US economist Paul Krugman, a well-known critic of the Bush administration for policies that he argues led to the current financial crisis, won the 2008 Nobel prize for economics on Monday.
The committee said the award was for Krugma’s work that helps explain why some countries dominate international trade.
A prominent economist who writes columns for the New York Times, Krugman is a professor of economics and international affairs at Princeton University.
Krugman, speaking by telephone to a news conference, said: “I rushed to take a shower so that I could take part in the press conference. I called my wife and my parents. I’ve not yet managed to get myself a cup of coffee,” he said. But lack of caffein did not stop him offering an ad-hoc diagnosis of how the world economy was faring. “We are now witnessing a crisis that is as severe as the crisis that hit Asia in the 90’s. This crisis bears some resemblance to the Great Depression.”
Praising world leaders’ efforts to staunch the financial bleeding, he added: “I’m slightly less terrified today than I was on Friday.”
Krugman has been heavily critical of Bush’s administration, arguing that its zeal for deregulation and loose fiscal policies helped spark the current banking meltdown.
The Royal Swedish Academy of Sciences said the prestigious 10 million crown ($1.4 million) award recognised Krugman’s formulation of a new theory that addresses what drives worldwide urbanisation.
“He has integrated the research fields of international trade and economic geography," the committee said. “Krugman’s approach is based on the premise that many goods and services can be produced more cheaply in a long series, a concept generally known as economies of scale,” it said. “Meanwhile, consumers demand a varied supply of goods. As a result, small-scale production for a local market is replaced by large-scale production for the world market, where firms with similar products compete with one another.”
His theory clarifies why trade is dominated by nations that not only have similar conditions but also trade in similar products.