First posted 7 p.m., updated 11:50 p.m.
Northwestern filled every seat, aisle and inch of wall space in the Owen L. Coon Forum to hear recent Nobel Prize-winning economist Paul Krugman dissect “the mother of all financial crises” Monday night.
“This is ugly,” Krugman said. “It’s a really scary world, and let’s hope we get our arms around it. A lot of things we thought we had under control we don’t.”
His 45-minute lecture addressed, in his words, “How we got into this mess and where we’re going from here.” The economist at first joked about how “bubblicious” the housing market was before the crisis, but then he got serious.
“It was predictable that the bubble would pop,” he said. “What I didn’t see was how huge the financial fallout has been.”
Krugman was introduced to the crowd of 800 as the “most influential economist in international trade since David Ricardo.” The Princeton University economics professor, recipient of the John Bates Clark Medal and opinion columnist for The New York Times, is well-known for developing the “new trade theory” of international economics, which is based on the effects of globalization and free trade. Krugman’s current research focuses on the current economic and currency crisis, making him an ideal first lecturer for Kellogg’s Distinguished Lecture Series, said Megan Washburn, Kellogg’s director of media relations.
Kellogg did not know Krugman would be awarded the Nobel Prize in Economics the same day the school planned to announce his speech, Washburn said. His lecture Monday at NU was his first since winning the award, which likely caused the extraordinary attendance, she said. In fact, when Washburn told the 200-plus people who could not find a seat that they could watch the lecture on screens in two separate rooms, few took advantage of the overflow locations provided.
Krugman was very clear in communicating the economic crisis will not have a short-term fix, second-year Kellogg student Phillip Zinda said.
“He’s as insightful as ever,” he said. “While the fundamentals of the economy right now are scary for everyone, at least he does a clear job of explaining why we are, where we are and offers some potential solutions to get out of it.”
Krugman said he blamed the “shadow banking system,” a system of banking without government regulation, and the common perception that “U.S. debt was less likely than the debt of Campbell’s Soup” for contributing to the financial crisis. The crisis also has happened more quickly than expected and is now moving to developing countries, he said.
“The scary thing about the crisis is that once you think you’ve found all the skeletons in the financial closet, another one falls out,” he said.
Now is the time for fiscal expansion and quick action, he said. The new administration must move quickly and effectively to deal with the crisis, he said.
Being able to hear Krugman speak and ask him questions was a tremendous opportunity for NU students, said Phil Arnold, Weinberg ’59 and Kellogg ’67.
“He has the ability to give you the historical perspective,” Arnold said. But he agreed with Krugman that it’s difficult to apply history to the current situation.
“The only problem is you’re cutting new ground here. There is no last time. It’s a moving target,” he said.
For Ed Freidheim, a second-year Kellogg student who has been keeping up with the financial crisis on the news, hearing Krugman’s views was a unique experience.
“Given his background and his stature, it carries a lot more weight than just some talking head on CNBC,” Freidheim said.
Weinberg junior Richard Zhang was interested in the political economic discussion, but he was also excited to see the Nobel Prize winner in person, he said.
“He’s the guy who wrote my economics book,” he said.
