— Ch. 1 · Childhood And The Science Of Psychohistory —
Paul Krugman.
~7 min read · Ch. 1 of 7
Paul Robin Krugman was born on the 28th of February 1953 in Albany, New York. He spent his early years moving between upstate cities before settling into Merrick, a hamlet in Nassau County, Long Island by age eight. His family background included Ukrainian Jewish grandparents who immigrated to the United States in 1914 and Belarusian relatives arriving in 1920. A specific moment from his youth redirected his entire career path toward economics. Krugman read Isaac Asimov's Foundation novels as a child and became fascinated by the fictional science of psychohistory. In these stories, social scientists used advanced mathematics to predict the future and save civilization. Since real-world science could not yet achieve such feats, Krugman decided that economics was the next best thing. This literary inspiration drove him to pursue academic excellence at Yale University. He graduated summa cum laude in 1974 as a National Merit Scholar. His journey continued to the Massachusetts Institute of Technology where he completed his PhD in three years by 1977.
The Theory Of Interstellar Trade
In 1978, Paul Krugman wrote a tongue-in-cheek essay titled The Theory of Interstellar Trade while working as an assistant professor. He composed this piece to cheer himself up during a period when he felt like an oppressed scholar. The paper calculated interest rates on goods traveling near the speed of light between star systems. It served as a humorous counterpoint to his serious academic work but demonstrated his unique ability to blend complex models with accessible storytelling. That same year, Krugman presented ideas about monopolistically competitive trade models to his advisor Rudi Dornbusch. Dornbusch flagged the concept as interesting enough for further development. Krugman worked on the idea and realized within hours that he had found the key to his entire career. This realization led directly to his groundbreaking 1979 paper published in the Journal of International Economics. The paper introduced two critical assumptions: consumers prefer diverse choices and production favors economies of scale. These concepts explained why countries with similar characteristics traded extensively despite having no obvious comparative advantage. The model showed how firms concentrate production in specific locations to maximize efficiency while offering varied products globally.