Paul Krugman on UFOs, AI and Room Temperature Superconductors

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1:01at chase.com forward slash business card. Chase for business. Make more of what's yours. Account subject to credit approval. Restrictions and limitations apply. Cards are issued by JPMorgan Chase Bank and a member FDIC. Hello, OddLots listeners. We recorded an episode with our friends over at What Goes Up. 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 OddLots listeners, ranging from the growing power of organized labor, the trillion dollar coin, EVs, Bidenomics, and more.

1:39You can find it on the What Goes Up podcast, available on Spotify, Apple, or anywhere else that you get your podcast fix.

1:56Hello and welcome to another episode of the Odd Lots podcast. I'm Joe Weisenthal. And I'm Tracy Alloway. 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, we have the excitement over the possibility of a room temperature superconductor. And then even weirder, we have a lot of talk about aliens.

2:39We 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. Like 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 hyperdrive is because the, I don't know, the powers that be are laying the groundwork for us to actually find out there are aliens.

3:20So they're sort of dripping it out. All right. 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 guests do you think?

3:55Who comes to mind as someone who would talk about. 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.

4:29Obviously, the first name we call is Paul's. I think this is your first time on our podcast. So, Paul, thank you so much for coming on OddLots. 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 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 uh life elsewhere in the galaxy i would think that it's extremely unlikely that there isn't i mean it there it's there there is an argument that says that uh you know that particularly that complex life may require some very, very special circumstances, and we might actually be alone out here.

5:24But I guess that sounds unlikely. It doesn't seem like 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 timescale 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 meaningful interaction is impossible. So in terms of there being actual aliens landing and kidnapping people and all of that, that doesn't seem to me to be a very plausible story.

6:11So 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 coming 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.

6:52And I wanted to be one of those guys. So that's how I got into economics, or at 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 or may not be good TV, but it has nothing to do with what Isaac Asimov wrote. But anyway, it was quite specific. In science fiction, economists save the world? In one particular classic science fiction series. They're not economists exactly. They're mathematical social scientists. But, you know, that's as close as I could get is doing economics.

7:30You did write a paper, as Tracy mentioned, on interstellar trade. What did you what is that all about? I mean, like what is what would make, say, interstellar trade any different between trade between U.S. and China? It's the 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's 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.

8:09And 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 perceived 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.

8:46I thought that was what's typical in economics. All right. Sorry, not to malign the whole profession. I'm sorry. I had some fun and helped keep me more or less sane during those pre-tenure years that every academic has to go through. Was it peer reviewed? I can't imagine. 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 said to me, why is the planet named Trantor? And we need revisions. And I said, I'm not going to do that.

9:30So I just let it sit, but it had circulated kind of in Samizdat for a long time. And eventually the Journal of Economic Inquiry contacted me and we said, we've heard about this paper you once wrote. Can we publish it? I feel like, not to keep diving out into 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. Okay. 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 makes any sense.

10:11Then 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 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, of Harvard, wrote a sort of companion paper around the same time called Is There 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, they don't actually match.

11:02Oh, yeah. And that the world as a whole appears to export more than it imports. You know, 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. Yeah. Also, that is 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 about someone claiming. I think we've got enough, you know, there's enough weird stuff in the world.

11:42Although 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 Velcro was supposed to be one of them. That's right. They joke about that. So 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 out. It's that the government agents in black suits are selectively releasing these alien technologies.

12:24Well, 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, 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, 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.

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15:02So these are important things if they pan out. Thank you.

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16:51Start fast, grow strategically, and scale at your pace. With a modular toolkit, you can flexibly deploy. Discover how at MasterCard.com slash commercial acceptance. Let's talk about technological progress as a driver of economic growth, because it seems like that. So it's like, OK, 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.

17:28I'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 go 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-00s.

18:09That 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 it's the internet some of it's just actually some of it's finally figuring out how to use barcodes to do effective inventory management and you know 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 uh all we got was 10 years of one percent faster growth but the that's a 10 bigger economy and there's almost no conceivable economic policy that would raise U.S.

18:51growth 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, they're 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.

19:33First 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 what is the value of streamed entertainment one way or another.

20:20For me, I'm really into live musical performances and 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. 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 it has always been true. Not always, but it's been true for a very, very long time.

21:02You 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 official statistics. So probably it's the case that much more economic growth than the numbers show or much more improvement in 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.

21:42And you were smartly in the corner watching, I think, a live video of the Arcade Fire in 2011 or 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 Larkin Poe, which is a sisters from Atlanta who do mostly the blues and are just incredible. I'm away for the summer. I went to a little, I won't get undisclosed location, but 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.

22:29But the next thing I'm going to do is something called, a band that's been around for a while called Warpaint 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 is I like the more intimate concerts. And the next Boy Genius performance is at Madison Square Garden. sorry that's i love the band but i 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 around 40 channels on youtube which are almost all indie musicians of one form or another and i'm gonna have to check out uh larkin poe i'm looking them up now it looks really good looks like the kind of thing that i would like i want to go back we're talking about technological impacts on macro and someone is going to get really mad.

23:18I've defended 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 fax machine was in the context of a piece that was meant to be funny.

24:04It was a piece that was written for - I defended it seriously. I've taken a lot of flack on Twitter now. Joe, you were trolled by Paul Kirkman. And now I'm discovering that I was defending a uh no i think it 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 times i was asked to write a piece looking back from 100 years in the future uh at what had happened yeah and so i wrote you know a bunch of things and many of them were deliberately counterintuitive some of which have turned out to be true and some are not but if you want to know the piece ends by 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.

24:45But 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 left, 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 endogenous shock?

25:48I mean, at some level, everything's 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 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.

26:31And so when you stumble on something that actually has big economic implications, 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.

27:08Yeah, it's exogenous for all practical purposes. You know, it's really important that we use the same gauge and 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 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.