Paul Krugman on His New Book

Broker studio in New York. Paul, So, nice to have you here. Welcome back. Hi, good to be back. So you know, I want to get into your book. I want to first though, ask you in a world, in a day where we have headlines on the virus, we're talking about politics in the Iowa caucus, We're talking about Tesla rallying, we're watching earnings, how do you kind of hone in on what's the most important things for investors, for kind of the world at large in terms of

what makes everything tick. Oh, I'm not or I know that. The answer to that. I mean, I try to work on the things where I have something to contribute. So it's a so I'll look at that's so I did write about the coronavirus, but from the economics point of view, because I think we know a fair bit now about how the world has changed and about global supply chain.

So I'll do that. Uh. And actually it's it's I don't know whether to be scared about dying, but I'm really very concerned about the disruptive effect on business because we have this value chain global economy. Now I'll write about you know, political implications of of of economic doctrine, fiscal policy, whatever. But it's all kind of to be honest, it's a little bit hard to break through. And especially I watched the readers. Uh, you know what people want

to read at the New York Times these days. Um, lately it's tend to be sort of impeachment, how to boil a perfect egg, impeachment grilling with mayonnaise. So it's a mixture of politics and escapism. It's a little bit hard to get my stuff that politics and escape absolutely, So what in heard this book in particular because you do as you tend to have a pretty clear idea that that you're putting out there. But to Carroll's point,

in a very difficult world to break through. Yeah, well it is an election year and that was one consideration. I have also been writing for The Times for twenty years, which made it It's been a while since I reprinted so much, though not all of the book has reprinted columns over the years, and it just seemed to me there was a good time to try and pull this together to understand why we're in the in the political policy mess we're in, and and also what has worked

because we have had some success stories over there. So um, it just seemed like an opportunity moment. And so when you went back and sort of looked at at the collection, what were the through lines that immediately jumped out at you and which were the ones that were maybe a little harder to discern. I actually I've been trying to say this without sounding like I've got a swelled head, though I probably do, But I mean, I think good. I was surprised at how much stuff holds up, how well.

You know, there have been consistent themes that I've been pounding on for for fifteen years now, and that they most of them are, are still relevant. Most of the work holds up pretty well. Um, it's the I mean, the the role of government in in making our economy a little bit more humane than it would otherwise be the role of government policy, and helping to stabilize the

economy get us closer to full employment. All of those things still hold up that the lots of things have not changed that much, except that the quality of our discourse keeps going getting worse. Right, Well, let's talk about that discourse. I think this is in your book, and that we specifically say ideas that should have been killed by contrary, contrary evidence, but instead keeps shambling along eating people's brains. Yes, that's the that's the zombie ideas. Those

are the zombies. And I but but speak to this because we have these conversations that you know, we grew up in a world of analism where fact was fact and you understood that, and I feel like we've gotten away from that. Yeah, facts as part of the issue, although the it's stuff that just doesn't get through. So the the most important zombie in American politics is the belief that cutting taxes on rich people um is magical

and actually pays for itself. And the that has never happened, has never worked, has failed again and again and yet when we had the debate over the tax cut, even the alleged moderates they aren't really, but they supposed moderates within the Republican Party, people like Susan Collins. We're saying, oh, I believe that this tax cut will pay for itself and it would reduce the budget deficit. And sure enough,

of course we've got a trillion dollar deficit. It did one of these things always do, which is to blow off the deficit. So the UM it is kind of hard. How do you have economic discussions when a large part of the political spectrum is committed to believing things that are manifestly not true. So, speaking of the deficits modern monetary theory, you've had some thoughts on that you have engaged in some reposts as it were, around that. Why do you think it has at least captured the imagination

at this point? Well partly so. I mean, by the way, the look on your face when I said modern monetary theory, I wish I could say it. I don't want to have because at least for the moment, the M m T people and me are on the same side all right on on the practical policy issues. UM and In fact, it's also what really drives you crazy, drives people like me crazy, is we're not actually sure what it is.

When you try and get what is what are the fundamental tenets of monitor monetary theory and how are they different from what conventional Keynesians like myself would say, and you get very long answers that don't actually seem to consist of complete sentences, um and um. A lot of it is seems to be just really sort of inventing new terms for old concepts, and coupled with a kind of attitude that says this is all very radical when

it actually mostly isn't. So it's it's it's kind of crazy making, and it's it's really a distraction from the debates we need to be having. Paul Krugman still with us, Nobel Laureate, City University of New York Distinguished Professor of Economics, his latest book Arguing with Zombies, Economics, Politics, and the Fight for a Better Future. You were too kind not to correct me, so forgive my mistake. Okay, all right,

so Paul, great to have you still with us. I do want to go back to the coronavirus because from an economic perspective. From a market perspective, the market still seems to be trying to figure out. But you mentioned this new world that we're living in, this value supplied, value based supply chain, I think is what is what

you said, help us understand the economic implications here? Okay, so you know I was I wrote a column because Wilbert Ross said something truly bone headed, which is not that unusual, but it was a good jumping off point where he said, this is great for America, help us compete with the Chinese. Uh. And that wouldn't have been totally bone headed forty years ago, when you actually did have a world where kind of national manufacturing bases competed

head to head with each other. But now we're in this world of these complicated interlinked value chains where, um, you know they I've got an iPhone in my pocket here where was that iPhone made? Well? There the last step was China. But in fact that that's the last step of a very long and winding chain, and there are pieces of it that were made in many places,

and it's been shipped across multiple borders. Um. And in that kind of world, anything that disrupts manufacturing anywhere is actually going to hurt manufacturing everywhere, and so the coronavirus, and that's actually by the rate, most most of the evidence says that actually all of the people who have actually done evidence says that the Trump trade war has actually hurt US manufacturing, not helped it. And the reason

is because of the value chains. What it did was it disrupted that raised the cost of US manufacturers by raising the cost of imported inputs. And the coronavirus is kind of like the Trump trade war on on steroids. If it turns out to be as serious as we fear it might be, it's going to be a really pretty nasty thing, even for people who are not at

all at risk of being infected themselves. I feel like, going back to your book, that we're at risk two of kind of creating a better future if we have folks putting out these ideas that have been you know, disproven if you will, and that they don't make sense. And we certainly see that among politicians. I do wonder do you have faith and maybe the private sector to

kind of move things along. Elon Musk, for instance, like him or not, he has certainly pushed forward the idea of an e V um, that many traditional auto automakers, Paul would have said, it's gonna take much longer to do, and I feel like he's moved up that. So do you have any faith in kind of the private sector moving along some of these ideas well? Sometimes I mean the one of the I do say in argument with zombies, that that the the overwhelming problem, the one I have.

Sometimes I asked, why isn't it The only thing I write about is climate change? Um, And the private sector has actually set us up to solve that problem. We've had this incredible technological revolution, and renewable energy and electric vehicles is part of that because it means that we can electrify a lot of transport as well, and we can generate the electricity in ways that don't regenerate greenhouse gases, and that that technology is already now. Government policy helped.

Without some of the investments that took place, particularly under the much maliganed Obama stimulus, we green energy wouldn't be where it is right now. But the private sector also did its part and delivered this great technological stuff. The trouble is, first that's sometimes not enough, and sometimes the politicians are fighting it. So we have the Trump administration trying to force us to burn coal even though the

private sector really doesn't want the coal anymore. What's the best economic lens to look at the Iowa caucus and the early Democratic vying for the nomination. Boy, I mean, I have by way to zero idea what's going to happen? Uh? And the but the caucus is it's a you know,

it's a deeply unrepresentative state and deeply peculiar. If somebody want to said that caucus is an artisanal primary, right, it's a it's it's a really bad way to judge what voters actually want, and with a highly unrepresentative set of voters. So this is a this is really bad, God knows. I mean, it's but let me tell you, it might be decisive for the nomination, particularly Biden wins that he may that may be a kind of it. Uh. But if he doesn't, then probably slog on for quite

a while. But my insight is that in terms of actual policy, it hardly matters which Democrat wins that it as long as a Democrat wins the general election. Um that Bernie Sanders has a lot of big plans, but in reality he would only be able to do part of them, and Biden, you know, maybe kind of old guard, but he's actually offering a pretty progressive economic program and his party would force him to go through with that.

So the reality is that that we're going to get a Democrat who in practice would be a what Europeans would call a social democrat. Would it spanned the safety net, raised taxes on the rich. And I'm not going to get worked up at all about about who ends up, you know, in the lead. Well, and one of the zombie ideas that you talk about in your book is the myth of the socially liberal fiscally conservative voter. So

there's a lot of things that are very relevant. Well, yeah, there are I know some socially liberal fiscally conservative I had to actually tend to encounter. Well, I basically encountered them in the breakfast meetings at Bloomberg. Uh. And they have an average net worth of maybe a thousand times mine at least. Uh. And they all wear gray suits and they are absolutely not there. There's nobody out there. They are effectively represent maybe three percent of the electorate.

We just want to spend a couple more minutes with Paul Krugman, because we've got him here obviously teaching now at the Graduate Center of the City University of New York. And when you came in, Paul, you and Carol were talking about an interview she did with you down in Princeton. You're now a full on resident of Manhattan. What do you make of New York City right now? Oh? You know, if if you can afford a place to live, which is the hard part. Uh, it's a golden age of

New York City. I mean crime is low, the cultural richness, whatever your tastes are, is enormous. The food is better by far than it was when I was growing up. You know. It's it's a um and and life is surprisingly easy. Uh, you know, and anything you want is five minutes away. So uh no, it's it's I'm a huge fan of New York. I even I'm a fan of the subway. For all of its problems, it's a it's a very efficient means of transport. So no, I'm a Uh you're a bull. I'm a bull. And you

know I grew up in this on Long Island. I always thought that would someday grow up to be in a New York intellectual and finally in my sixties, I made it. You made it, but you made it, which is great. Well, and I do wonder about, um, you know, bringing more people and making it more equal within this city. Do do you think that's something that we can fix, whether it's developers responsibility or whoever. No, we definitely need housing.

Affordable housing is probably the biggest single thing that you can do. I mean, there are other things. Universal pre K is great, but we should have even more child

support and that's something that the city can do. But building more housing for regular people, Um, it's you know, it's a dense city, but there was there's, in fact still plenty of room for that, and that's that's the biggest You know, it's always gonna be a highly unequal city because it's a place where billionaires want to live, right, so there's always gonna be some of those ten seconds. Got a favorite part of the neighborhood? Well, I mean I because I live on the Upper West Side and

it's it's you know, it's it's a wonderful place. All right, Yeah you do. All right, Paul Krugman, thank you so much. We really enjoyed spending some time with you. Today,