Economists are getting a bad rap for greater failings at the moment – so probably not many will notice their dismal failure to predict the winner of this year’s Nobel Prize in their field.
But for Global Dashboard readers, here’s a reminder of the standing in the Nobel Prize pool just before the aware of this year’s prize: Barro 16.2%; Hansen 12.2%; Sargent 6.8%; Fama 6.8%; Hart 5.4%; Diamond 4.1%; Feldstein 4.1%; Sims 4.1% and Thaler 4.1%.
So I think it’s fair to see that Paul Krugman’s win is a surprise – at least to his professional colleagues. Krugman’s award comes for work that “integrated the previously disparate research fields of international trade and economic geography.”
Many of these ideas are presented in approachable form in Pop Internationalism, a book that – among other things – takes a hatchet to the idea of international competitiveness and which remains worth a read.
“Let’s start telling the truth,” Krugman writes. “Competitiveness is a meaningless word when applied to national economies. And the obsession with competitiveness is both wrong and dangerous.” An emphasis on absolute economic advantage at a national level (as opposed to relative or comparative advantage) drives policy-makers towards zero-sum thinking, Krugman believes – something that can be disastrous in an interdependent world.
Writing in 1997, his warnings have great contemporary relevance:
Why do we imagine that the global market is something new? Because politics killed that first global economy. Between 1914 and 1945 wars and protectionism tore up the dense web of trade, investment and often family ties that linked old Chicago [then a boom city] to the rest of the world.
It is a little-known but startling fact that world trade as a share of world production did not return to its 1913 level until about 1970; it is even more startling that net international flows of capital (as opposed to complex financial operations that do not finance real investment) were a considerably larger share of world savings in the years preceding World War I than they have been in the ’emerging market’ boom of the last few years.
Surely everyone who things about it is aware that for all our current hysteria, international migration was far larger in an era that could actually build the Statue of Liberty to welcome immigrants than it has ever been since.
