The Theory of Interstellar Trade

The Theory of Interstellar Trade is a paper written in 1978 by economist Paul Krugman. The paper was first published in March 2010 in the journal Economic Inquiry. He described the paper as something he wrote to cheer himself up when he was an "oppressed assistant professor," caught up in the academic rat race.

Krugman analyzed the question of

how should interest rates on goods in transit be computed when the goods travel at close to the speed of light? This is a problem because the time taken in transit will appear less to an observer traveling with the goods than to a stationary observer.

Krugman emphasized that in spite of its farcical subject matter, the economic analysis in the paper is correctly done. In his own words,

while the subject of this paper is silly, the analysis actually does make sense. This paper, then, is a serious analysis of a ridiculous subject, which is of course the opposite of what is usual in economics.