scale production, which result in lower prices and a greater diversity of commodities,'' the Royal Academy said in a statement today.
Globalization
Solow said globalization shows the value of Krugman's work.
``As multinational corporations become more prominent, it's important to have a way of thinking about trade that gives them adequate attention,'' he said. ``As industry and modern economic activity spreads around the world, the question of what goes where and whether the world can get locked into production that is not the most efficient is going to become extremely important.''
A self-proclaimed liberal, Krugman has regularly taken Bush to task in his columns for the New York Times, slamming the president personally for everything from the war in Iraq to his big tax cuts.
``Mr. Bush has degraded our government and undermined the rule of law,'' Krugman wrote in a column on May 18, 2007. ``He has led us into strategic disaster and moral squalor.''
Depression Parallels
In an interview with Bloomberg Television on Oct. 10, Krugman said the current financial turmoil had similarities with the Great Depression. ``The parallels are stronger than I thought they would be,'' he said. ``We developed a financial system that is out of control. The only things people want to buy are Treasury bills and water.''
Krugman was warning in 2005 about the dangers posed to the U.S. economy by its then-ballooning house prices and trade deficit.
``These days Americans make a living by selling each other houses, paid for with money borrowed from China,'' he wrote in a column on Aug. 29, 2005. ``One way or other, the economy will eventually eliminate both imbalances.''
Krugman's public commentary on the economy and politics has earned him criticism from conservatives such as Donald Luskin, chief investment officer for Trend Macrolytics, an investment consulting firm in Menlo Park, California.
`Public Intellectual'
``Paul Krugman the economist died a long time ago; the man named Paul Krugman is a public intellectual,'' Luskin, a contributing editor for National Review Online, said in an interview. ``He is not in the same category as John Maynard Keynes, he is in the same category as Oprah Winfrey. To give it to him is to dishonor the Nobel Prize.''
Krugman ``made quite a few enemies, especially when his columns in the New York Times started to go beyond economic issues and into political territory,'' said Dani Rodrik, a Harvard University economist, who welcomed Krugman's selection. ``His disdain for Bush and the Republicans did not exactly endear him to the substantial minority of professional economists who are Republican.''
Columbia University economist Edmund Phelps, a 2006 Nobel laureate, said he has ``no reason to think'' that anything other than Krugman's academic work influenced his choice by the Royal Academy's Economics Prize Committee.
``I doubt the committee is an avid reader of the New York Times,'' he said.
Departure
Phelps said Krugman's award marked a break after three years in which the prize rewarded work focused on uncertainty in economics rather than more classical studies of forces such as trade.
``Trade theory had not had much in the way of a creative advance for a century so the scarcity value of Paul's work was very high,'' Phelps said.
Krugman said today he saw little danger of a move toward protectionism in the U.S., no matter which party wins in next month's elections.
``There may be a standstill, or slowdown at least, on new trade agreements, but I find reversal on trade agreements implausible,'' he said in remarks via telephone to a group of reporters in Stockholm. ``Full-scale protectionism I don't see.''
In 1991, Krugman was awarded the John Bates Clark Medal by the American Economic Association, which gives the prize to the best economist under the age of 40.
Doctorate From MIT
Krugman was born in Long Island and studied economics at Yale University. He obtained a Ph.D. from the Massachusetts Institute of Technology in 1977 before joining Princeton University. From 1982 to 1983 he served on the White House Council of Economic Advisers, during the presidency of Ronald Reagan.
Alfred Nobel, the Swede who invented dynamite, in his will in 1896 established awards for achievements in physics, chemistry, medicine, peace and literature. The economics prize was set up by Sweden's central bank in 1968. The prize consists of 10 million Swedish kronor ($1.41 million), a gold medal and a diploma.
To contact the reporters on this story: Simon Kennedy in Washington at skennedy4@bloomberg.netRich Miller in Washington at rmiller28@bloomberg.net;

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