Speaker 1: You're listening to Bloomberg Business Week with Carol Masser and
Speaker 1: Jason Kelly on Bloomberg Radio. So Paul Krogman is with
Speaker 1: us Nobel Laureate economists New York Times columnist n Yu,
Speaker 1: Distinguished Professor of Economics and Professor Emeritus at Princeton University's
Speaker 1: Woodrow Wilson School, Author and editor of nearly thirty books.
Speaker 1: His latest book, Arguing with Zombies, Economics, Politics, and the
Speaker 1: Fight for Better Future. He is in our Bloomberg Interactor
Speaker 1: Broker studio in New York. Paul, So, nice to have
Speaker 1: you here. Welcome back. Hi, good to be back. So
Speaker 1: you know, I want to get into your book. I
Speaker 1: want to first though, ask you in a world, in
Speaker 1: a day where we have headlines on the virus, we're
Speaker 1: talking about politics in the Iowa caucus, We're talking about
Speaker 1: Tesla rallying, we're watching earnings, how do you kind of
Speaker 1: hone in on what's the most important things for investors,
Speaker 1: for kind of the world at large in terms of
Speaker 1: what makes everything tick. Oh, I'm not or I know that.
Speaker 1: The answer to that. I mean, I try to work
Speaker 1: on the things where I have something to contribute. So
Speaker 1: it's a so I'll look at that's so I did
Speaker 1: write about the coronavirus, but from the economics point of view,
Speaker 1: because I think we know a fair bit now about
Speaker 1: how the world has changed and about global supply chain.
Speaker 1: So I'll do that. Uh. And actually it's it's I
Speaker 1: don't know whether to be scared about dying, but I'm
Speaker 1: really very concerned about the disruptive effect on business because
Speaker 1: we have this value chain global economy. Now I'll write
Speaker 1: about you know, political implications of of of economic doctrine,
Speaker 1: fiscal policy, whatever. But it's all kind of to be honest,
Speaker 1: it's a little bit hard to break through. And especially
Speaker 1: I watched the readers. Uh, you know what people want
Speaker 1: to read at the New York Times these days. Um,
Speaker 1: lately it's tend to be sort of impeachment, how to
Speaker 1: boil a perfect egg, impeachment grilling with mayonnaise. So it's
Speaker 1: a mixture of politics and escapism. It's a little bit
Speaker 1: hard to get my stuff that politics and escape absolutely,
Speaker 1: So what in heard this book in particular because you
Speaker 1: do as you tend to have a pretty clear idea
Speaker 1: that that you're putting out there. But to Carroll's point,
Speaker 1: in a very difficult world to break through. Yeah, well
Speaker 1: it is an election year and that was one consideration.
Speaker 1: I have also been writing for The Times for twenty years,
Speaker 1: which made it It's been a while since I reprinted
Speaker 1: so much, though not all of the book has reprinted
Speaker 1: columns over the years, and it just seemed to me
Speaker 1: there was a good time to try and pull this
Speaker 1: together to understand why we're in the in the political
Speaker 1: policy mess we're in, and and also what has worked
Speaker 1: because we have had some success stories over there. So um,
Speaker 1: it just seemed like an opportunity moment. And so when
Speaker 1: you went back and sort of looked at at the collection,
Speaker 1: what were the through lines that immediately jumped out at
Speaker 1: you and which were the ones that were maybe a
Speaker 1: little harder to discern. I actually I've been trying to
Speaker 1: say this without sounding like I've got a swelled head,
Speaker 1: though I probably do, But I mean, I think good.
Speaker 1: I was surprised at how much stuff holds up, how well.
Speaker 1: You know, there have been consistent themes that I've been
Speaker 1: pounding on for for fifteen years now, and that they
Speaker 1: most of them are, are still relevant. Most of the
Speaker 1: work holds up pretty well. Um, it's the I mean,
Speaker 1: the the role of government in in making our economy
Speaker 1: a little bit more humane than it would otherwise be
Speaker 1: the role of government policy, and helping to stabilize the
Speaker 1: economy get us closer to full employment. All of those
Speaker 1: things still hold up that the lots of things have
Speaker 1: not changed that much, except that the quality of our
Speaker 1: discourse keeps going getting worse. Right, Well, let's talk about
Speaker 1: that discourse. I think this is in your book, and
Speaker 1: that we specifically say ideas that should have been killed
Speaker 1: by contrary, contrary evidence, but instead keeps shambling along eating
Speaker 1: people's brains. Yes, that's the that's the zombie ideas. Those
Speaker 1: are the zombies. And I but but speak to this
Speaker 1: because we have these conversations that you know, we grew
Speaker 1: up in a world of analism where fact was fact
Speaker 1: and you understood that, and I feel like we've gotten
Speaker 1: away from that. Yeah, facts as part of the issue,
Speaker 1: although the it's stuff that just doesn't get through. So
Speaker 1: the the most important zombie in American politics is the
Speaker 1: belief that cutting taxes on rich people um is magical
Speaker 1: and actually pays for itself. And the that has never happened,
Speaker 1: has never worked, has failed again and again and yet
Speaker 1: when we had the debate over the tax cut, even
Speaker 1: the alleged moderates they aren't really, but they supposed moderates
Speaker 1: within the Republican Party, people like Susan Collins. We're saying, oh,
Speaker 1: I believe that this tax cut will pay for itself
Speaker 1: and it would reduce the budget deficit. And sure enough,
Speaker 1: of course we've got a trillion dollar deficit. It did
Speaker 1: one of these things always do, which is to blow
Speaker 1: off the deficit. So the UM it is kind of hard.
Speaker 1: How do you have economic discussions when a large part
Speaker 1: of the political spectrum is committed to believing things that
Speaker 1: are manifestly not true. So, speaking of the deficits modern
Speaker 1: monetary theory, you've had some thoughts on that you have
Speaker 1: engaged in some reposts as it were, around that. Why
Speaker 1: do you think it has at least captured the imagination
Speaker 1: at this point? Well partly so. I mean, by the way,
Speaker 1: the look on your face when I said modern monetary theory,
Speaker 1: I wish I could say it. I don't want to
Speaker 1: have because at least for the moment, the M m
Speaker 1: T people and me are on the same side all
Speaker 1: right on on the practical policy issues. UM and In fact,
Speaker 1: it's also what really drives you crazy, drives people like
Speaker 1: me crazy, is we're not actually sure what it is.
Speaker 1: When you try and get what is what are the
Speaker 1: fundamental tenets of monitor monetary theory and how are they
Speaker 1: different from what conventional Keynesians like myself would say, and
Speaker 1: you get very long answers that don't actually seem to
Speaker 1: consist of complete sentences, um and um. A lot of
Speaker 1: it is seems to be just really sort of inventing
Speaker 1: new terms for old concepts, and coupled with a kind
Speaker 1: of attitude that says this is all very radical when
Speaker 1: it actually mostly isn't. So it's it's it's kind of
Speaker 1: crazy making, and it's it's really a distraction from the
Speaker 1: debates we need to be having. Paul Krugman still with us,
Speaker 1: Nobel Laureate, City University of New York Distinguished Professor of Economics,
Speaker 1: his latest book Arguing with Zombies, Economics, Politics, and the
Speaker 1: Fight for a Better Future. You were too kind not
Speaker 1: to correct me, so forgive my mistake. Okay, all right,
Speaker 1: so Paul, great to have you still with us. I
Speaker 1: do want to go back to the coronavirus because from
Speaker 1: an economic perspective. From a market perspective, the market still
Speaker 1: seems to be trying to figure out. But you mentioned
Speaker 1: this new world that we're living in, this value supplied,
Speaker 1: value based supply chain, I think is what is what
Speaker 1: you said, help us understand the economic implications here? Okay,
Speaker 1: so you know I was I wrote a column because
Speaker 1: Wilbert Ross said something truly bone headed, which is not
Speaker 1: that unusual, but it was a good jumping off point
Speaker 1: where he said, this is great for America, help us
Speaker 1: compete with the Chinese. Uh. And that wouldn't have been
Speaker 1: totally bone headed forty years ago, when you actually did
Speaker 1: have a world where kind of national manufacturing bases competed
Speaker 1: head to head with each other. But now we're in
Speaker 1: this world of these complicated interlinked value chains where, um,
Speaker 1: you know they I've got an iPhone in my pocket
Speaker 1: here where was that iPhone made? Well? There the last
Speaker 1: step was China. But in fact that that's the last
Speaker 1: step of a very long and winding chain, and there
Speaker 1: are pieces of it that were made in many places,
Speaker 1: and it's been shipped across multiple borders. Um. And in
Speaker 1: that kind of world, anything that disrupts manufacturing anywhere is
Speaker 1: actually going to hurt manufacturing everywhere, and so the coronavirus,
Speaker 1: and that's actually by the rate, most most of the
Speaker 1: evidence says that actually all of the people who have
Speaker 1: actually done evidence says that the Trump trade war has
Speaker 1: actually hurt US manufacturing, not helped it. And the reason
Speaker 1: is because of the value chains. What it did was
Speaker 1: it disrupted that raised the cost of US manufacturers by
Speaker 1: raising the cost of imported inputs. And the coronavirus is
Speaker 1: kind of like the Trump trade war on on steroids.
Speaker 1: If it turns out to be as serious as we
Speaker 1: fear it might be, it's going to be a really
Speaker 1: pretty nasty thing, even for people who are not at
Speaker 1: all at risk of being infected themselves. I feel like,
Speaker 1: going back to your book, that we're at risk two
Speaker 1: of kind of creating a better future if we have
Speaker 1: folks putting out these ideas that have been you know,
Speaker 1: disproven if you will, and that they don't make sense.
Speaker 1: And we certainly see that among politicians. I do wonder
Speaker 1: do you have faith and maybe the private sector to
Speaker 1: kind of move things along. Elon Musk, for instance, like
Speaker 1: him or not, he has certainly pushed forward the idea
Speaker 1: of an e V um, that many traditional auto automakers,
Speaker 1: Paul would have said, it's gonna take much longer to do,
Speaker 1: and I feel like he's moved up that. So do
Speaker 1: you have any faith in kind of the private sector
Speaker 1: moving along some of these ideas well? Sometimes I mean
Speaker 1: the one of the I do say in argument with zombies,
Speaker 1: that that the the overwhelming problem, the one I have.
Speaker 1: Sometimes I asked, why isn't it The only thing I
Speaker 1: write about is climate change? Um, And the private sector
Speaker 1: has actually set us up to solve that problem. We've
Speaker 1: had this incredible technological revolution, and renewable energy and electric
Speaker 1: vehicles is part of that because it means that we
Speaker 1: can electrify a lot of transport as well, and we
Speaker 1: can generate the electricity in ways that don't regenerate greenhouse gases,
Speaker 1: and that that technology is already now. Government policy helped.
Speaker 1: Without some of the investments that took place, particularly under
Speaker 1: the much maliganed Obama stimulus, we green energy wouldn't be
Speaker 1: where it is right now. But the private sector also
Speaker 1: did its part and delivered this great technological stuff. The
Speaker 1: trouble is, first that's sometimes not enough, and sometimes the
Speaker 1: politicians are fighting it. So we have the Trump administration
Speaker 1: trying to force us to burn coal even though the
Speaker 1: private sector really doesn't want the coal anymore. What's the
Speaker 1: best economic lens to look at the Iowa caucus and
Speaker 1: the early Democratic vying for the nomination. Boy, I mean,
Speaker 1: I have by way to zero idea what's going to happen? Uh?
Speaker 1: And the but the caucus is it's a you know,
Speaker 1: it's a deeply unrepresentative state and deeply peculiar. If somebody
Speaker 1: want to said that caucus is an artisanal primary, right,
Speaker 1: it's a it's it's a really bad way to judge
Speaker 1: what voters actually want, and with a highly unrepresentative set
Speaker 1: of voters. So this is a this is really bad,
Speaker 1: God knows. I mean, it's but let me tell you,
Speaker 1: it might be decisive for the nomination, particularly Biden wins
Speaker 1: that he may that may be a kind of it. Uh.
Speaker 1: But if he doesn't, then probably slog on for quite
Speaker 1: a while. But my insight is that in terms of
Speaker 1: actual policy, it hardly matters which Democrat wins that it
Speaker 1: as long as a Democrat wins the general election. Um
Speaker 1: that Bernie Sanders has a lot of big plans, but
Speaker 1: in reality he would only be able to do part
Speaker 1: of them, and Biden, you know, maybe kind of old guard,
Speaker 1: but he's actually offering a pretty progressive economic program and
Speaker 1: his party would force him to go through with that.
Speaker 1: So the reality is that that we're going to get
Speaker 1: a Democrat who in practice would be a what Europeans
Speaker 1: would call a social democrat. Would it spanned the safety net,
Speaker 1: raised taxes on the rich. And I'm not going to
Speaker 1: get worked up at all about about who ends up,
Speaker 1: you know, in the lead. Well, and one of the
Speaker 1: zombie ideas that you talk about in your book is
Speaker 1: the myth of the socially liberal fiscally conservative voter. So
Speaker 1: there's a lot of things that are very relevant. Well, yeah,
Speaker 1: there are I know some socially liberal fiscally conservative I
Speaker 1: had to actually tend to encounter. Well, I basically encountered
Speaker 1: them in the breakfast meetings at Bloomberg. Uh. And they
Speaker 1: have an average net worth of maybe a thousand times
Speaker 1: mine at least. Uh. And they all wear gray suits
Speaker 1: and they are absolutely not there. There's nobody out there.
Speaker 1: They are effectively represent maybe three percent of the electorate.
Speaker 1: We just want to spend a couple more minutes with
Speaker 1: Paul Krugman, because we've got him here obviously teaching now
Speaker 1: at the Graduate Center of the City University of New York.
Speaker 1: And when you came in, Paul, you and Carol were
Speaker 1: talking about an interview she did with you down in Princeton.
Speaker 1: You're now a full on resident of Manhattan. What do
Speaker 1: you make of New York City right now? Oh? You know,
Speaker 1: if if you can afford a place to live, which
Speaker 1: is the hard part. Uh, it's a golden age of
Speaker 1: New York City. I mean crime is low, the cultural richness,
Speaker 1: whatever your tastes are, is enormous. The food is better
Speaker 1: by far than it was when I was growing up.
Speaker 1: You know. It's it's a um and and life is
Speaker 1: surprisingly easy. Uh, you know, and anything you want is
Speaker 1: five minutes away. So uh no, it's it's I'm a
Speaker 1: huge fan of New York. I even I'm a fan
Speaker 1: of the subway. For all of its problems, it's a
Speaker 1: it's a very efficient means of transport. So no, I'm
Speaker 1: a Uh you're a bull. I'm a bull. And you
Speaker 1: know I grew up in this on Long Island. I
Speaker 1: always thought that would someday grow up to be in
Speaker 1: a New York intellectual and finally in my sixties, I
Speaker 1: made it. You made it, but you made it, which
Speaker 1: is great. Well, and I do wonder about, um, you know,
Speaker 1: bringing more people and making it more equal within this city.
Speaker 1: Do do you think that's something that we can fix,
Speaker 1: whether it's developers responsibility or whoever. No, we definitely need housing.
Speaker 1: Affordable housing is probably the biggest single thing that you
Speaker 1: can do. I mean, there are other things. Universal pre
Speaker 1: K is great, but we should have even more child
Speaker 1: support and that's something that the city can do. But
Speaker 1: building more housing for regular people, Um, it's you know,
Speaker 1: it's a dense city, but there was there's, in fact
Speaker 1: still plenty of room for that, and that's that's the
Speaker 1: biggest You know, it's always gonna be a highly unequal
Speaker 1: city because it's a place where billionaires want to live, right,
Speaker 1: so there's always gonna be some of those ten seconds.
Speaker 1: Got a favorite part of the neighborhood? Well, I mean
Speaker 1: I because I live on the Upper West Side and
Speaker 1: it's it's you know, it's it's a wonderful place. All right,
Speaker 1: Yeah you do. All right, Paul Krugman, thank you so much.
Speaker 1: We really enjoyed spending some time with you. Today,