Paul Krugman warns: We’re in a worse position than before the financial crisis

At UChicago event, Nobel laureate discusses plain language, partisanship and policy

In his columns for The New York Times, Nobel-winning economist Paul Krugman doesn’t pull any punches. He has called his intellectual opponents hypocrites, cynics and liars—and that’s just in the past month.

That pointed wording is intentional: To have an impact on policy debates, Krugman argues, he needs to craft a memorable message and state it without fear.  

“‘Words ought to be a little wild, for they are the assault of thoughts on the unthinking,’” he said, quoting one of his favorite economists, John Maynard Keynes.

Krugman presented his views on partisanship, fears of a global recession, the threat of the coronavirus, U.S. trade and health care policy in a wide-ranging conversation hosted Feb. 26 by the University of Chicago’s Institute of Politics. Speaking with Prof. Austan Goolsbee of Chicago Booth, Krugman also discussed his new book, Arguing with Zombies: Economics, Politics, and the Fight for a Better Future, which draws on his columns for the Times and their exploration of issues such as health care, housing bubbles, tax reform and Social Security.

In the book, Krugman lists his four rules for engaged public intellectuals: They should focus on subjects where experts have reached some consensus; they should communicate plainly; they should highlight dishonesty; and they should point out politicians’ motives.

Two of these four rules, Goolsbee noted, are confrontational.

“Most of the important policy debates that are taking place are debates in which one side is not arguing in good faith,” Krugman countered. He asserted that political conservatives are routinely making claims that are not based on evidence. “To be fair to my readers, I have to not pretend otherwise.”

Krugman received the Nobel Prize in 2008 for his analysis of the effects of free trade and globalization. Goolsbee, the Robert P. Gwinn Professor of Economics, said Krugman’s columns on the 2008–09 financial crisis in Arguing with Zombies still feel relevant. He asked whether Krugman fears a future financial shock.

“We’re basically in a worse position than we were before,” Krugman responded. A few weeks earlier, he said, he didn’t see any risk factor so large as the housing bubble, which brought down large parts of the financial system in 2008.

Now, though, Krugman sees the novel coronavirus as potentially causing a global recession, as supply chains break down over fears of workers transmitting infection. With worldwide interest rates already very low, policymakers have little room to boost economic activity.

“Whatever the shock is—and there will be one—the problem is that we don’t have any shock absorbers anymore,” Krugman said.

On trade, Krugman said that President Donald J. Trump has been able to do more damage with his tariffs than he expected, because businesses have reacted to increased uncertainty by pulling back on investment.

Still, Krugman said that because U.S. trade policy was in reasonably good shape before Trump’s inauguration, he doesn’t worry about it as much as he does about health care policy—an area where the economics are, in his words, “totally distorted.”

In health care, Krugman said Democrats should finish what the Affordable Care Act started, but he doesn’t have a specific prescription for how to get there. “You want to make sure that we get close to universal coverage, but it doesn’t have to be purist,” he said.

He noted that every advanced country besides the U.S. has universal health care—whether socialized medicine such as Britain’s National Health Service, single-payer health care such as Canada’s system, or a decentralized private system with regulations and subsidies, as in the Netherlands and Switzerland.

In his column, Krugman regularly targets politicians from both sides of the aisle—something that Institute of Politics Director David Axelrod respected. “Even on days when he skewered the administration I was a part of, I appreciated the depth of his argumentation,” said Axelrod, a former senior adviser to President Barack Obama.

For Krugman, that was high praise. After all, his deep investment in his own positions doesn’t matter much if readers forget his arguments.

“Every column has to start with a hook to pull people in,” he said. “Every column has to end with a stinger, so that people remember what you told them.”