Paul Krugman wins Nobel economics prize

Paul Krugman, an American professor, has been awarded the Nobel prize for economics - hours after writing that Gordon Brown might have saved the world financial system, Telegraph reported.

Mr Krugman, who teaches at Princeton University, was given the accolade for his work on trade patterns and the geography of economic activity.

Announcing the $1.4 million (£816,231) prize, the Royal Swedish Academy of Sciences said : "What are the effects of free trade and globalisation? What are the driving forces behind worldwide urbanisation? Paul Krugman has formulated a new theory to answer these questions."

"He has thereby integrated the previously disparate research fields of international trade and economic geography."

Mr Krugman, 55, is also a columnist for the New York Times. In his Monday column , he endorsed Mr Brown`s £500 billion bail-out plan for the British banking industry, contrasting it favourably with the American Government`s scheme.

Mr Krugman asked: "Has Gordon Brown, the British Prime Minister, saved the world financial system?"

He went on: "Mr Brown and Alistair Darling, the chancellor of the Exchequer ... have defined the character of the worldwide rescue effort, with other wealthy nations playing catch-up."

He praised the British Government for having acted with "stunning speed" to address the financial crisis, again contrasting Mr Brown`s efforts with those of Henry Paulson, the US Treasury Secretary.

"This combination of clarity and decisiveness hasn`t been matched by any other Western government, least of all our own," he wrote.

Despite initially basing the US plan on buying up "toxic" mortgage debts, Mr Paulson has since suggested that he may follow Mr Brown in injecting money directly into the banks as fresh capital. Several European leaders are also expected to announce similar plans.

Mr Krugman wrote that during painful early negotiations that almost saw the US bail-out deal collapse amid fierce political fighting, someone should have told Mr Paulson "that he wasn`t making sense".

"Luckily for the world economy, however, Gordon Brown and his officials are making sense," he added. "And they may have shown us the way through this crisis."

The full title of Mr Krugman`s award is the Nobel Memorial Prize in Economic Science. It was not one of the original prizes and has been given out since 1968. It was the last of this year`s prizes to be announced.

The Academy explained that while "traditional trade theory assumes that countries are different and explains why some countries export agricultural products whereas others export industrial goods," Mr Krugman has sought to show why "worldwide trade is in fact dominated by countries which not only have similar conditions, but also trade in similar products."

Telegraph