Well ... wrong again.
But, no matter what I said the other day, Krugman is a great selection. I think everyone has known since the mid-80's that he was a lock to get the prize ... someday (he was on the list that I put together in 2002 and posted to the original MacroBlog, as well as this one from voluntaryXchange in 2005, this one from 2006, and my A list from last year).
I'm glad they didn't dilute his award by making it joint with someone else. It's arguable that he did less work than some others in the area for which he is getting the award, but I personally think the stuff he did was more pathbreaking.
What Krugman did was put together a fourth explanation for trade. Up to that time there were three: 1) you have a unique resource that others have to trade for, 2) you have a comparative advantage (this idea goes back to Ricardo), or 3) you have a concentration of a factor of production that helps you make things that require that factor more cheaply than others (this theory is associated with 1977 laureate Bertil Ohlin). Adding something to that list is really, really, fundamental.
Krugman's theory relies on increasing-returns-to-scale - this is when getting bigger makes you more profitable. Krugman's insight was that this gives you an incentive to trade more widely. This explains a lot of things, but most fundamentally, why parties will trade the same thing with each other (like Ford and Mercedes selling cars in each others countries).
The only thing that bugs me about this award is that I'm having a hard time figuring out how the Nobel committee decides to bypass older economists for younger ones one year, and then to revisit the old ones the next year. This seems kind of arbitrary to me. There's been a shortage of awards lately for those born between 1935 and 1950 (and only 1 of the last 16 was born between 1935 and 1940). Did those folks do something wrong I don't know about?