Minneapolis Fed’s quarterly magazine always has these super long interviews of top econs and their work.
The recent edition profiled the work of Prof. Elhanan Helpman of Harvard Univ. Prof. Helpman is also on the perennial waitlist for the elusive Prize for his work on international trade. Together with Paul Krugman he is credited for developing New Trade Theory (apart from his super work on Growth Theory etc which the interview tells you).
Since the days of Adam Smith, international trade and long-run growth have engrossed economists. Global trade, after all, is the exchange of goods and services—at the core of economics—writ large. And long-term growth is how countries do (or do not) permanently raise their standards of living.
Several giants in economics have made important contributions to one of these fields or the other, but very few have had an enduring and transformational influence on both. Among the latter is Harvard’s Elhanan Helpman, one of the world’s foremost authorities on international trade and economic growth, and a leading figure in several other areas, including political economy.
In 2010, the prestigious Nemmers Prize in Economics, awarded biennially to recognize “work of lasting significance,” was given to Helpman “for fundamental contributions to the understanding of modern international economics and the effects of political institutions on trade policy and economic growth.” (Five of the previous eight Nemmers Prize recipients later received the Nobel Prize.)
It was in the early 1980s that he helped develop “new trade theory,” a fundamental concept that explained what traditional comparative advantage theory could not: The vast majority of international trade takes place among quite similar countries and sectors. He later developed key insight into the ways modern firms organize production not at a single factory but in multiple stages, sites and nations—leading to global trade flows never envisioned by earlier economists.
In addition, with Gene Grossman of Princeton, Helpman pioneered the extension of “new growth theory”—the idea that information, ideas and technology (not just capital and labor) are central determinants of economic growth—into settings with international trade. They explored the importance of international research and development, and spillovers thereof, to technological innovation and growth itself.
More recently, Helpman has investigated the role of institutions—legal regimes, education systems and the like—in both growth and the political systems that determine trade policy. Currently, he is studying why economic inequality often accompanies greater trade flows across borders—contrary to predictions of traditional trade theory—but then diminishes.
In the following interview, he describes the history and current frontiers of his pathbreaking research, sharing insights gained through decades of research into the riddles of economic growth and global trade.