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Town Hall Meeting with Nobel Laureate Paul Krugman

Paul Krugman '74Yale President Rick Levin introduced Paul Krugman (’74), winner of the 2008 Nobel prize in economics, and bestowed on him Yale’s own Henry Elias Howland Memorial Medal, at a program on November 9 in Sprague Hall, sponsored by the Jackson Institute for Global Affairs. Levin, an economist himself, reminisced about the offices they shared on Hillhouse Avenue in the mid-1970s. Levin said, “This was exactly the period in Paul's career when he was working out the ideas that led to his Nobel prize: the notion of integrating some of the theoretical ideas from industrial organization economics into the international trade framework of comparative advantage.”

Krugman earned his PhD at MIT, then returned to Yale as an assistant professor for a few years before moving on with his career. He is currently a professor of economics and international affairs at Princeton, and for the past decade has written a popular op-ed column for The New York Times, making him one of the best-known economists in the country.

“Let's talk about this amazing economic situation,” he began, “and I mean that in a bad way,” he said to laughter. He said in the 1990s, “We had great faith that at least certain kinds of economic problems had been solved. The Great Depression happened because we were ignorant, because people didn’t know enough about macroeconomics” and many economists thought it wouldn’t happen again. But he said he and others began to wonder if something like that could happen again, mainly because of what occurred in Japan after a burst housing bubble and a banking crisis, “and it never seemed to recover. Japan was stuck in this seemingly endless depressed economic state.” A group of economists at Princeton – “Japan worriers” – himself included, wondered if the U.S. could find itself in the same situation. “The nightmare was that the United States and other advanced countries besides Japan, could find ourselves in this kind of situation – an economic downturn that would not respond, that had developed resistance to the usual antibiotics, and that would be really hard to deal with. And the nightmare has come true.” He said the U.S. is even worse off now than Japan was in the mid-1990s, with much higher unemployment and much more suffering.

“I never imagined that we would have such a complete intellectual collapse in the face of this problem, that the logic of having the government step in to prop up demand while the private sector was unable to spend would be so broadly rejected, that we’d be unable to get enough consensus to get even a halfway adequate program of fiscal policy. And now with the only players with any freedom of action left [being] the Federal Reserve, it turns out there’s enormous opposition to them doing anything as well.” He called recent action “a step in the right direction, but much too small.”

Krugman said that at Yale in the 1970s, “We had a pretty reasonable view of how macroeconomics worked,” but said over the past 30 years economists have moved away from that kind of professional expertise. He said it was hard to be optimistic, saying the results of the midterm election “pretty much guarantees that there will be no policy response from the U.S. government. Europe is also stalled, and Japan is pretty much out of room to [maneuver].” He concluded with a quip he made the day before in a public television interview: “We need to increase NASA's budget, so we can find another planet to export to.”

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The Henry E. Howland Memorial Prize was established in 1915 in honor of Henry Elias Howland, 1854, a well-known lawyer and judge who had served as a member of the Yale Corporation. The prize may be awarded to a “citizen of any country in recognition of some achievement of marked distinction in the field of literature, the fine arts, or the theory of government or politics,” with special consideration to “the idealistic element in the recipient’s work.” The first Howland Memorial Prize was awarded posthumously to poet Rupert Brooke in 1916. Among later Howland Prize recipients are composer Aaron Copland, journalist Sir Alistair Cooke, stateswoman Indira Gandhi and government leader Tony Blair.