Who is Paul Krugman

From Wikipedia:
Paul Robin Krugman (born February 28, 1953) is an American economist, professor of Economics and International Affairs at the Woodrow Wilson School of Public and International Affairs at Princeton University, Centenary Professor at the London School of Economics, and an op-ed columnist for The New York Times. In 2008, Krugman won the Nobel Memorial Prize in Economics for his contributions to New Trade Theory and New Economic Geography. According to the Nobel Prize Committee, the prize was given for Krugman's work explaining the patterns of international trade and the geographic concentration of wealth, by examining the impact of economies of scale and of consumer preferences for diverse goods and services.

Krugman is known in academia for his work on international economics (including trade theory, economic geography, and international finance), liquidity traps and currency crises. According to the IDEAS/RePEc rankings, he is the 14th most widely cited economist in the world today.

As of 2008, Krugman has written 20 books and has published over 200 scholarly articles in professional journals and edited volumes. He has also written more than 750 columns dealing with current economic and political issues for The New York Times. Krugman's International Economics: Theory and Policy, co-authored with Maurice Obstfeld, is a standard college textbook on international economics. He also writes on political and economic topics for the general public, as well as on topics ranging from income distribution to international economics. Krugman considers himself a liberal, calling one of his books and his New York Times blog "The Conscience of a Liberal".

Personal life
Krugman is the son of David and Anita Krugman and the grandson of Jewish immigrants from Brest-Litovsk. He was born in Albany, NY and grew up in Nassau County, New York. He graduated from John F. Kennedy High School in Bellmore. He is married to Robin Wells, his second wife, a yoga instructor and academic economist who has collaborated on textbooks with Krugman.

Krugman reports that he is a distant relative of conservative journalist David Frum. He has described himself as a "Loner. Ordinarily shy. Shy with individuals."

According to Krugman, his interest in economics began with Isaac Asimov's Foundation novels, in which the social scientists of the future use "psychohistory" to attempt to save civilization. Since "psychohistory" in Asimov's sense of the word does not exist, Krugman turned to economics, which he considered the next best thing.

Academic History
Krugman earned his B.A. in economics from Yale University in 1974 and his PhD from the Massachusetts Institute of Technology (MIT) in 1977. While at MIT he was part of a small group of MIT students sent to work for the Central Bank of Portugal for three months in summer 1976, in the chaotic aftermath of the Carnation Revolution. From 1982 to 1983, he spent a year working at the Reagan White House as a staff member of the Council of Economic Advisers.

He taught at Yale University, MIT, UC Berkeley, the London School of Economics, and Stanford University before joining Princeton University in 2000 as professor of economics and international affairs. He is also currently a centenary professor at the London School of Economics, and a member of the Group of Thirty international economic body. He has been a research associate at the National Bureau of Economic Research since 1979. Most recently, Dr. Krugman was President of the Eastern Economic Association.

Paul Krugman has written extensively on international economics, including international trade, economic geography, and international finance. The Research Papers in Economics project ranked him as the 14th most influential economist in the world as of March 2011 based on his academic contributions.

Krugman's International Economics: Theory and Policy, co-authored with Maurice Obstfeld, is a standard college textbook on international economics. Krugman also writes on economic topics for the general public, sometimes on international economic topics but also on income distribution and public policy.

The Nobel Prize Committee stated that Krugman's main contribution is his analysis of the impact of economies of scale, combined with the assumption that consumers appreciate diversity, on international trade and on the location of economic activity.

The importance of spatial issues in economics has been enhanced by Krugman's ability to popularize this complicated theory with the help of easy-to-read books and state-of-the-art syntheses. "Krugman was beyond doubt the key player in 'placing geographical analysis squarely in the economic mainstream' ... and in conferring it the central role it now assumes."

In 1978, Krugman wrote The Theory of Interstellar Trade, a tongue-in-cheek essay on computing interest rates on goods in transit near the speed of light. He says he wrote it to cheer himself up when he was "an oppressed assistant professor".

New trade theoryPrior to Krugman's work, trade theory (see David Ricardo and Hecksher-Ohlin model) emphasized trade based on the comparative advantage of countries with very different characteristics, such as a country with a high agricultural productivity trading agricultural products for industrial products from a country with a high industrial productivity. However, in the 20th century, an ever larger share of trade occurred between countries with very similar characteristics, which is difficult to explain by comparative advantage.

Krugman's explanation of trade between similar countries was proposed in a 1979 paper in the Journal of International Economics, and involves two key assumptions: that consumers prefer a diverse choice of brands, and that production favors economies of scale. Consumers' preference for diversity explains the survival of different versions of cars like Volvo and BMW.

But because of economies of scale, it is not profitable to spread the production of Volvos all over the world; instead, it is concentrated in a few factories and therefore in a few countries (or maybe just one). This logic explains how each country may specialize in producing a few brands of any given type of product, instead of specializing in different types of products.

Many models of international trade now follow Krugman's lead, incorporating economies of scale in production and a preference for diversity in consumption. This way of modeling trade has come to be called New Trade Theory.

Krugman's theory also took into account transportation costs, a key feature in producing the "home market effect", which would later feature in his work on the new economic geography. The home market effect "states that, ceteris paribus, the country with the larger demand for a good shall, at equilibrium, produce a more than proportionate share of that good and be a net exporter of it." The home market effect was an unexpected result, and Krugman initially questioned it, but ultimately concluded that the mathematics of the model were correct.

When there are economies of scale in production, it is possible that countries may become 'locked in' to disadvantageous patterns of trade. Nonetheless, trade remains beneficial in general, even between similar countries, because it permits firms to save on costs by producing at a larger, more efficient scale, and because it increases the range of brands available and sharpens the competition between firms.

Krugman has usually been supportive of free trade and globalization. He has also been critical of industrial policy, which New Trade Theory suggests might offer nations rent-seeking advantages if "strategic industries" can be identified, saying it's not clear that such identification can be done accurately enough to matter.

New economic geography
It took an interval of eleven years, but ultimately Krugman's work on New Trade Theory (NTT) converged to what is usually called the "new economic geography" (NEG), which Krugman began to develop in a seminal 1991 paper in the Journal of Political Economy.

In Krugman's own words, the passage from NTT to NEG was "obvious in retrospect; but it certainly took me a while to see it. ... The only good news was that nobody else picked up that $100 bill lying on the sidewalk in the interim." This would become Krugman's most-cited academic paper: by early 2009, it had 857 citations, more than double his second-ranked paper. Krugman called the paper "the love of my life in academic work."

The "home market effect" that Krugman discovered in NTT also features in NEG, which interprets agglomeration "as the outcome of the interaction of increasing returns, trade costs and factor price differences."

If trade is largely shaped by economies of scale, as Krugman's trade theory argues, then those economic regions with most production will be more profitable and will therefore attract even more production. That is, NTT trade theory implies that instead of spreading out evenly around the world, production will tend to concentrate in a few countries, regions, or cities, which will become densely populated but will also have higher levels of income.

International finance
Krugman has also been influential in the field of international finance. As a graduate student, Krugman visited the Federal Reserve Board, where Stephen Salant and Dale Henderson were completing their discussion paper on speculative attacks in the gold market. Krugman adapted their model for the foreign exchange market, resulting in a 1979 paper on currency crises in the Journal of Money, Credit, and Banking, which showed that fixed exchange rate regimes are unlikely to end smoothly: instead, they end in a sudden speculative attack.

Krugman's paper is considered one of the main contributions to the 'first generation' of currency crisis models, and it is his second-most-cited paper (457 citations as of early 2009).

In response to the global financial crisis of 2008, Krugman proposed, in an informal "mimeo" style of publication, an "international finance multiplier", to help explain the unexpected speed with which the global crisis had occurred. He argued that when, "highly leveraged financial institutions [HLIs], which do a lot of cross-border investment [....] lose heavily in one market [...] they find themselves undercapitalized, and have to sell off assets across the board. This drives down prices, putting pressure on the balance sheets of other HLIs, and so on."

Such a rapid contagion had hitherto been considered unlikely because of "decoupling" in a globalized economy. He first announced that he was working on such a model on his blog, on October 5, 2008. Within days of its appearance, it was being discussed on some popular economics-oriented blogs. The note was soon being cited in papers (draft and published) by other economists, even though it had not itself been through ordinary peer review processes.

Macroeconomics and fiscal policy
Krugman has done much to revive discussion of the liquidity trap as a topic in economics. He recommended aggressive fiscal policy to counter Japan's lost decade in the 1990s, arguing that the country was mired in a Keynesian liquidity trap. The debate he started at that time over liquidity traps and what policies best address them continues in the economics literature.

Krugman had argued in The Return of Depression Economics that Japan was in a liquidity trap in the late 1990s, since the central bank could not drop interest rates any lower to escape economic stagnation.

The core of Krugman's policy proposal for addressing Japan's liquidity trap was inflation targeting, which, he argued "most nearly approaches the usual goal of modern stabilization policy, which is to provide adequate demand in a clean, unobtrusive way that does not distort the allocation of resources." The proposal appeared first in a web posting on his academic site. This mimeo-draft was soon cited, but was also misread by some as repeating his earlier advice that Japan's best hope was in "turning on the printing presses", as recommended by Milton Friedman, John Makin, and others.

Krugman has since drawn parallels between Japan's 'lost decade' and the late 2000s recession, arguing that expansionary fiscal policy is necessary as the major industrialized economies are mired in a liquidity trap.

In response to economists who point out that the Japanese economy recovered despite not pursuing his policy prescriptions, Krugman maintains that it was an export-led boom that pulled Japan out of its economic slump in the late-90s, rather than reforms of the financial system.

Nobel Memorial Prize
Krugman was awarded the Nobel Memorial Prize in Economic Sciences, the sole recipient for 2008. This prize includes an award of about $1.4 million and was given to Krugman for his work associated with New Trade Theory and the New Economic Geography.

In the words of the prize committee, "By having integrated economies of scale into explicit general equilibrium models, Paul Krugman has deepened our understanding of the determinants of trade and the location of economic activity.