Monday, October 13, 2008

Huh?

Paul Krugman's Nobel Prize in Economics apparently has to do with how economies of scale affect international trade patterns. Now I'll admit that I haven't read Krugman's entire body of work here, nor is it terribly likely that I'd be able to understand it in detail either without a lot of work, but seems to me that concepts such as comparative advantage and economies of scale were well discussed in the "recent" past by those such as Adam Smith and Fredric Bastiat, among others. Hence, it's not entirely clear to me exactly what his contribution is. (Shawn? you reading?)

And here's a list of laureates. Scary listing; Leonid Vitalyevich Kantorovich of the U.S.S.R. in 1975 for work on "optimal allocation of resources". One would think that a laureate honored for work in the "optimal allocation of resources" might have come from a country without long lines for bread and other essentials, but evidently not. I guess he had ample reason to know what didn't work.

(dare I suggest that some of these listings demonstrate that the Sverige Riksbank prize may sometimes mean little more than a Nobel Peace or Literature prize?)

4 comments:

pentamom said...

Dr. Nassim Nicholas Taleb, author of "The Black Swan," says that the Nobel prizes in economics are bunk, because they are based on the elegance of the models, and how well they fit the received wisdom of economics, not on a demonstrated connection to reality.

That's a book that's worth a read, BTW.

Shawn said...

Someone agrees with you about the "sending a message" part, though does have some great things to say about the Krug's earlier macro work. You can't say much that isn't explication of Smith. :) I have heard good things about Krugtastic from my math econ/macro professor, but have seen all the criticism of his NYT views as well. All I know about Krugman is that he's gone a bit hyper-lib in recent times, and if it's true that he's stated that hurricanes cause economic growth, his PhD should be rescinded, and he be forced to use his $1.4 million Nobel prize money to purchase thousands of copies of Bastiat's work and read every single one over and over.

5xmom...you're sounding like an austrian. :)

I've never read NNT, but I've listened to him on Econtalk, and it was a great conversation...except he does the apparently-currently-fashionable-in-academic-circles "right" as a filler-word (at least I think it was "right"...may have been "OK"...same gist)...it's better than "umm," or as an old boss of mine would do, "and everything else." Man, I never could understand why that man said that. Every time he'd speak, every 5th word would be "and everything else."

Bike Bubba said...

The one thing that I can say is that Krugman appears to have added "economies of scale" to the trade equation, and that would seem to go a little further than Bastiat's thesis on Belgian iron does in explaining why people buy foreign goods.

Worth a Nobel? Well, if Kantorovich's work is worth a Nobel, certainly this is. And that brings us back to Taleb, doesn't it?

That said, I do agree that if Krugman indeed claimed that hurricanes cause growth, all of his degrees should be revoked.

pentamom said...

Well, I've never delved deeply into the schools of economic thought, but based on my meager understanding, I'll take Austrian as a compliment. :-) Mostly, anyway.