Transcript
00:00:00 The following is a conversation with Paul Krugman, Nobel Prize winner in economics,
00:00:04 professor at CUNY, and columnist at the New York Times. His academic work centers around
00:00:10 international economics, economic geography, liquidity traps, and currency crises. But he
00:00:16 also is an outspoken writer and commentator on the intersection of modern day politics
00:00:22 and economics, which places him in the middle of the tense, divisive, modern day political discourse.
00:00:30 If you have clicked dislike on this video and started writing a comment of derision before
00:00:34 listening to the conversation, I humbly ask that you please unsubscribe from this channel
00:00:39 and from this podcast. Not because you’re conservative, a libertarian, a liberal,
00:00:44 a socialist, an anarchist, but because you’re not open to new ideas, at least in this case,
00:00:49 especially at its most difficult, from people with whom you largely disagree.
00:00:55 I do my best to stay away from politics of the day because political discourse is filled
00:01:00 with a degree of emotion and self assured certainty that to me is not conducive to exploring
00:01:07 questions that nobody knows the definitive right answer to. The role of government,
00:01:13 the impact of automation, the regulation of tech, the medical system, guns, war, trade,
00:01:19 foreign policy, are not easy topics and have no clear answers, despite the certainty of the so
00:01:26 called experts, the pundits, the trolls, the media personalities, and the conspiracy theorists.
00:01:33 Please listen, empathize, and allow yourself to explore ideas with curiosity and without judgment
00:01:40 and without derision. I will speak with many more economists and political thinkers, trying to stay
00:01:47 away from the political battles of the day and instead look at the long arc of history
00:01:52 and the lessons it reveals. In this, I appreciate your patience and support.
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00:03:34 abstracts away all the details of the underlying algorithm. And now, here’s my conversation with
00:03:41 Paul Krugman. What does a perfect world, a utopia, from an economics perspective look like?
00:03:50 Wow, I don’t really, I don’t believe in perfection. I mean, somebody once once said
00:03:56 that his ideal was slightly imaginary Sweden. I mean, I like an economy that has a really high
00:04:06 safety net for people, good environmental regulation, and something that’s kind of like
00:04:16 some of the better run countries in the world, but with fixing all of the smaller things that
00:04:22 are wrong with them. What about wealth distribution? Well, obviously, you know, total equality is
00:04:28 neither possible nor, I think, especially desirable, but I think you want one where,
00:04:33 basically one where nobody is hurting and where everybody lives in the same material universe.
00:04:41 Everybody is basically living in the same society, so I think it’s a bad thing to have
00:04:47 people who are so wealthy that they’re really not in the same world as the rest of us.
00:04:50 What about competition? Do you see the value of competition? What may be its limits?
00:04:57 Oh, competition is great when it can work. I mean, I remember, I’m old enough to remember
00:05:04 when there was only one phone company and there was really limited choice, and I think the
00:05:09 arrival of multiple phone carriers and all that has actually, you know, it’s been a really good
00:05:17 thing, and that’s true across many areas, but not every industry is, not every activity is suitable
00:05:25 for competition. So, there are some things like healthcare where competition actually
00:05:30 doesn’t work, and so it’s not one size fits all.
00:05:35 That’s interesting. Why does competition not work in healthcare?
00:05:41 Oh, there’s a long list. I mean, there’s a famous paper by Kenneth Arrow from 1963,
00:05:46 which still holds up very well, where he kind of runs down the list of things you need for
00:05:50 competition to work well. Basically, both sides to every transaction being well informed,
00:05:56 having the ability to make intelligent decisions, understanding what’s going on,
00:06:02 and healthcare fails on every dimension.
00:06:06 Healthcare, so not health insurance, healthcare.
00:06:08 Well, both healthcare and health insurance, health insurance being part of it, but no,
00:06:12 health insurance is really the idea that there’s effective competition between health insurers is
00:06:18 wrong, and healthcare, I mean, the idea that you can comparison shop for major surgery is just,
00:06:25 you know, when people say things like that, you wonder, are you living in the same world I’m
00:06:32 living in?
00:06:33 You know, that piece of well informed, that was always an interesting piece for me,
00:06:38 just observing as an outsider, because so much beautiful, such a beautiful world is
00:06:44 possible when everybody’s well informed. My question for you is, how hard is it to be
00:06:49 well informed about anything, whether it’s healthcare, or any kind of purchasing decisions,
00:06:54 or just life in general in this world?
00:06:57 Oh, information, you know, it varies hugely. I mean, there’s more information at your
00:07:03 fingertips than ever before in history. The trouble is, first of all, that some of that
00:07:10 information isn’t true. So it’s really hard. And then some of it is just too hard to understand.
00:07:18 So if I’m buying a car, I can actually probably do a pretty good job of looking up, you know,
00:07:24 going to consumer reports, reviews, you can get a pretty good idea of what you’re getting
00:07:28 when you get a car. If I’m going in for surgery, first of all, you know, fairly often it happens
00:07:39 without your being able to plan it. But also, there’s a, you know, medical school takes
00:07:44 many, many years, and going on the internet for some advice is not usually a very good
00:07:50 substitute.
00:07:52 So speaking about news and not being able to trust certain sources of information,
00:07:57 how much disagreement is there about, I mentioned utopia, perfection in the beginning, but how much
00:08:02 disagreement is there about what utopia looks like? Or is most of the disagreement simply about the
00:08:09 path to get there?
00:08:11 Oh, I think there’s two levels of disagreement. One, maybe not utopia, but justice. You know,
00:08:20 what is a just society? And that’s, there are different views. I mean, I teach my students
00:08:25 that there are, you know, broadly speaking, two views of justice. One focuses on outcomes.
00:08:34 You ask yourself, a just society is the one you would choose if you were trying to,
00:08:41 the one that you would choose to live in if you didn’t know who you were going to be,
00:08:45 that’s kind of John Rawls. And the other focuses on process, that a just society is one in which
00:08:52 there is no coercion except where absolutely necessary. And there’s no objective way to choose
00:09:00 between those. I’m pretty much a Rawlsian, and I think many people are. But anyway, so there’s a
00:09:06 legitimate dispute about what we mean by a just society anyway. But then there’s also a lot of
00:09:13 a lot of dispute about what actually works. There’s a range of legitimate dispute. I mean, any
00:09:22 card carrying economist will say that incentives matter, but how much do they matter? How much does
00:09:28 a higher tax rate actually deter people from working? How much does a stronger safety net
00:09:34 actually lead people to get lazy? I have a pretty strong view that the evidence points to conclusions
00:09:46 that are considerably to the left of where most of our politicians are. But there is legitimate
00:09:53 room for disagreement on those things. So you’ve mentioned outcomes. What are some metrics you
00:10:01 think about that you keep in mind, like the Gini coefficient, but really anything that measures
00:10:07 how good we’re doing, whatever we’re trying to do? What are the metrics you keep an eye on?
00:10:12 Well, I’m actually I’m not a fan of the Gini coefficient, not because what is the Gini
00:10:17 coefficient? Yeah, the Gini coefficient is a measure of inequality, and it is commonly used
00:10:23 because it’s a single number. It usually tracks with other measures, but the trouble is there’s
00:10:29 no sort of natural interpretation of it. If you ask me what does a society with a Gini of 0.45
00:10:40 look like as opposed to a society with a Gini of 0.25? And I can kind of tell you, you know,
00:10:46 when 0.25 is Denmark and 0.45 is Brazil, but there’s no sort of easy way to do that mapping.
00:10:56 I mean, I look at things like what is, first of all, things like what is the income of the
00:11:04 median family? What is the income of the top 1%? How many people are in poverty by
00:11:12 various measures of poverty? And then I think you want to look at questions like
00:11:18 how healthy are people? How is life expectancy doing? And how satisfied are people with their
00:11:30 lives? Because there is that sounds like a squishy number, not so much happiness. It
00:11:35 turns out that life satisfaction is a better measure than happiness. But life satisfaction,
00:11:40 that varies quite a lot. And I think it’s meaningful, if not too rigorous to say, look,
00:11:49 according to polling, people in Denmark are pretty satisfied with their lives and
00:11:56 people in the United States, not so much so. And of course, Sweden wins every time.
00:12:01 No, actually Denmark wins these days. Denmark and Norway tend to win these days. Sweden doesn’t do
00:12:06 badly. None of these are perfect. But look, I think by and large, there’s a bit of a
00:12:18 pornography test. How do you know a decent society? Well, you kind of know it when you see it.
00:12:23 Right. Where does America stand on that?
00:12:26 We have a remarkable… There are a lot of virtues to America, but there’s a level of harshness,
00:12:35 brutality, an ability for somebody who just has bad luck to fall off the edge, that is really,
00:12:46 shouldn’t be happening in a country as rich as ours. So we have somehow managed to produce a
00:12:52 a crueller society than almost any other wealthy country for no good reason.
00:12:59 What do you think is lacking in the safety net that the United States provides? You said
00:13:04 there’s a harshness to it. And what are the benefits and maybe limits of a safety net
00:13:11 in a country like ours? Well, every other advanced country has some
00:13:16 universal guarantee of adequate healthcare. The United States is the only place where
00:13:21 citizens can actually fail to get basic healthcare because they can’t afford it.
00:13:27 It’s not hard to do. Everybody else does it, but we don’t. We’ve gotten a little bit better at it
00:13:34 than we were, but still, that’s a big deal. We have remarkably weak support for children.
00:13:45 Most countries have substantial safety… Parents of young children get much more support elsewhere.
00:13:53 They get often nothing in the US. We have limited care for people. Long term care for the elderly
00:14:04 is a very hit and miss thing. But I think that the really big issues are that we don’t take care of
00:14:14 children who make the mistake of having the wrong parents, and we don’t take care of people who make
00:14:20 the mistake of getting sick. And those are things that a rich country should be doing.
00:14:26 Sorry for sort of a difficult question, but what you just said kind of feels like the right thing
00:14:32 to do in terms of a just society. But is it also good for the economic health of society to take
00:14:40 care of the people who are the unfortunate members of society?
00:14:44 By and large, it looks like doing the right thing in terms of justice is also the right thing in
00:14:52 terms of economics. If we’re talking about a society that has extremely high tax rates that
00:14:58 deter, remove all incentives to provide a safety net that is so generous that why bother working
00:15:07 or striving, that could be a problem. But I don’t actually know any society that looks like that.
00:15:13 Even in European countries with very generous safety nets, people work and innovate and do all
00:15:20 of these things. And there’s a lot of evidence now that lacking those basics is actually destructive,
00:15:28 that children who grow up without adequate health care, without adequate nutrition,
00:15:34 are developmentally challenged. They don’t live up to their potential as adults. So the United
00:15:40 States actually probably pays a price. We’re harsh, we’re cruel, and we actually make ourselves poorer
00:15:46 as a society, not just the individuals, by being so harsh and cruel.
00:15:52 Okay, so Invisible Hand, Smith, where does that fit in? The power of just people acting selfishly
00:16:00 and somehow everything taking care of itself to where the economy grows,
00:16:06 nobody, there’s no cruelty, no injustice, that the markets regulate themselves. Is there power
00:16:14 to that idea and what are its limits? There’s a lot of power to that. I mean, there’s a reason why
00:16:23 I don’t think sensible people want the government running steel mills or they want the government
00:16:29 to own the farms, right? The markets are a pretty effective way of getting incentives aligned,
00:16:40 of inducing people to do stuff that works. And the Invisible Hand is saying that farmers aren’t
00:16:46 growing crops because they want to feed people, they’re growing crops because they can make money
00:16:51 by it, but it actually turns out to be a pretty good way of getting an agrarian
00:16:56 of getting agricultural products grown. So the Invisible Hand is an important part,
00:17:04 but there’s nothing mystical about it. It’s a mechanism, it’s a way to organize economic
00:17:10 activity, which works well given a bunch of preconditions, which means that it actually
00:17:15 works well for agriculture, it works well for manufacturing, it works well for many services,
00:17:22 it doesn’t work well for healthcare, it doesn’t work well for education. So having a society
00:17:30 which is kind of three quarters Invisible Hand and one quarter Visible Hand, something on that
00:17:39 order seems to be the balance that works best. You don’t want to romanticize or make something
00:17:47 mystical out of it. This is one way to organize stuff that happens to have broad but not universal
00:17:54 application. So then forgive me for romanticizing it, but it does seem pretty magical. I kind of
00:18:02 have an intuitive understanding of what happens when you have like five, ten, maybe even a hundred
00:18:06 people together, the dynamics of that. But the fact that these large society of people for the
00:18:12 most part acting in a self interested way and maybe electing representatives for themselves,
00:18:17 that it all kind of seems to work, it’s pretty magical. The fact that right now there’s a wide
00:18:28 assortment of fresh fruit and vegetables in the local markets up and down the street, who’s
00:18:39 planning that? And the answer is nobody. That’s the Invisible Hand at work and that’s great.
00:18:43 And that’s a lesson that Adam Smith figured out more than 200 years ago and it continues to apply.
00:18:56 But even Adam Smith has a section in his book about why it’s important to regulate banks.
00:19:02 So the Invisible Hand has its limits. And that example is actually a powerful one in terms of
00:19:07 the supermarket and fruit. That was my experience coming from Russia from the Soviet Union is when
00:19:13 I first entered a supermarket and just seeing the assortment of fruit, bananas. I don’t think I’ve
00:19:20 seen bananas before, first of all, but just the selection of fresh fruit was just mind blowing.
00:19:27 Beyond words and the fact that, like you said, I don’t know what made that happen.
00:19:32 Well, there is some magic to the market. As showing my age, but the old movie quote,
00:19:40 sometimes the magic works and sometimes it doesn’t. And you have to have some idea of when
00:19:43 it doesn’t. So how do you get regulation? What can government at its best do? Government,
00:19:52 strangely enough in this country today, seems to get a bad rap. Everybody’s against the government.
00:20:01 Yeah. Well, a lot of money has been spent on making people hate the government.
00:20:04 But the reality is government does some things pretty well. I mean, government does health
00:20:12 insurance pretty well. So much so, I mean, given our anti government bias, it really is true that
00:20:17 there are people out there saying, don’t let the government get its hands on Medicare. So
00:20:24 people actually love the government health insurance program far more than they love
00:20:28 private health insurance. Basic education. It turns out that your local public high school
00:20:38 is the right place to have students trained and private for, certainly for profit education is
00:20:46 by and large a nightmare of rip offs and grift and people not getting what they thought they
00:20:56 were paying for. It’s a judgment case. And it’s funny, there are things, I mean, everybody talks
00:21:05 about the DMV as being, do you want the economy? Actually, my experience is that the DMV have
00:21:11 always been positive. Maybe I’m just going to the right DMVs, but in fact, a lot of government works
00:21:17 pretty well. So to some extent, you can do these things on a priori grounds. You can talk about the
00:21:26 logic of why healthcare is not going to be handled well by the market, but partly it’s just experience.
00:21:30 We tried, or at least some countries have tried nationalizing their steel industries,
00:21:34 that didn’t go well. But we’ve tried privatizing education and that didn’t go well. So you find
00:21:40 out what works. What about this new world of tech? How do you see, what do you think works for tech?
00:21:49 Is it more regulation or less regulation? There are some things that need more regulation. I mean,
00:21:56 we’re finding out that the world of social media is one in which competitive forces aren’t working
00:22:07 very well and trusting the companies to regulate themselves isn’t working very well. But I’m on the
00:22:14 whole a tech skeptic, not in the sense that I think the tech doesn’t work and it doesn’t do stuff,
00:22:19 but the idea that we’re living through greater technological change than ever before
00:22:24 is really an illusion. Ever since the beginning of the industrial revolution,
00:22:30 we’ve had a series of epical shifts in the nature of work and in the kinds of jobs that are available.
00:22:38 And it’s not at all clear that what’s happening now is any bigger or faster or harder to cope
00:22:46 with than past shocks. It is a popular notion in today’s sort of public discourse that automation
00:22:54 is going to have a huge impact on the job market now. There is something transformational happening
00:23:01 now. Can you talk about that, maybe elaborate a little bit more? Do you not see the software
00:23:10 revolutions happening now with machine learning, availability of data, that kind of automation,
00:23:18 being able to sort of process, clean, find patterns in data, and you don’t see that
00:23:25 disrupting any one sector to a point where there’s a huge loss of jobs? There may be some things. I
00:23:32 mean, actually, you know, translators, there’s really reduced demand for translators because
00:23:38 machine translation ain’t perfect, but it ain’t bad. There are some kinds of things that are
00:23:45 changed, but overall productivity growth has actually been slow in recent years. It’s been much
00:23:56 slower than in some past periods. So the idea that automation is taking away all the jobs,
00:24:02 the counterpart would be that we would be able to produce stuff with many fewer workers than before,
00:24:07 and that’s not happening. There are a few isolated sectors. There are some kinds of jobs that are
00:24:14 going away, but that keeps on happening. I mean, New York City used to have thousands and thousands
00:24:20 of longshoremen taking stuff off ships and putting them on ships. They’re almost all gone now. Now
00:24:29 you have the giant cranes taking containers on and off ships in Elizabeth, New Jersey.
00:24:36 That’s not robots. It doesn’t sound high tech, but it actually pretty much destroyed an
00:24:44 occupation. Well, you know, it wasn’t fun for the longshoremen, to say the least. But it’s not,
00:24:52 we coped, we moved on, and that sort of thing happens all the time. You mean farmers.
00:25:00 We used to be a nation which was mostly farmers. There are now very few farmers left. And the
00:25:07 reason is not that we’ve stopped eating, it’s that farming has become so efficient that we don’t need
00:25:14 a lot of farmers, and we coped with that too. So the idea that there’s something qualitatively
00:25:19 different about what’s happening now so far isn’t true. So your intuition is there is going to be
00:25:26 lots of jobs, but it’s just the thing that just continues. There’s nothing qualitatively different
00:25:32 about this moment. Some jobs will be lost, others will be created, as has always been the case so
00:25:36 far. I mean, maybe there’s a singularity. Maybe there’s a moment when the machines get smarter
00:25:42 than we are, and sky tech kills us all or something, right? But that’s not visible in
00:25:48 anything we’re seeing now. You mentioned the metric of productivity. Could you explain that
00:25:53 a little bit? Because it’s a really interesting one. I’ve heard you mention that before in
00:25:58 connection with automation. So what is that metric? And if there is something qualitatively
00:26:03 different, what should we see in that metric? Well, okay, productivity. First of all, production.
00:26:09 We do have a measure of the economy’s total production, you know, real GDP, which is
00:26:16 itself, it’s a little bit of a construct because it’s quite literally, it’s adding apples and
00:26:21 oranges. So we have to add together various things, which we basically do by using market prices,
00:26:27 but we try to adjust for inflation. But it’s kind of, it’s a reasonable measure of how much
00:26:32 the economy is producing. Sorry to interrupt. Is it goods and services? It’s goods and services.
00:26:37 It’s everything. Okay. Productivity is, you divide that total output by the number of hours worked.
00:26:45 So we’re basically asking how much stuff does the average worker produce in an hour of work.
00:26:52 And if you’re seeing really rapid technological progress, then you’d expect to see productivity
00:26:57 rising at a rapid clip, which we did, you know, for the generation after World War II, productivity
00:27:05 rose, you know, 2% a year on a sustained basis. Then it dropped down for a while. Then there was
00:27:12 a kind of a decade of fairly rapid growth from the mid nineties to the mid two thousands.
00:27:18 And then it’s, it dropped off again and it’s not, it’s not impressive right now. So
00:27:22 you’re just not seeing an epical shift in, in, in the economy. So let me then ask you about
00:27:29 the psychology of blaming automation. A few months ago, you wrote in the New York Times,
00:27:34 quote, the other day I found myself, as I often do at a conference, discussing lagging wages and
00:27:39 soaring inequality. There was a lot of interesting discussion, but one thing that struck me was how
00:27:45 many of the participants just assumed that robots are a big part of the problem, that machines are
00:27:50 taking away the good jobs or even jobs in general. For the most part, this wasn’t even presented as
00:27:56 a hypothesis, just as part of what everyone knows. So why is, maybe can you psychoanalyze our,
00:28:05 the public intellectuals or economists or us actually in the general public, why this is
00:28:12 happening? Why this assumption has just infiltrated public discourse? There’s a couple of things.
00:28:19 One is that the particular technologies that are advancing now are ones that are a lot more visible
00:28:26 to the chattering class. When containerization did away with the jobs of longshoremen, well,
00:28:37 not a whole lot of college professors are close friends with longshoremen. And so we see this one.
00:28:43 Then there’s a second thing, which is, we just went through a severe financial crisis
00:28:49 and a period of very high unemployment. It’s finally come down. There’s really no question
00:28:56 that that high unemployment was about macroeconomics. It was about a failure of demand.
00:29:02 But macroeconomics is really not intuitive. I mean, people just have a hard time wrapping
00:29:07 their minds around it. And among other things, people have a hard time believing that something
00:29:11 as trivial as, well, people who just aren’t spending enough can lead to the kind of mass
00:29:16 misery that we saw in the 1930s or the not quite so severe, but still serious misery that we saw
00:29:22 after 2008. And there’s always a tendency to say it must be something big. It must be technological
00:29:28 change. That means we don’t need workers anymore. There was a lot of that in the 30s. And that same
00:29:33 thing happened after 2008, the assumption that it has to be some deep cause, not something as trivial
00:29:40 as a failure of investor confidence and inadequate monetary and fiscal response.
00:29:47 And the last thing on wages. A lot of what’s happened on wages is at some level political.
00:29:57 It’s the collapse of the union movement. It’s policies that have squeezed workers bargaining
00:30:02 power. And for kind of obvious reasons, there are a lot of influential people who don’t want to hear
00:30:08 that story. They want it to be an inevitable force of nature. Technology has made it impossible to
00:30:14 have people earn middle class wages. And so they don’t like the story that says,
00:30:23 actually, no, it’s kind of the political decisions that we made that have caused this income
00:30:28 stagnation. And so they’re a receptive audience for technological determinism.
00:30:34 LW. So what comes first in your view, the economy or politics in terms of what has impact on the
00:30:40 other?
00:30:41 RL. Oh, look, everything interacts. That’s one of the rules that I was taught in economics.
00:30:48 Everything affects everything else in at least two ways. I mean, clearly the economy drives a
00:30:57 lot of political stuff. But also clearly politics has a huge impact on the economy. We look at the
00:31:08 decline of unions in America and say, well, the world has changed and unions don’t have a role.
00:31:15 But two thirds of workers in Denmark are unionized. And Denmark has the same technology
00:31:21 and faces the same global economy that we do. It’s just a difference in political choices that leads
00:31:26 to that difference. So I actually teach a course here at CUNY called Economics of the Welfare
00:31:33 State, which is about things like healthcare and retirement and to some extent wage policy and so
00:31:38 on. And the message I keep on trying to drive home is that, look, all advanced countries have
00:31:46 got roughly equal competence. We all have the same technology, but we make very different choices.
00:31:51 Not that America always makes the wrong choices. We do some things pretty well. Our retirement
00:31:56 system is one of the better ones. But the point is that there’s a huge amount of political choice
00:32:03 involved in the shape of the economy. What is a welfare state? Well, welfare state is the old
00:32:10 term, but it basically refers to all the programs that are there to mitigate, if you like, the
00:32:19 risks and injustices of the market economy. So in the US, the welfare state is Social Security,
00:32:25 Medicare, Medicaid, minimum wages, food stamps. When you say welfare state, my first sort of
00:32:32 feeling is a negative one. Even though I like all, I probably generally, at least theoretically,
00:32:39 like all the welfare programs. Well, it’s been demonized. And to some extent, I’m doing a little
00:32:46 bit of thumbing my nose at all of that by just using the term welfare state. Although it’s not.
00:32:53 I see. Yeah, I got you. But everybody, every advanced country actually has a lot of welfare
00:32:59 state, even the US. I mean, that’s a fundamental part of the fabric of our society. Social Security,
00:33:07 Medicare, Medicaid are just things we take for granted as part of the scene. There’s a lot of
00:33:17 there’s people on the right wing who are saying, oh, it’s all socialism. And well,
00:33:25 words, I guess, mean what you want them to mean. And just today, I told my class about the
00:33:36 record that Ronald Reagan made in 1961, warning that Medicare would destroy American freedom.
00:33:41 And but that sort of didn’t happen on the topic of welfare state. What are your thoughts on
00:33:50 universal basic income? And that’s sort of a not a generic, but a universal safety net of this kind?
00:33:58 There’s always a trade off when we talk about social safety net programs. There’s always a
00:34:04 trade off between universality, which is clean, but means that you’re giving a lot of money to
00:34:12 people who don’t necessarily need it and some kind of targeting, which makes it easier to
00:34:20 get to deal with the crucial problems with limited resources. But both has incentive
00:34:27 problems and kind of political and I would say even psychological issues. So the great thing
00:34:36 about Social Security and Medicare is no questions asked. You don’t have to prove that you need them.
00:34:45 It just comes. I’m on Medicare, allegedly. I mean, it’s run through my New York Times health
00:34:54 insurance, but I didn’t have to file an application with the Medicare office to prove that I needed it.
00:35:02 It just happened when I turned 65. That’s good for dignity and it’s also good for
00:35:08 the political support because everybody gets Medicare. On the other hand, if you
00:35:15 and we can do that with health care to give everybody a guarantee of an income that’s
00:35:24 enough to live on comfortably. That’s a lot of money. What about enough income to carry you over
00:35:34 through difficult periods, like if you lose a job or that kind of? Well, we have unemployment
00:35:38 insurance and I think our unemployment insurance is too short lived and too stingy. It would be
00:35:44 better to have a more comprehensive unemployment insurance benefit. But the trouble with something
00:35:51 like universal basic income is that either the bar is too low, so it’s really not something you
00:35:58 can live on, or it’s an enormously expensive program. And so at this point, I think that
00:36:05 we can do far better by building on the kinds of safety net programs we have. I mean, food stamps,
00:36:12 earned income tax credit. We should have a lot more family support policies.
00:36:17 Those things can do a lot more to really diminish the amount of misery in this country.
00:36:24 UBI is something that is being… I mean, it goes kind of hand in hand with this belief that
00:36:33 the robots are going to take all of our jobs. And if that was really happening, then I might
00:36:37 reconsider my views on UPI, but I don’t see that happening. So are you happy with discourse that’s
00:36:45 going on now in terms of politics? So you mentioned a few political candidates. Is the kind of thing
00:36:52 going on both on Twitter and debates and the media through the written word, through the spoken word,
00:37:00 how do you assess the public discourse now in terms of politics? We’re in a fragmented world.
00:37:05 More so than before.
00:37:07 More so than ever before. So at this point, the public discourse that you see if Fox News is your
00:37:20 principal news source is very different from the one you get if you read the New York Times.
00:37:26 On the whole, my sense is that mainstream political reporting, policy reporting is a,
00:37:33 not too great, but b, better than it’s ever been. Because when I first got into the pundit business,
00:37:41 it was just awful. Lots of things just never got covered. And if things did get covered,
00:37:46 it was always both sides. It’s the line that comes back from me writing during the 2000
00:37:53 campaign was that if one of the candidates said that the earth was flat, the headline would
00:38:00 be views differ on shape of planet. I mean, that’s less true. There’s still a fair bit of
00:38:06 that out there, but it’s less true than there used to be. And there are more people reporting,
00:38:12 writing on policy issues who actually understand them than ever before. So though that’s good.
00:38:18 But still, how much the typical voter is actually informed is unclear. I mean, the Democratic
00:38:34 debates, I’m hoping that we finally get down to not having 27 people on the stage or whatever it
00:38:44 is they have, but they’re reasonably substantive, certainly better than before. And while there’s
00:38:52 a lot of still theater criticism instead of actual analysis and the reporting, it’s not as totally
00:39:00 dominant as in the past. Can I ask maybe a dumb question, but from an open minded perspective,
00:39:09 when people on the left and people on the right, I think view the others as sometimes complete
00:39:21 idiots. What do we do with that? Is it possible that the people on the right are correct about
00:39:32 their what they currently believe? Is that kind of open mindedness helpful or is this division
00:39:43 long term productive for us to sort of have this food fight?
00:39:48 Well, the trouble you have to confront is that there’s a lot of stuff that just is false out
00:39:55 there but commands extensive political allegiance. So the idea, well, both sides need to listen to
00:40:02 each other respectfully. I’m happy to do that when there’s a view that is worthy of respect,
00:40:09 but a lot of stuff is not. And so take economics is something where I think I know something,
00:40:18 and I’m not sure that I’m always right. In fact, I know I’ve been wrong plenty of times. But I
00:40:24 think that there is a difference between economic views that are within the realm of we can actually
00:40:33 have an interesting discussion and those that are just crank doctrines or things that are purely
00:40:42 being disseminated because people are being paid to disseminate them. So there are plenty of good,
00:40:47 serious center right economists that I’m happy to talk to. None of those center right economists
00:40:54 has any role in the Trump administration. The Trump administration and by and large Republicans
00:40:59 in Congress only want to listen to people who are cranks. And so I think it’s being dishonest with
00:41:07 my readers to pretend otherwise. There’s no way I can reach out to people who think that
00:41:12 reading Ayn Rand novels is how you learn about monetary economics.
00:41:17 Let me linger on that point. So if you look at Ayn Rand, okay, so you said center right. What
00:41:22 about extreme? People who have like radical views, you think they’re not grounded in any kind of data,
00:41:31 in any kind of reality. I’m just sort of curious about how open we should be
00:41:37 to ideas that seem radical. Oh, radical ideas is fine, but then you have to ask, is there some
00:41:44 basis for the radicalism? And if it’s something that is not grounded in anything,
00:41:55 then, and particularly, by the way, if it’s something that’s been refuted by evidence again
00:41:59 and again, and the people just keep saying it, if it’s a zombie, if it’s a
00:42:03 zombie idea, and there’s a lot of those out there, then there comes a point when it’s not worth
00:42:09 trying to fake respect for it. I see. So there’s a, through the scientific process,
00:42:14 you’ve shown that this idea does not hold water, but I like the idea of zombie ideas,
00:42:19 but they live on through, it’s like the idea that the earth is flat, for example,
00:42:26 has been for the most part, disproven. Yeah.
00:42:28 But it lives on, actually, and growing in popularity currently. Yeah. And there’s a lot
00:42:34 of that out there, and you can’t wish it away, and you’re not being fair to either yourself,
00:42:41 or if you’re somebody who writes for the public, you’re not being fair to your readers to pretend
00:42:46 otherwise. So quantum mechanics is a strange theory, but it’s testable, and so while being
00:42:53 strange, it’s widely accepted amongst physicists. How robust and testable are economics theories
00:43:01 if we compare them to quantum mechanics and physics and so on? Okay, economics, look, it’s a
00:43:08 complex system, and it’s also one in which, by and large, you don’t get to do experiments,
00:43:14 and so economics is never going to be like quantum mechanics.
00:43:18 That said, you get natural experiments, you get tests of rival doctrines. In the immediate
00:43:26 aftermath of the financial crisis, there was one style, one basic theory of macroeconomics, which
00:43:36 ultimately goes back to John Maynard Keynes that made a few predictions. It said, under these
00:43:40 circumstances, the economy is going to collapse. It’s going to collapse. It’s going to collapse.
00:43:48 Printing money will not be inflationary. Running big budget deficits will not cause a rise in
00:43:54 interest rates. Slashing government spending austerity policies will lead to depressions if
00:44:02 tried. Other people had exactly the opposite predictions, and we got a fairly robust test,
00:44:11 and one theory won. Interest rates stayed low. Inflation stayed low. Austerity, countries that
00:44:17 implemented harsh austerity policies suffered severe economic downturns. You don’t get much,
00:44:24 you know, that’s pretty clear, and that’s not going to be true on everything,
00:44:29 but there’s a lot of empirical. I mean, the younger economists these days are very heavily
00:44:36 data based, and that’s great, and I think that’s the way to go.
00:44:42 Trey Lockerbie What theories of economics are there? Is there currently a lot of disagreement about, would you say?
00:44:47 John Ligato Oh, first of all, there’s just a lot less disagreement, really, among serious
00:44:54 researchers in economics than people imagine. We actually, we can track that. The Chicago Booth
00:45:00 School has a panel, an ideologically diverse panel, and they pose regularly posed questions,
00:45:07 and on most things, there’s a huge, there’s remarkable consensus. There’s a lot of things
00:45:16 where people imagine that there’s dispute, but the illusion of dispute is something that’s
00:45:22 basically being fed by political forces, and there isn’t really. I mean, there are, I think,
00:45:28 questions about what are effective ways to regulate technology industries. We really don’t know
00:45:41 the answers there. There’s a, or, look, I don’t follow every part. Minimum wages. I think there’s
00:45:50 pretty overwhelming evidence that a modest increase in the minimum wage from current levels
00:45:57 would be, would not have any noticeable adverse effect on jobs. But if you ask, how high could it
00:46:06 go? $12 seems pretty safe, given what we know. Is $15 okay? There’s some legitimate disagreement
00:46:17 there, I think probably, but people have a point. $20, where is the line at which it starts to
00:46:24 become a problem, and the answer is, truly, we don’t know. It’s fascinating to try to,
00:46:30 such a cool, economics is cool in that sense, because you’re trying to predict something that
00:46:35 hasn’t been done before, the impact, the effects of something that hasn’t been done before.
00:46:40 Yeah, you’re trying, you’re going out of sample, and we have good reason to believe that there are,
00:46:46 you know, that it’s nonlinear, that there comes a point at which it doesn’t work the way it has
00:46:49 in the past. So, as an economist, how do you see science and technological innovation? When I
00:46:56 took various economics courses in college, technological innovation seemed like a
00:47:02 no brainer way of growing an economy, and we should invest in it aggressively. I may be biased,
00:47:09 but it seemed like the various ways to grow an economy, it seems like the easiest way,
00:47:14 especially long term. Is that correct? And if so, why aren’t we doing it more?
00:47:20 Well, that’s, okay, the first question is, yeah, I mean, all, it’s pretty much overwhelming.
00:47:27 We think we can more or less measure this, although there are some assumptions involved,
00:47:31 but it’s something like 70 to 80% of the growth in per capita income is basically the advance
00:47:38 of knowledge. It’s not just, it’s not just the crude accumulation of capital. It is the fact
00:47:43 that we get smarter. A lot of that, by the way, is more prosaic kinds of technology. So, you know,
00:47:52 I like to talk about things like containerization, or, you know, in an earlier period,
00:48:01 the invention of the flat pack cardboard box. That had to be invented, and now all of your
00:48:10 deliveries from Amazon are made possible by the existence of that technology. The web stuff is
00:48:15 important too, but what would we do without cardboard boxes?
00:48:20 But all of that stuff is really important in driving economic progress. Well, why don’t we
00:48:26 invest more? Why don’t we invest more in, again, more prosaic stuff? Why haven’t we built another
00:48:36 goddamn rail tunnel under the Hudson River, for which the need is so totally overwhelmingly
00:48:44 obvious? How do you think about, first of all, I don’t even know what the word prosaic means,
00:48:48 but I inferred it, but how do you think about prosaic? Is it the really most basic, dumb
00:48:54 technology innovation, or is it just like the lowest hanging fruit of where benefit can be
00:49:02 gained? When I say prosaic, I mean stuff that is not sexy and fancy and high tech. It’s building
00:49:11 bridges and tunnels, inventing the cardboard box, or the, I don’t know, where do we put
00:49:24 EasyPass in there? It is actually using some modern technology and all that, but it’s not
00:49:34 going to have, I don’t think we’re going to make a movie about the guy, whoever it was that invented
00:49:41 EasyPass, but it’s actually a pretty significant productivity booster. To me, it always seemed like
00:49:47 it’s something that everybody should be able to agree on and just invest. So in the same way,
00:49:56 the investment in the military and the DOD is huge. So everyone kind of, not everyone, but
00:50:05 there’s an agreement amongst people that somehow that a large defense is important. It always
00:50:15 seemed to me like that should be shifted towards, if you want to grow prosperity of the nation,
00:50:22 you should be investing in knowledge. Yes, prosaic stuff, investing in infrastructure and so on.
00:50:29 I mean, sorry to linger on it, but do you have any intuition? Do you have a hope that that changes?
00:50:35 Do you have intuition why it’s not changing? It’s unclear.
00:50:38 More than intuition, I have a theory. I’m reasonably certain that I understand why
00:50:42 we don’t do it. And it’s because we have a real values dispute about the welfare state,
00:50:55 about how much the government should do to help the unfortunate. And politicians believe,
00:51:04 probably rightly, that there’s a kind of halo effect that surrounds any kind of government
00:51:09 intervention. That even though providing people with enhanced social security benefits is really
00:51:17 very different from building a tunnel under the Hudson River, politicians of both parties seem
00:51:23 to believe that if the government is seen to be successful at doing one kind of thing,
00:51:28 it will make people think more favorably on doing other kinds of things. And so we have
00:51:33 conservatives tend to be opposed to any kind of increase in government spending, except military,
00:51:39 no matter how obviously a good idea it is, because they fear that it’s the thin end of
00:51:46 the wedge for bigger government in general. And to some extent, liberals tend to favor
00:51:53 spending on these things, partly because they see it as a way of proving that government can
00:51:59 do things well, and therefore it can turn to broader social goals. What you might have thought
00:52:11 would be a technocratic discussion about government investment, both in research and
00:52:15 in infrastructure, is contaminated by the fact that government is government and people link it
00:52:21 to other government actions. Perhaps a silly question, but as a species, we’re currently
00:52:28 working on venturing out into space, one day colonizing Mars. So when we start a society
00:52:35 on Mars from scratch, what political and economic system should it operate under?
00:52:41 Oh, I’m a big believer in… First of all, I don’t think we’re actually going to do that,
00:52:45 but let’s hypothesize that we colonize Mars or something. Look, representative democracy
00:52:54 versus pure democracy. Well, yeah, pure democracy where people vote directly on everything is really
00:53:06 problematic, because people don’t have time to try and master every issue. I mean, we can see
00:53:16 what government by referendum looks like. There’s a lot of that in California, and it doesn’t work
00:53:21 so good because it’s hard to explain to people that the various things they vote for may conflict.
00:53:26 So representative democracy, it’s got lots of problems. And kind of the Winston Churchill thing,
00:53:37 right? It’s the worst system we know, except for all the others. So yeah, sticking with the
00:53:43 representative and basically the American system of regulation and markets and the economy we have
00:53:52 going on is a pretty good one for Mars. If you start from scratch. If you’re gonna start from
00:53:57 scratch, you wouldn’t want a Senate where 16% of the population has half the seats.
00:54:06 You probably would want one which is actually more representative than what we have.
00:54:11 And the details, it’s unclear. When times are good, all of the various representative
00:54:22 democracy systems, whether it’s parliamentary democracies or a US style system, whether you
00:54:30 have a prime minister or the head of state as an elected president, they all kind of work well,
00:54:36 when times are good, and they all have different modes of breakdown. So I’m not sure I know what
00:54:40 the answer is. But something like that is given what we’ve seen through history, it’s the least
00:54:49 bad system out there. I’m a big fan of the TV series The Expanse, and it’s kind of gratifying
00:55:02 that out there, it’s the Martian Congressional Republic. In a brief sense, so amongst many things,
00:55:13 you’re also an expert at international trade. What do you make of the complexity? So I can
00:55:24 understand trade between two people, say two neighboring farmers. It seems pretty straightforward
00:55:30 to me. But internationally, we need to start talking about nations and nations trading seems
00:55:35 to be very complicated. So from a high level, why is it so complicated? What are all the different
00:55:42 factors that weigh the objectives that need to be considered in international trade? And maybe
00:55:48 feeding that into a question of, do you have concerns about the two giants right now of the
00:55:55 U.S. and China, and the tension that’s going on with the international trade there with the trade
00:56:01 war? Well, first of all, international trade is not really that different from trade among
00:56:05 individuals. It’s vastly more complex, and there are many more players. But in the end, the reasons
00:56:15 why countries trade are pretty much the same as the reasons why individuals trade. Countries trade
00:56:19 because they’re different, and they can derive mutual advantage from concentrating on the things
00:56:25 they do relatively well. And also, there are economies of scale. Individuals have to decide
00:56:36 whether to be a surgeon or an accountant. It’s probably not a good idea to try and be both,
00:56:42 and countries benefit from specializing just because of the inherent advantages of specialization.
00:56:48 Now, the fact that it’s a big world, and we’re talking about millions of products being traded,
00:56:56 and in today’s world, often trade involves many stages. So that made in China iPhone is actually
00:57:05 assembled from components that are made all over the world. But it doesn’t really change the
00:57:11 fundamentals all that much. There’s a recurrent… I mean, the dirty little secret of international
00:57:22 trade conflict is that actually it’s not… Conflicts among countries are really not that
00:57:27 important. Most trade is beneficial to both sides and to both countries, but it has big impacts on
00:57:37 the distribution of income within countries. So the growth of US trade with China has made both
00:57:44 US and China richer, but it’s been pretty bad for people who were employed in the North Carolina
00:57:52 furniture industry, who did find that their jobs were displaced by a wave of imports from China.
00:57:58 And so that’s where the complexity comes in. Not at all clear to me. We have some real problems
00:58:08 with China, although they don’t really involve trade so much as things like respect for intellectual
00:58:14 property. Not clear that those real problems that we do have with China have anything to do with the
00:58:22 current trade war. The current trade war seems to be driven instead by a fundamentally wrong notion
00:58:28 that when we sell goods to China, that’s good, and when we buy goods from China, that’s bad. And
00:58:33 that’s misunderstanding the whole point. Is trade with China in both directions a good thing?
00:58:40 Yeah, we would be poorer if it wasn’t for it. But there are downsides, as there are for any economic
00:58:46 change. It’s like any new technology makes us richer, but often hurts some people. Trade with
00:58:53 China makes us richer, but hurts some people. And I wouldn’t undo what has happened, but I wish we
00:59:01 had had a better policy for supporting and compensating the losers from that growth.
00:59:09 So we live in a time of radicalization of political ideas, Twitter mobs, and so on.
00:59:14 And yet here you are in the midst of it, both tweeting and writing in the New York Times articles
00:59:21 with strong opinions, riding this chaotic wave of public discourse. Do you ever hesitate or feel
00:59:29 a tinge of fear for exploring your ideas publicly and unapologetically?
00:59:34 Oh, I feel fear all the time. It’s not too hard to imagine scenarios in which this is going to,
00:59:40 you know, I might personally find myself kind of in the crosshairs. And I mean, I am the
00:59:49 king of hate mail. I get amazing correspondence. Does it affect you?
00:59:55 It did. It did when it started. These days I’ve developed a very thick skin.
01:00:01 So I don’t usually get, in fact, if I don’t get a wave of hate mail after a column, then
01:00:07 I’ve probably wasted that day.
01:00:10 So what do you make of that as a person who’s putting ideas out there? If you look at the
01:00:16 history of ideas, the way it works is you write about ideas, you put them out there. But now
01:00:22 when there’s so much hate mail, so much division, what advice do you have for yourself and for
01:00:29 others trying to have a discussion about ideas, difficult ideas?
01:00:33 Well, I don’t know about advice for others. I mean, for most economists, you know, just
01:00:40 do your research. We can’t all be public intellectuals and we shouldn’t try to be.
01:00:46 And in fact, I’m glad that I didn’t get into this business until I was in my late 40s. I mean,
01:00:55 this is probably best to spend your decades of greatest intellectual flexibility addressing
01:01:03 deep questions, not confronting Twitter mobs. And as for the rest, I think when you’re writing
01:01:12 about stuff, the answers like no one’s watching, write like nobody’s reading. Write what you think
01:01:23 is right. Trying to make it, obviously, trying to make it comprehensible and persuasive. But
01:01:29 don’t let yourself get intimidated by the fact that some people are going to say nasty things.
01:01:40 You can’t do your job if you are worried about criticism.
01:01:48 Well, I think I speak for a lot of people in saying that I hope that you keep dancing like
01:01:52 nobody’s watching on Twitter and New York Times and books. So Paul, it’s been an honor. Thank you
01:01:58 so much for talking to me. Great. Thanks for listening to this conversation with Paul Krugman.
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01:02:33 from Adam Smith in The Wealth of Nations, one of the most influential philosophers and economists
01:02:39 in our history. It is not from the benevolence of the butcher, the brewer, or the baker that we
01:02:45 expect our dinner, but from their regard to their own interest. We address ourselves not to their
01:02:51 humanity, but to their self love and never talk to them of our necessities, but of their advantages.
01:02:59 Thank you for listening and hope to see you next time.