Odd Lots - Paul Krugman on UFOs, AI and Room Temperature Superconductors

Episode Date: August 11, 2023

There have been a number of news stories lately that seem straight out of science fiction. We've heard claims before Congress that the government is suppressing information regarding the existence of UFOs or aliens. There are computers that seem to think. And scientists in Korea claimed to have made an extraordinary breakthrough in the hunt for room temperature superconductivity. So how should we think about these things in terms of their potential impact on the economy? In addition to being a Nobel Prize winner and a columnist for the New York Times, economist Paul Krugman is also an avid science fiction fan. In fact, he has credited science fiction for his original interest in economics, even once writing a paper on interstellar trade. He joined us to discuss all of these things, and how to view them through the economics lens.See omnystudio.com/listener for privacy information.

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It's live today, so go check it out. It's called the Oddlots crossover episode. Yep, we chatted with the hosts, Mike Regan and Vildana Hyrick, about a bunch of topics that are near and dear to Oddlott's listeners ranging from the growing power of organized labor, the trillion dollar coin, EVs, Bidenomics, and more. You can find it on the What Goes Up podcast, available on Spotify, Apple, or anywhere else that you get your podcast fix.

Oh, and welcome to another episode of the Odd Lots podcast. I'm Joe Wisenthall. And I'm Tracy Allaway. Tracy, it feels like there are many things in the news these days that are like on the edge of reality and frankly, science fiction. More evidence that we're living in the simulation. Yes. No, you're absolutely right. So, first of all, we had this influx of AI technology.

Everyone got very into chat GPT. And now everyone's talking about future AI applications. And then we had, let's see, ooh, we have the excitement over the possibility of a room temperature. Superconductor. And then even we have a lot of talk about aliens. We had the congressional hearings about UFOs recently. I actually saw someone tie all of these things together recently. They thought that the LK99 coming out, like the week after the congressional hearings or the week of, was evidence that there are, in fact, aliens and the technology has come from them.

So take that with a grain of salt. The aliens like left this little trail of hints for us. Oh, that's interesting. Well, I think one of the conspiracy theories is the reason it feels like all of this is popping up now and sort of going into hyper drive is because the, I don't know, the powers that B are laying the groundwork for us to actually find out there are aliens. So they're sort of dripping it out. And now the pace is picking up. And so it's coming, Joe. So here's the thing.

I do not believe in it. I'm like a deep UFO skeptic to the point where I've almost like tuned out all the news. If we do have a room temperature superconductor, I don't even know what that means. Like I see all these people like, oh my God, we are so back. This is going to change the world. I still don't really understand the significance. AI, I think it's pretty cool, but I don't know what it's going to do yet in terms of the economy. So when you're faced with all these sci-fi things, Tracy, like what kind of guess do you think?

Who comes to mind as someone who would talk about that? Who's the first person I call? Yeah. Well, I guess we have the perfect guest. We have the perfect guest. We are going to be speaking with Paul Krugman, opinion writer for the New York Times, professor at City University of New York, of course, a Nobel Prize winner in economics. And I read on the internet that he was inspired to be an economist because of science fiction, at least according to a website I'm reading. And so I think to understand the economics, the implications, the thoughts around aliens, AI, superconductors, what they mean for the world and the economy.

Obviously, the first name we call is Paul. I think that's your first time on our podcast. So, Paul, thank you so much for coming on Odd Lots. Thanks. I think it is my first time. I'm so proud that the first time you're coming on, oddlots, is to talk about aliens. I'm so happy.

I know. Of all the various things we could be talking about, but hey, I'm pretty bored with inflation. Yeah, yeah, inflation, the Fed, soft landing, fiscal policy, the $600 checks, this recovery versus the other one. It's so boring. It's so tired.

Paul, do you think there could be, life elsewhere in the galaxy? I would think that it's extremely unlikely that there isn't. I mean, it's, there is an argument

that says that, you know, particularly that complex life may require some very, very special circumstances and we might actually be alone out here. But that's, well, I guess that sounds unlikely. It doesn't seem like

that it should be that hard for there to be someplace else where complex life has arisen. But here's an argument that I don't see very often, which is that if there is other intelligent life out there, just given the time scale of things, it must have evolved hundreds of millions of years before we did. So if there are aliens out there, they either wipe themselves out one way or another

or are on a level so far beyond us that, you know, the meaningful interaction is impossible. So in terms of there being actual aliens, you know, landing and kidnapping people and all of that, that doesn't seem to me to be a very plausible story. So can I ask a step back question, which is, you know, Joe mentioned that he read on the internet always a reliable source that you got into economics because of your interest in science fiction. I remember you wrote a paper, I think it's a very long time ago, a theory of interstellar trade. But why does this area interest you? How did you get into science fiction? Why did you say yes to come out of our podcast? Pretty much. Oh, yeah. So it's actually very specific. I read as a teenager Isaac Asimov's foundation novels. And if anybody's ever read the novels, they're about how galactic civilization is collapsing, but is saved by mathematical social scientists. And I wanted to be one of those guys. So that's how I got into economics.

least that's the story I like to tell, which is also, by the way, why I cannot bear to watch the Apple TV Foundation series, which completely ditches the whole premise. It may not be good TV, but it has nothing to do with what Isaac Asimov wrote. So, but anyway, but that was quite specific. In science fiction, economists save the world? In one particular, a classic science fiction series. They're not economists, exactly. They're mathematical, social scientists. But, But, you know, that's as close as I could get is doing economics. You did write a paper, as Tracy mentioned, on interstellar trade. What did you, what is that all about?

I mean, like, what would make, say, interstellar trade any different between trade between U.S. and China? And it's a paper I wrote when I was very, very young. I was a frustrated assistant professor, and it finally got published decades later. And so it was mostly a blow-off steam paper. I was having some fun with the fact that, well, look, shipping times for interstellar commerce would be very, very long. You know, not the time it takes to get from Shanghai to Los Angeles, but the time it takes to cross 20 life years. And at that point, the interest costs on shipping, you know, stuff in transit are going to be a pretty significant part of the expense.

But how much time is spent on transit? Because of the theory of relativity, we know that the amount of time received on the spaceship, is going to be different from the amount of time perceived on a planet that remains stationary. And it's always all kind of silly. But, you know, as I said, I think in the introduction that the results of this paper will be true but useless, which is the opposite of what is typical in economics. Wait, I thought that was typical, true but useless. I thought that was what's typical in economics.

All right. Well, anyway. Sorry, not to malign the whole profession. I'm sorry. I had some fun. and helped keep me more or less sane during those, you know, pre-10-year years that every academic has to go through. Was it peer-reviewed? I can't imagine, but... No, well, actually, I sent it off. The Journal of Political Economy used to have a joke paper section at the end, miscellany.

And I sent it, and the then-editor didn't get any of the references. There were, in fact, references to Isaac Asimov. And so he sent it, why is the planet named, Trantor. And I, you know, we need revisions. And I said, I'm not going to do that. So I just let it sit. But it had circulated kind of in Stammed's dot for a long time. Eventually, the Journal of Economic Inquiry contacted me. And we said, we've heard about this paper you once wrote. Can we publish it? Wait, I feel like it was not to keep diving out to this one paper, but, you know, if it takes an incredibly long time to ship something from here to the other planet. But the people on the ship don't perceive it as long as those of us on Earth, right? Because time is slower? Yeah. Okay.

And yes, that's the point. Because if you're traveling at close to the speed of light, unless you can do that, then none of this, it makes any sense. Then the subjective time is going to be much shorter. And I actually then went on a very fancy economic theorem proving to say that that doesn't matter because the relevant opportunity cost is the time it takes on the planet. Anyway, I'm looking at it now. I found it online. There's some great charts. It's really funny also, like in a very dry way. There's a line that like interplanetary trade while of considerable empirical interest raises no major theoretical problems among the authors who have not pointed this out are Olin and Samuelson. I love that. Yeah. Actually, Jeff Frankel, you may know that Harvard wrote a sort of companion paper around the

same time called is their trade with other planets in which he pointed out that if you sum up total world exports and total world imports, you know, countries report the amount, they export the amount, they don't actually match. Oh, yeah. And that the world as a whole appears to export more than it imports. Every statistical agency around the world wants to flatter their numbers of exports and shave a little bit off the imports, I guess. Yeah, maybe. There are for, right, Yeah, and a fair bit. Yeah. Stuff that is not also that it's just, if you smuggle stuff in past customs,

it shows up as an export, but not as an import. Right. Anyway. Do you pay attention to things like the UFO hearings, like in right now? Like, how engaged are you? Like, when you see these headlines, not someone claiming. I think we've got enough, you know, there's enough, there's enough weird stuff in the world.

Although I will say that, by the way, the theory that says that the aliens are selectively releasing, technologies. That's a subplot in the movie Men in Black. I don't know if people remember this, but the agency that employs Will Smith is how they finance themselves by selectively releasing alien technologies. I think that Delcrow was supposed to be one of them. That's right. They joke about that. So that's, so you really should be, it should be even more conspiratorial than people are making it. It's not just that the aliens are doing this because they're about to be found doubt, it's that the government agents in black seats are selectively releasing these alien technologies.

Well, let me ask, I guess the big question, which is, how would you, as a economist, you know, a rigorous, well-grounded researcher in this field, how would you go about thinking or incorporating something like aliens slash alien technology into the way you think about the economy? Yeah. Yeah, the aliens, I have absolutely no idea. I mean, again, it's just, if there are aliens out there, if they exist, they almost have to be immensely more advanced, you know, basically on a different plane. And it's not clear that they would have any interest in dealing with us.

But the technologies that there are, for whatever reason, whether it's, they're leaking out of Area 50. On April 4, 2023, around 2 in the morning, A man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16. There are really big technological things happening.

Of course, the technological place. progress is the ultimately the main driver of economic growth. So these are important things if they are, if they pan out. Bloomberg Tech returns to San Francisco, June 3rd and 4th. Join me, Emily Chang, along with Tom Giles, as we convene the CEOs, investors, and innovators shaping what's next in technology. Powered by Bloomberg's Global Newsroom and unrivaled terminal data will break down the capital, connectivity, and big ideas driving the industry forward. Be part of the conversation. Register now at bloomberglive.com slash tech. That's bloomberglive.com slash tech. Let's talk about technological progress as a driver of economic growth because it seems like that.

So it's like, okay, there is this thing that people are talking about, which is the possibility of superconductors that can exist at room temperature instead of really cold temperatures, which supposedly might have all kinds of implications for battery tech or power transmission or electricity consumption. I don't really totally get it. I'm not a scientist, but it seems good. But on the other hand, technologies exist, and they are exciting, but they don't necessarily show up in the economic aggregates. They don't suddenly make GDP growth grow from 3% to 10% just because there's some new

breakthrough. Why don't they? Why don't we get technological inventions that suddenly cause GDP growth to grow at a much faster pace? Oh, well, we certainly do get inventions that make a difference that show up a lot. I mean, so if you think about, you know, we have a pretty good idea. There was an acceleration in U.S. productivity growth for about 10 years, from the mid-90s to the mid-naughties. That was something like 1% a year faster growth than before or since, which we think was because business finally figured out what to do with IT.

Some of us the Internet, actually, some of it is finally figuring out how to use barcodes to do effective inventory management, into more prosaic things, but basically there was a clear bump in productivity that was associated with the rise of IT and networks and all of that. And you could say, well, that's it. All we got was 10 years of 1% faster growth, but that's a 10% bigger economy. And there's almost no conceivable economic policy that would raise U.S. growth that much. Right. So even what was relative to a lot of what people had hoped for or predicted, even though the results of IT have been somewhat disappointing, there's still huge relative to anything that, you know, that any presidential candidate could plausibly promise to accomplish. How good are we at actually measuring technology's impact on productivity? Because I remember this was a talking point a few years ago, the idea that, well, technology is, in fact,

improving, but the way that it's improving and sort of feeding into the economy is not well captured by statistical methods. There's actually two levels of that. First of all, the way that we actually sort of measure technology is god awful, except not clear how else you do it. I mean, we think that we have ways of measuring the contributions of tangible stuff, like an increased stock of capital to economic growth. And what economists do is they add up all of those things, that's growth accounting, and then

whatever's left, they say that's technology. It's a really pretty poor technique. It's basically technology is the measure of what you can't explain otherwise. That's not great. But on top of that, then there's the unmeasured, as you say. We don't have a very good handle on, you know, what is the value of dreamed entertainment one way or another? For me, I'm really into live musical performances and can't get into, you know, can't make time in my life to go to as many as I would like to, but I can watch a lot of live musical performances on YouTube. That's a pretty big. I would probably be willing to pay thousands of dollars a year for that.

As it happens, I don't have to pay that, but it's, and that's not captured by the GDP statistics. And there's probably a bunch of things like that to take something that's. less sexy, but health care, the fact that doctors can treat lots of things that were untreatable before is a really big thing. But, you know, it has always been true, but not always, but it's been true for a very, very long time. You know, if you start from the late 19th century, when you started to finally get big improvements in public health, because people stopped getting their drinking water from a well next to the outhouse, those are huge gains that are really not at all captured by our official statistics.

So probably is the case that much more economic growth than the numbers show or much more improvement than the quality of life anyway than the numbers show. I'm glad you brought up the live music. I was talking to Tracy earlier

and I have this memory of us running into each other. It might have been like 2011 or 2012 at some conference in New York City and everyone else was mingling and you were smartly in the corner watching I think a live video of the arcade fire in 2011 and 2012. Who do you like these days?

Any band wrecks? Oh, wow. It's fine if not. I worry when I say this that I'm going to insult bands I love by forgetting to mention them. But the last concert I went to, which was just at the beginning of the summer, was Lark and Poe, which is sisters from Atlanta who do mostly the blues and are just incredible. I'm away for the summer. Actually, I went to a little, I won't get underscloved location, by the way. I went to just a bunch of local musicians doing, they're calling themselves the Grateful Dread, Reggae-inspired, Grateful Dead covers, which was great fun.

But the next thing I'm going to is something called a band has been around for a while, a whole war paint and does sort of vaguely psychedelic stuff. I'm a huge fan of boy genius. They've been getting quite a lot of play, but actually the trouble that I like, I like the more intimate concerts. Yeah. And the next Boy Genius performance is at Madison Square Garden. Sorry, I love the band, but I wouldn't love that experience. So, you know, there's a bunch.

I mean, that's the thing. I subscribe to, I think, around 40 channels on YouTube, which are almost all indie musicians of one form or another. I'm going to have to check out Lark and Po. I'm looking them up now. It looks really good. It looks like the kind of thing that I would like, I want to go back. We're talking about technological.

packs on macro and someone is going to get really mad. I've defended the fact, the sort of famous, infamous internet fax machine comment on the sort that you made because it doesn't seem like 1% growth, even over 10 years, is really changes the economy like that much or as much as you would think given the sort of like huge upheaval that we've seen that the internet caused. Like, is there any way to sort of know early on or in real time? what a technology is going to do to the economy, or is it the only kind of thing where you can say afterwards, this seems to be what happened here.

Okay. What people don't know, by the way, is that comment about the Internet and the fact machine was in the context of a piece that was meant to be funny. Oh. It was a piece that was written for the... I defended it seriously. I've taken a lot of flack on Twitter now.

Joe, you were trolled by Paul Kerman. And now I'm discovering that I was defending a... No, I think it's... is actually defensible, and I will agree with you on that. But what was actually happening was that was a piece where, before I worked for the time, so I was asked to write a piece looking back from 100 years in the future at what had happened. And so I wrote a bunch of things, and many of them were deliberately counterintuitive, some of which have turned out to be true in some or not.

But if you want it, the piece ends by saying that my day job is working at a veterinarian, but I'm hoping that this piece will get me on the lecture circuit. But the point was, in fact, if you're looking for the transformative economic effects of the Internet, they are pretty elusive in the data. Actually, to take an even more extreme example, the smartphones, the iPhone is introduced, I think, in 2006. And if you look at the official productivity numbers, the period since 2006 has been lousy for productivity. It's been a long productivity drought. The boom in productivity such as it was, the boom let, was between about 95 and 2005, which is much more the fax machine era than the internet era. I have a really basic question, which is if you get a brand new world-changing technology like the

internet or say a room temperature superconductor, would that count as like an exogenous shock or an or an indogenous shock? I mean, at some level, everything is endogenous, right? At some level, it's all quantum mechanics. But in terms of being something that, look, the long sweep of technological progress that begins, you know, about two centuries ago or a bit more, that's clearly endogenous. Given that we had whatever it was, the change in mindset, the change in the way that people behave that caused the industrial revolution

and everything that followed, then, of course, there were going to be a lot of explorations of new possibilities, lots of new technologies. Any individual technology is there's a strong element of we stumbled on something. And so when you stumble on something that actually has big economic implications, patients, that's even more fortuitous. It's really not predictable in advance. Either way, you can have something like, I think many people would have expected to see a much bigger, visible impact on the economy from smartphones than we appear to have seen. But on the other hand, who would

have thought that shipping containers would matter as much as they have turned out to for the global economy. So it's really, in the sense of being really hard to have predicted, either that the innovation would happen or that it would matter a lot. Yeah, it's, it's exogenous for all practical purposes. You know, it's really important that we use the same gauge in size shipping containers as they do in China. I wonder how we would even coordinate that with another planet. They might have like a totally different size shipping container at their ports. That could be a very difficult interstellar shipping containers. It could be a very different coordination problem. And the trouble is, if they're 40 years, light years away,

the negotiations to establish a common standard might take a couple of millennia. That's what I was thinking, right. Like, it's hard enough to come up with common standards here on Earth. I want to pivot. I want to ask you about AI, actually. And I'm curious, like, people, you know, every technology has its things, like, are people worry about which jobs are going to get disrupted and so forth. And then with AI, it feels like there's, like, deeper angst that many people have.

have because it can think and it can write and I've expressed my own anxiety. Like, well, I'll be out of a job in a few years as someone who, like, does words on the internet for a living because chat GPT is pretty good at doing words. Like, does it feel different to you in some way in terms of, or is it, yeah, we have tech, you know, we are always getting better at things and it's sort of part of a continuous process of technological gain? Well, this looks like it may be, there are things that are kind of narrow, gauge technologies that affect a very particular sector, but not that many people.

This stuff, although what we're calling AI isn't really arguably, but the stuff we're calling AI anyway does look like it's going to affect a lot of activities. The pessimists say, or the skeptics say, look, it's not really thinking, it's not creative or original, it's just sort of processing what other people say, and it's just basically super enhanced autocorrect, which is all kind of true, but then how many people out there in the real world are in fact being creative, how much of the work that we pay people a lot of money to do is, in fact, a lot like super expanded autocorrect, and I think the answer is quite a lot. So this is potentially a really big thing, and it could displace a lot of.

jobs. And interestingly, it's the jobs that it might displace are going to be ones that are kind of high prestige, high education. We're a very, very long way, as far as I can tell from being able to have robot plumbers, but we may be very quite close. In fact, may already be there to having robot journalists. So yeah, this is serious. So you obviously talk and write about economic policy quite a lot. From that perspective, what would be the best way to handle AI? If you're worried about society, if you're worried about things like inequality, what would be the best economic policies to put in place? I don't think this one calls for a lot of remedial policies other than simply having a strong social safety net. It's too pervasive and too diffuse, I think. You know,

It's something, when you have something like, it's not a technology, but in some ways similar, you have something like the China shock, that period of about 10 years where we had a real surge of imports from China. The thing about that was, actually, the number of jobs displaced was probably not, was like a million, between one and two million. But they were very concentrated. There were just communities that were effectively wiped out. And that's where the idea that you probably should have had some kind of remedial policy that try to sustain or at least help these communities adjust or help them downsize or something so that the social impact would be less.

That kind of made sense. But now if you have something that is going to be wiping out certain kinds of white-collar jobs, but more or less evenly across the country, It's not going to be doing a whole lot more or less in any particular region. It's not going to be affecting any particular social group, except in the sense that it may be devaluing certain kinds of higher education. I don't think there's much you can do about that, aside from just trying to ban the technology altogether,

which isn't going to work. So I actually am not sure that aside from the fact that we should have a society where you don't starve or go without medical care, if technology does have to take your job. I'm not sure that's much more you can do than now. Bloomberg Tech returns to San Francisco, June 3rd and 4th. Join me, Emily Chang, along with Tom Giles, as we convene the CEOs, investors, and innovators shaping what's next in technology.

Powered by Bloomberg's Global Newsroom and unrivaled terminal data will break down the capital, connectivity, and big ideas driving the industry forward. Be part of the conversation. Register now at BloombergLive.com slash tech. That's BloombergLive.com slash tech. I'm going to break the pattern and actually kind of ask a question that might be relevant to the current economic data. But I was thinking about going back to the 90s and the sort of productivity boom that we saw in sort of the mid-90s and beyond. And the other thing about that time beyond just the sort of advent of the internet and a lot of information technologies is it was a strong economy.

It was robust. It was robust growth. It was robust employment growth. And one theory that sometimes gets aired is that productivity is downstream of robust growth and tight labor markets. And that when there's tight labor markets, that firms have to find ways to implement new technologies because they can't just hire someone cheaply, that forces the sort of genuine productivity gained technology to actually be incorporated. Of course, we have very tight labor markets right now in the U.S. Like, how much credence to you by that? I remember Jenny

Yellen giving a speech and I want to say like 2014, like the reverse hysteresis and this idea that like if we run the economy hot for a while, that it can really pay off in terms of these productivity gains. And we might be getting a test of that now. Like how compelling do you find that? It's one of those things where I take it seriously and have absolutely no idea whether it's true. There is some case to be made that running the economy depressed. leads to losses that you basically never make up. So that a weak economy for a sustained period of time leads to lower productivity growth for many, many years thereafter.

And you can read some of the evidence from the 2008 financial crisis and aftermath to say that. On the other hand, that isn't always true. The Great Depression in the United States appears to have had zero impact on all of that. If you look at the economy in the late 40s, it was just about where extrapolating trends from 1929 would have led you to think it would be. Now, it's true that we did run a very, very high pressure economy for four years in 1940s. So maybe that was what, but actually the original frying pan chart. Yeah, I'm not sure if readers will know about that, but yeah, the frying pancharts that I've been promoting too. But productivity did pretty well even during the third.

even with a very depressed economy. It's possible. Right now it denies to believe that by running a genuinely full employment economy, arguably, for the first time since the late Clinton years, that we are setting the stage for an era of good productivity growth. But I don't know that. And I think I can make a firm prediction is that we will never know that. We would even know, looking back 10 years from now,

if productivity growth was high, we won't know. whether that was because finally we got sufficiently expanded to very macro policy or because we just happened to luck into getting usable AI for the first time. Yeah, Tracy, if there's one thing I feel like I've learned from, you know, sort of covering economics over the last 15 years or whatever, is that debates never actually get resolved. It's like you can have all the data and then it's just two people tell a different story. Yeah, no, that is very true.

As the same two people selling the same two different stories, decade after decade, that's what really drives you crazy. It's always the same people on the same side. Now, whatever the data are, it doesn't actually speak too well for my profession. Wait, since Joe asked a question that brought us back to more modern times and more relevant themes, I want to ask one too, which is, would an alien invasion be deflationary or inflationary? Very serious question. I think that we can say pretty almost surely would de-inflationary. Wars almost always are. And uncontested alien invasion, I guess it kind of depends on how they run the occupation.

But the actual wars that are have been in, are always inflationary. I can't think of one that wasn't. They always involve big government spending. Actually, they always involve a collision between large spending and at least temporarily reduced productive capacity. So, yeah, you may recall that back when I was desperately leading. for more fiscal stimulus. Oh, that's right.

Yes. I said that the government should lie and claim that we were facing an imminent alien invasion, and that in order to fight that imminent alien invasion, what we needed was better infrastructure. So we should have a big public infrastructure platform to, because things that people would never agree to, simply in order to make people's lives better, they will agree to it in order to fight invasion. It is interesting, the degree, and you definitely see this over the last couple of years, the degree to which big public investment programs seem to go down easier politically, if it can be couched in the language of geopolitical conflict.

And so even, say, like, some of the decarbonization efforts in the U.S., the IRA, a lot of it is almost either implicitly or explicitly, oh, because China is doing this, too. And suddenly that brings out the votes a bit more. Well, yeah. I mean, we have two big public infrastructure programs. Well, three, we have one, which is just great. infrastructure, but that was to some extent said, well, you know, we're falling behind and China, we need to do something. Then we have the Chips Act, which is explicitly about

countering China. And then, yeah, some of the IRA stuff has been sold as being a national security concern as well. So sure, it's crazy. But yeah, in order to provide people with just a better economy and a better life, you generally can't get that past the deficit's goal. unless it's in the interest of fighting evil outsiders. I want to ask another AI question. I mean, I know you say like, okay, there's not some obvious, like, remedial policy, but it is interesting that there is this possibility that it disrupts a lot of currently, like, high status jobs, people with a high level of education, white-collar work, etc.,

which I guess in people's minds feels different than, like, a loom, on a shop floor or something like that, which people think, well, this is different in some way. Historically, other examples that feel similar were like, no, this really disrupted something that at the time was seen as like very high status prestige work. Well, really high status prestige work, I'm not sure,

but relatively high. I mean, people, we talk about the Luddites. The Luddites were not the poorest, least skilled workers. The Luddites were skilled weavers. who were actually relatively high-waged. What had happened was that the factory production of yarn had created an abundance of yarn, but the weaving was still being done by highly skilled manual workers,

manual workers by high-skill. And then along came to power loom, and suddenly the relatively high-wage workers found their jobs disappearing. And they were the ones who went out and rioted. So it's certainly not the case that technology is always going to, favor the higher wage people at the expense of the lower wage people. And, you know, there's probably a lot of quiet stuff in there that this has probably been going on to some extent.

And one of the things about U.S. inequality is that there was a time when people said, oh, it's all about education differentials. But the college wage premium hasn't really gone up for a long time now. But it's also true that a lot of information processing that used to require a human being either doesn't or can be done by fewer human beings because machine assistance helps. On the topic of inequality, it does feel like there is this pervasive sense that the U.S. economy is doing worse in many ways for a large chunk of the population, despite everything that we've seen in some of the hard data recently and a lot more discourse about the possibility of a soft landing.

But what do you think is driving that dissatisfaction? And then secondly, you know, how do you go about, I guess, like, messaging that the economy isn't that bad to the general population so that aliens don't feel the need to invade the planet to make us all feel better or worse? Yeah. It's an interesting question. I mean, if you actually are asking about inequality, have recent events hurt lower income people more than higher income, that's actually not what the data says. And if anything, on the contrary, what we've seen is a surprisingly fast narrowing of wage gaps. The people at the bottom of the wage distribution have done a lot better than the average. You know, Aaron Dube has been writing about this, the unexpected compression of wage inequality that's taken place in the last couple of years.

So that's not really the story of why people are feeling dissatisfied. If I had to try to say why people are dissatisfied, one of it is that, look, the return of inflation after a generation when people just didn't think about it, that was a big shock. And people are going to take some time to recover from it. Then actually, I think it's more than two things. I'm going to turn in Monty Python routine amongst the reasons. But then there is partisanship. it's just astonishing if you look at the surveys how much it's true for both parties although it's even more extreme for republicans but an economy that was really great as long as

Trump was in the white house suddenly becomes terrible even though it's the same economy with a Democrat in the White House but then perceptions are shaped by narratives there's just lots and lots of surveys now which you ask people how are you doing and they say fine and how's the economy doing? Oh, it's terrible, which is, this is relatively new in economics, but in other areas, we know we see that all the time. I look at crime. You know, if we had an epic decline in crime between about 1990 and the mid-2010s,

really astonishing, and we still basically have no idea why it happened, but for some reason, America became a much safer place. And all through that, surveys, if you ask people, what's happening to crime, they said it's increasing. Although if you ask them, how do you feel about your neighborhood or your town, they were much more favorable. So we've got some kind of psychology where a lot of people now believe that really bad things are happening to somebody else, somebody I don't know. I hope the media isn't culpable for any of that. You know, just going back to your point about how things like AI or things that may have compressed education labor is like it's not really that new of a story. Guillermo Rodity Dominguez, who's been on the show, he always likes pointing out that the word computer used to refer to a profession, that like there used to be like people whose type, whose occupation was computer.

Human Excel spreadsheet. A human Excel spreadsheet. Yeah. Richard Feynman. Richard Feynman ran the computers at Los Alamos. You've just seen Oppenheimer. What is clearly Feynman appears there playing the Bongo's, but he's not a speaking character. But he ran the computer section at Los Alamos, which was a bunch of women who were actually computing.

Right. Can I ask, we sort of glossed over this within the context of alien technology. But are you paying attention to the superconductor stuff? And I, you know, you're really plugged in. You're online. You're probably as like online and on Twitter as much as me. And Tracy is. And you see these videos of like a magnet flapping.

And people are like, oh, my God, this is like the holy grill. Like how do you, this is like a question I've been asking everyone. Like, how do you as a sort of intelligent plugged in person try to like process what's going on when you see things like this happening in the world? This one is really hard. Yeah. I mean, I am extremely online. I actually hate my phone tells me how much screen time I've had each day. I often feel that I can go online and get reasonably reliable assessments of stuff in areas of which I personally know nothing,

because I kind of think that I do know enough to recognize people who have some idea what they're talking about. Yeah. I know what actual research sounds like. This is one of those areas where I can't make it out. It sounds like there are reasonable people. people on both sides. There's no obvious motivated reasoning driving this. And I'm kind of just saying, I have no idea. And not only am I not entitled to an independent opinion, I don't know whose opinion to trust. I just have one more sort of theoretical question getting back to the beginning

of this conversation and science fiction. But what's your favorite economic system in science fiction if you had to choose. This is a good one. Oh, well, that's interesting. Most science fiction either doesn't specify or kind of assumes that it's not very different from what we have now. So there are very few sort of serious alternatives. If you look at the start trick universe, that appears to be, nobody says it, but it actually

appears to be sort of idealized Marxian socialism, right? That's the one that you always see. I've heard that before. That's like the social. Literally live long and prosper. Well, live long and prosper. Actually, that's actually the opposite. America's is the country where we prosper and die early.

But the live short and prosper. Yeah. But if we, you know, the replicator, you just say, tea, Earl Grey, hot, and there it is. And supposedly it's an economy of total abundance. although, you know, I'm occasionally tempted to yell at the screen, but services are most of the economy, and replicators can't do that,

although I guess Android can. But other than that, it's really hard to see very much. People are not very original in trying to think about economic systems. There is a real paucity of ideas for something different. And we've seen, there are very little sort of central planning fans. out there in economics. There are some people who try to invent a word on some kind of system of points or so on, but what they don't seem to realize is that what they're actually doing is reinventing capitalism. Other than that, I haven't seen a whole lot of interesting speculation.

It's possible that we've already explored all the possibilities there are, but I don't know. The one thing I had to see is a fair bit of sort of fairly, thoughtful science fiction just kind of assumes that the future societies have a kind of a Scandinavian welfare state that whatever else there is there's always basic income to fall back on and actually if too much too much information but the expanse if you watch that science fiction series which was one of those things where the tv i think was better than the novels but anyway the earth's economy and the expanse appears to be a kind of of a UBI society, except that it sounds like what everybody receives if they're not employed.

And apparently they have mass numbers of people who just have no jobs. But what they get is they get the basics to survive in kind rather than in cash. So that's a few, but it's not a utopia. It's kind of portrayed as being kind of grim. But that's kind of where if you look for real seriously alternative economic systems, I can't think of one in any of the science fiction I've read. Paul Krugman is so great to finally have you on Odd Lots, and it was so great to talk about things that are not just the sort of day-to-day,

what's the Fed going to do next week? So really appreciate you coming on. That was a really fun conversation. So much fun. Okay, take care. Yeah, that's great stuff. That was fun, Trace. I absolutely love it that Paul Krugman's first appearance on this podcast

is to talk about aliens. You can't be thought. I hadn't thought about the challenge that would pose, which is that the time... To productivity statistics? Yeah, and the challenge that that would pose of like, well, the time, like the rate of interest for people in normal time

versus like the payment that people would demand who are like on the ship itself, moving at a different time. Very interesting theoretical questions that to his point, but I think that probably much of economics does not have much practical application. You know what would blow your mind if you start thinking what interstellar finance would actually look like currency exchange markets

and things like that where you have spot and forward markets and things. Anyway, can I just say something? I foundation for economic something fee.org, which is foundation for economic education, which I think is like this sort of like libertarian, like pro-capitalist like think tank. They have a way, they have an article that's like, Star Trek is not socialist. They're like really like, because I did that was one of the first hit first things that came up. Is Star Trek really socialist? No. So some people push back on that. I do think clearly there's a gap in the market for like a really well thought out piece of science fiction that's like predicated on a very specific and creative economic system.

It's funny to think about like these sci-fi writers. It's like, oh, it's going to be like points and blows like, bro, you invented money. You reinvented the dollar. Well, I mean, it does also get back to, you know, Paul made the point that a lot of science fiction seems to, you know, to default to this idea of Keynesian abundance, right? Like post-scarcity. But if anything, in 2023, like, yes, there have been a lot of technological advances, but there are serious concerns over basic resources and their availability and how they're distributed and things like that.

And services, because we have so much good AI, but we don't have good robots. And so it's like when we talk about like child care or elder care, et cetera, it's like, we really need these robots to come along. going to get that true abundance. Hopefully the aliens bring the robots. Yes. Okay. Please bring robots. Shall we leave it there? Let's leave it there. All right. This has been another episode of the Odd Lots podcast. I'm Tracy Alloway. You can follow me on Twitter at Tracy Allaway. And I'm Joe Wisenthall. You can follow me on Twitter at the stalwart. Follow our guest Paul Krugman on Twitter. He's at Paul Krugman. Follow our producers, Carmen Rodriguez at

Carmen Armin and Dashel Bennett at Dashbot. And check out all of our podcasts at Bloomberg under the handle at podcasts. And for more oddlots content, go to Bloomberg.com slash oddlots, where we have transcripts, a blog, and a newsletter. And if you want to chat about like everything we talked about in here from energy, scarcity and abundance to AI to other stuff, check out our Discord. We're channels for all this stuff. People chatting 24-7, discord.g.g slash oddlots. It's a lot of fun. And if you enjoy Oddlots, if you like our conversations about alien technology with Nobel Prize winners, then please leave us a positive review on your favorite podcast platform. Thanks for listening.

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