The Nobel economics prize was awarded on Monday to Paul Krugman, one of the great popularisers of economic ideas and a trenchant critic of the Bush administration. However, the prize was awarded for work done almost three decades ago in developing what is known as “new trade theory” and “new economic geography”.

Earlier trade theories suggested that a country would trade with partners that were different – rich would trade with poor, and capital-intensive would trade with labour-intensive. In practice, rich countries tend to trade with other rich countries. Mr Krugman’s analysis showed why this was to be expected: many products were most efficiently produced by large companies, but consumers wanted variety and would buy products from foreign giants as well as the dominant domestic corporations.