International Law

Congratulations to Paul Krugman

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Paul Krugman has won the Nobel Prize in Economics

There will be plenty of stories around the blogosphere explaining Krugman's economic accomplishments.

However, I am very interested in what Krugman describes as his modeling strategy.

"Fortunately, there is a strategy that does double duty: it both helps you keep control of your own insights, and makes those insights accessible to others.

The strategy is: always try to express your ideas in the simplest possible model. The act of stripping down to this minimalist model will force you to get to the essence of what you are trying to say (and will also make obvious to you those situations in which you actually have nothing to say).

And this minimalist model will then be easy to explain to other economists as well. I have used the "minimum necessary model" approach over and over again: using a one-factor, one-industry model to explain the basic role of monopolistic competition in trade; assuming sector-specific labor rather than full Heckscher-Ohlin factor substitution to explain the effects of intraindustry trade; working with symmetric countries to assess the role of reciprocal dumping; and so on.

In each case the effect has been to allow me to tackle a subject widely viewed as formidably difficult with what appears, at first sight, to be ridiculous simplicity.

The downside of this strategy is, of course, that many of your colleagues will tend to assume that an insight that can be expressed in a cute little model must be trivial and obvious -- it takes some sophistication to realize that simplicity may be the result of years of hard thinking.

I have heard the story that when Joseph Stiglitz was being considered for tenure at Yale, one of his senior colleagues belittled his work, saying that it consisted mostly of little models rather than deep theorems.

Another colleague then asked, "But couldn't you say the same about Paul Samuelson"? "Yes, I could", replied Joe's opponent. I have heard the same reaction to my own work.

Luckily, there are enough sophisticated economists around that in the end intellectual justice is usually served. And there is a special delight in managing not only to boldly go where no economist has gone before, but to do so in a way that seems after the fact to be almost childs' play."

Simple, small and cute models which express the essence of the matter. Easier said than done. But, it leaves a puzzle what is it about economics that would lend itself to simple models, which would be out of place in chemistry, physics or biology?

Full post as published by Misleading Advertising Law on October 13, 2008 (boomark / email).