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Lore & Background

Krugman was born to a Russian Jewish family in Albany, New York, and grew up from age eight in Merrick, a hamlet on Long Island. He graduated from John F. Kennedy High School in Bellmore. His interest in economics began with Isaac Asimov's Foundation novels, where social scientists use 'psychohistory' to save civilization; Krugman turned to economics as the next best thing. He earned his BA summa cum laude in economics from Yale University in 1974, then a PhD from MIT in 1977 with a thesis titled 'Essays on Flexible Exchange Rates.' While at MIT, he spent three months in the summer of 1976 working for the Central Bank of Portugal during the chaotic aftermath of the Carnation Revolution. He later praised his PhD advisor Rudi Dornbusch as 'one of the great economics teachers of all time.' In 1978, Krugman presented ideas to Dornbusch, who flagged a monopolistically competitive trade model as interesting. Krugman worked on it and later wrote, '[I] knew within a few hours that I had the key to my whole career in hand.' That same year, he wrote 'The Theory of Interstellar Trade,' a tongue-in-cheek essay on computing interest rates on goods in transit near the speed of light, to cheer himself up when he was 'an oppressed assistant professor.'

Krugman became an assistant professor at Yale in September 1977, joined MIT in 1979, and from 1982 to 1983 spent a year working at the Reagan White House as a staff member of the Council of Economic Advisers. He rejoined MIT as a full professor in 1984. In 2000, he joined Princeton University as Professor of Economics and International Affairs, retiring in June 2015 and holding the title of professor emeritus. He also holds the title of Centennial Professor at the London School of Economics. He was President of the Eastern Economic Association in 2010. On December 6, 2024, New York Times opinion editor Kathleen Kingsbury announced Krugman was retiring as a Times columnist; his final column, 'Finding Hope in an Age of Resentment,' was published on December 9, 2024. Afterwards, he began publishing a daily newsletter on Substack titled 'Paul Krugman,' with his wife, economist Robin Wells, serving as his editor. By mid-2025, the newsletter was reaching 350,000-450,000 readers per post. Krugman wrote there that he left the Times because his editors began to discourage him from writing columns that might 'get some people (particularly on the right) riled up.'

Reader's Guide

Krugman's main contribution, as stated by the Nobel Prize Committee, is his analysis of the effects of economies of scale combined with the assumption that consumers appreciate diversity, on international trade and the location of economic activity. Prior to his work, trade theory emphasized comparative advantage between countries with very different characteristics. But in the 20th century, an ever-larger share of trade occurred between similar countries, which is hard to explain by comparative advantage. Krugman's explanation, proposed in a 1979 paper in the Journal of International Economics, involves two key assumptions: consumers prefer a diverse choice of brands, and production favors economies of scale. Consumers' preference for diversity explains the survival of different versions of cars like Volvo and BMW. But because of economies of scale, it is not profitable to spread production of Volvos all over the world; instead, it is concentrated in a few factories and therefore in a few countries. Krugman modeled a 'preference for diversity' by assuming a CES utility function like that in a 1977 paper by Avinash Dixit and Joseph Stiglitz. This way of modeling trade has come to be called New Trade Theory. Krugman's theory also took into account transportation costs, a key feature in producing the 'home market effect,' which states that, ceteris paribus, the country with the larger demand for a good shall produce a more than proportionate share of that good and be a net exporter of it. The home market effect was an unexpected result, and Krugman initially questioned it, but ultimately concluded the mathematics were correct. Krugman points out that although globalization has been positive on a whole, since the 1980s the process known as hyper-globalization has at least played a part in rising inequality. Nonetheless, trade remains beneficial in general, even between similar countries, because it permits firms to save on costs by producing at a larger, more efficient scale, and because it increases the range of brands available and sharpens competition. Krugman is the author or editor of 27 books, including scholarly works, textbooks, and books for a general audience, and has published more than 200 scholarly articles. A 2011 survey of economics professors named him their favorite living economist under the age of 60. According to the Open Syllabus Project, he is the second most frequently cited author on college syllabi for economics courses. He considers himself a modern liberal, referring to his books, his blog on The New York Times, and his 2007 book The Conscience of a Liberal. His popular commentary has attracted widespread praise and criticism.

Did You Know?

• Krugman's interest in economics began with Isaac Asimov's Foundation novels, where social scientists use 'psychohistory' to save civilization.
• In 1978, he wrote 'The Theory of Interstellar Trade,' a tongue-in-cheek essay on computing interest rates on goods in transit near the speed of light, to cheer himself up as an 'oppressed assistant professor.'
• He spent three months in the summer of 1976 working for the Central Bank of Portugal during the chaotic aftermath of the Carnation Revolution.
• His PhD thesis was titled 'Essays on Flexible Exchange Rates,' completed at MIT in 1977.
• By mid-2025, his Substack newsletter was reaching 350,000-450,000 readers per post, with his wife Robin Wells serving as editor.