Paul Krugman on Politics, Inequality, and Following Your Curiosity

Conversations with Tyler is produced by the Mercatus Center at George Mason University, bridging the gap between academic ideas and real-world problems. Learn more at mercatus.org. And for more conversations, including videos, transcripts, and upcoming dates, visit conversationswithtyler.com. Today I'm here with Paul Krugman, who needs no introduction. And just to remind you all, this is the conversation with Paul I want to have, not the one you want me to have. To start with a very basic question, the major tech companies have become increasingly controversial. Do you think there's a significant market failure there? And if so, what would it be?

Oh, wow. I mean, It's hard. I think that it's hard even to start with the market failure. I mean, everything about tech, certainly everything about networks is a violation of the principles that say that a market should be efficient. The trouble is it's hard to sort out. It's not that there's any one thing. It's got increasing returns, it's got imperfect competition, it's got spillovers. So I'm not sure what I know is the particular market failure, but there's no reason at all to think that Facebook or Twitter or Google are supplying— are doing the optimal thing from a social point of view. The trouble is trying to figure out what to do as an alternative is not trivial, but yeah.

They have zero price. That's very different from the monopolies of the past. They don't restrict output. They try to build these platforms, and it seems increasingly clear the plan is not to raise price someday., but just to make the platform as big as possible. And is that problematic or is that just consumer paradise?

Well, what's problematic is that they're still, although they're not charging us anything, they're not in business for our health, they're in business for their health. They're in business to sell something else. So what Google is selling really is still ads, selling advertiser access. At some level, that's what Facebook is doing as well. Since it's indirect, in some ways the reasons to think that it's going to be non-optimal are even greater. You can see a little bit. I mean, I actually don't use Facebook. I have an account which is impossible to close, but I don't use it. But I do use YouTube, and I use it only for music, but I gather that there's a lot of politics on it, and YouTube actually has algorithms that push you towards more extreme stuff, and that's because that enhances their— their ability to market their position. It's probably not what most people, if you asked, "Is this what you want?" would say they want, but YouTube isn't interested in what you want. It's interested in— and of course it's part of Google— but it's interested in what it can use to make money, which in this kind of completely— this is nothing at all like an Econ 101 supply and demand market, and so there's no reason at all to think it gets it right.

The New York Times recently referred to a new movement. They called it hipster antitrust, the notion, for instance, that maybe Amazon was bad for a more general commercial ecosystem of publishing and retail. Do you have an opinion on hipster antitrust?

I mean, yeah. I mean, we need something. I haven't actually looked at the hipster antitrust. It's pretty clear— well, two things actually I think are pretty clear. One is the old antitrust paradigm still has a lot of relevance. Most of the economy is still not in fact novel tech zero marginal cost stuff. Most of it is still traditional stuff and the fact that we largely stopped enforcing good old-fashioned antitrust is actually a problem. It is part of the problem with our economy and part of the problem with rising inequality. How big a part is something that's hard to pin down, but it's something. So good old-fashioned antitrust is far from irrelevant. But second, yeah, there's a whole bunch of issues. There's been nothing— the role of these handful of tech platform providers in possibly distorting markets is a pretty big deal. I have to admit, I haven't put a lot of effort into trying to think about what the solutions are because it seems like the political climate for actually doing anything is probably not there and the chance of doing anything good is not high, but that may be a bad judgment on my part. I've just been more focused on other areas where market failure is so pervasive that it's— even a market failure framework is almost the wrong way to go about it, like healthcare.

You've been tweeting a good deal about politics lately and in particular the notion that malevolent intentions may be stronger than you had thought. If you had to explain to someone, not using any names or even party names, but just in terms of a model, what has gone wrong for the United States lately? How would you boil that down to its essence in terms of what you've called toy models?

Well, we have— put it this way, we have a— our political system is set up on the basis that we elect representatives who will not exactly reflect their voters but will in fact deliberate and exercise independent judgment, but we are in an extreme partisan environment in which for all practical purposes, only the party matters. All that matters on most things is whether there's an R or a D, which means that all of the— people used to— not that long ago, people used to refer to the Senate as the world's greatest deliberative body in a non-ironic fashion, right? These days, it's ridiculous. There is no There's no deliberation that goes on. It's a completely partisan institution where if the president is of one party and the Senate majority leader is of another party, well, presidential appointments just don't even get hearings and so—

What's the structural reason why that's become worse? Because as you said, it was once much better.

I think it's actually— it's two things. One is simply I do believe that in the end, Tyler Cowen: There's a pretty strong correlation between income inequality and partisan polarization. Political scientists who measure polarization have found that that's a really strong correlation. It kind of makes sense. In effect, the increasing weight of the right tail of the income distribution has dragged one party off in its direction and that's opened up a large gap so that the center really just did not hold. There used to be some— at least some overlap on economic issues between the parties and there is none now. The other, which is a kind of uglier— one of the bases of our— some degree of bipartisanship in our politics was in fact the overt racism. We used to have two dimensions in American politics, one of which was race. This is what the political science modelers tell us, that one of which was race, the other of which was essentially left-right on economics. Those have collapsed into a single dimension now. And that means that you no longer have the sort of populist Southern senator that used to provide part of what was for, in bad ways, the political center. So that's another piece. But I have to admit, when all is said and done, I find it a little bit mysterious. It's hard for me to quite understand. I mean, I can talk about it. I think that the role of Money in politics has created a kind of— a lot of people in political life now have spent their entire lives within a partisan ecosystem, never really having to step outside and any sort of independence in judgment, any sort of demonstration of an independent conscience is actually career-destroying and so the kind of people you get are people who are are basically bad people. At the very least, very cynical people. But I still find it hard to understand how people can be quite as cynical as they have become.

So Hayek wrote a famous essay, you know, Why the Worst Get to the Top in Politics. And at the time, he seemed to think it was a fairly universal tendency, which maybe in the 1940s was a reasonable thing to believe. But there seems to be a lot of variation. Like what's your underlying model for why the worst sometimes do or do not get to the top?

Oh, I think there was a time. Think about becoming— being a US senator. There was a time when I think voters cared about someone who wanted to be a US senator seeming senatorial, seeming to have some gravity, some strength of character. Now, often that may have been an illusion, but there was still some sense that you wanted a kind of a person of high character to be representing you in that august body. With increasing partisanship and tribalism, that matters less and less and so you have a lot of people— I mean the kinds of things that come out of the mouths of senators and I don't think— I obviously don't think the parties are the same. I think that you can find a lot more just, "I can't believe he said that" things from the Republicans than the Democrats but the point is that for the most part, voters don't care. Because they've become so polarized that really in a lot of places, as long as the guy is a Republican, it doesn't matter what he says.

Are there potentially beneficial changes you think we should at least consider making to the US Constitution?

Well, I'm reading a lot about the Supreme Court discussion now and I have to say some people have been suggesting that instead of lifetime appointments to the Supreme Court, we should do 18 years, which is probably enough to— insulate from short-term political pressures but ends this— at least reduces the extreme drama where when somebody is finally— collapses, then all hell breaks loose and would basically give every president a chance to nominate 2 Supreme Court justices. That sounds like something that would work. But in many ways, I think what we really need to do if we can is to recreate the kind of society that supported a more reasonable political process, which means— reducing income inequality.

Let me throw out a number of ways we might do that and tell me what you think. Universal basic income.

I'm still debating with myself over UBI. The pro is that its automaticity is a big thing. I think it matters a lot that Social Security and Medicare are just there, that no one asks, "Do you need it? Do you deserve it?" It's just there. And UBI would have that character. On the other hand, it's expensive. If you make it generous enough so that people who really, really need help get it, then it's a lot of money and if you try to keep the price down, then it's not good enough and you need— what we have now is a bunch of means-tested programs which are a lot more generous to people at the bottom than a skinny UBI would be. So I'm actually unsure, but it's a possibility. But that's only— that would only really make a big difference at the bottom and I think we need to do more towards further up the scale.

Reparations for descendants of slaves.

Certainly just, but I just find it hard to believe it's going to happen. I mean, it's— but that's not going to change the structure. That's just something that, you know, and if we were really going to talk about justice, it would make sense. There will be a fair number of people who say, "Well, my grandparents or my great-grandparents came over in 1915 and why should I be liable for this?" But on the other hand, Our country was built in large part on incredible injustice, but that's not going to change the structure. That would be a one-time thing.

But symbolic actions can matter. Some of the Supreme Court debate is about symbolism.

Well, look, I think that going after the Confederate monuments is a— you can say, "What difference does that make to people's lives?" Well, it's actually taking away some symbols that say that violent action on behalf of slavery was a good thing. I mean that's why the monuments were put in there in the first place. They weren't actually put in immediate— the aftermath of the Civil War in memory to the heroes. They were put in during the Jim Crow era to remind people of the importance of keeping those people in their place. So that's the kind of symbolic action I certainly think makes sense.

Ending the war on drugs and moving to either decriminalization or legalization. Would it help our cities or hurt them?

Probably would help, but I think I put in no thought at all on drugs. I just done no homework.

Say immigration policy. Maybe your views on this have changed over time, but if you could set an ideal immigration policy for 2018, what would it be and how would it impact income inequality?

Okay, first views. This is one of those areas where my views have changed. If you'd ask me about it 20 years ago, I basically went with a kind of simple model of the labor force being workers with different levels of education and immigration of low education workers would widen income inequality and then you could— then there was a— you could ask about some of the other effects and dilemmas and so on. But I've been— mostly convinced by evidence that says that an immigrant with a high school degree or less equivalent is really not competing head-to-head with native-born workers who have similar educational credentials. It just doesn't look like they're filling the same jobs. It doesn't look like they're competing in the same labor markets. So I think the income distribution effects of immigration are actually— much less than we thought.

The backlash effects that if too many foreigners enter too rapidly, a lot of native-born Americans become, say, Trump supporters?

How much is that worrying? Well, or just to— look, in general, if you have a— my view on immigration has always been that if you aren't at least somewhat conflicted about it, there's something wrong with you. If you want to have a strong social safety net, which I do and I think majority— most people do if actually pressed on it, then completely open borders is going to get in the way. You're going to have whether or not it's really going to bankrupt the system, the sense that lots of people are coming in to take your benefits is going to be a problem. On the other hand, not allowing anybody in is— from a global welfare point of view is a terrible thing because— One of the best ways to improve people's lives is to give them a chance to move to a place where they're more productive and there are good reasons to think that just our own economic prospects are enhanced by immigration. So some kind of inevitably awkward compromise is what you're going to do and then the question becomes, you know, so how many million immigrants a year are we talking about? That's a hard question to answer but I think restricted immigration but but not slamming the door has got to be the right place to be. Particularly for— this is America. Diversity has been our huge strength over the centuries and it's a real betrayal of our own history and of our prospects to turn it off. By the way, I'm sitting here at CUNY, which is the quintessential children of immigrants As is my school now, George Mason. Yeah, and we're— and everybody, you know, and it continues to fill that role. And it did, of course, in previous generations. Janet Gornick in the office next door runs the Stone Center and I are both CUNY babies. Her father went to CCNY, mine went to Brooklyn College, and the story is the same but the ethnicity is different now.

In 1996, for the New York Times, you wrote a very interesting essay called White Collars Turn Blue.— and I took this on your part to be a speculation, not an actual prediction. But you mused about the possibility that maybe the returns to education would fall dramatically because of automation. Do you think this has in any way come about or—?

Okay. So that was a— you know, the Times actually assigned— told people, write things from the perspective of a century from now looking back. And I was the only one who was willing to actually do it.

You predicted ridesharing in that piece, by the way. I don't know if you remember this.

It was fun. And so it wasn't— none of it was entirely I don't think it's entirely serious, but yeah, there is this question. Now, at the moment, college degrees still carry a significant wage premium, but there is a question in many ways, you know, in the longer run. I think I did say that a lot of the things we think of as being high skill, requiring lots of education, are actually the kinds of things that computers can in the end do. I mean, you know, AI or machine learning, whether that's really AI or not, but it can do a whole lot of stuff. That we thought of not very long ago as being the stuff that you had to go to school for years and years to achieve, whereas robot plumbers are still quite a ways off because the material world tends to be full of unpredictable, hard-to-model features. So I think that the idea that we're always going to be spending huge resources or that it will always make sense to put a lot of effort into higher education is at least arguable. So I think the idea that— We could become a society where education goes back to being a status symbol for the elite is still a real— is a live possibility.

If I think of a lot of your criticisms of the Republicans, of Donald Trump, as I read you, very often you're saying that what's wrong here is really quite obvious, so that it's still happening. Is your view that somehow shame has become too weak a force, or is it asymmetric information? Is there simply some kind of permanent lock?— that bad forces have over various processes, kind of the microfoundations of how some very obvious wrongs could persist.

Oh, sure. We have to ask why— the question is for different people, why do certain wrongs persist? So if the question, why do people continue to claim that cutting top marginal tax rates has huge positive effects on growth for a proposition for which there is zero evidence? The answer is, well, who benefits from the— perception that cutting top tax rates is good for growth and that's almost a question that answers itself and there's a— it doesn't take a whole lot of money to create a— relative to the amount of wealth in our society to create a whole structure of institutions that reward people who will endorse supply-side economics.

But at the voter level, most voters don't know that debate. They see Republicans doing bad things. Republicans are still getting reelected. We might have all Republican governors in New England which to me is deeply strange? OK.

At the voter level, there's two things. I mean, actually, the Republican governors in New England thing is a little weird because you need to— they often don't behave like Republicans. I was in New Jersey. I was in Massachusetts, both places that are deep blue, so much so that you end up with kind of routine machine politics corruption among the Democrats and people elect Republicans just to get a break from the machine and they don't necessarily pursue policies that are anything like those of the national parties. That's an exceptional case. But look, the ordinary people, people with real lives, real jobs, people who aren't paid to think about abstract policy issues are understandably really more poorly informed than those of us who do— who push around words and symbols for a living can easily appreciate. If you ask people, do they actually know what policies are being propounded? If you ask them, do they know what Republican healthcare policies actually are? Maybe more so now than a year or two ago, but still mostly not. People have a very poor— people are poorly informed. Of course, sometimes they're actively misinformed by Fox News or something, but it's just— it's instructive being out there in public, writing for a newspaper, even writing for the New York Times, and then looking at the mail you get.— leaving aside the crazy and hate stuff, but just the sort of ordinary citizens who— they've heard from somebody that there's a plan to replace the US dollar with some global currency. Well, you know and I know that that's ridiculous, but these aren't necessarily stupid people. They're not devoting a lot of time to public affairs, and of course The news environment, leave aside again the partisan media, tends to be very information scarce. Years back, I did a— during the 2004 campaign, I actually went through transcripts for network news over a 3-month period on the issue of healthcare to find out how much would somebody who got their news from watching the TV news programs have learned about Bush versus Kerry on healthcare. And the answer was not one thing. There was not one mention of the actual— there were a couple of stories about how their healthcare strategies were playing politically, but there were none at all about the actual content of their healthcare programs. So why would we expect voters to necessarily recognize bad ideas?

A lot of times you remind me of the earlier progressive historians, the notion special interests and self-interest is rife. That it's quite obvious that someone needs to blow the whistle, that there's a kind of ongoing moral struggle in America. A lot of it's about economic self-interest. Is that an identification you either agree with or make self-consciously, or you just think it's evolved that way because of historical constants?

I think it's evolved that way. I mean, first of all, that's always been somewhat true. You always need to be blowing the whistle on self-interested stuff that's going on that in the hope that the public won't understand it. But it's also true, you know, the progressive movement arose during a period of great income inequality and corporate dominance of a lot of politics. And here we are in an era of great economic inequality and corporate dominance of politics. So of course, we're going to sound the same when critiquing a lot of the conventional wisdom.

You've written a few times that you started with history before economics, but never explained that much besides mentioning Isaac Asimov's Foundation trilogy. A funny kind of history, but still a historically oriented series of novels. What else did your early history background consist of and how has that shaped your thought? Well, I just—

I took lots of courses. I just read tons and I still actually probably read in my nonfiction reading history is dominant. I don't know. I just find that the story of the past, whether or not it actually translates into any kind of direct parallels with the present, is just a great way to have a sense of the world.

You have a paper with Van Obbels from the mid-'90s in the QJE. I think it's called Globalization and the Inequality of Nations. It's really a paper about history. For some reason, it's become somewhat neglected. But the notion that as transportation costs fall very low, that nations on the periphery come back at the expense of nations in the center. Do you think that's what's happening to the world today?

I think we don't really know. I mean, we Just around the corner, Branko Milanović has his office and Branko has the famous elephant curve that shows income growth around the world and there's a clear transition after the late 1980s as globalization really takes off. You start to see twin peaks, the global 1% pulling away from the rest but also the global middle, the Chinese middle class really experiencing rapid growth and with a trough in between which is the working class in advanced countries. Is that actually because— of globalization or are common factors driving both globalization? I don't think we really know, but it's certainly— it's a nice story. But yeah, Tony Venables and I were having some fun. We were working on economic geography and realized that one way you could cast the models would be one that would give you this U-shaped behavior in which you start from a world of high transport costs with very little globalization, reduce them some and the world differentiates into an advanced region and a peripheral region and then reduce them further in the peripheral region with its lower cost makes a comeback. That's a nice story. It's probably too simple to capture what really went on.

What's your view on NIMBY versus YIMBY? Do we need to build more in America's major cities?

Oh, yeah. I'm a total YIMBY on that. I mean, there are reasons for certain kinds of zoning restrictions, but that has very little to do with most of the reasons we don't We don't build housing. And no, this is a place where I— if you like, it's a place where at least a lot of liberals are wrong and the de facto policies of a lot of conservative places are right. You want to allow more building. New York is in many ways a thriving successful example of what you can do. We make it way too hard to build housing for people who want to come here and the result is to price out a lot of people who really should be part of this experience.

Henry George's single land tax, would you consider it as a means of both encouraging building and reducing inequality? Haven't done my homework.

Just haven't done my homework on that.

If you think of the international supply chains that spread across many countries, Richard Baldwin has written on this, you have yourself. Do you think we're now in an era where those chains are in essence contracting or collapsing? And what is now done in China may end up being done in Mexico or NAFTA, and that will unravel? Was it all too utopian to begin with?

It wasn't utopian. Concert— it worked. Now, it is true that global trade really soared from about 1990 to 2010 and then sort of leveled off. And it does look as if it was a one-time thing, that combination of trade liberalization in emerging markets and reduced transportation and transaction costs, because it's not just the shipping cost, but it's the cost of getting things on and off the ships and all that, led to— but it looks like it was a one-time surge in trade. So this value chain kind of trade, and there's some indication that there was a little bit of overreach. That businesses got in search of that saving that last penny, built international logistics chains that were just too complex, too subject to delays, disruption, and that there wasn't advantage in moving stuff back closer to home. So there probably would have been some retrenchment anyway. Now, you tell me what's going to happen with our trade conflict. I mean, we can think—

It's perpetual, and supply chains will contract and become more regional. But how big, how severe?

Even the regional stuff, I have to say that the trade policy guy in me is in some ways enjoying this because it's been historically for a long time a pretty boring subject. World trade was almost free. Nothing was happening. Now all of a sudden, not only is stuff happening, but it's happening in unpredictable directions. Even after the 2016 election, if you told me that we would be making nice with Mexico but in dire conflict with Canada, so I have no idea how far this goes. I suspect that— let's put it this way, a good guess would be that the regional trading agreements are more robust in the end just because business has so much of a stake in maintaining them, but who knows?

Given the trends in economic geography we see, the trends in evolving technologies, do you think the two American coasts will become increasingly economically important, or will at some point that trend reverse itself?

It really looks as if agglomeration economies have become more important. You really do see a migration of economic activity to the areas that are already rich, and that is a little interesting. I mean, there was a debate— still goes on a bit— but there was a debate 20 years ago with the internet, with distance shouldn't matter, why won't people relocate to where land is cheap and there's no traffic?— and doesn't seem to happen. There seem to be other factors that make it more, not less desirable to locate where the action is. So as far as we can tell, it's still going in that direction. I'm a little reluctant to be sure that it continues because I don't think— you know, ex ante, it wasn't at all clear which way it was going to go and we still— to the extent that we can model this at all, which is pretty limited, it seems to be that there are countervailing factors and I don't think anyone had enough insight to know that it was it's going to turn out that the big metropolitan areas were going to be winners rather than losers from this trend.

A few macro questions. How much do you worry about slowing population growth as a factor for an ongoing slowing of aggregate demand? Oh, very much. I was—

so there's a little story here. Larry Summers became famous for advocating the idea that we're facing secular stagnation. I had written about the same time or even a month or so earlier along the same lines except What I wrote was very poorly formulated and unreadable and Larry came up with this crystal clear explanation of the issue. So he gets all the credit and what's even worse is he deserves it. So I get really pissed because I blew it on that one. But no, I'm very much— I think that the secular stagnation type stories, the stories that say that with falling population growth, we have a hard time generating enough investment demand to use the desired savings so that interest rates tend to be low even when times are good and tend to hit the zero bound way too often is a good story. It's not 100% certain that it's right, but I think it's a good story. The first sort of dress rehearsal for the difficulties that we've all had since 2008 was Japan, and Japan famously is the place where declining working age population kicked in well before it happened in the rest of the advanced world. So, no, I think it's a big issue.

Political risk aside, which we've already discussed, but what do you think is the number one danger to the global economy right now? Is it corporate debt? Is it China? Is it Turkey plus Argentina? Something else?

I've been arguing that the next recession will be a smorgasbord recession, that it'll be a mix of, of all of these, that there's no one huge thing that stands out, but there's a bunch of things where it looks like the kind of Minsky financial cycle. People, after a long period without shocks, people get complacent and they start extending themselves, taking risks, taking on leverage that creates new risks. That all tends to proliferate. The thing that makes it dangerous is not so much that there's this one huge weakness as the fact that a typical recession The Fed cuts interest rates by something like 600 basis points. At the moment, the Fed only has 200 basis points to cut. So it ties in with the question about secular stagnation. It's the fact that we're starting from a position of really low interest rates, which means that monetary policy is not very effective and we're accumulating no one huge— problem in the economy, but arguably a bunch of smaller ones. If several of them come to a head together, then we're set up for a very difficult business cycle again.

Janet Yellen mentioned yesterday, I read, that the Fed may need to raise interest rates again at this point. If you view that matter different than she does, how would you trace that difference back to underlying frameworks? That's an interesting question because as far as I can tell, She's very dovish, we all know, right?

And as far as I can tell, her framework is not very different from mine. And what my framework was telling me is don't raise rates because actually a somewhat higher inflation rate would be extremely useful. If you don't raise rates now, you can get up to somewhat higher inflation, which means that you'll have room to get real interest rates lower during the next slump, and that would be a good thing. So why don't people— why doesn't Janet Yellen Why do they see it that way? And my answer, I think, is that for reasons that are, I think, less intellectual and more almost social, anyone who's been associated with central banking is really wedded to the 2% inflation target. And if you accept that the 2% inflation target is sacrosanct, then yeah, I think there's pretty reasonable grounds to think that although inflation has been very low to come along, the chances that if the Fed doesn't raise rates further, inflation will start to creep noticeably above 2% are reasonably high. So if you take that as your constraint, inflation must not be allowed to substantially exceed 2%, then yeah, you need to raise rates, but I don't accept the starting premise.

If we have a service sector economy where contracts are not renegotiated all the time, workers' bargaining power at times will be weak, would the American public put up with, say, a 4% inflation rate? Knowing their real wages would be cut into and they would have to struggle to get that back every time there's a bargaining cycle?

Well, that's a good question, although I'm not sure that that makes— I'm not sure that the service economy aspect really makes a big difference. And to the extent that—

But there are fewer unions, right? That's the point.

There are fewer unions, but on the other hand, fewer unions might mean that more wages could arguably become more flexible, but not. What is true is we don't have COLAs. Actually, I'm showing my age, but even knowing what a COLA is, I think, but cost of living adjustments. Oh, sure, yes. So I don't know. But at the moment, it's not the public is saying 4% inflation or 3% inflation is unacceptable. It's all the central bankers who are there. And I am actually old enough to remember a 4% inflation economy, which is the second half of the 1980s. And I don't remember people complaining bitterly about inflation during those years. It felt okay. So I think that's a— we shouldn't be in— inventing a public objection without clear evidence that it's really there. And meanwhile, the economics that says that a 4% inflation rate makes a lot of sense I think is pretty strong. And the economics that said that 2% was enough has all turned out to be wrong given the experience of the last 10 years.

In your view, how well run is New York City as an entity?

Oh, not very. I mean, it's— Compared to what? I mean, there are pieces that are— Now, I actually, I like de Blasio. So I actually think he's done some really good things and it doesn't get— What he's done on education and even on affordable housing is actually quite substantial, but the city is so big and the problems are so large that people may not get it. I will say it is crazy that you have a city that is so dependent on public transportation and yet the public transportation is not actually under the city's control and has clearly been massively neglected. Directed and so I don't suffer the full woes of the subway but I suffer some of them even myself. So this is not— the city could be run better than it is but it's not— certainly not among the worst managed political entities in the United States, let alone in the world.

But purely local control of the subway to internalize those gains you think would be a good idea?

Well, probably would be because it would mean that the— that the complaints would be felt sooner, that there would probably be less— I mean, the subway is desperately strapped for money but has spent a fair bit on things that seem to be more about prestige than actually improving the daily ride. I don't know. I'm not sure what else is important. I mean, someplace where de Blasio I think is in the wrong, we could really use a congestion tax.— I guarantee you that outside the window just behind me, there is a standing traffic jam because there always is. So I'm not sure exactly how the politics would— what political— what do I know about political institutions and their effect? Only amateur. Only what anybody who reads the newspaper does. But there are things that could be done better.

Bringing down infrastructure costs in part to be able to build more. What's the trick there? It doesn't seem to be mainly labor unions. Why can't we do it?

Yeah, I haven't— seems to be there's just a lot of cross-cutting interests and it's not mostly the labor unions. It does seem to be something about some combination of opposing bureaucracies. I don't know. It is a remarkable thing though. And why everything is so expensive, I still haven't figured it out. That's not a New York problem.

That's an everywhere problem. —But some areas London seems to run much better than New York. Cleanliness, certain kinds of public order, even though New York is safe now, but it doesn't look like a well-run city in every way. I mean, you walk past garbage, say.

—Oh yeah, there's some of that. Although actually I would say that the— I remember New York 40 years ago. It's inconceivable how much it's gotten better. And by the way, this is not a recent— I don't think New York gets enough credit for the brilliant innovation— I don't know how many decades ago of the 4-track subway system with express and local trains makes a huge difference in the livability of the city and the ability to commute within it. But yeah, but there's something in the US— how did we get there? We used to be a great country on infrastructure.

We used to be— Incredible. The best, right?

—the best-built place in the world and now we can't seem to— a mile of anything costs at least $1 billion and I don't know why.

What do you think of the Baumol-Bowen cost disease hypothesis? There are just some sectors where rising wages mean they cost more and more and become less effective.

Well, there's some of— that's obviously true of some things, but it's not clear that that applies to infrastructure. The old Baumol hypothesis was very much service costs were always going to rise relative to goods production, but that's not at all clear more recently where at least during that productivity spurt we had from '95 to '05, a lot of it was in the service sector. So I think it varies. With changing technology, the cost disease may be afflicting different sectors. Machine learning is going to— that already means that a lot of stuff that we used to think of as cost disease-afflicted service sectors has now actually gotten startlingly cheap.

Will there ever be interstellar trade in intellectual property? So you send your tech-knowledge to a planet far away. It arrives much later, of course. Or you trade Beethoven to the aliens in return for a transporter beam. Can this work? You've written a paper. It seems to indicate it can work.

Yeah. So I wrote a paper on theory of interstellar trade when I was an unhappy assistant professor. Are there any happy assistant professors? I was just blowing off steam. But no, I mean, it's an interesting question.

I mean, we— It could become your most important paper, right? We could imagine.—

that there would be some way. I suspect that we'd have to find somebody to trade with. But yeah, the idea— although it's the kind of thing I think would be— if you imagine, try to imagine interstellar trade for real and intellectual property, it's probably the kind of thing that would be more like government-to-government exchanges. It sounds like it would be really, really hard. Although, you know, I Some science fiction writers are imagining that something like Bitcoin would make it possible to do these long-range— I don't think something like Bitcoin is even going to work here, but anyway, but the idea that is one of the things, although given the— one might hope that in the 23rd century or something that we've actually got to the point where we will share our knowledge with the aliens out of our goodness and that they will do the the reverse. The Star Trek universe appears to be a post-capitalist society, so who knows?

If you can send humans out into space at near light speeds and bring them back, does that mean real interest rates have to fall to zero? No. Because many years could pass and you could save and come back and be a trillionaire.

Yeah, but that's what I— it's not clear that the— first of all, actually, it's not clear that interest rates that the returns are high enough to make that an attractive proposition. I mean, there was an old, old story about the guy who put a dollar in the bank and left it in a perpetual trust fund and eventually ends up owning the economy. But in fact, R has been less than G on average historically, so that doesn't actually happen. I think the same thing is true at the— and you don't need interstellar trade for that, right? You could have cryonics. People could— Sure. But the fact of the matter is that would not have worked, right? If you had found yourself a way to do a Rip Van Winkle and then to reclaim your invested money from a century ago, I don't think you would end up being all that— have done all that well. I don't think that's going to be the constraint.

Star Trek versus Star Wars, which do you find more interesting?

Oh boy. Good thing about Star Trek is that there were lots of shows and not 3 absolutely horrible movies that I refuse to watch. I don't know. I've actually never been all that into either one. So purely non-intellectual stuff, I think the use of iconography of just the way things look in Star Wars is a lot more interesting, but the social speculation in Star Trek is more interesting. So both have their virtues and the truth is I'm not all that into either one.

What would be a science fiction novel that maybe people don't all know about that you would recommend that's influenced how you think about the world? We know the connection to Asimov, Iain Banks, The Culture series.

What else? Charlie Stross, almost everything he writes, but he has— I actually— so Charlie Stross, if people don't know, he's an English writer but living in Edinburgh, but he's incredibly prolific and writes these multiple linked series of books. Andy Bloggs. Andy Bloggs. Yeah. Which is also great fun. But the Merchant Prince novels involve world walkers, people who can step between alternative universes, and they come from an alternative timeline in which North America is this backward medieval society, and they can step back and forth to our timeline, and you would think that they would bring back our technology and transform everything. In fact, they have some of our technology, but their society stays medieval and backward, and they basically use their worldwalking ability to be drug smugglers. And I've actually written about this. I view these things as being— this is a series that's about development economics, about having access to advanced technology doesn't make you an advanced society and how hard it is actually to achieve social change.

The dream of a generalized psychohistory is outlined in the Foundation trilogy. Will it ever be possible? Probably not. Or is it just a motivating dream?

Yeah, that's what I always wanted. That's why I went into economics, as I say. I wanted to be a psychohistorian. But just— there are— it is a deeply— the reason we can get even as far as we do in economics is that economics is about the simplest, crudest aspects of human motivation and behavior. Getting and spending basically is a— even there we don't do too great, but at least we have a pretty good idea of what it is people are trying to do. Get beyond that and it gets way harder. So yeah, I mean—

Returning to nonfiction, is there an economically viable role for humans in space? That's unclear.

At the moment, it doesn't seem obvious that there is. If you try to think about the things you can actually use space for. Colonizing space doesn't look like a great thing to do. There's a lot of things you can imagine space— in fact, space is already extremely useful for communications and could become useful for some kinds of manufacturing, but hard to see that any of these things require that there be people up there. So—

What about just diversification? The Earth is vulnerable, if only to asteroid strikes.

Yeah, but that's really hard.— I mean, there's a case to be made for it, but is there really an incentive to do it?

Yeah, who internalizes that case?

Yeah, who internalizes? And yeah, I mean, a lot of the space— a lot of science fiction is built around the analogy between space and the frontier, but it's not much like that. There's not like there's rich land waiting to be exploited. There's extremely hostile environments. We haven't colonized Antarctica either.

Finish up the discussion, a few questions about what I call the Paul Krugman production function. So in the 1990s, you wrote a well-known paper, it's called "How I Work." Yeah. It was giving people tips and not, not quite advice for other people, but how it is that you get things done. Now, a few decades have passed since then. What do you think you've learned about getting things done that was not in your paper, "How I Work"?

I put in a lot more effort. And when I wrote that, I mean, first of all, I still think that that reads pretty well as a description of how I work. At the time I wrote that though, I was just— I was writing for academics and now I do a lot obviously of public intellectual stuff. And so you kind of would probably have to add some principles about thinking about how this reads to people who are intelligent but don't come at it with no background. One of the principles I think about all the time with the Times is the— nobody has to read your column. So you actually have to have a hook at the beginning and you have to have a zinger at the end. Style matters and as it should because people have scarce time and you have to give them a reason to spend time with you. So, oh, and of course these days, now with Twitter, which it turns out I guess if numbers are an indication I do well at, and there I think the most important thing is actually to just not think about how many people are reading it. Dance as if no one is watching, tweet as if no one is reading. That just seems to be the way to make it work.

You mentioned having had around 1987 a kind of temporary dry spell in your career. How is it you pulled yourself out of that?

No idea. It just happened. I just happened to— I was thinking about lots of things, doing, running around to conferences, and somehow that gelled into a series of good ideas. I mean, I guess given the trajectory, the dry spell was the anomaly somewhat.

If you were given a free decade you could take off and then return to the life you have, what would you do with that decade? That's hard.

I mean, you know, I'm 65 years old. I'm pretty set in my ways. It's hard to think about.

But you could read more books. You could travel around. You could— I'm sort of doing that already.

That's the thing is I'm not working as hard as I was. This past summer, I was trying to decide between two bike trips in Europe that both looked really appealing. And then I said, "You know, what the hell?" So I did both of them. So I'm actually just taking more time to see the world do stuff. The great luxury of being where I am now is the end of ambition, that there's nothing more that I— there are no more notches I need to put in my belt, no more rungs I need to climb on the ladder. So I'm actually kind of doing— aside from the fact that the world is going to hell, otherwise I'm just basically having a good time.

Is that utopia or dystopia, however? Because presumably to have arrived at your current point, you're driven in some set of ways, right? And now if you're not sure what the next step is.

There was a period, I have to say that I think I'm over that hump, though we'll see if I go crazy in the near future. But there's a moment when you— I mean, I suspect that quite a few people after getting a Nobel Prize or something, —actually experience a spell of depression because now what? And I had a little bit of that, but that's where a point where you just say, "Okay, find things that you're interested in and try to—" You know, the old business about do what you love and the money will follow, that of course is garbage. But if the money is already there, you know, you're being paid a nice salary, then you can do what you love.

Let's say a very smart 20-year-old came to you and said, "I want to be the next Paul Krugman," and they meant as a public intellectual, not as a want to be a research economist? What advice would you give them?

Truth is I have no idea, but I would say maybe to just be interested in a lot of things, but when you find something that really grabs your attention, work at it seriously. Figure stuff out. I mean, the curiosity is— as opposed to intellectual complacency is the big thing. If you don't feel that you've got that the explanations you're being given of something, whether it's international trade patterns or the Japanese slump or something, if you don't feel that the explanations quite hold together, then worry at it. Try to find something that— scratch that itch. Don't let it go away. And then whether that will turn out to do what you want it to do, I don't know.

And for a budding research economist, would it in fact be the exact same advice?

Oh, yeah, except what I would say is at this point, don't do what I did, which was very heavily theory-oriented, simple models, because I think that's— there may still— there's always a possibility of that, but now we are in this golden age of miracle work. And so the same advice that we used to give our grad students, find facts and data that have not been heavily worked over and look for anomalies or Look for natural experiments that shed light on disputed issues. So go out there and look at the world. I would say probably— I suspect that stepping beyond traditional economic methodology is going to be productive in the years ahead. I mean, we just had the Rainwater Lecture here. We had a lecture from an ethnologist. Tyler Cowen, who goes and talks to working-class fathers. I was just blown away by— it's a totally different research method from anything we do in economics normally. It's totally different. It requires a degree of personal interaction with the subject you're studying that I would find terrifying, but that just made me think, "You know, I wonder how many insights might we get by doing things in a way that's very different from anything that is now part of the standard economics research paradigm. Paul Krugman, thank you very much.

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