Nobel prize in economics awarded to trade theorist at Princeton

PRINCETON, N.J. — Paul Krugman won the Nobel prize in economics Monday for his work on international trade patterns.

The Princeton University professor and New York Times columnist is the best-known American economist to win the prize in decades.

The Nobel committee commended Krugman’s work on global trade, beginning with a paper in 1979 that knit together two fields of study, helping to foster understanding of why countries produce similar products and why people move from small towns to cities.

Krugman is best known for his unabashedly liberal column in the Times, which he has written since 1999.

Tore Ellingsen, a member of the prize committee, acknowledged that Krugman was an “opinion maker” but said he was honored solely for his research.

“We disregard everything except for the scientific merits,” Ellingsen said.

Krugman, 55, was the lone winner of the $1.4 million award, which is typically shared by two or three researchers.

He said he hoped to continue focusing on his research and writing.

“I’m a great believer in continuing to do work,” he said. “I hope that two weeks from now I’m back to being pretty much the same person I was before.”

In awarding Krugman the Nobel, the Swedish academy said his theory helped answer pressing questions and inspired an enormous field of research.

Krugman’s work looked at on how economies of scale — the idea that as the volume of production increases, the cost of making each unit falls — worked alongside population levels and transportation costs to affect global trade. Krugman’s theory was that because consumers want a diversity of products, and because economies of scale make production cheaper, multiple countries can build similar products, such as cars.

“Trade theory, like much of economics, used to be discussed in the context of perfect competition: thousands of farmers and thousands of customers meeting in a market,” with supply and demand governing prices, said Avinash Dixit, a Princeton economist who specializes in trade theory.

The theory changed as economists realized conditions in the market were imperfect, and that only a small number of companies in certain industries, such as autos, had economies of scale.

“Krugman was the main person who brought all the theory together, recognized its importance to the real world, produced a large expansion of international trade theory to make it more applicable to the modern world,” Dixit said.