Those Wacky Swedes
Since I'm not an economist - nor do I play one on the Internet - I don't quite understand the hubbub over a New York Times columnist winning (approximately) $1.4 million in a Swedish lottery. Many reports curiously state that the lottery winner, Paul Krugman, won something called a "Nobel Prize". While there are five awards established by the last will and testament of the late Swedish chemist Alfred B. Nobel, none relate to economics. Instead, there is something currently known as Sveriges riksbanks pris i ekonomisk vetenskap till Alfred Nobels mine, which translated means "The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel". Sveriges Riksbank is the Swedish central bank.
The bank, however, does not award the actual prize. That duty falls to the Royal Swedish Academy of Sciences, which has about 500 members, most of whom are, surprisingly, from Sweden. The Academy appoints a five-member committee to screen nominations using a process that, as best I can determine, is similar to how the U.S. Academy of Motion Picture Arts & Sciences selects its winner for Best Cinematography. (I'd add that AMPAS has about ten times the membership of the Royal Swedish Academy, so it's possible that even more people vote on the Best Cinematography Oscar then the Sveriges Riksbank Prize.)
In addition to the Sveriges Riksbank Prize and two bona fide Nobels - chemistry and physics - the Royal Swedish Academy awards several other prizes, some of which are international like the Nobels and others limited to Swedish nationals. My personal favorite is the Gregori Aminoff Prize, an international award for crystallography, the "experimental science of determining the arrangement of atoms in solids." That sounds way cooler then the Sveriges Riksbank Prize or even the Best Cinematography Oscar.
My point here, of course, is that it's unusually silly to grant Mr. Krugman any particular respect or acclaim because a self-selected handful of people from a country of about nine million decided that they're the standard-bearers for all economics. It's nice that Mr. Krugman will receive a medal and a check for $1.4 million, but it doesn't make his ideas any more valid or alter the true principles of economic science. The Swedish Academy could have simply picked the name of a random economist out of a hat and its decision would have been equally valuable.
Comments (19)
Friedrich August von Hayek's speech at the Nobel Banquet, December 10, 1974
"Your Majesty, Your Royal Highnesses, Ladies and Gentlemen,
Now that the Nobel Memorial Prize for economic science has been created, one can only be profoundly grateful for having been selected as one of its joint recipients, and the economists certainly have every reason for being grateful to the Swedish Riksbank for regarding their subject as worthy of this high honour.
Yet I must confess that if I had been consulted whether to establish a Nobel Prize in economics, I should have decidedly advised against it.
One reason was that I feared that such a prize, as I believe is true of the activities of some of the great scientific foundations, would tend to accentuate the swings of scientific fashion.
This apprehension the selection committee has brilliantly refuted by awarding the prize to one whose views are as unfashionable as mine are.
I do not yet feel equally reassured concerning my second cause of apprehension.
It is that the Nobel Prize confers on an individual an authority which in economics no man ought to possess.
This does not matter in the natural sciences. Here the influence exercised by an individual is chiefly an influence on his fellow experts; and they will soon cut him down to seize if he exceeds his competence.
But the influence of the economist that mainly matters is an influence over laymen: politicians, journalists, civil servants and the public generally.
There is no reason why a man who has made a distinctive contribution to economic science should be omnicompetent on all problems of society - as the press tends to treat him till in the end he may himself be persuaded to believe.
One is even made to feel it a public duty to pronounce on problems to which one may not have devoted special attention.
I am not sure that it is desirable to strengthen the influence of a few individual economists by such a ceremonial and eye-catching recognition of achievements, perhaps of the distant past.
I am therefore almost inclined to suggest that you require from your laureates an oath of humility, a sort of hippocratic oath, never to exceed in public pronouncements the limits of their competence.
Or you ought at least, on confering the prize, remind the recipient of the sage counsel of one of the great men in our subject, Alfred Marshall, who wrote:
"Students of social science, must fear popular approval: Evil is with them when all men speak well of them". "
http://nobelprize.org/nobel_prizes/economics/laureates/1974/hayek-speech.html
Published: October 13, 2008 11:34 AM
Instead of all this fuster and bluster about him winning, I'd love to see a well-thought-out response to some of Krugman's ideas. Specifically to his "Austrian criticism lite" article on Slate:
http://www.slate.com/id/9593
Intelligent discourse is always more useful than accusatory/inflammatory tripe. And I say that as an Austrian enthusiast.
Published: October 13, 2008 11:38 AM
A year after Al Gore got the peace prize on the basis of environmental alarmism, nothing can shock me. (I realize these are different and unrelated committees, but no doubt the psychological dynamics involved are similar.)
Published: October 13, 2008 11:47 AM
Brian, that's an old article of Krugman's (1998) and Krugman's ideas have appeared several times on the Mises blog. But man, after reading that article, it's hard not to consider Krugman an idiot. Even If someone's already done a critique of that article, it'd be good to do another one.
Published: October 13, 2008 11:53 AM
I agree with MM, and Hayek's speech in general. It is disingenuous for Austrians to hold Hayek in high regard as "Nobel-Prize winning", yet also hold that Mr. Krugman's prize--in fact, the prize itself--is something to be disdained.
Published: October 13, 2008 12:26 PM
Brian, David Gordon has responded to that tripe. It is fraught with misunderstandings of Austrianism. Google it on this site.
Joshua, I'm not familiar with any hardline Austrians who care much about the prize.
Published: October 13, 2008 1:02 PM
Brian D.: “I'd love to see a well-thought-out response to some of Krugman's ideas.”
Krugman’s articles isn’t worth the time because he doesn’t take Austrian econ seriously enough to understand it. Krugman does not attack Austrian econ in his article. The claims he makes about Austrian econ are not true. He attacks some demon in his own mind, but not Austrian econ. Better attacks against Austrian econ have been launched by many other people and Hayek and Mises respond in all of their works. Roger Garrison and Mark Skouzen have taken real criticisms seriously and responded thoughtfully in their books.
Published: October 13, 2008 1:09 PM
http://mises.org/story/103
Published: October 13, 2008 2:08 PM
And here's one more (sorry for the multiple posts):
http://www.auburn.edu/~garriro/hangover.htm
Published: October 13, 2008 2:22 PM
As I understand it Paul Krugman gets this price for his work on International Trade theory and Economic Geography which are his specialties and not Macroeconomics, Politics(Athough, he has said a good thing or too in this area, but he is very very sadly no Libertarian) or "critiques" of Austrian economics which are decidedly NOT his specialties.
Yet it is the latter set of areas he is usually slammed for(Rigthfully so) her on this blog.
Yet as a mainstream economist wouldn't you have to admit he is pretty (damn) good in the areas he gets this prize for ?
Especially given the (very very very faulty) underpinnings of the mainstream framework he works under ?
Isn't the real problem with Krugman that
1) He oversteps the bounds of his expertise.
2) He is a mainstream economist.
3) He is not familiar with Austrian economics
4) He criticizes it despite 3).
Published: October 13, 2008 4:51 PM
I’m certainly no economist or expert on the Austrian school of economics, but it appears to me that Krugman’s error is rather obvious: he completely evades the Fed’s creation of credit and money and the role that plays in fueling the boom. Instead, he constructs a fantasy world in which the money supply is stable and fixed.
Here is the way Krugman puts it:
“As a matter of simple arithmetic, total spending in the economy is necessarily equal to total income (every sale is also a purchase, and vice versa). So if people decide to spend less on investment goods, doesn't that mean that they must be deciding to spend more on consumption goods—implying that an investment slump should always be accompanied by a corresponding consumption boom? And if so why should there be a rise in unemployment?”
What an evasion. Krugman is either completely ignorant of the Austrian explanation for the “business cycle” -- or he is simply dishonest.
Published: October 13, 2008 5:24 PM
Michael Smith:
I'm of the opnion that you're dead wrong.
For one, you've made a serious logical error in reaching the conclusion that "Krugman is either completely ignorant of the Austrian explanation for the "business cycle"---or he is simply dishonest."
Unnecessarily excluded is the possibility (and one I find far more persuasive) that Krugman is not only ignorant but dishonest as well!
Your fault (as in "shortcoming") is the simple one that all of us fall prey to at one time or another: 1. ) believing that, because a person is famous or celebrated for one reason or another, that they are, therefore, "worth paying attention to" and 2.) that reason No. 1 is somehow intensified when such people speak (or write) on a subject related to that which has brought them celebrity in the first place.
I will admit to extensive ignorance where Krugman is concerned. I've never read him. I've seen him as a pundit on TV on just a few occasions and had no
particular opinion of him as particularly highly qualified--I'd have pegged him as just another of the general description "mainstream economist." But I got a significant jolt one day in September, 2001, just a day or a few after the trade center destruction, when I heard him say (I was in my office but the TV was "on" in another room) that the
catastrophe "would prove an enormous boon to the economy."
No one is incapable of error or of making even large and important mistakes. But no one who actually had a deep understanding of economic phenomena and principles could manage to make that mistake and on so grand a scale.
Published: October 13, 2008 7:03 PM
Michael Smith:
I cannot know how thoroughly Krugman has familiarized himself with the thought (in the writings) of the people with whose theories he disagrees. In the very slight references (in what appeared above), he seems no different than similar savants of two to three generations ago whom Mises criticized for their unfounded belief that economics, to be "scientific," must be reduced to equations and mathemetical operations--for reasons expertly and
(so far irrefutably) logically supported and explained. At least, someone disputing assertions of another must understand that such dispute must consist precisely in stating the matter in which
error is to be found and an explanation of just why it is erroneous. It is difficult to believe that Krugman does not understand this; the evasion of such responsibility may not be "proof" of dishonest intent but is certainly an important evidence that such intent is a fact (and it's more than enough for me).
The topic Krugman has chosen (comparative advantage) is a most important one; moreover, it is one that Mises has already addressed most powerfully and eloquently, finding in it not only cosmologic and ontologic analogy but elevating it in clearly understandable terms to virtual identity with civilization itself. I've commented previously to that effect in this same place,so I won't repeat myself.
But what is particularly galling about the entire species (Economistes mainstreamis, esp. var. numericus) is that their search is for "methods" or "techniques" for "management" of people and their economic activities. Their goal in trying to understand what is "going on" is in order to interfere with whatever folks are doing to improve their lives and, in so doing, to "improve" what they're doing in ways that would please them (the managers) more than at present. That in itself wouldn't be so bad--if they'd simply be prudent enough to wait until they actually understood before they interfered. Now you can see what is the function of Krugman and the host of others of the same sort: to convince people that they already understand enough to justify `an entitlement to interfere---now, and if they don't get it right, again and again. Mises' covered all that, come to think on it.
Published: October 13, 2008 7:49 PM
"handful of people from a country of about nine million"
on that line of thinking, anything coming out of a country of 1.3 million is four times better than what a banana republic of merely 305 million can concoct
Published: October 13, 2008 7:57 PM
"on that line of thinking, anything coming out of a country of 1.3 million is four times better than what a banana republic of merely 305 million can concoct"
You make no sense.
Published: October 13, 2008 8:10 PM
Gene Berman:
Thanks for your comments!
I must agree that when dealing with any alleged economist who falls for "the broken window fallacy" -- as Krugman so blatantly did in declaring that 9/11 "would prove an enormous boon to the economy" -- we must certainly admit the possibility that they are *both* dishonest and ignorant.
Wouldn't it be wonderful if we could test the sincerity of his statement by inviting him to destroy all of his property -- his home, his automobile, his bank accounts,his clothing, indeed all of his personal effects -- to demonstrate to the rest of us how this destruction would prove to be a boon to his prosperity?
Published: October 14, 2008 7:08 AM
Michael Smith:
Actually, Mike, what I'd said above in re Krugman doesn't exhaust my thoughts--but they're convoluted enough for me not to attach any rock-solidness to them.
I haven't read (with respect to comparative advantage)
what Krugman wrote in the paper for which the prize was awarded. What I read was an article he'd written previously on the same subject for more popular (though intellectual) consumption which I found linked over at Tim Worstall's site. His theme is essentially a bemoaning of the fact that lay audiences (even lay intellectual audiences--simply not attuned to the mathematically-oriented nature of science in general) are inclined to simplistic explanations of many phenomena, particularly to ones which seem novel or to otherwise upset received scientific thought.
It is unclear to me, however, whether K has ever read Mises on comparative advantage or on the unsuitability of mathematical methods to economics. I find it likely that he's read him superficially on both. Moreover, that (if I'm correct) he'd reached the conclusion that his own work would need to scrupulously avoid any reference to Mises for the simple (but powerful) reason that any more public comparison would not only be unfavorable to him but would also call into question the entire rationale---the raison de etre---of his own professional existence as a public economic intellectual.
Krugman is a good, lucid writer. But I detect a whiff of
"lawyerliness" more evident by what's omitted than by what's said. He is intent---commendably---on supporting the Ricardian theory of comparative advantage but makes no mention whatever of its extended significance. I suggest either that such extended significance is not mentioned either because: a) he'd not read Mises on the subject and it never occurred to him independently; or, b) he'd read Mises and either didn't understand the significance (Mises dubbed it "the law of association" and allowed as how Ricardo would have approved or he'd read Mises and recognized straightaway that, given what Mises had to say, there was nothing left for him to exploit without crediting the now three-generations-ago insight to Mises and opening up that whole new "can of worms" and all that it implied, not only of the virtual insignificance of his own explication of comparative advantage but of further matters, especially Mises' extensive and devastating logical criticism of all mathematical approaches to economic theorizing and study. Krugman confines himself exclusively to fault-finding with modern writers whose hostility to economic writers (such as himself) is tied to their basic, personal unfamiliarity with mathematics itself.
But the prize award does not surprise me at all. Nor does it throw cold water on such prizes as a general category--only on their misapplication to economic
subjects. You would have thought they'd be just a little
bit chastened by their award for the Black-Scholes theories and the subsequent failure of LTCM.
Published: October 14, 2008 9:22 AM
I have not read Krugman's economic theories; I only know his work through his articles in the NY Times.
As a lawyer trained in logic and reasoning, I can tell you his articles are not logical nor well-reasoned. He cherry-picks data to support his Marxist views. And, he uses non-sequitur, to try and connect points.
Since giving the Nobel Prize to Al Gore, the committee has shown that it values politics above science, ironically a charge liberals have made against Bush and conservatives.
Published: October 14, 2008 11:50 AM
I agree with Lester and Taylor - just one more group showing a political bias.
Published: October 14, 2008 2:23 PM