A relatively unknown economist, Emily Anne Schneider, already seems to be giving up on her ambition to win the Nobel Prize. In any case, I still hope it goes to Anne Krueger first.

Krueger is much more than the co-discoverer, with Gordon Tullock, of rent-seeking. She also probably did more than any other economist in international trade and development to discredit import-substitution industrialization as a model for modernization.

In the 50’s and 60’s, many countries and all-too-many economists turned their backs on basic economics and decided that the best way to grow rich was to cut yourself off from the world economy with enormous tariffs and strict quotas. That way, your country could start manufacturing a vast array of goods to meet its own needs. Import-substitution industrialization led to all kinds of crazy policies, like tiny countries producing their own cars at astronomical prices, and losing money anyway.

Krueger’s alternative was a return to economic orthodoxy: If you want to grow, specialize and trade. This is one of the main things that the Asian tigers did right. It’s true, of course, that only Hong Kong and Singapore get high marks for actual free trade; but the more protectionist South Korea, Taiwan, and Japan at least had the good sense to produce for the global economy instead of cutting themselves off from the world and squeezing captive domestic consumers for overpriced junk.

In my dreams, the Nobel committee would also mention that Krueger was one of the inspirations for my article on the idea trap. I led the article with this quote, and I still love it:

If the market mechanism is suspect, the inevitable temptation is to resort to greater and greater intervention, thereby increasing the amount of economic activity devoted to rent seeking. As such, a political ‘‘vicious circle’’ may develop. People perceive that the
market mechanism does not function in a way compatible with socially approved goals because of competitive rent seeking. A political consensus therefore emerges to intervene further in the market, rent seeking increases, and further intervention results.

(Anne Krueger. 1974. “The Political Economy of the Rent-Seeking Society.” American Economic Review 61: 302)

Hey, if there’s one thing we learn from Emily Anne Schneider, it’s that economists of all ages ought to have a dream.