Congratulations Paul Krugman

the new Nobel recipient in Economics.

The Nobel Prize citation highlights two distinct but connected contributions: Mr. Krugman’s development of the “new trade theory” and his work on the “new economic geography.” International trade has a long history in economics, and for the bulk of the field’s history, patterns of trade have been explained by factor endowments and comparative advantage. Why does England export wool and Portugal export wine? The cold winters of Yorkshire produce really fluffy sheep and the banks of the Douro produce splendid grapes.

Yet comparative advantage does little to explain much of modern international trade, especially not trade within industries. (Economix Blog)

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