17 July 2020

Vox: “Paul Krugman on climate, robots, single-payer, and so much more”

But I’m not sure that it’s actually about values versus efficiency. There are a lot of things where public provision is just plainly more efficient than private. I think we learned from the history of the 20th century that you probably don’t want the government running auto companies and steel mills.

On the other hand, publicly run utilities actually have a pretty good record. Public K-12 education has always been the bedrock of our education system (and the track record of for-profit private schools is horrifying). A lot of higher education has historically been done really well by state run institutions as well. On health care, if you actually ask what system delivers the best results at low cost, it’s genuine socialized medicine. The NHS is actually a pretty good system and damn cheap.

When I added up all of the things that were there, there’s a pretty strong case that the public sector actually is better, it’s 25-30 percent of the economy. So fairly straightforward economic logic actually says that a significantly mixed economy with a pretty big public role makes a lot of sense.

Paul Krugman

Interesting interview with Nobel Prize winner economist Paul Krugman (from late last year, another one of the articles I read and made notes about, but haven’t found the time to share on the blog). The observations remain very relevant though, from climate change policies, to the concentration of monopoly power in the US economy driven by the arrival of the Internet, to the role of robotics and automation in the future. These concentration trends may even accelerate considerably because of the current pandemic – a handful of technology giants account for the majority of stock market gains this year – and the forced adoption of working from home – already Facebook is considering adjusting salaries for employees who relocate out of the Bay Area, thereby reducing its personnel costs.

Nobel Prize winner economist Paul Krugman speaking on “Europe: What next?” in Athens, Greece
Nobel Prize winner economist Paul Krugman speaking on “Europe: What next?” in Athens, Greece, on April 17, 2015. Panayiotis Tzamaros/ullstein bild via Getty Images

When I look at the overall picture — which is that we have very high profits and very low business investment spending — that’s what you’d expect to see if monopoly power was the source. It’s not that the return on capital is low, but the return on having a dominant market position is really quite high. So, it makes sense to think that monopoly power has become a big problem for the US economy and helps explain the bind we’re in.

Somewhat perversely, it looks to me as if the internet has actually fostered concentration because it’s made it possible to separate the low-value activities from the high-value activities. Today, your back office operations can be some place where land is cheap and wages are low, but you can keep your corporate headquarters and your high-level technical staff in lower Manhattan. So, you don’t have to pay the higher rates for everybody but only for the good stuff. So that may also have fostered concentration.

From where I sit, the problem of rising inequality in America is a problem of power. It’s because we crushed our labor movement and allowed firms to gain monopoly power. It’s because we set the rules of the game in a way that have really disempowered ordinary workers. That’s not an appealing vision for a lot of people who are themselves successful. They like the story that it’s about technology — that it’s all about these fancy new machines. It’s something less confrontational than saying this is all about power.

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