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Speaker 1

00:00

The following is a conversation with Paul Krugman, Nobel Prize winner in economics, professor at CUNY and columnist at the New York Times. His academic work centers around international economics, economic geography, liquidity traps, and currency crises. But he also is an outspoken writer and commentator on the intersection of modern day politics and economics, which places him in the middle of the tense, divisive modern day political discourse. If you have clicked dislike on this video and started writing a comment of derision before listening to the conversation, I humbly ask that you please unsubscribe from this channel and from this podcast, not because you're conservative, a libertarian, a liberal, a socialist, an anarchist, but because you're not open to new ideas, at least in this case, especially at its most difficult, from people with whom you largely disagree.

Speaker 1

00:56

I do my best to stay away from politics of the day because political discourse is filled with a degree of emotion and self-assured certainty that to me is not conducive to exploring questions that nobody knows the definitive right answer to. The role of government, the impact of automation, the regulation of tech, the medical system, guns, war, trade, foreign policy are not easy topics and have no clear answers despite the certainty of the so-called experts, the pundits, the trolls, the media personalities and the conspiracy theorists. Please listen, empathize, and allow yourself to explore ideas with curiosity and without judgment and without derision. I will speak with many more economists and political thinkers trying to stay away from the political battles of the day and instead look at the long arc of history and Lessons it reveals in this I appreciate your patience and support This is the artificial intelligence podcast if you enjoy it subscribe by YouTube give it 5 stars an Apple podcast Follow on Spotify support on patreon or simply connect with me on Twitter at Lex Friedman, spelled F-R-I-D-M-A-N.

Speaker 1

02:15

I recently started doing ads at the end of the introduction. I'll do 1 or 2 minutes after introducing the episode and never any ads in the middle that can break the flow of the conversation. I hope that works for you and doesn't hurt the listening experience. This show is presented by Cash App, the number 1 finance app in the App Store.

Speaker 1

02:35

Cash App lets you send money to friends, buy Bitcoin, and invest in the stock market with fractional share trading, allowing you to buy $1 worth of a stock no matter what the stock price is. Brokerage services are provided by Cash App Investing, a subsidiary of Square and member SIPC. Get Cash App from the App Store and Google Play and use the code LEXPODCAST. You'll get $10 and Cash App will also donate $10 to FIRST, 1 of my favorite organizations that is helping to advance robotics and STEM education for young people around the world.

Speaker 1

03:10

Since Cash App does fractional share trading, let me say that to me, it's a fascinating concept. The order execution algorithm that works behind the scenes to create the abstraction of fractional orders for the investor is an algorithmic marvel. So big props to the Cash App engineers for that. I like it when tech teams solve complicated problems to provide in the end a simple effortless interface that abstracts away all the details of the underlying algorithm.

Speaker 1

03:39

And now here's my conversation with Paul Krugman.

Speaker 2

03:44

What does a perfect world, a utopia from an economics perspective look like?

Speaker 3

03:50

Wow, I don't really, I don't believe in perfection. I mean, somebody once said that his ideal was slightly imaginary Sweden. I mean, I like an economy that has a really high safety net for people, good environmental regulation, and something that's kind of like Some of the better run countries in the world, but with fixing all of the smaller things that are wrong

Speaker 2

04:22

with them. What about wealth distribution?

Speaker 3

04:25

Well obviously, you know, total equality is neither possible nor I think especially desirable, but I think you want 1 where, basically 1 where nobody is, nobody is hurting and where everybody lives in the same material universe. Everybody is basically living in the same society. So I think it's a bad thing to have people who are so wealthy that they're really not in the same world as the rest of us.

Speaker 2

04:51

What about competition? Do you see the value of competition? What may be its limits?

Speaker 3

04:57

Oh, competition is great when it can work. I mean, there's a... I remember, I'm old enough to remember when there was only 1 phone company and there was really limited choice and I think the arrival of multiple phone carriers and all that has actually, you know, it's been a really good thing and that's true across many areas, But not every industry is, not every activity is suitable for competition.

Speaker 3

05:26

So there's some things like healthcare where competition actually doesn't work. And so it's not 1 size fits all.

Speaker 2

05:35

That's interesting, why does competition not work in healthcare?

Speaker 3

05:41

Oh, this is a long list. I mean, there's a famous paper by Kenneth Arrow from 1963 which still holds up very well where he kind of runs down the list of things you need for competition to work well. Basically, both sides to every transaction being well-informed, having the ability to make intelligent decisions, understanding what's going on, and healthcare fails on every dimension.

Speaker 3

06:06

Healthcare, so not health insurance, healthcare. Well, both healthcare and health insurance, health insurance being part of it, but no, health insurance is really, the idea that there's effective competition between health insurers is wrong in healthcare. I mean, the idea that you can comparison shop for major surgery is just, you know, when people say things like that, you wonder are you living in the same world I'm living in?

Speaker 2

06:33

You know, that piece of well-informed, that was always an interesting piece for me, just observing as an outsider, because so much beautiful, such a beautiful world is possible when everybody's well-informed. My question for you is how hard is it to be well-informed about anything, whether it's healthcare or any kind of purchasing decisions or just life in general in this world?

Speaker 3

06:57

Oh, information, you know, it varies hugely. I mean, there's more information at your fingertips than ever before in history. The trouble is, first of all, that some of that information isn't true, so it's really hard, and then some of it is just too hard to understand.

Speaker 3

07:18

So if I'm buying a car, I can actually probably do a pretty good job of looking up, going to consumer reports, reviews. You can get a pretty good idea of what you're getting when you get a car. If I'm going in for surgery, first of all, fairly often it happens without you being able to plan it, but also, medical school takes many, many years, and going on the internet for some advice is not usually a very good substitute. So

Speaker 2

07:53

speaking about news and not being able to trust certain sources of information, how much disagreement is there about, I mentioned utopia, perfection in the beginning, but how much disagreement is there about what utopia looks like, or is most of the disagreement simply about the path to get there?

Speaker 3

08:11

Oh, I think there's 2 levels of disagreement. 1, maybe not utopia, but justice. You know, what is a just society?

Speaker 3

08:21

And that's, there are different views. I mean, I teach my students that there are, broadly speaking, 2 views of justice. 1 focuses on outcomes. You know, it's A just society is the 1 you would choose if you were trying to, the 1 that you would choose to live in if you didn't know who you were gonna be, that's kind of John Rawls.

Speaker 3

08:48

And the other focuses on process, that a just society is 1 in which there is no coercion except where absolutely necessary. And there's no objective way to choose between those. I'm pretty much a Rawlsian, and I think many people are. But anyway, so there's a legitimate dispute about what we mean by a just society anyway.

Speaker 3

09:11

But then there's also a lot of dispute about what actually works. There's a range of legitimate disputes. I mean any card-carrying economist will say that incentives matter, but how much do they matter? How much does a higher tax rate actually deter people from working?

Speaker 3

09:31

How much does a stronger safety net actually lead people to get lazy? I have a pretty strong view that the evidence points to conclusions that are considerably to the left of where most of our politicians are, but there is legitimate room for disagreement on those things. So you've mentioned outcomes. What are

Speaker 2

10:00

some metrics you think about that you keep in mind, like the Gini coefficient, but really anything that measures how good we're doing, whatever we're trying to do, what are the metrics you keep an eye on?

Speaker 3

10:12

Well, I'm actually, I'm not a fan of the Gini coefficient, not because it's anything.

Speaker 2

10:17

What is the Gini coefficient?

Speaker 3

10:18

Okay, yeah, the Gini coefficient is a measure of inequality. And it is commonly used because it's a single number. It usually tracks with other measures, but the trouble is there's no sort of natural interpretation of it.

Speaker 3

10:34

She asked me, what does a society with a Gini of 0.45 look like as opposed to a society with a Gini of 0.25? And Well, I can kind of tell you, you know, when the 0.25 is Denmark and 0.45 is Brazil, but that's a really, there's no sort of easy way to do that mapping. I mean, I look at things like what is, first of all, things like what is the income of the median family, what is the income of the top 1%, how many people are in poverty by various measures of poverty. And then I think we want to look at questions like how healthy are people?

Speaker 3

11:27

How is life expectancy doing? And how satisfied are people with their lives? Because there is, That sounds like a squishy number, not so much happiness. It turns out that life satisfaction is a better measure than happiness.

Speaker 3

11:39

But life satisfaction, that varies quite a lot. And I think it's meaningful, if not too rigorous, to say, look, according to that kind of, according to polling, people in Denmark are pretty satisfied with their lives, and people in the United States not so much so.

Speaker 2

11:59

And of course Sweden wins every time.

Speaker 3

12:01

No, actually Denmark wins these days. Denmark and Norway tend to win these days. Sweden doesn't do badly, but none of these are perfect.

Speaker 3

12:12

But look, I think by and large, There's a bit of a pornography test. If you, how do you know a decent society? Well, you kind of know it when you see it.

Speaker 2

12:23

Right. Where's America stand on that?

Speaker 3

12:26

We are, have a remark, our society, I mean, it's, There are a lot of virtues to America, but there's a level of harshness, brutality, an ability for somebody who just has bad luck to fall off the edge that is really, shouldn't be happening in a country as rich as ours. So we have somehow managed to produce a crueler society than almost any other wealthy country for no good reason. What do you

Speaker 2

13:00

think is lacking in the safety net that the United States provides? You said there's a harshness to it. And what are the benefits and maybe limits of a safety net in a country like ours?

Speaker 3

13:13

Well, every other advanced country has some universal guarantee of adequate health care. The United States is the only place where citizens can actually fail to get basic health care because they can't afford it. That's not hard to do, everybody else does it, but we don't.

Speaker 3

13:33

We've gotten a little bit better at it than we were, but still, that's a big deal. We have remarkably weak support for children. Most countries have substantial safety, you know, parents of young children get much more support elsewhere. They get often nothing in the US.

Speaker 3

13:57

We have limited care for people, long-term care for the elderly is a very hit and miss thing. But I think that the really big issues are that we don't take care of children who make the mistake of having the wrong parents, and we don't take care of people who make the mistake of getting sick. And those are things that

Speaker 2

14:23

a country, a rich country should be doing. Sorry for sort of a difficult question, but what you just said kind of feels like the right thing to do in terms of a just society, but is it also good for the economic health of a society to take care of the people who are the unfortunate members of society?

Speaker 3

14:46

By and large, it looks like doing the right thing in terms of justice is also the right thing in terms of economics. If we're talking about a society that has extremely high tax rates that deter, remove all incentives to provide a safety net that is so generous that why bother working or striving? That could be a problem, but that's, I don't actually know any society that looks like that.

Speaker 3

15:15

Even in European country with very generous safety nets, people work and innovate and do all of these things. And there's a lot of evidence now that lacking those basics is actually destructive, that children who grow up without adequate healthcare, without adequate nutrition, are developmentally challenged. They don't live up to their potential as adults. So the United States actually probably pays a price.

Speaker 3

15:44

You know, We're harsh, we're cruel, and we actually make ourselves poorer as a society, not just the individuals, by being so harsh and cruel.

Speaker 2

15:54

Okay, so invisible hand, Smith. Where does that fit in? The power of just people acting selfishly and somehow everything taking care of itself to where the economy grows, there's no cruelty, no injustice, that the markets regulate themselves.

Speaker 2

16:16

Is there power to that idea and what are its limits?

Speaker 3

16:20

There's a lot of power to that. I mean, there's a reason why I don't think sensible people want the government running steel mills or they want the government to own the farms, right? The markets are a pretty effective way of getting incentives aligned, of inducing people to do stuff that works.

Speaker 3

16:46

And the invisible hand is saying that people, farmers aren't growing crops because they want to feed people. They're growing crops because they can make money by it, but it actually turns out to be a pretty good way of getting agricultural products grown. So the invisible hand is an important part, but it's not, there's nothing mystical about it, it's a mechanism, it's a way to organize economic activity, which works well given a bunch of preconditions, which means that it actually works well for agriculture, it works well for manufacturing, it works well for many services, it doesn't work well for health care, it doesn't work well for education. So there are...

Speaker 3

17:29

Having a society which is kind of 3 quarters invisible hand and 1 quarter visible hand seems to be something, something on that order seems to be the balance that works best. It's just don't wanna, you don't wanna romanticize or make something mystical out of it. It's just, this is 1 way to organize stuff that happens to have broad but not universal application.

Speaker 2

17:55

So then forgive me for romanticizing it, but it does seem pretty magical that, you know, I kind of have an intuitive understanding of what happens when you have like 5, 10, maybe even 100 people together, the dynamics of that. But the fact that these large society of people, for the most part, acting in a self-interested way and maybe electing representatives for themselves, that it all kind of seems to work. It's pretty magical.

Speaker 3

18:22

The fact that there's, you know, that right now there's a wide assortment of fresh fruit and vegetables, and you know, in the local markets up and down the street. Who's planning that? And the answer is nobody.

Speaker 3

18:41

That's the invisible hand at work, and that's great. And that's a lesson that Adam Smith figured out more than 200 years ago, and it continues to apply. But even Adam Smith has a section in his book about why it's important to regulate banks. So the invisible hand has its limits.

Speaker 3

19:04

Yeah, and that example is actually a powerful 1 in terms of the supermarket of fruit. That was

Speaker 2

19:09

my experience coming from Russia, from the Soviet Union, is when I first entered a supermarket and just seeing the assortment of fruit, bananas. I don't think I've seen bananas before, first of all, but just the selection of fresh fruit was just mind-blowing. Beyond words, and the fact that, like you said, I don't know what made that happen.

Speaker 3

19:32

Well, there is some magic to the market. As showing my age, but you know the old movie quote, sometimes the magic works and sometimes it doesn't. And you have

Speaker 2

19:42

to have some idea of when it doesn't. So how do you get regulation right? What can government at its best do?

Speaker 2

19:50

Government, strangely enough in this country today, seems to get a bad rap. Like everyone seems to, everybody's against the government.

Speaker 3

20:01

Yeah, well a lot of money has been spent on making people hate the government. But the reality is government does some things pretty well. I mean, government does health insurance pretty well.

Speaker 3

20:14

So much so, I mean, given our anti-government bias, it really is true that there are people out there saying, don't let the government get its hands on Medicare. So people actually love the government health insurance program far more than they love private health insurance. Basic education. It turns out that your local public high school is the right place to have students trained.

Speaker 3

20:42

And private for, certainly for-profit education is by and large a nightmare of ripoffs and grift and people not getting what they thought they were paying for. It's a judgment case. And it's funny. There are things, I mean, everybody talks about the DMV as being, you know, do you want the economy?

Speaker 3

21:10

Actually, my experience is that the DMV have always been positive. Maybe I'm just going to the right DMVs, but in fact, a lot of government works pretty well. So you'd have to, to some extent, you can do these things on a priori grounds. You can talk about the logic of why health care is not going to be handled well by the market, but partly it's just experience.

Speaker 3

21:30

We tried, or at least some countries have tried nationalizing their steel industries. That didn't go well. But we've tried privatizing education and that didn't go well. So you find out what works.

Speaker 2

21:43

What about this new world of tech? How do you see, what do you think works for tech? Is it more regulation or less regulation?

Speaker 3

21:52

There are some things that need more regulation. I mean, we're finding out that, you know, the world of social media is 1 in which competitive forces aren't working very well and trusting the companies to regulate themselves isn't working very well. But I'm on the whole a tech skeptic, not in the sense that I think the tech doesn't work and it doesn't do stuff, but the idea that we're living through greater technological change than ever before is really an illusion.

Speaker 3

22:26

We've, ever since the beginning of the Industrial Revolution, We've had a series of ethical shifts in the nature of work and the kinds of jobs that are available. And it's not at all clear that what's happening now is any bigger or faster or harder to cope with than past shocks.

Speaker 2

22:49

It is a popular notion in today's sort of public discourse that automation is going to have a huge impact on the job market now. Yeah, there is something transformational happening now. Can you talk about that, maybe elaborate a little bit more?

Speaker 2

23:08

Do you not see the software revolutions happening now with machine learning, availability of data, that kind of automation, being able to sort of process, clean, find patterns in data, and you know, you don't see that disrupting any 1 sector to a point where there's a huge loss of jobs?

Speaker 3

23:31

Well, there may be some things. I mean, actually, you know, translators, there's really reduced demand for translators because machine translation ain't perfect, but it ain't bad. There are some kinds of things that are changed, but it's not, overall productivity growth has actually been slow in recent years.

Speaker 3

23:55

It's been much slower than in some past periods. So The idea that automation is taking away all the jobs, the counterpart would be that we would be able to produce stuff with many fewer workers than before, and that's not happening. There are a few isolated sectors, there are some kinds of jobs that are going away, But that keeps on happening. I mean, New York City used to have thousands and thousands of longshoremen taking stuff off ships and putting them on ships.

Speaker 3

24:28

They're almost all gone now. Now you have the giant cranes taking containers on and off ships in Elizabeth, New Jersey. That's not robots, it doesn't sound high-tech, but it actually pretty much destroyed an occupation. Well, it wasn't fun for the Longshoremen, to say the least, but it's not, we coped, we moved on and that sort of thing happens all the time.

Speaker 3

24:57

You mean farmers, We used to be a nation which was mostly farmers. There are now very few farmers left. The end reason is not that we've stopped eating, it's that farming has become so efficient that we don't need a lot of farmers, and we coped with that too. So the idea that there's something qualitatively different about what's happening now, so far isn't true.

Speaker 3

25:24

So yeah, your intuition is there is going to be a loss of jobs, but it's just a

Speaker 2

25:28

thing that just continues. There's nothing qualitatively different about this moment.

Speaker 3

25:33

Some jobs will be lost, others will be created, as has always been the case so far. I mean, maybe there's a singularity, maybe there's a moment

Speaker 2

25:41

when the machines get smarter than we are and SkyTech kills us all or something, right? But that's not visible in anything we're seeing now. You mentioned the metric of productivity.

Speaker 2

25:52

Could you explain that a little bit? Because it's a really interesting 1. I've heard you mention that before, in connection with automation. So what is that metric?

Speaker 2

26:02

And if there is something qualitatively different, what should we see in that metric?

Speaker 3

26:06

Well, okay, productivity, first of all, production. We do have a measure of the economy's total production, you know, real GDP, which is itself, it's a little bit of a construct because it's quite literally, it's adding apples and oranges. So we have to add together various things, which we basically do by using market prices, but we try to adjust for inflation.

Speaker 3

26:30

But it's kind of, it's a reasonable measure of how much the economy is producing.

Speaker 2

26:34

Is it goods and, sorry to interrupt, is it goods and services?

Speaker 3

26:36

It's goods and services, it's everything. Okay. Productivity is, you divide that total output by the number of hours worked.

Speaker 3

26:45

So we're basically asking how much stuff does the average worker produce in an hour of work? And if you're seeing really rapid technological progress, then you'd expect to see productivity rising at a rapid clip, which we did for the generation after World War II, productivity rose 2% a year on a sustained basis. Then it dropped down for a while. Then there was a decade of fairly rapid growth from the mid-'90s to the mid-2000s.

Speaker 3

27:18

And then it dropped off again. And it's not impressive right now. So you're just not seeing an ethical shift in the economy. So let

Speaker 2

27:28

me then ask you about the psychology of blaming automation. A few months ago you wrote in the New York Times, quote, the other day I found myself as I often do at a conference discussing lagging wages and soaring inequality. There was a lot of interesting discussion, but 1 thing that struck me was how many of the participants just assumed that robots are a big part of the problem, that machines are taking away the good jobs, or even jobs in general.

Speaker 2

27:54

For the most part, this wasn't even presented as a hypothesis, just as part of what everyone knows. Yeah. So why, maybe can you psychoanalyze our public intellectuals or economists, or us actually in the general public, why this is happening? Why this assumption is just infiltrated

Speaker 3

28:16

public discourse? There's a couple of things. 1 is that the particular technologies that are advancing now are ones that are a lot more visible to the chattering class.

Speaker 3

28:31

When you had, when containerization did away with the jobs of longshoremen, well, not a whole lot of college professors are close friends with longshoremen, right? And so we see this 1. Then there's A second thing, which is, you know, we just went through a severe financial crisis and a period of very high unemployment has finally come down. There's really no question that that high unemployment was about macroeconomics, It was about a failure of demand.

Speaker 3

29:02

But macroeconomics is really non-intuitive. People just have a hard time wrapping their minds around it. And among other things, people have a hard time believing that something as trivial as, well, people just aren't spending enough, can lead to the kind of mass misery that we saw in the 1930s, or the not quite so severe, but still serious misery that we saw after 2008. And there's always a tendency to say, it must be something big.

Speaker 3

29:27

It must be technological change. That means we don't need workers anymore. There was a lot of that in the 30s, and that same thing happened after 2008, the assumption that it has to be something, some deep cause, not something as trivial as a failure of investor confidence and inadequate monetary and fiscal response. And the last thing, wages.

Speaker 3

29:53

A lot of what's happened on wages is at some level political. It's the collapse of the union movement, it's policies that have squeezed workers bargaining power, and for kind of obvious reasons there are a lot of influential people who don't want to hear that story. They want it to be an inevitable force of nature. Technology has made it impossible to have people earn middle class wages.

Speaker 3

30:18

And so they don't like the story that says, actually, no, it's kind of the political decisions that we made that have caused this income stagnation, and so They're a receptive audience for technological determinism. So what comes first in your view, the economy or politics in terms of what has impact on the other? Oh, look, everything interacts. Actually, that's 1 of the rules that I was taught in economics.

Speaker 3

30:48

Everything affects everything else in at least 2 ways. But the, I mean, clearly the economy drives a lot of political stuff. But also, clearly politics has a huge impact on the economy. We look at the decline of unions in America and say, well, the world has changed and unions don't have a role, But 2 thirds of workers in Denmark are unionized.

Speaker 3

31:19

And Denmark has the same technology and faces the same global economy that we do. It's just a difference in political choices that leads to that difference. So I actually teach a course here at CUNY called Economics of the Welfare State, which is about things like health care and retirement and to some extent wage policy and so on. And the message I keep on trying to drive home is that, look, All advanced countries have got roughly equal competence.

Speaker 3

31:47

We all have the same technology. But we make very different choices. Not that America always makes the wrong choices. We do some things pretty well.

Speaker 3

31:55

Our retirement system is 1 of the better ones. But the point is that there's a huge amount of political choice involved in the shape of the economy. So what is a welfare state? Welfare state is the old term, but it basically refers to all the programs that are there to mitigate, if you like, the risks and injustices of the market economy.

Speaker 2

32:22

So in the US, the welfare state is Social Security, Medicare, Medicaid, minimum wages, food stamps. When you say welfare state, my first sort of feeling is a negative 1. Well, that's.

Speaker 2

32:36

Even though I like all, I probably generally, at least theoretically, like all the welfare programs.

Speaker 3

32:41

Well, it's been demonized. And to some extent, I'm being a little, doing a little bit of thumbing my nose at all of that by just using the term welfare state Although it's not

Speaker 2

32:53

I see yeah, I got you

Speaker 3

32:55

but everybody every advanced country actually has a lot of welfare state even the u.s. I mean we That's fundamental part of the fabric of our society the Social Security Medicare Medicaid are just things we take for granted as part of the scene and So if you and you know, there's a lot of there's people on the right wing who are saying, oh, it's all socialism. And well, I guess, mean what you want them to mean.

Speaker 3

33:28

And we, just today, I told my class about the record that Ronald Reagan made in 1961 warning that Medicare would destroy American freedom, but it sort of didn't happen.

Speaker 2

33:46

On the topic of welfare state, what are your thoughts on universal basic income? And that's sort of a, not a generic, but a universal safety net of this kind.

Speaker 3

33:58

There's always a trade-off. When we talk about social safety net programs, there's always a trade-off between universality, which is clean but means that you're giving a lot of money to people who don't necessarily need it, and some kind of targeting, which makes it easier to deal with the crucial problems with limited resources, but both has incentive problems and kind of political, and I would say even psychological issues. So the great thing about Social Security and Medicare is no questions asked, you don't have to prove that you need them, it just comes.

Speaker 3

34:46

I mean I didn't, I'm on Medicare allegedly, I mean it's run through my New York Times health insurance, but I didn't have to file an application with the Medicare office to prove that I needed it. It just happened when I turned 65. That's good for dignity. And it's also good for the political support, because everybody gets Medicare.

Speaker 3

35:13

On the other hand, If you, and we can do that with healthcare. To give everybody a guarantee of an income that's enough to live on comfortably, that's a lot of money.

Speaker 2

35:28

What about enough income to carry you over through difficult periods, like if you lose a job or that kind of thing?

Speaker 3

35:36

Well, we have unemployment insurance, and I think our unemployment insurance is too short-lived and too stingy. It would be better to have a more comprehensive unemployment insurance benefit. But the trouble with something like universal basic income is that either the bar is set too low, so it's really not something you can live on, or it's an enormously expensive program.

Speaker 3

36:02

And so at this point, I think that we can do far better by building on the kinds of safety net programs we have. I mean, food stamps, earned income tax credit, we should have a lot more family support policies. Those things can deal with, can do a lot more to really diminish the amount of misery in this country. UBI is something that is being, I mean, it goes kind of hand in hand with this belief that the robots are gonna take all of our jobs.

Speaker 3

36:35

And if that was really happening, then I might reconsider my views on UPI, but I don't see that happening. So are you happy with

Speaker 2

36:45

discourse that's going on now in terms of politics. So you mentioned a few political candidates. Is the kind of thing going on, both on Twitter and debates and the media, through the written word, through the spoken word, How do you assess the public discourse now in terms of politics?

Speaker 3

37:03

We're in a fragmented world. So the public discourse. More so than ever before.

Speaker 3

37:09

So at this point, the public discourse that you see if Fox News is your principal news source, is very different from the 1 you get if you read the New York Times. On the whole, my sense is that mainstream political reporting, policy reporting, is A, not too great, but B, better than it's ever been. Because when I first got into the pundit business, it was just awful. Lots of things just never got covered.

Speaker 3

37:45

And if things did get covered, it was always both sides. It's the line that comes back from me writing during the 2000 campaign was that if 1 of the candidates said that the earth was flat, the headline would be views differ on shape of planet. I mean, that's less true. There's still a fair bit of that out there, but it's less true than there used to be.

Speaker 3

38:08

And there are more people reporting, writing on policy issues who actually understand them than ever before. So that's good. But still, how much the typical voter is actually informed unclear. I mean, the democratic debates, I think we, I'm hoping that we finally get down to having a, not having 27 people on the stage or whatever it is they have, but, but, you know, they're reasonably substantive, certainly better than before.

Speaker 3

38:51

And while there's a lot of still theater criticism instead of actual analysis in the reporting, it's not as totally dominant as in the past.

Speaker 2

39:03

Can I ask maybe a dumb question, but from an open-minded perspective, when people on the left and people on the right, I think view the others as sometimes complete idiots?

Speaker 3

39:23

Yeah. What

Speaker 2

39:25

do we do with that? You know, is it possible that the people on the right are correct about what they currently believe. Is that kind of open-mindedness helpful or is this division long-term productive for us to sort of have this food fight?

Speaker 3

39:48

Well, the trouble you have to confront is that there's a lot of stuff that just is false out there and but commands extensive political allegiance. So the idea, well, both sides need to listen to each other respectfully. I'm happy to do that when there's a view that is worthy of respect, but a lot of stuff is not.

Speaker 3

40:12

And so take economics is something where I think I know something. And I'm not sure that I'm always right. In fact, I know I've been wrong plenty of times. But I think that there is a difference between economic views that are within the realm of we can actually have an interesting discussion.

Speaker 3

40:36

And those that are just crank doctrines or things that are purely being disseminated because people are being paid to disseminate them. So there are plenty of good, serious center-right economists that I'm happy to talk to. None of those center-right economists has any role in the Trump administration. The Trump administration and by and large Republicans in Congress only want to listen to people who are cranks.

Speaker 3

41:05

And so I think it's being dishonest with my readers to pretend otherwise. There's no way I can reach out to people who think that reading Ayn Rand novels is how you learn about monetary economics.

Speaker 2

41:21

Let me linger on that point. So if you look at Ayn Rand, okay, so you said center right. What about extreme?

Speaker 2

41:26

People who have like radical views, you think they're not grounded in any kind of data, in any kind of reality. I'm just sort of curious about how open we should be to ideas that seem radical.

Speaker 3

41:44

Oh, Radical ideas is fine, but then you have to ask, is there some basis for the radicalism? And if it's something that is not grounded in anything, then, and particularly, by the way, if it's something that's been refuted by evidence again and again, and people just keep saying it, if it's a zombie idea, and there's a lot of those out there, then there comes a point when it's not worth trying to fake respect for it.

Speaker 2

42:16

I see, so there's a, through the scientific process, you've shown that this idea does not hold water, but I like the idea of zombie ideas, but they live on through, it's like the idea that the earth is flat, for example, has been for the most part disproven. But it lives on actually and growing in popularity currently.

Speaker 3

42:38

Yeah, and there's a lot of that out there. And you can't wish it away and you're not being fair to either yourself or if you're somebody who writes for the public, you're not being fair to your readers to pretend otherwise.

Speaker 2

42:53

So quantum mechanics is a strange theory, but it's testable, and so while being strange, it's widely accepted amongst physicists. How robust and testable are economics theories? If we compare them to quantum mechanics and physics and so on.

Speaker 3

43:11

Okay, economics, look, it's a complex system. And it's also 1 in which, by and large, you don't get to do experiments. And so economics is never gonna be like quantum mechanics.

Speaker 3

43:24

That said, you get natural experiments, you get tests of rival doctrines. You know, In the immediate aftermath of the financial crisis, there was 1 style, 1 basic theory of macroeconomics, which ultimately goes back to John Maynard Keynes, that made a few predictions. It said, under these circumstances, printing money will not be inflationary. Running big budget deficits will not cause a rise in interest rates.

Speaker 3

43:56

Slashing government spending, austerity policies will lead to depressions if tried. Other people had exactly the opposite predictions. And we got a fairly robust test. And 1 theory won, interest rates stayed low, inflation stayed low, austerity, countries that implemented harsh austerity policies suffered severe economic downturns.

Speaker 3

44:23

You don't get much, that's pretty clear. And that's not going to be true on everything, but there's A lot of empirical, I mean, the younger economists these days are very heavily data-based. And that's great. And

Speaker 2

44:40

I think that's the way to go. What theories of economics Is there currently a lot of disagreement about what you said?

Speaker 3

44:48

Oh, first of all, there's just a lot less disagreement, really, among serious researchers in economics than people imagine. We actually can track that. The Chicago Booth School has a panel, an ideologically diverse panel, and they regularly pose questions.

Speaker 3

45:08

And on most things, there's a huge... There's remarkable consensus. There are a lot of things where people imagine that there's dispute, but the illusion of dispute is something that's basically being fed by political forces and there isn't really. I mean, there are, I think, Questions about what are effective ways to regulate technology industries.

Speaker 3

45:36

We really don't know the answers there. There's a, or Look, I don't follow every part. Minimum wages. I think there's pretty overwhelming evidence that a modest increase in the minimum wage from current levels would not have any noticeable adverse effect on jobs.

Speaker 3

46:05

But if you ask how high can it go, $12 seems pretty safe given what we know. Is 15 okay? There's some legitimate disagreement there, I think probably, but people have a point. 20, where is the line at which it starts to become a problem?

Speaker 3

46:25

And the answer is, truly, we don't know.

Speaker 2

46:28

It's fascinating to try to, such a cool, economics is cool in that sense, because you're trying to predict something that hasn't been done before, the impact, the effects of something that hasn't been done before.

Speaker 3

46:39

Yeah, you're trying, you're going out of sample.

Speaker 2

46:41

Out of sample.

Speaker 3

46:42

And we have good reason to believe that there are, you know, that it's non-linear, that there comes a

Speaker 2

46:48

point at which it doesn't work the way it has in the past. So as an economist, how do you see science and technological innovation? When I took various economics courses in college, technological innovation seemed like a no-brainer way of growing an economy, and we should invest in it aggressively.

Speaker 2

47:08

I may be biased, but it seemed like the various ways to grow an economy seems like the easiest way, especially long-term. Is that correct? And if so, why aren't we doing it more? Well, that's okay.

Speaker 3

47:22

The first question is, yeah, I mean, all, it's pretty much overwhelming. We think we can more or less measure this, although there are some assumptions involved, but it's something like 70 to 80% of the growth in per capita income is basically the advance of knowledge. It's not just the crude accumulation of capital.