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

What does a perfect world, a utopia, from an economics perspective, look like?

Wow. I don't really. I don't believe in perfection. I mean, somebody once once said that his ideal was slightly imaginary. Sweden. I like an economy that has a really high safety net for people, good environmental regulation, and something that's not. That's kind of like some of the better run countries in the world, but with fixing all of the smaller things that are wrong with them.

What about wealth distribution?

Well, obviously, total equality is neither possible nor, I think, especially desirable. But I think you want one where basically one where nobody is hurting and where everybody lives in the same material universe. Everybody is basically living in the same society. So I think it's a bad thing to have people who are so wealthy that they're really not in the same world as the rest of us.

What about competition? Do you see the value of competition? What may be its limits?

Oh, competition is great when it can work. I remember. I'm old enough to remember when there was only one phone company and there was really limited choice. And I think the arrival of multiple phone carriers and all that has actually been a really good thing. And that's true across many areas, but not every activity is suitable for competition. So there are some things, like healthcare, where competition actually doesn't work, and so it's not one size fits all.

That's interesting. Why does competition not work in healthcare?

Oh, there's a long list. I mean, there's a famous paper by Kenneth Arrow from 1963, which still holds up very well, where he kind of runs down the list of things you need for competition to work well, basically both sides to every transaction, being well informed, having the ability to make intelligent decisions, understanding what's going on. And healthcare fails on every dimension.

Health care. So not health insurance? Health care.

Well, both health care and health insurance. Health insurance being part of it, but no, health insurance is really the idea that there's effective competition between health insurers is wrong, and health care. I mean, the idea that you can comparison shop for major surgery, when people say things like that, you wonder, are you living in the same world I'm living in?

The piece of well informed, that was always an interesting piece for me, just observing as an outsider, because such a beautiful world is possible and everybody's well informed. My question for you is, how hard is it to be well informed about anything, whether it's health care or any kind of purchasing decisions or just life in general in this world?

Oh, information. It varies hugely. There's more information at your fingertips than ever before in history. The trouble is, first of all, that some of that information isn't true. So it's really hard, and then some of it is just too hard to understand. So if I'm buying a car, I can actually probably do a pretty good job of looking up, going to consumer reports, reviews, you can get a pretty good idea of what you're getting when you get a car. If I'm going in for surgery, first of all, fairly often it happens without you being able to plan it. But also, medical school takes many, many years, and going on the Internet for some advice is not usually a very good substitute.

So speaking about news and not being able to trust certain sources of information, how much disagreement is there about, I mentioned utopia perfection in the beginning, but how much disagreement is there about what utopia looks like? Or is most of the disagreement simply about the path to get there?

Oh, I think there's two levels of disagreement. One, maybe not utopia, but justice. What is a just society? And there are different views. I mean, I teach my students that there are, broadly speaking, two views of justice. One focuses on outcomes. A just society is the one you would choose if you were trying to, the one that you would choose to live in if you didn't know who you were going to be? That's kind of John Rawls, and the other focuses on process, that just society is one in which there is no coercion except we're absolutely necessary, and there's no objective way to choose between those. I'm pretty much a Rawlsian, and I think many people are. But anyway, so there's a legitimate dispute about what we mean by a just society anyway. But then there's also a lot of dispute about what actually works. There's a range of legitimate dispute. I mean, any card carrying economist will say that incentives matter, but how much do they matter? How much does a higher tax rate actually deter people from working how much does a stronger safety net actually lead people to get lazy? I have a pretty strong view that the evidence