In presenting his trade model, Krugman planted the seeds for his later work in economic geography, in which he tried to explain the location of economic activity. He summarized his basic finding as follows:. Because of economies of scale, producers have an incentive to concentrate production of each good or service in a limited number of locations.
Because of the cost of transacting across distance, the preferred locations for each individual producer are those where demand is large or supply of inputs is particularly convenient—which in general are the locations chosen by other producers. Thus [geographical] concentrations of industry, once established, tend to be self-sustaining; this applies both to the localization of individual industries and to such grand agglomerations as the Boston-Washington corridor.
Doing that would encourage people to reduce their cash balances and spend more. In his popular writing, Krugman is at his best when defending free trade. He becomes passionate, showing a deep concern for the well-being of people around the world. In it, Krugman told of Smokey Mountain, a huge garbage dump in Manila in which men, women, and children made a living combing through garbage for valuable items.
The result is that we never need to worry about low-wage countries competing us out of jobs because the most they can do is change the items in which we have a comparative advantage. One reason that action to limit growing income inequality in the United States is difficult is that the growth in inequality is not a simple picture.
Old-line leftists, if there are any left, would like to make it a single story—the rich becoming richer by exploiting the poor. For another, the poor had so little to start with that the dollar value of the gains of the rich dwarfs that of the losses of the poor. In constant dollars, the increase in per family income among the top tenth of the population in the s was about a dozen times as large as the decline among the bottom tenth.
He argued that what matters to most people is their income relative to that of others. Nevertheless, he noted how well even the poor were doing in the s. In his blog and his New York Times column, Krugman often denounces his opponents. One main target has been former President George W.
Bush, but he also has attacked prominent economists such as robert e. David R. Henderson is the editor of The Concise Encyclopedia of Economics. He is also an emeritus professor of economics with the Naval Postgraduate School and a research fellow with the Hoover Institution at Stanford University. He earned his Ph. Paul Krugman. Geography and Trade. He would remain at Princeton until retiring from there in to join the faculty at the City University of New York as a distinguished professor of economics.
He remains a professor emeritus at Princeton, however, and is also a member of the Group of 30 , also known as G30, who meet twice yearly to discuss issues of the global economy. Krugman has written on a range of issues in economics, including New Trade Theory, New Economic Geography, and macroeconomics. He is also a popular columnist and blogger as well as the author or editor of 27 books, including a standard text for economics students, International Economics: Theory and Policy , with Maurice Obstfeld, currently in its 7th edition.
Krugman developed New Trade Theory as an alternative to older theories that explain patterns of international trade as based on comparative advantage and natural resource endowments.
Krugman explains observed patterns of trade in the modern era as based on the interaction of consumer preferences for diverse brands of products, which support the persistence of multiple close substitute products traded back and forth between similar countries, and the home market effect , which supports specialization in producing specific brands and concentrates their production in certain countries based on economies of scale.
New Economic Geography argues that based on the effects of economies of scale in manufacturing, such as agglomeration and the home market effect, industries and associated economic growth will tend to be tightly clustered in specific cities, regions, and countries rather than spread evenly around the world. Krugman's early research on international currency crises and later paper on the transition of financial shocks have been highly influential, especially in the years during and since the financial crisis and Great Recession.
These writings argue that inappropriately pegged exchange rates can be susceptible to sudden crises and that highly leveraged, globally interconnected financial institutions can quickly transmit financial crises around the world. Krugman has also written to emphasize the dangers of liquidity traps, which he says occurred in Japan's Lost Decade and the Great Recession, that spread financial crises into the real economy.
He is a leading advocate of expansionary monetary policy to boost inflation and aggressive fiscal policy to directly boost aggregate demand. In addition to his scholarly work, Krugman is also an op-ed columnist for The New York Times , and he's also written for Fortune magazine, Slate , Foreign Affairs , Harvard Business Review , and Scientific American , plus hundreds of academic papers and commentary on economics and politics.
In , Krugman released a book by the same name, and Krugman refers to himself as a "modern liberal. Federal Reserve. Fiscal Policy. Your Privacy Rights. To change or withdraw your consent choices for Investopedia. At any time, you can update your settings through the "EU Privacy" link at the bottom of any page. These choices will be signaled globally to our partners and will not affect browsing data. We and our partners process data to: Actively scan device characteristics for identification.
I Accept Show Purposes. Your Money. Personal Finance. Your Practice. Popular Courses. Economy Economics. Who Is Paul Krugman? Key Takeaways Paul Krugman is an economist and Nobel Prize winner known for his academic trade theory, geographic economics, international finance, and macroeconomics.
Krugman has also written several popular books and is a prolific blogger and columnist. Krugman played a prominent role in the resurgence of Keynesian economics in the wake of the Great Recession. Compare Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation.
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