Speaker 1: Joining us now is the laureate and there is a
Speaker 1: ned Philps Paul Krugman distinction. In the year where Professor
Speaker 1: Krugman took the trophy, he was the sole winner. I
Speaker 1: can't tell you within modern economics a special that is.
Speaker 1: I've been a fierce defender of his international economics, retiring
Speaker 1: from the New York Times colin where he's been a
Speaker 1: lightning rod of debate, and we are honored that we
Speaker 1: can speak our international economics forward with Paul Krugman. Paul,
Speaker 1: thank you so much for joining Bloomberg this morning. If
Speaker 1: you had a cup of coffee in mar Lago with
Speaker 1: President elect Trump this morning, how would you brief President Trump?
Speaker 2: I would ask, what on earth do you think you're doing?
Speaker 2: You know, it's we're looking at a US economy that
Speaker 2: this morning's Jaws report was really good. Everything is kind
Speaker 2: of coming up roses. It's soft landing everywhere. And yet
Speaker 2: he's prepared, or claims he preparing to go on this
Speaker 2: trade war against everybody. And the question really is why,
Speaker 2: what is it? Why do you want to do something
Speaker 2: so disruptive when you're inheriting an economy that is really
Speaker 2: looking pretty good.
Speaker 3: I'm looking Paul Krugman.
Speaker 1: It's something you taught with a piece of chalk at
Speaker 1: Princeton and at City College. The basic idea here is
Speaker 1: a tariff chart, which is the microeconomics in dynamics. We
Speaker 1: talked to Richard Clara the other day about the dead
Speaker 1: weight loss of tariffs for our listeners, the magnitude of terroriffs.
Speaker 1: Does it matter or is there just simply a dead
Speaker 1: weight loss to each American citizen?
Speaker 2: Oh? No, the magnitude. I mean, one of the things
Speaker 2: that you learn from at studying the economics of tariffs
Speaker 2: is that tariffs at low rates do very very little harm.
Speaker 2: Would we had an average terraff of something like two
Speaker 2: to three percent, We do at the moment coming into
Speaker 2: this that if you ask you know, how much difference
Speaker 2: would it make if we got that down to zero,
Speaker 2: The answer is basically invisible. But if you go from
Speaker 2: five percent to twenty five percent, which is what Trump's
Speaker 2: talking about for everybody and sixty percent for China, then
Speaker 2: it's roughly speaking, we think that the losses are to
Speaker 2: go up roughly as the square of the terriff freight.
Speaker 2: So with Trump talking not about a modest increase in tariffs,
Speaker 2: not about a terriffs on a few products, but across
Speaker 2: the board trade war sweet Holly Tarff levels that starts
Speaker 2: to become a really, really big deal.
Speaker 1: Paul, I've been If you're in folks, the textbook on
Speaker 1: this is Krugman Opsfeld.
Speaker 3: It's all again.
Speaker 1: You throw Ken rogoff in as well, but Krugman ops Who.
Speaker 1: There's some adult textbooks out there of what Kruman invented
Speaker 1: for international economics. Paul, I've always defended you by saying
Speaker 1: the then diagram of Krugman economics and John Taylor economics
Speaker 1: at Stanford is pretty pretty tight. Can Kevin Hassett advise
Speaker 1: this president towards some form of tariff moderation or sanity?
Speaker 2: Kevin Hassett has a history of basically saying whatever I mean.
Speaker 2: He's been a loyalist and a court here. I would
Speaker 2: be really shocked if he goes to you know, Tarras
Speaker 2: appears to be a real Trump obsession, and I'd be
Speaker 2: shocked if has it, or actually anybody stood up to
Speaker 2: Trump and said, mister President, you're thinking about this all wrong.
Speaker 2: You know, I've been writing for listeners. I'm retired from
Speaker 2: the Times, but not from life and I'm writing almost
Speaker 2: every day on my substack.
Speaker 3: How do we your substick?
Speaker 1: He needs to make a buck on this, That's what
Speaker 1: it is, Paul, Well, at the moment, how do they
Speaker 1: still see your writing as you've exited The Times?
Speaker 2: Ol Krugman dot substack dot dot com. You just google
Speaker 2: Krugman substack and you'll find it. And look, you know,
Speaker 2: I'm free to it's a newsletter slash blog. And I mean,
Speaker 2: and one what I wrote the other day was we're
Speaker 2: seeing a continual dynamic where people who claim to be
Speaker 2: close to Trump but remain anonymous tell news you know,
Speaker 2: source of newspaper writers, Hey, he's not really as crazy
Speaker 2: as he sounds. And then Trump immediately reacts with a
Speaker 2: truth social post saying yes, I am.
Speaker 3: So.
Speaker 2: It does look like we're really talking about, uh, you know,
Speaker 2: in tarrace on a scale that we really have not seen.
Speaker 2: We're talking about a reversal of really ninety years of
Speaker 2: US policy. Yeah, trying to.
Speaker 4: Where I wanted to go, professor. I mean, you know,
Speaker 4: I grew up on Global Wall Street, where and many
Speaker 4: of our listeners and viewers as well of internationalism being
Speaker 4: a fundamental business tenant. Now that's taken a back seat
Speaker 4: here over the last ten years. Is internationalism dead?
Speaker 2: Well, probably in the form it was, Yeah, I mean
Speaker 2: a lot of this was USA geminy, and we thought
Speaker 2: that a more prosperous, peaceful world was in our interest.
Speaker 2: You know, what was good for the world was good
Speaker 2: for America, and we thought that freer trade was good
Speaker 2: for America, and we led the way. We built a
Speaker 2: world trading system kind of in us, in our own image.
Speaker 2: It's very rules bound, legalistic, it's you know, and it worked.
Speaker 2: We've managed to get everybody's tariffs down. We got to
Speaker 2: a world of pretty close to free trade. We've been
Speaker 2: in the last couple of decades. The European Union, which
Speaker 2: is not very united many things, but is unified on
Speaker 2: trade policy, sort of co manage the system with US.
Speaker 2: Now we've gotten much more nationalistic, and even Biden was
Speaker 2: pursuing for I think pretty good reasons and pretty seriously
Speaker 2: nationalistic policies, specifically on technology and China. But so the
Speaker 2: age of full on more globalism is good. That's behind us.
Speaker 2: That that really died about a decade ago. But there's
Speaker 2: a big difference between saying, Okay, we're going to be
Speaker 2: much more selective about this and maybe even be protectionists
Speaker 2: here and there and saying, you know, smooth Holly had
Speaker 2: the right idea, which is basically what Trump is saying.
Speaker 4: Right, So, professor, you know, we had today's a big
Speaker 4: jobs day here on a global Wall Street, showing again
Speaker 4: the strength of the US labor market. That calls into
Speaker 4: question another one of the presidental policies, which is about
Speaker 4: immigration and what to do with the migrants that are
Speaker 4: already here. From an economic perspective, what would your how
Speaker 4: would you advise the president on thinking about immigration policy.
Speaker 2: I mean, immigration has been one of the great strengths
Speaker 2: of the US economy, whatever else you may think about it.
Speaker 2: And I mean it's not actually a source of crime
Speaker 2: or any of the things that he says, but the
Speaker 2: immigration has been a tremendous safety valve, has helped to
Speaker 2: contain inflation. And the immigrants, particularly if I might say
Speaker 2: undocumented immigrants, they're not evenly spread across the US economy.
Speaker 2: There a really critical part of the labor force in
Speaker 2: some particular sectors. If you want, if you're worried about
Speaker 2: agriculture or meat packing or construction, those are all sectors
Speaker 2: where we have an aging The native born population is
Speaker 2: agent the working age. Native born population is shrinking because
Speaker 2: we've had low fertility for a really long time, so
Speaker 2: that without immigration we would be basically we would be Japan.
Speaker 2: And so from an economic point of view, this is
Speaker 2: a hugely This is a tremendous self owned Paul.
Speaker 1: Krugman with us. We are thrilled to these with us
Speaker 1: here with Cee you and my Qun's Stone Center and
Speaker 1: socio Economic Inequality among others, and affiliated also with Yellows,
Speaker 1: I should say, and of course he years at Princeton
Speaker 1: as well. I talked to him about his first paper
Speaker 1: once at Yale, which was in star Trek.
Speaker 3: This is a few years ago, right, yeah, just after Ricardo.
Speaker 3: But the answer is the laureate Paul Krugman with us.
Speaker 1: Thank you for the huge response to Professor Krugman with
Speaker 1: us this morning. Paul.
Speaker 3: I've said this before, but I.
Speaker 1: Guess there can be a tour of duty when you
Speaker 1: win a second Nobel Prize. You deserve a second Nobel
Speaker 1: Prize for your persistent discussion of wages and monopsony in America, Folks.
Speaker 1: Monopsony the model is a rubber plantation in Malaysia where
Speaker 1: the rubber plantation sets the price because they have power
Speaker 1: over all the farmers and the rubber trees in the
Speaker 1: manufacturing process. Professor Krugman, how is monopsony in America affecting
Speaker 1: our listeners in our viewers on YouTube?
Speaker 2: Oh gosh, I mean, I'm in a way what it's
Speaker 2: telling you. I mean that the main monopsony issue on
Speaker 2: wages is is that it's okay to raise the minimum wage.
Speaker 2: I mean, is this is where we really started to
Speaker 2: take it seriously when you first had the work by
Speaker 2: Card and Krueger, now replicated by many people, which says
Speaker 2: that local minimum wage increases don't actually reduce employments. It's
Speaker 2: it you eq on one on one unless you well,
Speaker 2: I have to say, even in my own textbook, we
Speaker 2: do talk through how a minimum wage can reduce employment,
Speaker 2: but it doesn't actually seem to happen in the United States. Now,
Speaker 2: that's because minimum wages are low in the United States.
Speaker 2: And you know, if if you set the minimum wage
Speaker 2: at forty dollars an hour, even I would accept that
Speaker 2: that would have some employment consequences. But so that's the
Speaker 2: main place where it hurts. Although if you are you know,
Speaker 2: a small small supplier or something trying to pedal your
Speaker 2: stuff on Amazon. The fact you know that you've got
Speaker 2: a giant Beza size monopsimist certainly affects your business.
Speaker 1: I mean, it's very interesting to see Paul Krewman and
Speaker 1: then the conservatives listening. I'm going to frame this, Paul
Speaker 1: is a liberality in a way, is a locke in
Speaker 1: individualism of conservative theory in America. Should we be more
Speaker 1: like Germany flat on their back? Should we be more
Speaker 1: like Sweden? Should we be more like France?
Speaker 2: Well, I mean, ideally we should be more like Denmark,
Speaker 2: which is a place that does strong welfare states, strong unions,
Speaker 2: and does it well. It's you know, everybody's got. One
Speaker 2: of the things. I've spent many years teaching a course
Speaker 2: versus Princeton then than at CuNi on the ecnology of
Speaker 2: the welfare state comparing different countries, and one of the
Speaker 2: things you learn, first of all, the United States has
Speaker 2: a much more we have a much bigger welfare state
Speaker 2: than we like to imagine, but it's much smaller than
Speaker 2: what European countries have. But there's no country that does
Speaker 2: everything right. US healthcare is a nightmare. US retirement system
Speaker 2: is actually pretty good. France, it's exactly the opposite. So
Speaker 2: it's not as simple more government is good. I mean,
Speaker 2: I think their conservatives always think that less government is good.
Speaker 2: Liberals progressives never think that more government is automatically good.
Speaker 2: But there are certainly things where we should be doing more,
Speaker 2: and obviously that's on hold over the next few years.
Speaker 2: But there are lots We can learn a lot from
Speaker 2: other countries. So that's one thing I would say to
Speaker 2: you as an international economist. The biggest problem with Americans
Speaker 2: is that we don't actually seem to believe the rest
Speaker 2: of the world exists, and we don't think that we
Speaker 2: can learn lessons from things that other countries do.
Speaker 4: Right, Professor, Most of the market participants that we speak to,
Speaker 4: particularly over the last several months, and they see a
Speaker 4: data point like today's non farm payils. So Nicoel, like
Speaker 4: the FEDES, engineered a pretty solid soft landing. What concerns you?
Speaker 4: What worries you about this US economy right here?
Speaker 2: I think the US economy as of right now is
Speaker 2: in very good shape. Okay, I am worried. You know,
Speaker 2: I've been around a while and the whole ai fewer
Speaker 2: and although the money being thrown that that technology gives
Speaker 2: me definite nineteen ninety nine vibes the sense that we
Speaker 2: may be having even if there's even if the technology
Speaker 2: does do a lot of good stuff, and there's some
Speaker 2: indications that it will, the valuations look awfully high, and
Speaker 2: you can very easily imagine a kind of two thousand
Speaker 2: and two thousand and one type. But the biggest concern
Speaker 2: for policy, I mean, if if you actually believe that
Speaker 2: Trump is going to do what he promised in the
Speaker 2: campaign with these massive talents, mass deportations, and let's not
Speaker 2: forget taking away a lot of the feral reserves independence
Speaker 2: we are, it's not at all hard to see us gratuitously.
Speaker 2: I mean, we're in good shape right now. But we
Speaker 2: could very easily have a gratuitous outbreak of stagflation of
Speaker 2: America and it will be entirely coming top down from
Speaker 2: the from the White House very quickly.
Speaker 1: Heref scrub Paul, we got to do this, Sircrubman won't
Speaker 1: come back the substack this morning. The real threat, the
Speaker 1: real threat of fake numbers.
Speaker 3: Paul Krugman, are.
Speaker 1: You suggesting the president and his administration will cook the books?
Speaker 2: I think that's a very high possibility if you believe
Speaker 2: what I'm saying about inflation. Inflation is actually going to
Speaker 2: go up substantially. And do you really imagine that Trump
Speaker 2: will just sit there at and not say these are
Speaker 2: fake numbers, it's fake news and put pressure on the
Speaker 2: Bureau of Labor Statistics to produce better numbers. I mean,
Speaker 2: we've seen populist regimes do that all over the world.
Speaker 2: Why imagine that it won't happen here? And I know
Speaker 2: that people, you know, people who've had long careers at
Speaker 2: the Bureau of Labor Statistics are really worried about this.
Speaker 2: So I'm just saying, you know, flag this. This is
Speaker 2: something to watch.
Speaker 1: Paul, generous of your time. Thank you so much again.
Speaker 1: Paul Krugman in a New Life out. Do you got
Speaker 1: it from Adam Two's substack? Yeah, maybe we should do
Speaker 1: a substance.
Speaker 3: And we should do that. Paul Krugman, thank you so much.
Speaker 1: Don't know about Laureate of Princeton always in Cuney as well.