Paul Krugman facts for kids
Quick facts for kids
Paul Krugman
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Krugman in 2023
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Paul Robin Krugman
February 28, 1953 Albany, New York, U.S.
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New Keynesian economics |
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Rudi Dornbusch |
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Paul Robin Krugman (born February 28, 1953) is a famous American economist. He is a professor of economics at the City University of New York. From 2000 to 2024, he also wrote a regular column for The New York Times newspaper.
In 2008, Krugman won the Nobel Memorial Prize in Economic Sciences. He received this award for his important ideas about how countries trade with each other and why economic activities are located in certain places. His work helps us understand how things like economies of scale (making things cheaper when you produce a lot) and people's desire for different products affect trade and where businesses set up shop.
Krugman has taught at many top universities, including MIT and Princeton University. He has written many books and over 200 scholarly articles. He is known for his work on international economics, which includes how countries trade and manage their money. He also studies economic geography, which looks at where economic activities happen.
Contents
Early Life and Education
Paul Krugman was born in Albany, New York. His family came from Ukraine and Belarus. He spent his childhood in different parts of New York. He graduated from John F. Kennedy High School.
Krugman says he became interested in economics after reading Isaac Asimov's The Foundation Series novels. These books describe a future where social scientists use a special science called "psychohistory" to predict and save civilization. Since "psychohistory" wasn't real, Krugman decided to study economics as the next best thing.
In 1974, he earned his bachelor's degree in economics from Yale University. He then went on to get his PhD in economics from Massachusetts Institute of Technology (MIT) in just three years, finishing in 1977. His PhD paper was about how exchange rates can change flexibly.
Krugman admired his PhD advisor, Rudi Dornbusch, calling him "one of the great economics teachers." Dornbusch encouraged Krugman's ideas, especially about how trade works when companies have a lot of control over their products. Krugman realized this idea was key to his future career.
Academic Career and Contributions
Krugman started as a professor at Yale University in 1977. He then joined MIT in 1979. For a year, from 1982 to 1983, he worked at the Reagan White House as part of the Council of Economic Advisers. He returned to MIT as a full professor in 1984. He has also taught at Stanford and the London School of Economics.
In 2000, Krugman became a professor at Princeton University, where he taught until 2015. He is now a professor at the Graduate Center of the City University of New York. He is considered one of the most influential economists in the world.
Krugman has written many books on international economics, including international trade, economic geography, and international finance. His textbook, International Economics: Theory and Policy, is widely used by college students. He also writes books for the general public, explaining economic topics like income distribution and public policy.
The Nobel Prize Committee recognized Krugman for his work on how economies of scale (producing more means lower costs per item) and people wanting different kinds of products affect international trade and where businesses are located. He made these complex ideas easier to understand through his books and writings.
New Trade Theory: Why Countries Trade Similar Goods
Before Krugman's work, economists thought countries traded based on their unique strengths. For example, a country good at farming would trade food for industrial goods from a country good at manufacturing. But in the 20th century, countries that were quite similar started trading a lot with each other. This was hard to explain.
Krugman's idea, proposed in 1979, explained this. He suggested two main things:
- People like having many different brands to choose from (like different car brands such as Volvo and BMW).
- Producing goods often benefits from economies of scale. This means it's cheaper to make a lot of something in one place than a little bit in many places. So, a car company might have just a few big factories, often in one or two countries.
Because of these two ideas, countries that are similar can still benefit from trading. They can specialize in making certain types of products efficiently, and then trade them for other specialized products. This gives consumers more choices and lowers costs. This way of thinking about trade is called New Trade Theory.
Krugman's theory also looked at how much it costs to transport goods. This led to the "home market effect." This idea says that a country with a big demand for a certain product will likely produce more of that product and export it.
New Economic Geography: Where Businesses Locate
Krugman's ideas about trade also led to what's called "new economic geography" (NEG). This field looks at why economic activities tend to gather in certain places, like cities or specific regions, instead of spreading out evenly.
NEG suggests that if making things in large quantities (economies of scale) is important, then places that already produce a lot will become even more profitable. This attracts more production and more people. So, cities or regions can become very busy and wealthy, even if they are densely populated. This happens because businesses save on costs by being close to each other and to their customers.
International Finance: Understanding Money Crises
Krugman has also made important contributions to international finance, which is about how money moves between countries. He studied currency crises, where a country's money suddenly loses a lot of value.
In 1979, he wrote a paper explaining that countries with fixed exchange rates (where their money is tied to another currency) can face sudden "speculative attacks." This happens when investors expect the fixed rate to fail, so they quickly sell off that country's currency, causing a crisis. This paper is one of the most cited in the field.
During the 2007–2008 financial crisis, Krugman suggested an "international finance multiplier." He explained that when big financial companies that invest across borders lose money in one market, they have to sell off assets everywhere. This drives down prices and hurts other companies, causing a fast spread of the crisis around the world.
Macroeconomics and Government Spending
Krugman has helped bring back discussions about the "liquidity trap" in economics. A liquidity trap happens when interest rates are already very low, and the central bank can't lower them further to boost the economy. In this situation, people and businesses prefer to hold onto cash rather than invest or spend.
He argued that Japan was in a liquidity trap in the 1990s. He suggested that governments should spend more money (called fiscal policy) and central banks should use unusual methods to get the economy moving again. He believes that during a downturn, government spending is necessary to create jobs and demand.
Krugman has compared Japan's "lost decade" to the late 2000s recession in many industrialized countries. He argues that governments need to spend more to help economies recover when they are stuck in a liquidity trap. He is a strong supporter of using government spending to fight unemployment and encourage growth.
Nobel Memorial Prize in Economic Sciences
In 2008, Paul Krugman was the only person to receive the Nobel Memorial Prize in Economic Sciences. He won this award for his work on New Trade Theory and New Economic Geography. The prize committee said his work helped us better understand why countries trade the way they do and why economic activities are located where they are.
Major Awards and Recognition
Krugman has received many important awards for his work:
- 1991: John Bates Clark Medal from the American Economic Association. This award is given to a top American economist under 40.
- 2004: Princess of Asturias Awards in Social Sciences from Spain.
- 2008: Nobel Memorial Prize in Economic Sciences.
- He is also a Fellow of the American Academy of Arts and Sciences.
In 2011, a study found that Krugman was one of the most accurate commentators in predicting economic events. He was correct in 15 out of 17 predictions.
Author and Commentator
Besides his academic books, Krugman has written many books for the general public. These books often discuss important public policy issues. For example, in The Age of Diminished Expectations (1990), he wrote about the increasing gap between rich and poor in the United States.
In 2003, he published The Great Unraveling, a collection of his newspaper columns. In this book, he discussed government economic policies and argued that large budget deficits were not sustainable.
His 2007 book, The Conscience of a Liberal, looks at the history of wealth and income differences in the U.S. He argues that government policies played a big role in both reducing and increasing inequality over time.
In The Return of Depression Economics and the Crisis of 2008, Krugman discussed the causes of the 2008 financial crisis. He explained how the financial system became out of control and what could be done to fix it. His 2012 book, End This Depression Now!, argues that cutting government spending during an economic downturn can make things worse. He believes that stimulating the economy is crucial to recovery.
Public Commentary
Krugman is known for his strong opinions and clear writing style. He has been described as both "most hated and most admired" for his columns. He has a talent for explaining complex economic ideas to a wide audience.
From the mid-1990s, he wrote for magazines like Fortune and Slate. In 1999, he started writing his bi-weekly column for The New York Times. His columns often focused on economic and political issues. He used his platform to discuss government policies and their impact on the economy.
Krugman's columns have received both praise and criticism. Some people appreciate his clear analysis and willingness to speak out. Others have criticized him for being too partisan or for how he uses economic data. He retired from his New York Times column in December 2024 and now publishes a daily newsletter.
Economic Views
Keynesian Economics
Krugman identifies as a Keynesian economist. This means he believes that government spending and policies can help stabilize the economy, especially during downturns. He has argued that simpler economic models from the 1930s are often more useful for understanding real-world problems than some complex modern theories.
He has worked on models that explain how debt and financial problems can lead to economic slumps. These models suggest that during a debt-driven slump, people and businesses might save more and spend less, which can make the economic problem worse.
Free Trade and Globalization
Krugman has generally supported free trade, which is the idea that countries should trade goods and services without many barriers like tariffs. He believes that free trade helps countries specialize and produce goods more efficiently, leading to lower costs and more choices for consumers.
However, he has also pointed out that while globalization (the increasing connection of economies worldwide) has many benefits, it can also affect jobs and income inequality in some countries. He has suggested that the impact of globalization on jobs in developed countries was underestimated in the past.
In 2009, during the Great Recession, he considered the idea of a tariff (a tax on imports) on Chinese goods. He argued this could be a response to China's policy of keeping its currency value low, which he believed made their exports unfairly cheap.
Immigration
In 2006, Krugman wrote that immigration could lower wages for workers who compete with immigrants, especially low-skilled workers. He also mentioned that low-wage immigrants could create a financial burden.
However, in 2024, he updated his view. He reported that many labor economists now believe that immigrants often bring different skills and take different jobs, so they don't directly compete much with native-born workers. He noted that recent years with more immigration have also seen good wage growth for lower-paid workers.
Green Economy
Krugman supports a shift towards a green economy, which focuses on environmentally friendly practices. He has supported the Green New Deal, a plan for large-scale investments in renewable energy and green infrastructure. He believes that such investments are crucial and that concerns about government debt for these projects are often overstated. He also thinks that putting a price on greenhouse gas emissions will be necessary to address climate change.
Political Views
Krugman describes himself as a liberal, which he says is similar to what "social democratic" means in Europe. He is known for being outspoken and has been described as both a critic of some government policies and a supporter of others.
He has sometimes supported free markets in areas where they are often debated. For example, he has written against rent control and certain land-use rules, arguing that markets work best. He has also argued that sweatshops, while not ideal, might be better than no jobs at all in some situations.
Krugman has been a strong critic of Donald Trump and his administration's policies, especially on climate change, economics, and foreign policy. He often used his newspaper column to express his views against these policies.
Foreign Policy
Krugman has commented on international affairs. He opposed the 2003 invasion of Iraq. He argued that people should always be skeptical and not just rely on authority when it comes to major policy decisions like war.
He has also described Russia as a "Potemkin superpower," suggesting that its military and economic strength are not as great as they appear. He noted that Russia's economy is much smaller than many other major countries, despite its size and resources.
Views on Technology
In 1998, during the "dot-com bubble" (when many internet companies were highly valued), Krugman was skeptical about overly optimistic predictions for technology's impact. He jokingly predicted that the internet's effect on the economy by 2005 would be no greater than that of the fax machine. He later said these predictions were meant to be fun, not serious forecasts.
Krugman is a critic of Bitcoin, arguing that it is not economically sound. He has said that Bitcoin is a "bubble" (meaning its price is too high and likely to crash) and that it hasn't proven useful for everyday economic transactions.
In 2022, he predicted that generative AI (like ChatGPT) could replace many "knowledge jobs." While he believes AI will be beneficial in the long run, he also warned that some people might face unemployment or lower earnings in the short term.
Personal Life
Paul Krugman has been married twice. His current wife is Robin Wells, who is also an economist. They have co-authored several economics textbooks together. Krugman has stated that he and his wife do not have any children.
He lives in New York City. After retiring from Princeton University in 2015, he joined the Graduate Center of the City University of New York. He wanted to live in New York City and focus more on public policy issues.
Krugman has described himself as a "loner" and "ordinarily shy" when meeting individuals.
Published Works
Krugman has written many books, both for academic audiences and for the general public.
Selected Books for a General Audience
- Arguing with Zombies: Economics, Politics, and the Fight for a Better Future (2020)
- End This Depression Now! (2012) - A call for more government spending to end economic downturns.
- The Conscience of a Liberal (2007) - Discusses income inequality in the U.S.
- The Great Unraveling: Losing Our Way in the New Century (2003) - A collection of his newspaper columns.
- The Return of Depression Economics and the Crisis of 2008 (2008) - An updated look at economic crises.
- Peddling Prosperity: Economic Sense and Nonsense in an Age of Diminished Expectations (1995) - A history of economic ideas for everyone.
- The Age of Diminished Expectations: U.S. Economic Policy in the 1990s (1990) - A guide to economic policy issues.
Images for kids
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Krugman in 2023
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Paul Krugman, Roger Tsien, Martin Chalfie, Osamu Shimomura, Makoto Kobayashi and Toshihide Masukawa, Nobel Prize Laureates 2008, at a press conference at the Swedish Academy of Science in Stockholm
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Krugman giving a lecture at the German National Library in Frankfurt in 2008
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Graph illustrating Krugman's 'core-periphery' model. The horizontal axis represents costs of trade, while the vertical axis represents the share of either region in manufacturing. Solid lines denote stable equilibria, dashed lines denote unstable equilibria.
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President George W. Bush poses for a photo with Nobel Prize winners Monday, Nov. 24, 2008, in the Oval Office. Joining President Bush from left are, Dr. Paul Krugman, Economics Prize Laureate; Dr. Martin Chalfie, Chemistry Prize Laureate; and Dr. Roger Tsien, Chemistry Prize Laureate.
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Krugman at the 2010 Brooklyn Book Festival
See also
In Spanish: Paul Krugman para niños
- Capitol Hill Baby-Sitting Co-op, popularized in Krugman's book, Peddling Prosperity
- List of economists
- List of Jewish Nobel laureates
- List of newspaper columnists
- New Yorkers in journalism
