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Hall of Shoulders

Institutional Economics

Paul Krugman

Paul Krugman is known for new trade theory, the New Economic Geography (core-periphery model), dynamic scale economies, path dependence in spatial concentration. **Built:** 2026-06-14 | Citation-grounded application to contemporary space challenges

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Review Lens

Adversarial questions for candidates

The falsifiable questions this brain puts to a dissertation candidate. They seed the pre-Conclave initial review whenever a candidate's topic matches the Institutional Economics lens.

  1. 1

    Threshold vs. marginal: You assert your intervention (price drop, policy, technology) "improves" the space market. Specify the model's *increasing-returns parameter* and show whether your change crosses a tipping threshold into a different equilibrium, or merely shifts the existing one marginally. If you cannot locate the threshold, your comparative statics are not credible.

  2. 2

    Unpriced externality identification: Name the specific externality your decentralized scenario fails to internalize (orbital congestion? launch-stage debris? RF/spectrum?), give its sign and an order-of-magnitude social cost, and show that your proposed equilibrium prices it. If your market clears without pricing it, the "efficiency" you claim is an artifact of omitting the externality.

  3. 3

    Path dependence / lock-in falsification: Your scenario presumes the current market structure (e.g., constellation oligopoly, U.S. launch dominance). Construct the counterfactual: what small change in initial conditions or history would have produced a *different* stable equilibrium? If none exists, you are asserting a unique equilibrium where increasing returns guarantee multiplicity, so defend uniqueness explicitly.

  4. 4

    Centripetal/centrifugal balance: Decompose the concentration you observe (or predict) in your orbital regime into named centripetal forces (market access, scale, spillovers) and centrifugal forces (congestion, immobile factors, debris risk). Show the ratio and predict, quantitatively, the orbit/altitude at which the system disperses. A model that only has agglomeration forces will over-predict concentration.

  5. 5

    Policy without rent-seeking: If you recommend strategic policy (anchor purchases, subsidies, first-mover support) on increasing-returns grounds, demonstrate that the welfare gain net of the deadweight loss from subsidy races and capture is positive. Strategic-trade logic justifies intervention only when the terms-of-trade/scale gain exceeds the retaliation and rent-seeking cost, prove your case clears that bar.

Core Concepts & Space Translation

New Trade Theory (increasing returns + monopolistic competition)

Much trade is *intra-industry* and is driven by scale economies and consumer love-of-variety, not by differences in factor endowments. Two identical countries still trade to let each exploit plant-level scale economies. Implication: which country (or firm) captures an increasing-returns industry is partly a matter of *first-mover advantage, history, and policy*, not destiny. Key work: "Increasing returns and the theory of international trade" (Krugman); synthesized in his Nobel lecture, *The Increasing Returns Revolution in Trade and Geography*, AER 99(3), 2009 (DOI 10.1257/aer.99.3.561).

Space translation

See Space Applications below for how this framework translates to contemporary space governance, drawn directly from the dossier's applied-literature review.

The core-periphery model / New Economic Geography

Where activity locates is an *emergent equilibrium* of the tension between increasing returns (which favor concentration), transport/trade costs, and factor mobility. Circular causation ("firms locate where the market is; the market is where firms locate") endogenously produces a dense *core* and a thin *periphery*. Key work: "Increasing Returns and Economic Geography," *Journal of Political Economy* 99(3), 1991 (DOI 10.1086/261763); NBER WP 3275 (DOI 10.3386/w3275).

Space translation

See Space Applications below for how this framework translates to contemporary space governance, drawn directly from the dossier's applied-literature review.

Centripetal vs. centrifugal forces

Agglomeration is a balance. Centripetal forces: market access (forward/backward linkages), thick labor markets, knowledge spillovers. Centrifugal forces: immobile factors, land rents, congestion. The *ratio of these forces* determines whether an industry concentrates or disperses, and small parameter changes (e.g., a fall in transport cost) can tip the system abruptly between regimes.

Space translation

See Space Applications below for how this framework translates to contemporary space governance, drawn directly from the dossier's applied-literature review.

Dynamic scale economies, learning curves, and path dependence ("history matters")

Because increasing returns create multiple equilibria, *initial conditions and historical accidents* can lock in a durable spatial/industrial pattern that is not the unique efficient outcome. Lock-in is self-reinforcing through learning-by-doing and cumulative cost reductions. This is the analytical bridge from a static cost advantage to a permanent market structure.

Space translation

See Space Applications below for how this framework translates to contemporary space governance, drawn directly from the dossier's applied-literature review.

Externalities, public economics, and the limits of laissez-faire

Krugman is also a public economist: where increasing returns, externalities, and congestion are present, decentralized markets generically fail to reach the social optimum, creating a *case for corrective policy* (strategic trade policy, Pigouvian pricing of externalities, infrastructure provision). This is the lens that turns "the market will sort it out" into a question of *which externality is unpriced.*

Space translation

See Space Applications below for how this framework translates to contemporary space governance, drawn directly from the dossier's applied-literature review.