Posted 8:16 AM by Robert

Paul Krugman: Complete And Utter Insignificance

Within the past few weeks the Man Without Qualities has spent a good deal of time in France, where the EU Constitution is in trouble, largely (but not solely, more on that in a subsequent post) on concerns regarding international trade. Irish bookies say the French will reject the EU Constitution - with a betting margin of 3%. Scads of polls predict that the French will reject the Constitutional in a referendum on Sunday, many by margins 1% to over 4% or more (although with a big undecided bloc). A full scale, intense nationwide debate is in progress, with commuters seen reading the more than 300-page document on the way to work. One of the big reasons the Constitution is in such big trouble is the belief among both its backers and opponents that it would increase competition among EU members, especially in service industries, and that investments would flow to states with lower wages, taxes and operating costs (that is, Eastern Europe), and nations with expensive welfare systems and lagging productivity would have to modify those. There's lots of argument and discussion going on. Cafes, homes, faculty lounges, commuter trains - you name it - percolate with Constitutional chatter and especially chatter about international trade. And from the airiest and most gaseous academic to the most loquacious cabby, absolutely nobody in France is talking about anything Herr Doktorprofessor Paul Von Krugman ever wrote, thought or believed.

How can this be? Herr Doktorprofessor's most important works by far are supposedly his early papers in international trade and competition (as discussed here and here and here). In those early papers Herr Doktorprofessor crafted a new way of viewing international trade - one that supposedly displaced old fashioned David Ricardo's comparative advantage "factors" such as relative costs of production, labor and other inputs with fancier concepts like "home market effect."

The EU Constitution stands on the brink of rejection because of concerns over the effects of international trade, yet no one in Europe is talking about "home market effect" or anything else Herr Doktorprofessor allegedly contributed to the theory of international trade. The Constitution's advocates do not speak of "home market effects" or other Krugmania in answer to economic arguments proffered by the Constitution's opponents. Nor do the Constitution's pro-business advocates tremble at the thought that the "comparative advantage" factor considerations (which those advocates count on to increase competition and the profitable flow of investment to Eastern Europe) will be swamped by Herr Doktorprofessor's fancy theories. The fact is that in Europe now the international trade arguments are conducted in neoclassical terms at all levels - with a little silly Marxism on the far left. Herr Doktorprofessor Paul Von Krugman could not be less relevant to this very real world debate - and yet this is the kind of debate in which his most important theories are supposed to have paramount significance.

One may contrast the insignificance of Herr Doktorprofessor's work on its home turf with the very real and important work of Nobelist Robert Mundell. His work formed the basis of the creation of the Euro and all discussions of the Euro (and most discussion of world currency issues generally) use his thinking and insights in many essential ways every single day.

But the deafening Krugmanian silence is not limited to Europe! It redounds across Central America, where practically everyone is now concerned and arguing about international trade in the form the Central America Free Trade Agreement (CAFTA) - but nobody gives un asno de la rata about Herr Doktorprofessor and his "insights." The international fight is joined - with web sites, such as Stop CAFTA - bringing the battle to the internet. But there's not one word about Herr Doktotprofessor or "home market effect" or anything else he ever did or said on Stop CAFTA or in any of the many articles to which it links. It's about the role of nationalism and national security in economics. It's about social safety nets and workers' rights. It's about labor costs. It's about production inputs. It's about comparative advantage. It's about the thoughts of David Ricardo and his intellectual heirs. (Pete Dupont today provides some solid analysis here, for example.) But it's not about home market effects or any other Krugmania. Nor in the United States does CAFTA opposition invoke Herr Doktorprofessor or his works - directly or indirectly. US supporters of CAFTA similarly show such distain, with Robert B. Zoellick describing the CAFTA debate to the Heritage Foundation just a few days ago:

Central Americans are talking about freedom, democracy, and hope. Meanwhile, our domestic debate has been dominated by topics such as sugar and whether CAFTA will codify international labor conventions that the United States has not even ratified itself.

What? No "home market effects?" No "imperfect competition models?" And neither the EU nor the CAFTA debates involve a word about Herr Doktorprofessor's "New Geography." It's all about the Old Geography. You know, what's really, geometrically, located close to something else. As in: The United States and Central America are both in the Western Hemisphere, so we should all pay better attention to each other and treat each other better. Or: The EU is all about Europe and how Europeans should relate to each other. Yet Herr Doktorprofessor himself wrote about his still-born baby that the field has been given a big boost in particular by plans to unify the European market. Odd, then that nobody in France is talking about "the field" now - at least not in Herr Doktorprofessor's terms or framework. [Postscript: There is a bit of additional irony in this, since Charles DeGaulle based his advocacy of the EU (then the Common Market) on beliefs he shared with French historians of the Annales school, like Fernand Braudel, that history is mostly determined by geography - that is, by Old Geography.]

UPDATE: The Associated Press reports:

The question being asked of them in a referendum — should we ratify the European Union constitution? — has taken France by storm, dominating discussions in cafes, at political meetings and over dinner tables. Books about the landmark treaty topped best seller lists in France for weeks and three were still among the top 15 this week. Five million viewers also tuned in when a former prime minister, Lionel Jospin, went on TV to support it. ....

"It's the return of politics, it's the return of the debate of ideas ... It divides families, it's dividing friends — it's a very good thing." ... "Oui" or "Non" — the choice weighs heavily on voters' shoulders, and makes for easy arguments between co-workers, neighbors and friends. ....

Right-wing opponents argue the constitution would erode national sovereignty, and far-left detractors say it would herald a new era of unfettered capitalism, siphon off French jobs to other parts of Europe where labor is cheaper and erode France's coveted social safety net. But supporters, mainly on the center-right, argue the treaty will give France — through the EU — the clout to face potential challenges posed by the United States and rising powers like China and India.

WOW! It's a wild, uninhibited intellectual Gallic free-for-all on the nature and consequences of international trade! Almost everything is up for discussion!

Except, of course, that nobody, absolutely nobody, cares to talk about anything Herr Doktorprofessor Paul Von Krugman ever wrote, thought or believed on the topic de jour! Some things just don't matter at all.

POSTSCRIPT: As the French and Dutch referenda approach, one might think that Herr Doktorprofessor, at least, would weigh in on the applicability of his work on the economics of international trade. After all, he has a New York Times column at his disposal. The topic is timely, interesting - even fascinating. He, himself, has argued that his work has special relevance to the EU - especially Herr Doktorprofessor's "New Geography", since "the field has been given a big boost in particular by plans to unify the European market." And the need is urgent - since the French supporters of the Constitution are in disarray and throwing in the towell! How can this be when the fate of the Constitution is admitted by all sides to turn in large measure on considerations of international trade - and Herr Doktorprofessor's essential contributions have not even been discussed by anyone at all!

But Herr Doktorprofessor is silent! Yes, the fact appears to be that the most important works of Herr Doktorprofessor Paul Von Krugman are so utterly and completely irrelevant to the current international trade discussions pertaining to the EU Constitution that even Herr Doktorprofessor doesn't think they're worth the mention in one of his own columns.

Sad, that.

Of course, he recently wrote a column on Chinese/US trade and currency matters. That column didn't invoke a word of his own work (even indirectly) on either international trade or currency, either. Perhaps Herr Doktorprofessor has learned in at least this one area the wisdom of Dirty Harry's sage maxim: A man has to know his limitations.

Final Note: The Man Without Qualities is fully aware of the silly talk that circulates about Paul Krugman maybe winning the Nobel Prize someday, and not just from the intellectually flatulent Brad Delong. For example, Greg Mankiw recently said:

I was a junior staffer in the Reagan administration. Two members of the senior staff were Krugman and (former Harvard economics professor, Clinton Treasury Secretary and current Harvard president Lawrence) Summers. At that time he was a brilliant economist. I thought he'd win a Nobel prize. I think there's a good chance he still will. His early work on international trade theory deserves it.

Perhaps Professor Mankiw meant what he said and I am wrong. But I think it is more likely that Professor Mankiw was annointing himself with the balm of reason in the form of a suggestion he believes is highly improbable while elsewhere in this interview absolutely savaging Herr Doktorprofessor as a kind of Jerry Springer manque. In any event, it would be amusing to see the Nobel Prize committee explaining such an award after what appears at this time to be a looming EU Constitution debacle: "And, most of all, we have given this award to Paul Krugman as the only international economist whose work featured in no significant manner in the discussions or analyses leading up to the recent EU Constitutional catastrophe!" It would take a lot of top drawer anti-Bush palaver from Herr Doktorprofessor to get the often anti-American Nobel Committee to choke that nugget down. In any event, I take as evidence (but far from proof) that Professor Mankiw was speaking tongue in cheek the fact that he mentions absolutely nothing for which Herr Doktorprofessor's work is or has been used. Such allusions to the use of complimented work are normal in genuine comments of this type. For example, if Professor Mankiw had opinied that the work of Nobelist Robert Mundell deserved that Prize, the compliment would naturally and likely have been accompanied with a brief statement along the lines of "His work formed the basis of the creation of the Euro and all discussions of the Euro use his thinking and insights in many essential ways every single day." In addition, Paul Krugman himself seems to consider his own work in currency - not international trade - his strongest.