Paul Krugman, Nobel

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Abstract: 

After nearly 30 years, the Swedish Academy has returned to international trade awarding the Nobel Prize to Princeton economist Paul Krugman. Earlier, in 1977, the award had gone to two giants, Bertil Ohlin and James Meade, whose brilliant work formed the foundations of trade theory as it was taught when I came to Princeton to do my Ph.D. in 1974. Krugman, no less a giant, revolutionized the field.

Until the end of the 1970s, the Heckscher-Ohlin theory for which Bertil Ohlin won the prize--Eli Heckscher died before the Nobel Prize in economics was instituted--dominated the field. This theory explained well why labor-abundant countries such as South Korea and Taiwan would export labor-intensive products such apparel, toys and footwear and capital-abundant countries such as the United States would export machinery and aircraft.