Paul Krugman: Economics of Innovation, Automation, Safety Nets & Universal Basic Income

Lex Fridman introduces Paul Krugman as a Nobel Prize winner in economics, professor at CUNY and New York Times columnist. His academic work centers on international economics, economic geography, liquidity traps and currency crises, and he is an outspoken commentator on the intersection of politics and economics.

Fridman asks listeners who have already clicked dislike and begun writing a derisive comment to unsubscribe, not because of their political leaning but because they are not open to new ideas from people they disagree with. He says he tries to stay away from the politics of the day, since its emotion and self-assured certainty are not conducive to exploring questions nobody knows the answer to, such as the role of government, automation, tech regulation, medicine, guns, war, trade and foreign policy. He plans to speak with more economists and political thinkers, looking at the long arc of history.

The remainder of the opening is the usual show format and a Cash App sponsor read. Fridman notes he now places ads at the end of the introduction rather than in the middle, praises the order execution algorithm behind fractional share trading as an algorithmic marvel, and introduces the conversation.

Asked what a perfect world looks like from an economics perspective, Krugman says he does not believe in perfection. He quotes someone whose ideal was a slightly imaginary Sweden: an economy with a high safety net, good environmental regulation and the better aspects of well-run countries, with their smaller flaws fixed.

On wealth distribution, total equality is neither possible nor especially desirable, he says, but nobody should be hurting and everyone should live in the same material universe and society. It is bad for people to be so wealthy that they are no longer in the same world as everyone else.

Competition is great when it can work, Krugman says, recalling when there was only one phone company, with limited choice. Multiple carriers have been a good thing, but not every activity suits competition. Healthcare, for example, is an area where it does not work, so policy is not one size fits all.

He explains that Kenneth Arrow's 1963 paper lists the conditions for competition to work well, including both sides to every transaction being well informed and able to make intelligent decisions. Healthcare fails on every dimension. The idea of effective competition between health insurers is wrong, and the idea that people can comparison shop for major surgery makes him wonder whether those who say it live in the same world.

Fridman asks how hard it is to be well informed. Krugman answers that information varies hugely: there is more available than ever, but some is untrue and some too hard to understand. A car buyer can consult consumer reports, but surgery often happens unplanned, and medical school takes many years, so the internet is not a good substitute.