0:00

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0:42

Hello and welcome to another episode of

0:44

the Odd Lots Podcast.

0:45

I'm Joe Wisenthal and I'm Tracy Alloway.

0:48

Tracy, it feels like there are many things

0:50

in the news these days that are like

0:52

on the edge of reality and frankly

0:55

science fiction.

0:56

More evidence that we're living in the simulation.

0:59

Yes, no, you're absolutely right. So

1:01

first of all, we had this influx

1:03

of AI technology. Everyone

1:06

got very into chat GPT and now

1:08

everyone's talking about future AI applications.

1:11

And then we had let's see, oh,

1:13

we have the excitement over

1:16

the possibility of a room temperature

1:18

superconductor. And then even

1:21

weirder. We have a lot

1:23

of talk about aliens. We

1:25

had the congressional hearings about

1:27

UFOs recently. I actually saw

1:30

someone tie all of these things together

1:32

recently. They thought that the

1:34

LK nine to nine coming out like

1:37

the week after the congressional

1:39

hearings or the week of was evidence that

1:41

there are in fact aliens and the technology

1:43

has come from them.

1:44

So they take that with a grain of likes,

1:47

like left this little trail of yes for

1:49

us.

1:49

That's interesting.

1:50

Well, I think one of the conspiracy theories is

1:52

the reason it feels like all of this

1:54

is popping up now and sort of going

1:56

into hyper drive is because

1:59

the uh, I don't know, the powers

2:01

that be are laying the groundwork

2:03

for us to actually find out there

2:05

are aliens. So they're sort of dripping it out

2:08

and now the pace is picking up, and

2:10

so it's coming Joe.

2:12

So here's the thing. I do not believe

2:14

in it.

2:15

I'm like a deep UFO skeptic to

2:17

the point where I've almost like tuned out all the news.

2:20

If we do have a room temperature superconductor,

2:23

I don't even know what that means. Like I see

2:25

all these people like, oh my god, we are so back, this

2:27

is going to change the world. I still don't really understand

2:29

the significance AI. I

2:31

think it's pretty cool, but I don't know what it's going to do and

2:33

yet in terms of the economy. So when

2:36

you're faced with all these sci fi things,

2:38

Tracy like, what kind of guests do you

2:40

think?

2:41

Who comes to mind? Is someone who talking about Who's

2:43

the.

2:43

First person I call? Yeah, well,

2:46

I guess, uh, we have the

2:48

perfect guests.

2:49

We have the perfect guest. We are going to be speaking

2:52

with Paul Krugman, opinion writer for The

2:54

New York Times, professor at City

2:56

University of New York, of course, a Nobel Prize

2:58

winner in economics. And I read

3:00

on the internet that he was inspired to be an

3:02

economist because of science fiction, at

3:05

least according to a website I'm reading. And

3:07

so I think to understand the economics,

3:10

the implications, the thoughts are on aliens,

3:12

AI, superconductors, what they mean for the

3:14

world and the economy. Obviously, the

3:16

first name we calls Paul's. I think this is your first time

3:18

on our podcast. So, Paul, thank you so much for coming

3:20

on.

3:20

Odd lots.

3:22

Oh thanks, I think it is my first time.

3:24

I'm so proud that the first time

3:26

you're coming on all thoughts is to talk about

3:29

aliens. I'm so happy, I.

3:30

Know, of all the various things

3:32

we should be talking about. But hey, I'm

3:34

pretty bored with inflation.

3:36

Yeah, that inflation, the FED soft

3:38

landing fiscal policy, the six hundred

3:41

dollars checks. This recovery

3:43

versus the other one is so boring. It's so tired. Paul.

3:45

Do you think there could be a life elsewhere

3:48

in the galaxy?

3:50

I would think that it's extremely

3:53

unlikely that there isn't. I mean, it's

3:58

there is an argument that says that, you

4:00

know, particularly the complex life,

4:04

may require some very very special

4:06

circumstances, then we might actually be

4:08

alone out here. But that's

4:11

well, I guess that sounds unlikely.

4:14

It doesn'tseem like that it should be that hard

4:16

for there to be someplace else where

4:18

complex life has arisen. But here's

4:21

an argument for that don't

4:23

see very often, which is that

4:25

if there is other intelligent life out there,

4:28

just given the timescale of things, it

4:30

must have evolved hundreds of millions

4:33

of years before we did. So

4:35

if there are aliens out there, they are

4:38

if either wipe themselves out one way

4:40

or another or are on a level

4:42

so far beyond us that you know,

4:44

the meaningful interaction is impossible.

4:47

So in terms of there being

4:49

actual aliens, you know, landing

4:52

and kidnapping people and all of that,

4:54

that doesn't seem to me to be a very plausible

4:56

story.

4:57

So can I ask a step back question, which

4:59

is you know, Joe mentioned that he

5:02

read on the internet always a reliable source,

5:04

that you got into economics because of your

5:06

interest in science fiction. I remember you

5:08

wrote a paper, I think it's a very long time

5:10

ago, a theory of interstellar trade.

5:13

But why does this area interest

5:16

you? How did you get into you?

5:17

Why did you pretty

5:19

much?

5:20

Oh? Yeah, so it's very specific.

5:23

I read as a

5:25

teenager Isakasimov's

5:27

Foundation novels, and if anybody's

5:29

ever read the novels, they're about

5:32

how galactic civilization is collapsing

5:34

but is saved by mathematical

5:37

social scientists. And I wanted

5:39

to be one of those guys. So that's how I got

5:41

into economics, or at least that's

5:43

the story I like to tell, which is also,

5:45

by the way, why why I

5:48

cannot bear to watch the Apple TV

5:50

Foundation series, which completely

5:52

ditches the whole premise.

5:55

There may not be good TV, but it has nothing to

5:57

do with what Isakasimov wrote. So but anyway,

5:59

wait, it was quite specific.

6:01

In science fiction Economists Save.

6:03

The World in one particular,

6:06

a classic science fiction series, and they're

6:09

not economists exactly, they're mathematical

6:11

social scientists. But you know, that's

6:13

as close as I could get is doing

6:15

economics.

6:17

You did write a paper, as Tracy mentioned, on interstellar

6:20

trade.

6:22

What did you What is that all about?

6:24

I mean, like, what is what would make say,

6:26

interstellar trade any different between

6:28

trade between yous and China.

6:30

It's the paper I wrote when I was very

6:32

very young. I was a frustrated

6:34

assistant professor, and it finally got published

6:37

decades later. And so with mostly

6:39

a blowoff steam paper, I was having so

6:41

fun with the fact that, well, look, shipping

6:43

times for interstellar commerce

6:45

would be very very long. You know, not the time

6:48

it takes to get from Sharing High to Los

6:50

Angeles, but the climate takes to cross

6:53

twenty life years and at

6:56

that point the interest costs on shipping,

6:59

yes, up in transit are going to be a pretty significant

7:02

part of the expense. But how

7:04

much time is spent on transit Because of the theory

7:06

of relativity we know that the amount of time

7:08

received on the spaceship is going to

7:11

be different from the amount of time

7:13

perceived on a planet that remains

7:15

stationary. And it's always

7:17

all kind of silly. But you know, as

7:19

I said, I think in the introduction that

7:21

that the results of this paper will

7:23

be true but useless, which

7:26

is the opposite of what is typical in economics.

7:29

Wait, I thought that was typical, true but useless.

7:32

I thought that was what's typical in economics.

7:34

All right, Well, I'm sorry not to not

7:37

to malign the whole profession.

7:38

Sorry, I had some fun and

7:41

helped helped keep me more or less sane

7:43

during those you know, pre ten year

7:45

years that every academic has to go through.

7:48

Was it pure reviewed, I can't imagine.

7:50

But no. Actually, well, actually I

7:53

sent it off The Journal of Political

7:55

Economy used to have a joke paper section

7:57

at the end, miscellany.

7:59

I sent it and the then editor didn't

8:02

get any of the references.

8:05

There were, in fact, references to Isaac Asimov,

8:07

and so he sent why why is

8:09

the planet named Trantor? And I,

8:12

you know, we need revisions, And I said, I'm

8:15

not going to do that, so I just let it

8:17

sit. But it hits circulated kind of the samisdot

8:20

for a long time, and eventually

8:22

the Journal of Economic Inquiry contacted

8:26

me and we said, we've heard about this paper

8:28

you once wrote, can we publish it?

8:30

So I feel like not

8:33

to keep diving onto this one paper. But

8:35

you know, if it if it takes an incredibly

8:37

long time to ship something from here to the

8:40

other planet, is the But the

8:42

people on the ship don't perceive

8:44

it as long as those of us on

8:47

Earth, right, because time is slower time,

8:49

Okay.

8:50

And yes, that's the point. If you're

8:52

traveling at close to the speed of light, you

8:54

can do that, then none of this it makes any sense.

8:57

Then the subjective time is

8:59

going to be much And I actually

9:01

then went on very fancy

9:04

economic steer improving to say that that

9:06

doesn't matter because the relevant opportunity

9:08

costs is the time it takes on the planet.

9:10

Anyway, I'm looking at it now. I found

9:12

it online.

9:13

There's some great it's really funny.

9:15

Yeah.

9:15

Also, like in a very dry way, there's a line

9:18

that like interplanetary trade, while

9:20

of considerable empirical interest, raises

9:22

no major theoretical problems. Among

9:24

the authors who have not pointed this out

9:27

are Oland and Samuelson. I love that.

9:30

Yeah, Actually, Jeff Frankel, you

9:32

may know that if Harvard wrote it. A sort

9:34

of companion paper around the same time

9:37

called is Their Trade with Other Planets, in which

9:39

he pointed out that if you sum up total

9:41

world exports and total world

9:43

imports, you know, countries report

9:45

the amount the export they don't actually match.

9:48

Oh yeah, and that the

9:50

world as a whole appears to export

9:52

more than it imports. Yeah.

9:54

Every statistical agency around

9:56

the world wants to flatter their numbers

9:58

of exports and a little bit off

10:00

the imports.

10:01

I guess, yeah, maybe there

10:03

there are for right, Yeah, and a fair

10:05

bit yeah stuff that is not Also

10:08

that it's just if you smuggle stuff in past

10:10

customs, it shows up as an export

10:13

but not as an import.

10:14

Right Anyway, do you pay attention to

10:16

things like the UFO hearings, like right

10:19

now? Like how engaged are you? Like when you see

10:21

these headlines?

10:24

I think We've got enough. You know, there's enough. There's

10:26

enough weird stuff in the world. Although I

10:28

will say that, by the way, the theory

10:31

that says that the aliens are selectively

10:33

releasing technologies

10:36

that's a subplot in the movie men in

10:38

black and I hope people remember this. But

10:40

the agency that employees will

10:43

smith is how they

10:45

financed themselves by selectively releasing

10:48

alien technologies. I think

10:50

that Bell Crow was supposed to be one of them about

10:54

that, so that that's

10:56

so you really should be. It should be even more conspiratorial

10:59

than people are. It's not just that the aliens

11:01

are doing this because they're about to be found out.

11:04

It's that the government agents in

11:06

black suits are selectively

11:08

releasing these alien technologies.

11:10

Well, let me ask I guess the big question,

11:12

which is, how would you, as

11:15

an economist, you know, a

11:17

rigorous, well grounded researcher

11:20

in this field, how would you go about

11:22

thinking or incorporating

11:24

something like aliens

11:27

slash alien technology into

11:29

the way you think about the economy.

11:31

Yeah, the aliens, I have absolutely no idea.

11:34

I mean again, it's just if there are

11:36

aliens out there, if

11:38

they exist, they almost have to be immensely

11:42

more advanced, basically on a different

11:44

plane. And it's not clear that they would have any interest

11:47

in dealing with us. But the technologies,

11:49

if there are for whatever

11:51

reason, whether it's they're

11:53

leaking out of Area fifty one where

11:55

there are really big technological

11:58

things happening. Of course, the

12:01

technological progress is the

12:04

ultimately the main driver of

12:06

economic growth. So these are important things

12:09

things if they are if they pan.

12:11

Out, let's

12:28

talk about technological progress

12:31

as a driver of economic growth because

12:33

it seems like that. So it's like, Okay, there

12:35

is this thing that people are talking about, which

12:37

is the possibility of superconductors

12:40

that can exist at room temperature instead of really

12:43

cold temperatures, which supposedly might

12:45

have all kinds of implications for battery

12:47

tech or power transmission or electricity

12:50

consumption. I don't really totally get

12:52

it. I'm not a signed this, but it seems good.

12:54

But on the other hand, technologies exist and

12:57

they are exciting, but they don't necessarily show

12:59

up in the economic aggregates. They don't

13:01

suddenly make GDP growth grow from three to

13:03

three percent to ten percent just because there's

13:05

some new breakthrough. Why don't they Why

13:07

don't we get technological inventions

13:10

that suddenly caused GDP growth to

13:12

grow at a much faster pace.

13:14

Oh? Well, me, we certainly

13:16

do get inventions that make a difference

13:19

that show up a lot. I mean, so

13:21

if you think about, yeah, we have

13:24

a pretty good idea there was an

13:26

acceleration in US productivity growth

13:28

for about ten years from the mid nineties

13:31

to the mid naughties. That

13:33

was something like one percent a year faster

13:36

growth than before or since, which

13:38

we think was because business

13:41

finally figured out what to do with it. And

13:44

some of that's the Internet, it's it's just actually

13:46

some of it is finally figuring out how to use barcodes

13:48

to do effective inventory management, you know,

13:50

more prosaic things. But basically

13:52

there was a clear bump in productivity

13:55

that's was associated

13:57

with the rise of IT, networks

14:00

and all of that. And you could say, well,

14:02

that's it. All

14:04

we got was ten years of one percent faster

14:07

growth. But that's a ten percent

14:09

bigger economy, and there's almost

14:11

no conceivable economic policy

14:14

that would raise you as growth that much. Right,

14:16

So, even what was relative

14:19

to a lot of what people had

14:21

hoped for or predicted, even

14:23

though the results of it have

14:25

been somewhat disappointing, there's

14:27

still huge relative to anything that

14:29

you know that any presidential

14:32

candidate could plausibly promise to

14:34

accomplish.

14:35

How good are we at actually measuring

14:38

technology's impact on productivity?

14:40

Because I remember this was a talking point

14:42

a few years ago the idea that well, technology

14:45

is in fact improving, but the

14:47

way that it's improving and sort

14:49

of feeding into the economy is not

14:51

well captured by statistical

14:54

methods.

14:55

There's actually true levels of that. First of all, the way

14:57

that we actually of

15:00

measure technology is god awful

15:02

except not clear how else you

15:04

do it. I mean, we think that we have ways

15:06

of measuring the contributions of

15:08

tangible stuff like an increased

15:10

stock of capital to economic

15:13

growth. And what economists do

15:15

is they add up all of those things.

15:17

That's growth accounting, and then

15:20

whatever's left they say that's technology.

15:23

You know, it's a really pretty poor technique. It's

15:25

basically, technology is the measure of

15:27

what you can't explain otherwise. That's

15:30

not great. But on top of that,

15:32

then there's the unmeasured. As

15:34

you say, we don't have a very good handle

15:37

on. You know, what is the value of streamed

15:41

entertainment one way or another?

15:43

You know, for me, I'm really into

15:46

live musical performances and can't

15:48

get into you know, can't make

15:50

time in my life to go to as many as

15:52

I would like to. But I can watch a

15:55

lot of live musical performances on YouTube.

15:57

That's a pretty big. I would probably be

15:59

willing to pay thousands of dollars

16:01

a year for that. As it happens,

16:03

I don't have to pay that, but it's

16:06

and that's not captured by

16:08

the GDP statistics. And there's probably

16:11

a bunch of things like that. To take something

16:13

that's less sexy, but healthcare,

16:16

the fact that doctors can treat lots of things

16:18

that were untreatable before is

16:20

a really big thing. But you know, it has

16:22

always been true, but not always, but it's been

16:24

true for a very very long time. You

16:27

know, if you if you start from the late

16:29

nineteenth century when you started

16:31

to finally get big improvements in public

16:33

health because the people stopped

16:36

getting their their drinking water from a well

16:38

next to the outhouse, those are huge

16:40

gains that are really not at all captured

16:42

by our official statistics. So probably

16:44

it's the case. Uh, you

16:46

know, there's been much more economic growth than the

16:49

numbers show, or the much more, much

16:51

more improvement than the quality of life anyway than the

16:53

numbers show.

16:54

I'm glad you brought up the live music.

16:55

I was talking to Tracy earlier, and I have this

16:58

memory of us running into each other. It might

17:00

have been like twenty eleven or twenty twelve at

17:02

some conference in New York City and everyone

17:05

else is mingling and you were smartly in the

17:07

corner watching I think a live video

17:09

of the Arcade fire in twenty eleven.

17:11

Twenty jobs.

17:12

Who do you like the days any band wrecks?

17:15

Oh wow, it's fine.

17:19

And I worry when

17:21

I say this that I'm going to insult

17:23

bands I love by forgetting to mention them.

17:26

But the last concert I went to,

17:28

which was just at the beginning of the summer, was

17:30

Lark and Poe, which is a sisters

17:33

from Atlanta who do mostly

17:35

the blues and are just incredible.

17:38

I'm away for the summer. I went to a

17:40

little I won't get undisclosed

17:42

located by way. I went to just a bunch of local

17:44

musicians doing calling

17:47

themselves the Grateful Dread regularly

17:49

inspired Grateful Dead covers, but which

17:52

was great fun. But the next thing I'm

17:54

going to do something called a band has been around

17:56

for a while, old War Paint and

17:59

does sort of vaguely psychedelic

18:01

stuff. I mean, he's saying a boy genius.

18:04

They've been getting quite a lot of play. But

18:06

actually the troubling I like

18:08

the more intimate concerts. Yeah,

18:11

and the next Boy Genius performance is at

18:13

Madison Square Garden. Sorry

18:15

that's I love the band, but I wouldn't

18:18

love that experience. So you know, there's

18:20

a bunch. I mean, that's the thing I subscribed

18:22

to. I think around around forty

18:25

channels on YouTube which are almost all

18:27

indie musicians of one form or another, and.

18:29

I'm gonna have to check out Lark and Poe.

18:32

I'm looking them up now. It looks really good.

18:34

It looks like the kind of thing that I would like. I want

18:36

to go back.

18:36

We're talking about technological impacts

18:39

on macro, and someone's going to get

18:41

really mad. I've defended the

18:44

fact the sort of famous infamous

18:46

internet fax machine comment on

18:48

the sort that you made, because it doesn't

18:51

seem like one percent growth

18:53

even over ten years, is

18:55

really changes the economy like that

18:58

much or as much as you would think, given there's

19:00

sort of like huge upheaval that we've

19:02

seen that the Internet caused.

19:04

Like, is there any way to sort of know early

19:07

on or in real time what

19:09

a technology is going to do to the

19:12

economy or is it the only kind of

19:14

thing where you can say afterwards?

19:16

This seems to be what happened here.

19:19

Okay. What people don't know, by the way, is that

19:21

comment about the Internet and the fax machine

19:24

was in the context of a piece

19:26

that was meant to be funny.

19:29

I've taken a lot of

19:31

flak on Twitter, Paul,

19:35

and now I'm discovering that I was defending.

19:38

No. I think it is actually defensible, and I

19:40

will agree with you on that. But what was actually happening

19:43

was that was a piece where before I worked

19:45

for The Times, so I was asked to write a piece looking

19:48

back from one hundred years in the future

19:51

at what had happened, and so I wrote

19:53

that, you know a bunch of things, and many of them were deliberately

19:55

counterintuitive, some of which have turned

19:57

out to be true, and some whatnot that they if you want it.

20:00

The piece ends by saying that my

20:02

day job is working at a vernet at

20:05

a veterinarian, but I'm hoping that this piece

20:07

will get me on the lecture circuit. But

20:10

the other point was, in fact, if

20:12

you're looking for the transformative

20:16

economic effects of the

20:18

Internet, they are pretty

20:20

elusive in the data. Actually,

20:23

take a even more

20:25

extreme example, the smartphones.

20:28

The iPhone is introduced, I think in two thousand

20:30

and six, and if

20:32

you look at the official productivity

20:35

numbers, the period since two thousand

20:37

and six has been lousy

20:40

for productivity. It's been a long productivity

20:43

drought. The boom and productivity

20:45

such as it was the boom let was between

20:47

about ninety five and two thousand and five, which

20:50

is more much more the fax machine

20:52

era than the Internet era.

20:53

Okay, I have a really basic question, which

20:55

is, if you get a brand new,

20:58

world changing technology like

21:00

the Internet or say a room

21:03

temperature superconductor, would that

21:05

count as like an

21:07

exogenous shock or an

21:09

indigenous.

21:12

I mean, at some level everything's in

21:14

dodgeness, right, At

21:16

some level it's all quantum mechanics. But in

21:19

terms of being something that look

21:22

that the long sweep of technological

21:26

progress that begins in about two centuries

21:28

ago or a bit more, that's clearly endogenous.

21:31

Given that we had whatever it was,

21:34

the change in mindset, the change in the way

21:36

that people behave that

21:38

caused the Industrial Revolution and everything that

21:40

followed, then of course there were going

21:42

to be a lot of explorations

21:45

of new possibilities, lots of new technologies.

21:47

Any individual technology is

21:50

there's a strong element of we

21:52

stumbled on something, and

21:55

so when you stumble on something

21:57

that actually has big economic implication,

22:00

that's even more fortuitous. It's really

22:02

not predictable in advance. Either way. You can

22:04

have something like I think many people

22:07

would have expected to see a much bigger

22:09

visible impact on the

22:12

economy from smartphones than we

22:15

appear to have seen. But on the other

22:17

hand, who would have thought that shipping containers

22:20

would matter as much as they have turned out to for

22:22

the global economy. So it's

22:25

really in the sense of being really

22:27

hard to have predicted either that the

22:29

innovation would happen or that it would matter

22:31

a lot. Yeah, it's it's exogennous for

22:34

all practical purposes.

22:35

You know, it's really important that we use the

22:37

same gauge and size shipping containers

22:39

as they do in China. I wonder how we would

22:42

even coordinate that with another planet. They

22:44

might have like a totally different size shipping

22:46

container at their ports. That could

22:48

be a very difficult container

22:52

trouble.

22:53

And the trouble is that if they're forty years light

22:56

years away, the negotiations

22:58

to establish the common standard a

23:01

couple of.

23:01

Millennias, That's what I was thinking, right, Like, it's

23:03

hard enough to come up with common standards

23:05

here on Earth. I want to pivot.

23:08

I want to ask you about AI actually, and

23:11

I'm curious like people,

23:13

you know, every technology has its things like oh,

23:15

people worry about which jobs are gonna get disrupted

23:17

and so forth, And then with AI, it

23:20

feels like there's like deeper angst that many

23:22

people have because it can think and it can write.

23:24

And I've expressed my own anxiety like, well,

23:27

will I be out of a job in a few years? Is someone who

23:29

like does words on the internet for a living,

23:31

because chat GPT is pretty good at doing

23:33

words? Like does it feel different

23:36

to you in some way in terms

23:38

of or is it? Yeah, we have technically

23:41

you know, we are always getting better at things and it's

23:43

sort of part of a continuous process

23:45

of technological gain.

23:48

Well, this looks like it. Maybe

23:50

there are things that are kind of narrow

23:53

gauge technologies that affect a

23:55

very particular sector, but

23:58

not that many peopleeople this

24:01

stuff. Although we're what

24:03

we're calling AI isn't

24:06

really arguably, but the

24:08

stuff we're calling AI anyway does

24:10

look like it's going to affect a lot of

24:14

activities. The pessimists say,

24:16

or the skeptics say,

24:19

look, it's not really thinking. It's

24:21

not creative or original. It's

24:23

just sort of processing what other

24:26

people say, and it's just basically

24:29

super enhanced autocorrect,

24:32

which is all kind of true. But

24:34

then, how many people out

24:36

there in the real world are in fact

24:38

being creative? How much of the work that

24:40

we pay people a lot of money to do is in

24:42

fact a lot like super

24:45

expanded or correct? And I think the answer

24:47

is quite a lot. So this is

24:49

potentially a really big thing, and it could

24:51

displace a lot of jobs. And interestingly,

24:54

it's the jobs that it might displace

24:56

are going to be ones that are kind of high

24:58

prestige, high education. We're

25:01

a very very long way, as far as I can tell,

25:03

from being able to have robot

25:05

plumbers, but we may be very quite

25:08

quite close, in fact, may already be there

25:10

to having robot journalists.

25:12

So yeah, this is serious.

25:15

So you obviously talk and write about

25:17

economic policy quite a lot from

25:20

that perspective. What would be the best

25:22

way to handle AI

25:25

if you're worried about society, if you're

25:27

worried about things like inequality,

25:29

what would be the best economic policies

25:32

to put in place?

25:34

I don't think this one calls for a

25:36

lot of remedial policies

25:38

other than simply having a

25:40

strong social safety net. It's too

25:44

pervasive and too diffuse. I

25:46

think you know it's something when you

25:48

have something like it's not technology,

25:50

but in some ways similar. You have something like

25:52

the China

25:55

Shock, that period of about ten

25:57

years where we had a real surge of

25:59

import from China. The thing about

26:01

that was actually a number of jobs

26:03

displaced was probably not was

26:06

a million, between one and two

26:08

million, but they were very

26:11

concentrated. There were just

26:13

communities that were effectively wiped

26:16

out. And that's where the

26:18

idea that you probably should

26:21

have had some kind of remedial

26:23

policy that tried

26:25

to sustain or

26:27

at least help these communities adjust

26:29

or help them downsize or something so that

26:31

the social impact would be less. That kind

26:34

of made sense. But now, if you have something that

26:36

is going to be wiping out certain

26:38

kinds of white collar jobs,

26:41

but more or less evenly across the country,

26:43

it's not going to be doing any a

26:46

whole lot more or less in any

26:48

particular region. It's not going to

26:50

be affecting any particular social

26:53

group, except in the sense that it may be devaluing

26:55

certain kinds of higher education. I

26:57

don't think there's much you can do about that, just

27:00

trying to ban the technology altogether, which

27:02

isn't going to work. So I actually

27:05

not sure that that, aside from the fact that we should

27:07

have a society where you don't starve or go without

27:09

medical care, if technology does have

27:11

to take your job, I'm not sure there's

27:13

much more you can do than that.

27:31

I'm going to break the pattern and actually

27:33

kind of asking a question that might be relevant

27:36

to the current economic data. But I

27:38

was thinking about going back to the nineties

27:41

and the sort of productivity boom

27:43

that we saw in sort of the mid nineties and beyond.

27:45

And the other thing about that time, beyond

27:49

just the sort of advent of the Internet and a lot of information

27:51

technologies, is it was a strong economy.

27:53

It was a robust it was robust growth, It was

27:56

robust employment growth. And one

27:58

theory that sometimes gets aired

28:00

is that productivity is

28:03

downstream of robust growth and

28:05

tight labor markets, and that when there's tight labor markets

28:08

that firms have to find ways to implement

28:10

new technologies because they can't just hire someone

28:12

cheaply. That forces the sort of

28:15

like genuine productivity gains technology

28:17

to actually be incorporated. Of

28:19

course, we have very tight labor markets

28:22

right now in the US. Like how

28:24

much credence do you buy that? I remember Jenny Yellen

28:26

giving a speech and I want to say, like twenty

28:29

fourteen, like the reverse history sists,

28:31

and this idea that like, if we run the economy

28:33

hot for a while, that it can really pay

28:35

off in terms of these productivity gains,

28:38

and we might be getting a test of that now,

28:40

Like how compelling do you find that?

28:42

It's one of those things where I

28:46

take it seriously and have

28:48

absolutely no idea whether it's true. There

28:51

is some case to be made

28:54

that running of the economy depressed These

28:57

two losses that you basically differ make

28:59

up so that a weak economy

29:02

for a sustained period of time leads

29:05

to lower productivity growth for many, many

29:07

years thereafter. And you

29:09

can read some of the evidence

29:11

from the two thousand and eight financial

29:13

crisis in aftermath to say that, on

29:16

the other hand, that

29:19

isn't always true. The Great Depression

29:21

in the United States appears to have had zero

29:24

impact on all of that. If

29:27

you look at the economy in the late

29:29

forties, it was just about where

29:32

extrapolating trends from nineteen twenty

29:34

nine would have led you to think it would

29:36

Denail. It's true that we did run a very very

29:38

high pressure economy for four

29:40

years in nineteen

29:42

forties, so maybe that was what.

29:44

Actually the original.

29:47

Yeah, I'm not sure if readers will know about that,

29:49

but yeah, the frying pan charts that I've

29:51

been promoting through. But productivities

29:54

did pretty well even during the

29:56

thirties, even with the very depressed economy.

29:58

It's possible right now, Denice

30:01

to believe that by running

30:03

a genuinely full employment economy, arguably

30:06

for the first time since the late

30:08

Clinton years, that we are setting the stage

30:11

for an era of good productivity

30:13

growth. But I don't know that, and

30:16

I think I can make a firm prediction is

30:18

that we will never know that we were

30:20

even though, you know, looking back ten years from now,

30:22

if productivity growth was high, we

30:25

won't know whether that was because

30:28

finally we got sufficiently expanised

30:31

very macro policy or because

30:33

we just happened to luck into getting

30:36

usable AI for the first time.

30:38

Yeah, Tracy.

30:38

If there's one thing I feel like I've learned

30:41

from you know, sort of covering economics

30:43

over the last fifteen years or whatever, is that debates

30:46

never actually get resolved. It's you can

30:48

have all the data and then there's just two people tell a different

30:50

story.

30:51

Yeah, no, that is very that's the same.

30:52

Two people selling the same two different

30:54

stories decade after decade.

30:57

That's what really drives me crazy. It's always

30:59

the same people on the same side. Whatever

31:02

the data are, it doesn't actually

31:04

speak too well for my profession.

31:05

Wait, since Joe asked a question that brought us

31:08

back to more modern times and more

31:10

relevant themes, I want to ask one too,

31:12

which is would an alien invasion

31:14

be deflationary or inflationary?

31:18

Very serious question.

31:20

I think that we can say pretty almost

31:22

surely with the inflationary wars almost

31:24

always are an uncontested

31:27

alien invasion. I guess it kind of depends

31:29

on how they run the occupation. But

31:32

actual wars have been

31:35

in are always inflationary.

31:37

I can't think of one that wasn't They always involved

31:40

big government spending. Actually,

31:42

they always involve a collision between large

31:44

spending and at least temporarily reduced

31:46

productive capacity. So yeah,

31:49

you may recall that back when

31:52

I was desperately

31:54

leading for more fiscal stimulus.

31:56

Oh that's right, Yes, I

31:59

said that the government should lie and claim

32:01

that we were facing an imminent alien invasion

32:03

and that in order to fight that

32:05

imminent alien evasion, what we needed was better

32:08

infrastructure. So a

32:10

big public infrastructure platform.

32:12

Two, because things that people would never

32:14

agree to simply in order to make people's

32:16

lives that are, they will agree to it

32:19

in order to fight invasion.

32:20

It is interesting the degree, and you definitely

32:23

see this over the last couple of years, the degree

32:25

to which big public investment programs

32:28

seem to go down easier politically

32:30

if it can be couched in the language of geopolitical

32:33

conflict. And so even like say,

32:35

like some of the decarbonization efforts

32:37

in the US, the IRA, a lot of it is almost

32:40

either implicitly or explicitly oh

32:42

because China is doing this too, and

32:44

suddenly that that brings out the votes

32:47

a bit more.

32:48

Well, yeah, I mean we have two big

32:50

public infrastructure programs,

32:53

well three. We have one which is the straight infrastructure,

32:55

but that was to some extent said

32:57

well, you know, we're falling behind and China

33:00

need to do something. Then we have the

33:02

Chips Act, which is explicitly

33:05

about countering China. And then

33:07

yeah, some of the IRA stuff has

33:09

been sold as being a national security

33:11

concern as well. So sure it's

33:15

crazy, but yeah, in order to

33:17

provide people with just a

33:19

better economy and a better life, you

33:22

generally can't get that past the depths

33:24

that's golds unless it's in the interest

33:26

of fighting evil outsiders.

33:31

I want to ask another AI question.

33:33

I mean, I know you say, like, okay, there's not some

33:35

obvious like medial policy,

33:37

but it is interesting that there is this possibility

33:40

that it disrupts a lot of currently

33:43

like high status jobs, people

33:45

with a high level of education, white

33:48

color work, et cetera, which I guess

33:50

in people's minds feels different

33:52

than like a loom on

33:55

you know, a shop floor or something like that, which people

33:57

think, well, this is different in some way. Historically,

34:00

other examples that feel similar were like, no, this

34:03

really disrupted something that at the time was

34:05

seen as like very high status

34:07

prestige work.

34:09

Well really high status prestige

34:11

work, I'm not sure, but relatively

34:14

high. I mean people we talk about the Bloodes,

34:17

the Bludyes were not the poorest, least

34:20

skilled workers. The blood Ice were

34:22

skilled weavers who were actually

34:25

relatively high waves. What had happened was

34:27

that the factory production of yarn

34:30

had created an abundance of yarn, but the

34:32

weaving was still being done by highly

34:34

skilled manual workers. Manual

34:36

workers but high high skill. And then along

34:39

came the power loom, and suddenly the relatively

34:41

high wage workers found their jobs

34:44

disappearing, and that they were the ones who

34:46

went out and rioted. So

34:49

it's simply not the case that technology

34:52

is always going to

34:54

favor the higher wage people

34:56

at the expensive lower wage people. And

34:59

yeah, there's probably a lot of quiet stuff

35:01

in there that this has probably been going

35:03

on to some extent. One of the things that about

35:06

US inequality is that there

35:08

was a time when people said, oh, it's all about education

35:10

differentials, but the college wage

35:13

premium hasn't really gone

35:15

up for a long time

35:17

now. But it's also true that a lot of information

35:20

processing that used to require human

35:22

being either doesn't or can be

35:24

done by fewer human beings because

35:26

machine assistance helps.

35:29

On the topic of inequality, it does feel

35:31

like there is this pervasive sense that

35:33

the US economy is doing worse

35:36

in many ways for a large

35:38

chunk of the population, despite

35:41

everything that we've seen in some

35:43

of the hard data recently, and a

35:45

lot more discourse about the possibility of a

35:47

soft landing, But what do you think is

35:49

driving that dissatisfaction? And

35:51

then secondly, you know, how do

35:53

you go about I guess like messaging

35:56

that the economy isn't that bad

35:59

to the general population so that

36:01

aliens don't feel the need to invade

36:03

the planet to make us all feel better or

36:05

worse.

36:05

Yeah, it's now

36:08

it's an interesting question. I mean, if you actually are

36:10

asking about inequality,

36:13

have recent events hurt lower

36:16

income people more in the higher

36:18

income That's actually not what

36:20

the data says. If anything.

36:23

On the contrary, what we've seen is

36:25

is a surprisingly

36:27

fast narrowing of wage gaps.

36:30

The people at the bottom of the wage distribution

36:32

have done a lot better than the average. You

36:34

know, Aaron Doubay has been doing writing about

36:36

this. The unexpected compression of wage

36:39

inequality has taken place in the last

36:41

couple of years. So that's not really

36:45

the story of why people are feeling dissatisfied.

36:48

If I had to try

36:51

to say why people are dissatisfied, what if

36:53

it is that Look, the

36:55

return of inflation after a

36:58

generation when people just

37:00

didn't think about it. That was a big

37:02

shock and people

37:05

are going to take some time to recover

37:07

from it. Then actually I think

37:09

it's more than two things. I'm going to turn Monty

37:12

Python routine amongst the reasons,

37:14

but then various partisan shit.

37:17

It's just astonishing if you look at

37:19

the surveys how much it's

37:21

true for both parties, although it's even more extreme

37:24

for Republicans. But an economy that

37:26

was really great as long as Trump

37:28

was in the White House suddenly becomes

37:31

terrible, even though it's the same economy

37:33

with a Democrat in the white House. But

37:35

then perceptions are

37:38

shaped by narratives. There's just lots

37:40

and lots of surveys now which you ask

37:43

people, how are you doing, and they say fine,

37:46

and how's the economy doing, Oh, it's terrible,

37:49

which is this

37:52

is relatively new in economics,

37:54

but in other areas we know, we

37:56

see that all the time. I look at crime,

38:00

and an epic decline in

38:02

crime between about nineteen ninety

38:04

and the mid twenty tens really

38:07

astonishing, and we

38:09

have still basically have no idea why it

38:11

happened. But for some reason America became

38:13

a much safer place and all

38:16

through that surveys. If you ask

38:18

for people what's happening

38:20

to crime, they said it's increasing, Although

38:22

if you ask them, How how do

38:25

you feel about your neighborhood or your town?

38:27

They were much more favorable. So there's

38:30

we've got some kind of psychology where a

38:32

lot of people now believe that really

38:34

bad things are happening to

38:37

somebody else, somebody I don't know.

38:40

I hope the media isn't culpable for any

38:42

of that, you know, just going back to your

38:44

point about how things like

38:46

AI or things that may have compressed

38:48

education labor is like, it's

38:51

not really that new of a story. Germo

38:54

Ruddy T Domingos, who has been on the show, He

38:56

always likes pointing out that the word computer used

38:59

to refer to a profession that like, there

39:01

used to be like people who's type

39:03

whose occupation was.

39:05

Computer, human Excel spreadsheets.

39:08

Human Excel Spreadsheeah Richard Fireman,

39:11

Richard Fiman ran the computers

39:14

at Los Alamos. You've just seen

39:16

Oppenheimer and the Fireman, and actually

39:18

what is clearly Fireman appears there playing

39:21

the bongos but is not a speaking

39:23

character. But he ran the computer section

39:25

at Los Alamos, which was a bunch of

39:27

women. How we're actually

39:29

computing, right?

39:32

Can I ask?

39:32

We sort of glossed over this within the context

39:35

of alien technology, but are

39:37

you paying attention to the superconductor

39:39

stuff? Like and you know you're really plugged in

39:41

your online You're probably is like online

39:44

and on Twitter as much as me and

39:46

Tracy is. And you see these videos

39:48

of like a magnet flapping and

39:50

people are like, oh my god, this is like the Holy Grail,

39:52

Like, how do you This is like a question I've

39:54

been asking everyone, like, how do you, as

39:57

a sort of intelligent, plugged

39:59

in person and try to process

40:01

what's going on when you see things like this happening

40:03

in the world.

40:05

This one is really hard. I mean, I

40:07

am extremely online. Actually, I

40:09

hate when when my phone tells

40:11

me how much screen time I've had each day. I

40:14

often feel that I can go online and get

40:16

reasonably reliable assessments of

40:18

stuff in areas of which I personally

40:20

know nothing, because I kind of

40:23

think that I do know enough to

40:26

recognize people who have some idea what

40:28

they're talking about. I know what actual research

40:30

sounds like. This is one of those areas

40:32

where I can't make

40:35

it out. It sounds like there

40:37

are reasonable people on

40:39

both sides. There's no obvious

40:42

motivated reasoning driving

40:44

this, and I'm

40:46

kind of just saying I have no idea,

40:49

and not only am I not entitled

40:51

to an independent opinion, I don't know

40:53

whose opinion to trust.

40:56

I just have one more sort of theoretical

40:58

question, getting back to the beginning

41:01

of this conversation and science fiction, But

41:03

what's your favorite economic system

41:06

in science fiction?

41:07

If you had to choose.

41:08

This, Oh, well,

41:10

that's interesting. Most science

41:13

fiction either doesn't

41:15

specify or kind

41:17

of assumes that it's not very

41:20

different from what we have now, So

41:22

there are very few sort of furious

41:24

alternatives. If you look at the start

41:27

Trek universe, that

41:30

appears to be nobody says

41:32

it, but it actually appears to be sort

41:34

of idealized Marxian socialism.

41:37

Right, that's the one that you always

41:39

see. I've heard that before, that that's like the literally

41:43

live.

41:43

Long and well, actually

41:47

that's actually the opposite. The America

41:49

is the country where we we prosper

41:52

and die and die early, but.

41:56

Live short and prosper.

41:58

Yeah, but if we know

42:00

the replicator, you just say tea

42:03

earl Gray hot and there it is. And

42:05

supposedly it's an economy of total abundance.

42:08

Although you know, I'm occasionally

42:10

attempted to yell at the screen, but services

42:12

are most of the economy, and replicators

42:14

can't do that, although I guess androids

42:17

can. But other than that, it's really hard

42:19

to see very

42:22

much. People are not very original

42:25

in trying to think about economic systems.

42:28

There is a real paucity of ideas

42:30

for something different. I mean, we've seen there's

42:34

are little sort of central planning

42:37

fantasies out there in economics.

42:40

There are some people who try to invent or

42:43

some kind of system of points or so

42:45

on, But what they don't seem to realize

42:47

is that what they're actually doing is reinventing

42:50

capitalism. Other than that, I

42:52

haven't seen a whole lot of interesting

42:55

speculation. It's possible that

42:57

we've already explored all the possibilities there

43:00

are, but I don't know. It's really

43:02

the one thing I had to see is a fair

43:04

bit of sort of fairly

43:08

thoughtful science fiction just kind of assumes

43:11

that the future, that future

43:13

societies have a kind of a Scandinavian

43:15

welfare state, that whatever

43:17

else there is, there's always basic income to

43:20

fall back on. And actually, if

43:22

too much too much information, but the expanse

43:25

if you watch that science fiction series,

43:28

which was one of those things where the

43:30

TV I think was better than the novels. But anyway,

43:32

the Earth's economy

43:34

and the expanse appears to be

43:37

a kind of a UBI society,

43:40

except that it sounds like what everybody receives

43:42

if they're not employed, and they apparently they have mass

43:44

numbers of people who just have no jobs. But

43:47

what they did, what they get is they get the

43:49

basics to survive in kind

43:51

rather than in cash. So that's

43:53

a few but it's not

43:56

a utopia. It's kind of portrayed

43:58

as being kind of grim, but that's

44:01

kind of where if you look for

44:03

real, seriously alternative

44:06

economic systems, I can't

44:08

think of one in any of the science fiction I've

44:10

read.

44:12

Paul Krugman is so great to finally

44:14

have you on Odd Lots, and it was so great

44:16

to talk about things that are not just

44:18

the sort of day to day what's the Fed going

44:21

to do next week? So I really appreciate

44:23

you coming on. That was a really fun conversation, so

44:25

much fun.

44:26

Okay, take care and yeah, that's

44:28

great, great stock.

44:42

That was fun, Tracy.

44:44

I absolutely love it that

44:47

Paul Krugman's first appearance on this podcast

44:49

is to talk about aliens. You

44:52

can't be I.

44:52

Hadn't thought about the challenge

44:55

that would pose, which is at the.

44:56

Time the productivity statistics.

44:58

Yeah, or and the challenge that would

45:00

pose of like well the time, like the

45:02

rate of interest for people

45:04

in normal time versus like the payment that

45:07

people would demand who are like on the ship

45:09

itself moving at a different time. Very interesting

45:11

theoretical questions that to his point.

45:14

But I think that probably much of economics does not have

45:16

much practical application.

45:17

You know, it would blow your mind if you start thinking what

45:19

interstellar finance would actually

45:21

look like, like currency exchange markets and things

45:24

like that, where you have spot and

45:26

forward markets and things.

45:27

Well, anyway, can I just say something, I

45:30

Foundation for Economic something

45:32

fee dot org, which is Fundation

45:35

for Economic Education, which I think is like this sort

45:37

of like libertarian like pro capitalists,

45:39

like think Tank, they have a they

45:41

have an article a Star Trek is not socialist,

45:44

They're really like because I did, that

45:46

was one of the first hit first things that came

45:48

up, is Star Trek really socialist?

45:50

Knows So some people push back on that.

45:53

I do think there clearly there's a gap in the

45:55

market for like a really well

45:57

thought out piece of science fiction that's like

45:59

predic on a very specific

46:01

and creative economic system.

46:03

It's funny to think about like these sci

46:05

fi writers like, oh, it's gonna be a points and blows,

46:07

like, bro, you invented money, you reinvented

46:10

the dollar.

46:10

Well done, well.

46:12

I mean it does also get back to you know. Paul

46:14

made the point that a lot of science

46:17

fiction seems to default

46:19

to this idea of Knesyan abundance,

46:22

right like most scarcity, but

46:25

if anything in twenty twenty

46:27

three, like, yes, there have been

46:29

a lot of technological advances, but there

46:32

are serious concerns over basic

46:34

resources and their availability

46:36

and how they're distributed and things like

46:38

that.

46:39

And services because we have so much good AI,

46:41

but we don't have good robots, and so it's

46:43

like when we talk about like childcare, elder care,

46:45

etc. It's like, we really need these robots

46:48

to come along, and we're going to get that true abundance.

46:49

Hopefully the aliens bring the robots.

46:51

Yes, okay, please

46:54

bring robots.

46:54

Shall we leave it there?

46:55

Let's leave it there all right?

46:57

This has been another episode of the Odd Thoughts

46:59

podcast. I'm Tracy Alloway. You can follow

47:01

me on Twitter at Tracy Alloway.

47:03

And I'm Joe Wisenthal. You can follow me on

47:05

Twitter at the Stalwart. Follow our guest

47:07

Paul Krugman on Twitter He's at Paul

47:09

Krugman. Follow our producers Carmen Rodriguez

47:12

at Carmen Arman and Dashel Bennett

47:14

at dashbot. And check out all of our podcasts

47:17

at Bloomberg under the handle at podcasts.

47:19

And for our Odlots content, go to.

47:21

Bloomberg dot com slash odlots,

47:23

where we have transcripts, a blog,

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and a newsletter. And if you want

47:28

to chat about like everything we talked about

47:30

in here, from energy scarcity

47:33

and abundance to AI to other stuff,

47:35

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47:37

People are chatting twenty four to seven Discord

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47:41

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47:42

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47:47

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48:00

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48:12

In