Paul Krugman Wins Nobel for Economics

http://www.nytimes.com/reuters/business/business-nobel-economics.html?_r=2&oref=slogin&oref=slogin

Raise your hand if you saw this comming.




UPDATE:


The Nobel prize for economics (let’s just call it that) is a subject near and dear to my heart. If the 2008 election was is my NCCA championship, then to me the Nobel prize for economics is the superbowl. I love it. I wrote papers in college about Markowitz and his famous Ph. D thesis. During a class on portfolio theory I corrected my professor on his faulty assertions of Markowtiz’s theories. Merton, Scholes, and Black’s work brought about from the 1997 prize and papers on the topic dominate a good part of my weekly workload. The 1976 winner single-handedly convinced my all-time favorite columnist, David Brooks, to study economic theory.

I will stop for a minute to say that I love the work of these great men with a hint of realism. In short, all of their theories have been more or less proved wrong by Tabel’s Black Swan Theory (Update: just the financial theory ones, obviously MF is still right on Econ). If any fool thought that 1987 crash wasn’t enough data, please read up on the last year or so of volatility and macro-blunders by the fed to end the argument.

I won’t give my opinion on Krugman. Read between the lines and find out for yourself (update: tried to be impartial below, didn’t really succeed very well). I will say that I read every one of his articles in the NYT for quite some time now and have watched numerous interviews with him on Countdown on MSNBC.

In my opinion, Krugman’s win is a direct consequence of John Nash’s 1994 win. Yes, the beautiful mind guy. In 1994, his win of the prize caused a huge amount of controversy. Namely because awards for intellectual ability do not often fall to the totally insane. Yes, I love game theory. A lot. I think my only regret in life so far is not studying game theory (or really engaging with my classes at all in college; that is a different story though). Nash’s work is incredibly important. But his win changed the rules about who gives out the award. A forced changing of the guard so to speak has allowed political theater to enter into what was once a purist award for classic Austrian theory or modern interpretation of those theories. I will not say the change in direction is due entirely to Bertil Holmlund being the new chairman. Honestly, I know nothing about the man (Holmlund). But something really changed, even since last year’s very important and deserving win.

This pick is going to go down as controversial. Why? Well, at the moment, Krugman is a pundit. I have been saying for months now he is the next secretary of the treasury (under Obama) and really has campaigned as such. He spends the entirety of his time railing on the Bush administration while keeping busy with his one class at Princeton. Why this troubles me is that Krugman is (hold your breath) actually incredibly intelligent. His body of work is simply breathtaking. He work in trade theory is deserving of a Nobel Prize. In fact, I would say less then 5% of the economists whose opinion I have read today are surprised (I read quite a few). Krugman wasn’t shocked or even pleased really in his NYT statement.

But why now? Right before arguably the most important election in modern memory? Look at this: http://scientific.thomsonreuters.com/nobel/nominees/#economics I was pulling for the Hansen, Sims, and Sargent ticket. Econometrics is so very important, and the attention gained from a nobel win would have really advanced the science. I mean, if I really wanted a pick out of left field I don’t think Eugene Fama has his yet? Reuters didn’t even have Krugman as a possible win. Does this pick, at this time, indicate anything else but the Nobel prize committee’s interest in the apparent Obama regime?

I can’t help but feel cynical (as I did with McCain’s pick of Palin). This is political theater and in my opinion tarnishes this win. In summation: think what you will of Krugman, but the timing of this is suspicious to say the least. Krugman just joined a club with Hayek and Milton Friedman as members. I wonder if we could go back to 1976 and ask Friedman what he would say about the Krugman pick.