The Economic Risks Keeping Paul Krugman Up at Night

Ed Elson and Scott Galloway are joined by Paul Krugman, Nobel Prize winning economist, and distinguished professor of economics at the graduate center of CUNY, to break down what concerns him the most about this year’s economy. He weighs in on the affordability crisis, how the White House is handling AI policy, and where the media is headed. Check out our latest Prof G Markets newsletter Follow Prof G Markets on Instagram Follow Ed on Instagram and X Follow Scott on Instagram Learn more about your ad choices. Visit podcastchoices.com/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

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• 1:29Scott Galloway?

  Today's number 2.4. That's how many hours on average people spend shopping online at work. I hate those little reminders that people who bought this also bought. Okay. Those people are also emotionally fucked up in the head. Stop profiling me.

• 1:48Speaker 09

  Listen to me. Markets are bigger than us. What you have here is a structural change in the wealth distribution. Cash is trash.

• 1:54Speaker 07

  Stocks look pretty attractive.

• 1:55Speaker 09

  Something's going to break. Forget about it.

• 1:57Scott Galloway?

  Ed, I made that up myself. Yeah, I could tell. You could tell I made it up myself? I had a great joke on, um, what was it? Oh, there's the Prof G show. I don't know if you know this. I have another pod, I do other podcasts. That's right. And it was that I watched Jaws last night, but instead I watched it backwards. And it's actually the heartwarming story of a shark that helps disabled people recover their lives.

• 2:22Scott Galloway?

  I think that's genius.

• 2:23Ed Elson?

  Really dialing it back. And this was the, the question last week, should we dial it back? I thought the answer was no. I guess the answer is yes. We've got a dad joke about jaws and about shopping.

• 2:34Scott Galloway?

  Would you trust the judgment of someone who takes the time to comment on a YouTube video?

• 2:40Scott Galloway?

  I mean, we love our fans. We love our fans.

• 2:43Ed Elson?

  Love them, but I'm not listening to any of you. No shot.

• 2:47Scott Galloway?

  I always try to be positive in comments. I'm not getting into fights anymore with people online. Cause I'm usually fighting against a bot and then I find my erectile dysfunction gets even more dysfunctional. And so, ah, telling you it's coming. You laugh now. You laugh now. Just wait, my friend. Just wait. Tlalatnafil, which by the way, is a generic name for Cialis. Just get used to it. And it's less embarrassing to say to your nurse who's got, or your nurse, your doctor who always has like an attractive nurse in the room. And you have to say, I'm kind of interested in those drugs that, um, what is it? How you say, make dick hard?

• 3:27Scott Galloway?

  I don't know who I'm imitating there. I just know that's all kinds of wrong. You know what? Actually, our producer's fucked up. You know what today's number should have been?

• 3:35Ed Elson?

  What?

• 3:35Scott Galloway?

  30. Why is that?

• 3:38Ed Elson?

  Ah, okay.

• 3:39Scott Galloway?

  That's right.

• 3:40Ed Elson?

  There we go.

• 3:41Scott Galloway?

  Ed Elson, 30 under 30, according to Forbes. Which by the way, I did not know Forbes still existed, but it is still very prestigious.

• 3:53Ed Elson?

  Very prestigious.

• 3:54Scott Galloway?

  And Catherine, uh, we're on another podcast, Rachel Moderates. She came on, this is such exciting news. Ed just got 30 under 30 on Forbes. And I literally reflexively shouted out, that bitch owes me everything.

• 4:11Ed Elson?

  It's true. I do owe you everything.

• 4:12Scott Galloway?

  Tell us, how does it feel to be the 30 over 30 or 30 under 30?

• 4:16Ed Elson?

  Yeah, it's nice. You know, the, the secret of the 30 under 30 is it's actually 600 under 30. They keep on increasing the number of us every year. So, I mean, that's the sort of little footnote that, that, that we should consider, but still very exciting.

• 4:32Scott Galloway?

  Well, you join past alumni, including Mark Zuckerberg, LeBron James, Milo Cyrus.

• 4:38Ed Elson?

  LeBron James. He and I have a similar. Career trajectory, I think.

• 4:43Scott Galloway?

  I think you're much more similar to Miley Cyrus, but that's just me. The guy who started Spotify.

• 4:48Ed Elson?

  That's pretty good company. Also Elizabeth Holmes and also Sam Bagman-Fried. I mean, if anything's gonna happen to me, I'm gonna end up in prison in the next two years. If we're being realistic here.

• 4:59Scott Galloway?

  Let's bring this back to me. I peaked pretty early. I came out of the gates strong out of business school. I started a strategy firm. Someone got me invited to Davos. I was literally 29 at Davos. And I thought it would just keep going uphill, just up into the right. And by the time I was 33, I was divorced, broke and basically living like a caveman in New York. Like occasionally leaving to try and go to the ready teller and get food and pursue sex unsuccessfully. And then going back, retreating back to the cave. So that's what's coming next to you, Ed. That's what's coming. That's next up. Next up.

• 5:34Ed Elson?

  I can't wait. You just got it. You can't let it get to your head.

• 5:38Scott Galloway?

  Oh, that's too late for that. You're one of those quiet, conceited guys. You're always like, oh, well, I don't think about me, me, me all the time.

• 5:45Ed Elson?

  I have to make you think that I don't think about me all the time.

• 5:48Scott Galloway?

  That fake British accent is about says it all. That says it all. Claire and I know you're from fucking Alabama. Anyways, what do we got going on today?

• 5:57Ed Elson?

  We got a conversation with Paul Krugman, which is gonna be great. And I would also add that we are recording our annual Ask Me Anything episode next week. So please send in your questions to [email protected] or drop them in the comments. Very excited about that episode. I think that's all I got before we got this conversation with a Nobel Prize winning economist.

• 6:20Scott Galloway?

  More importantly, along the same lines. Did you see me on Oprah?

• 6:23Ed Elson?

  I didn't see you on Oprah. I saw the photo of you and Oprah. Is it out yet?

• 6:27Scott Galloway?

  No, she and I just rolled together. What do you think? Yeah, I was on her show.

• 6:31Ed Elson?

  No, I said you were on the show. I just haven't seen the interview yet.

• 6:34Scott Galloway?

  We decided to come public with our relationship.

• 6:38Ed Elson?

  We were talking in the in the side channels. It strangely looked AI generated that photo of you and Oprah Winfrey.

• 6:44Scott Galloway?

  Yeah, it did look fake, didn't it? Everyone looked so happy. It didn't look like repeat. I had no idea what to expect. I know you want to know more about this.

• 6:51Ed Elson?

  I do, actually.

• 6:52Scott Galloway?

  I walk into a room and they have filled the room with like 100 young people. Eighty of them are men.

• 6:59Ed Elson?

  Wow.

• 6:59Scott Galloway?

  And they all proceed to ask me questions about mental health. And what should I do? I'm having trouble connecting to relationships. And I'm like, dude, I don't know. When I was your age, I was getting fucked up and approaching people in Irish bars. I don't know. It was, I was literally sweating and I had to basically start every sentence with, I am not a licensed therapist. I'll just give you my experience and if it's helpful, great. But and at one point I said to this woman, I'm like, I don't know. I have no idea. It sounds like you're really, you know, it sounds like you're struggling. I have no idea. It was so uncomfortable. I think someone told them I was Dr. Drew or something, or Esther Perel.

• 7:40Ed Elson?

  Well, you've got to assume that position. If you're going on Oprah, you're not going to be doing hard hitting economics. You're going to be talking about feelings, right?

• 7:47Scott Galloway?

  My friend, Gayle King, got me on the show. Gayle King's my new best friend. She's super cool and nice and funny. Anyways, I was on Oprah.

• 7:55Ed Elson?

  That's very cool.

• 7:56Scott Galloway?

  That's it. And now Paul Krugman.

• 8:00Ed Elson?

  Let's get into it. Here is our conversation with Paul Krugman, Nobel Prize winning economist and distinguished professor of economics at the Graduate Center of the City University of New York. Paul, thank you very much for joining us for the very first time on Prof G Markets. Oh, hi there. Good to be on. Scott Cleland has an issue with the intro.

• 8:23Scott Galloway?

  We talk about Paul so much. I assumed he'd been on seven or eight times. It probably feels as if we know you. We're parroting your.

• 8:29Speaker 11

  Your data so much.

• 8:30Ed Elson?

  Well, we're slightly short on time, so I want to get straight into the questions. I have so many questions for you, Paul. And the first is, you know, we're coming to the end of the year here and a lot has happened. We've had a new administration, we've had Liberation Day, we've had tariffs, AI has exploded. You have been writing about economics for years. You're a foremost leader in economics. Just at a very broad level, what has stood out to you in 2025? And how do you think 2025 is going to be remembered in economic history?

• 9:08Speaker 11

  I mean, it's a weird year and that's all I can say. I mean, history doesn't usually give you, you know, clean experiments. It's usually more than one thing going on. But this year is really extreme. On the one hand, you have 90 years of US trade policy abruptly thrown into the waste bin. I mean, placed with very high tariffs. And on the other side, you have this AI boom, which is the biggest sort of, well, it's the biggest thing since the housing bubble. But the housing bubble was kind of on its own. And here we have the AI boom sort of colliding with and interacting with the tariffs. And it's a very, very bizarre economy right now.

• 9:53Ed Elson?

  One of the things you've been talking about lately is affordability. And that's something that's been very prevalent in politics, most notably probably with the mayoral election. Where do we stand in terms of affordability in this economy right now? Clearly, we're seeing some growth in the overall economy because of AI. But the affordability crisis seems to be a kind of a different thing.

• 10:17Speaker 11

  The problem that we have in talking about affordability is that there is a simple thing, which is just your real income. Typical person's wage divided by the Consumer Price Index, which is actually up a little bit since, you know, pre pandemic. So we're actually not seeing the simple version, oh, prices are way up and everybody is impoverished is not true. Way too much reporting talks as if that was the story. But that doesn't mean that everything is okay. Uh, so once you start to look under the surface, you see, first of all, there are some real cost of living issues or just generally getting by issues. There's a interest costs are way up, certain really critical things.

• 11:01Speaker 11

  Above all, I would say that the cost of of your buying your first house are way up. Uh, so, so it's not, people are not imagining that there's an affordability crisis. Um, and then, uh, if we just sort of take affordability as kind of a proxy for how are things, well, it's, the economy is in some important ways worse than it looks. Uh, we don't have high unemployment, at least not yet. We don't have high inflation by historical standards, but we do have this frozen job market where, you know, if you got your job, okay, but if you lose it or you're new to the labor market, uh, it's very hard to get a first job or a new job. And, um, again, I, I, I do think that, and I will be writing myself some more, I think

• 11:45Speaker 11

  that the, the way that some things that are key markers or have been key markers of middle class status are receding out of reach matters in a way that the normal numbers don't quite capture.

• 11:57Ed Elson?

  We read a really interesting, um, Substack article recently, which has kind of gone viral by this guy, Michael Green, this asset manager, where he, he brought up, and I don't know if you've, you've seen this, but he brought up this poverty line question where, you know, uh, uh, the current poverty line in America that we all use is around thirty thousand dollars, a little, a little over thirty thousand dollars. And he made the point that this is an old metric, an old measurement that we used that that worked in the sixties, but no longer works anymore. And he came up with kind of an adjusted calculation and he landed on a hundred and forty thousand dollars as the poverty line. It's been very controversial.

• 12:39Ed Elson?

  Some people said that, that number is all wrong, but the point kind of stands. It's like, well, we're all talking about affordability. We're all trying to figure out what's going on for the American, uh, economy, particularly on the lower end. And this has really resonated with people. I just want to get your reactions to that article and this idea that perhaps that, that metric that we've used to measure poverty might be flawed.

• 13:03Speaker 11

  I actually have been aware of the article and not bothered to read it because it's kind of, this is kind of a stupid point. Um, I mean, you know, I, I, I sit and at the City University, I sit at something called the Stone Center for the Study of Socioeconomic Inequality. Let me tell you, my colleagues know all about poverty measurement and, um, uh, you know, poverty measure is one of those things where basically Lyndon Johnson needed a quick and dirty measure of poverty and, uh, uh, a economist at the Bureau of Labor Statistics, Molly Arshansky, you know, did a quick and dirty calculation which somehow got stuck. And it's the original calculation was based on the cost of food and, um, since

• 13:45Speaker 11

  then has been just adjusted for the Consumer Price Index and nothing else. I mean, Molly Arshansky did something really useful and it's, it turned out to be extremely useful to have a standard measure of poverty, even if it's somewhat arbitrary. Uh, but if you really want to think about poverty, there's one question, which is can people afford the essentials of living? Um, and then there's a bigger, tougher question, which is are people really part of the broader society? That's a poverty as a measure of social exclusion is really what you want mostly. Um, most countries actually measure poverty quite differently. They'd say that poverty is having less than half the median income. Uh, and we can do

• 14:29Speaker 11

  that for the United States. And it does show that, that we've actually because of increasing inequality, poverty has risen over time. Um, and yes, the material standard of living associated with half the median income has gone up, but in some ways that doesn't help much. So this is the wrong approach. I mean, in some ways it should just say, you know, poverty, schmerty, how are we doing? How many people are really effectively excluded from the economic mainstream in America? And the answer is a lot and too many. And the, you know, we, we, for

• 15:04Speaker 11

  Kind of almost bureaucratic policy reasons. We're kind of stuck with this poverty measure, but try to, you know, fiddle with it to make it better is not that that's really not very helpful.

• 15:18Ed Elson?

  It sounds like maybe you agree with the premise, though, which is that this idea of a poverty line is kind of an arbitrary and stupid way to measure things with this question of how is America doing? I feel like one of the larger points is like the economy is so much different today than it was 60 years ago. There are so many other things that we need to to account for. You mentioned there that real income is up, but this affordability crisis is still a problem for all of the other issues that you mentioned, the job market, housing market, borrowing costs, all of these things, which seems to bring us to this question of like, how are we supposed to measure the economy then? If we can't rely on the poverty, we can't rely on income, what should we be looking at?

• 16:03Speaker 11

  I mean, I would say the poverty measure is arbitrary, but not stupid. There was a reason for doing it. There's a reason why a lot of a lot of federal programs are keyed to the official poverty threshold because they have to be keyed to something. So if you look at what are the subsidy rates under the Affordable Care Act, they're tied to your income as a percentage of the official poverty line. And, you know, changing that would be kind of a nightmare. It's just, you know, there there are more important things to spend political capital on, so let's let's focus on what's important. And again, we have we have pretty good measures of inequality. We have a pretty good sense of how many people really can't afford to be part of the mainstream of American life.

• 16:48Speaker 11

  They're all very troubling. So just, we don't need the problem, the fault lies not in our numbers, but in ourselves, right? It's it's fundamentally a question of what kind of society do we want to have and how do we deviate from that? And and clearly, if the poverty line, you know, if you have some calculation that sets the poverty line at a level that is, you know, way, way above, where people actually consider themselves poor, then that's wrong. Doesn't matter what the details of the calculation are. So so let's just say, are there a lot of Americans who are below some line? Yes, there are.

• 17:25Scott Galloway?

  If someone said, we're taking in $5 trillion in receipts, tax receipts, and spending $7 trillion.

• 17:32Scott Galloway?

  I would naturally assume that we were either at war or trying to jumpstart or reverse an economic decline and malaise get us out of a recession or a depression. And yet, we're not. I mean, I don't think either of those are true. And the fact that the economy is not surging with $2 trillion in additional deficit spending, to me, says that masks and underlying sickness, that the economy is actually much weaker than people think. Your thoughts?

• 18:01Speaker 11

  Before COVID, a lot of us were talking about secular stagnation, which is a totally impenetrable set of words. Nobody, it gives you no clue of what we're actually talking about. What it really was, that we actually had persistently inadequate demand, persistently inadequate spending in the economy. And that the interest rates were always extremely low. And that even that wasn't enough to really jumpstart the economy. It may well be that we would still be in that state if it weren't for these big budget deficits. And so, that's a concern. It's also the case that advanced, stable, rule of law

• 18:45Speaker 11

  nations that borrow on their own currency have a lot of leeway to run up large debts. They can go a long way, up that debt to GDP ratio without getting into a financial crisis. Is that still a description of America? Are we, I mean, we're large, but are we, are we stable? Are we a rule of law society? If I were an investor, wouldn't I worry about some current or future autocratic presidents deciding that to just arbitrarily write down our obligations? You know, it's so, these numbers are troubling. And they're, they're, but we all know where it comes from.

• 19:26Speaker 11

  We basically have a political deadlock where we have immensely popular programs, I think deservedly so, like Medicare and Social Security. And we also have a complete unwillingness to collect enough taxes to pay for them.

• 19:42Scott Galloway?

  To me, this feels unsustainable. When we're we're operating at what feels like it's not a good economy, not a bad economy, just what you call, I don't know, somewhere in the middle. And we've decided that it's just standard operating procedure to go 40%, you know, to spend 140% of our tax receipts. To me, A, I feel that's unsustainable. Do you agree? And B, when, and it's hard to tell when, but how does the music stop? Is it just when? I've never bought that people won't show up for our treasury auctions, they'll just demand more payment in exchange for the risk. Is there a limit? Do we go to, I mean, Japan's much higher than us, okay, but at what point does the debt become an issue?

• 20:22Speaker 11

  Britain had debt that was 250% of GDP at the end of World War II. But it wasn't a crisis because people said Britain is a serious country run by people who are not idiots and they will in the end do what is necessary, as they did, to to control their debt load. Now, the trouble is that we may not be a serious country. And more to the point, that the that the markets may conclude that we're not a serious country. And that's when the limit hits. It's not a, it's not an arbitrary number. It's kind of a, who are we? You know, there, Stein's Law. Herb Stein, Chairman of the Council of Economic Advisers, with a, whose son was a much less

• 21:07Speaker 11

  funny comedian. But Herb Stein's Law was if something cannot go on forever, it will stop. And Stein's Law clearly must apply at some point. But, you know, so far, we haven't hit that, though. I have to wonder, I mean, the the character of American governance has changed so much in this past year that you have to wonder whether any assumptions based on the kind of country we used to be still apply. But I've, I've, I've put a lot of work on this. I actually was looking for, at various times, I've looked for examples of countries that, like the United States, borrow in their own currency, have a high level of of debt and

• 21:48Speaker 11

  are kind of politically paralyzed, but are not, you know, hyperinflation territory, whatever, and for crises. And it's really hard to find them in history. I mean, I mean, you talk about the French franc in 1926, where, but it's, it is really hard to, to, to, we don't have a lot of historical examples, so that will help us understand how this ends. Sooner or later, it has to end one way or another, but. How I don't know.

• 22:17Ed Elson?

  We'll be right back after the break. And if you're enjoying the show, send it to a friend and please follow us if you haven't already.

• 22:32Speaker 00

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• 24:08Scott Galloway?

  We're back with Prof G Markets. So one of the big themes of our show, our talk tracks, is that our economy has become more fragile because 40% of the S and P is represented by 10 companies. And that if Nvidia announces a big company announces they're not getting the return they'd hoped regarding their investment in AI, Nvidia doesn't meet expectations, Nvidia goes down 60 or 70%, which I will remind people, every one of the big tech companies has been down that much in a 12-month period at some point in the last 10 months or 10 years. And basically overnight, the S and P is off 10, 15, 20%, which represents a half of global market capitalization.

• 24:50Scott Galloway?

  And immediately, we're in a, what feels like something like a global recession, if not something worse. Our sense is that that feels more likely than not in the next 24 months. Your thoughts?

• 25:03Speaker 11

  I think you and I, not Ed, but you and I have remembered the 90s.

• 25:10Scott Galloway?

  I knew it was going to be that we're old.

• 25:13Speaker 11

  Definitely is. And there was, there's a lot of markers that feel like the dot com, actually more telecom in terms of economics, but the excesses of the tech bubble are, you know, details differ quite a lot. And I have to say that this bubble, if it is a bubble, is an amazingly joyless bubble compared with the 90s. But it's, but sure, I think there's a, and we are in a situation now where, you know, but for all of that spending on data centers, we would probably be in a recession right now.

• 25:58Speaker 11

  And so it's not at all hard to see this going south quite suddenly. And it's also, by the way, it does worry me that, and this was not true back then, that a lot of this is not only there's a few companies, but really the economy is being driven by the capex decisions of like 10 guys. If a handful of people have a mood swing,

• 26:24Speaker 11

  they could take down the whole world economy.

• 26:26Scott Galloway?

  To me, this all, all roads lead to the same place. And that is, and the thesis is that the cloud cover, I think the S and P and the Nasdaq are the worst metrics invented in modern, modern economy because they create the delusion of prosperity and don't really say how people are actually doing or feeling. And without the cloud cover of the S and P being up double digits, it'd be much more difficult for the president to be sending a mass police, secret police into big cities. And that he has a huge vested interest in the continued kind of Lollapalooza champagne and cocaine of the AI

• 26:59Scott Galloway?

  bet driving the markets. And to me, this all leads to one place. When I look at the expectations built into the forward earnings of these companies, I don't think it's sustainable. And all roads for me, or not all roads, a lot, I think there's a very big likelihood that in 2026, we see some form of a bailout in the form of government-backed debt such that these guys can continue this capex, which seems to be propping up the market and the economy. A bailout of AI in the form of some, some quote unquote, government investment or government-backed continued buying of or financing a capex. Your thoughts?

• 27:34Speaker 11

  I think maybe tempted. We certainly shouldn't think of this administration as having any, you know, free market principles. And so it's quite possible that they might want to do it.

• 27:51Speaker 11

  I remember 2008. And it's, it's worth remembering that in the face of the absolute meltdown of markets, the first time that TARP, which was a limited bailout of banks, the first time the TARP was put in front of Congress, it was voted down. I don't think it's that easy to engineer a bailout. I think that, and among other things, were people worried about?

• 28:19Speaker 11

  People worried about the budget and the deficit and all of that. And this is, you know, this is really big. In the fact, it's one thing to, you know, bail out Silicon Valley Bank or something like that. That's a, that's a fairly small thing, but this, this would be really, really huge, really, really hard to justify. And one thing that is really clear also is that, you know, people hate AI. They hate the companies, they hate the people. This is the most unpopular boom. I mean, you know, as I said, this is, this is a joyless bubble. Compared with the nineties, everyone was kind of, you know, kind of feeling some goods,

• 29:04Speaker 11

  there were some good vibes about the companies, even the ones that failed. So I, I mean, it could happen, but I think that politically, it would be extremely difficult.

• 29:13Ed Elson?

  It's really interesting. I, I feel like two big themes here, or one big theme in two stories, is that it feels as though we are artificially propping up the economy right now. And we've talked about it in relation to deficit spending, which is already kind of out of control. And now with the big, beautiful bill, it will get more out of control. And the predictions are that it's going to grow our economy, perhaps the stock market, because we're going to spend so much money. And this is coming from the administration that said, we're going to balance the budget. So that's a whole other can of worms. And at the same time, you've got massive AI capex investment, which is basically keeping

• 29:58Ed Elson?

  our GDP growth positive. And we're not yet seeing the underlying demand in the consumer economy that would warrant the amount of investment that we're, that we're seeing in AI, which I think leads me and Scott and probably a lot of our audience to believe that whenever the music stops because of the amount that we are artificially inflating everything in our system right now, it's going to be an extremely aggressive and shocking downturn. I just want to get your reactions to, to that notion.

• 30:32Speaker 11

  The IMF once did a systematic study of how successful are economists at predicting recessions? What is the track record of economists at predicting recessions? And the answer is zero success. Might as well use a magic eight bull as ask me or or you know, anybody else on this where is there there's just too many damn things happening in the world to be very good at this. Now, maybe it's worth saying that all the the capex on data centers are related and I've been the measures are kind but we're we're talking about something like one to two percent of GDP. So although it's it's a that's that's not chicken feed, but that's that's not enough to produce a 2008 level crash.

• 31:16Speaker 11

  It's more like so, you know, think more like 2001 than 2008. So it's it's it's not all that catastrophic if you try and do the math. Now, what the effects on sentiment might be, what the effects of falling stock prices might be is harder to say, but it at so this does look crazy. But I think we probably don't want to go overboard in terms of the scale of what's at stake. It it will certainly be unpleasant and there will be demands, demands that that we bail the these this thing out and also furious pushback against those demands. But, you know, I it's not the end of the world, which I can say, because I remember the end

• 32:01Speaker 11

  of the world, right, which did sort of happen in 2008. So it's it's a it's no it's worrisome, but let's not get too over our skis on this.

• 32:11Ed Elson?

  When you look you talk about the politics of AI, when you look at the way that this administration has been handling AI, I'm really thinking about, you know, these dinners where you've got Zuckerberg and Tim Cook showing up to the White House, offering gifts. I mean, it's you said out there that these capex decisions, it's not just in the hands of a few companies, it's really in the hands of a very, very small set of people. What do you make of how the White House is handling AI, handling AI policy right now? How do you think it will shake out politically and where does this land in the economic story of America?

• 32:51Speaker 11

  Well, it's not clear to me that we really have an AI policy. It's actually in general, it's not clear to me that we have an economic policy at all. I mean, one of the one of the things that is really, you know, for the for those of us who've spent decades.

• 33:05Speaker 11

  Interacting with the policy wall community. What's really remarkable about this administration is there's nobody to talk to. There's nobody in there. You ask, you know, who, who in the White House is thinking hard about AI and how it's, it's going to affect the economy? Um, the answer is nobody. There, there, there just is nothing there. Um, and what's happening, this is more, the dinners is these are all, um, basically big corporate types, but especially, especially it turns out the tech, uh, sector, although there's some others who are, um, trying to butter up, uh, the White House and look for, you know, so this isn't really policy, it's chronic capitalism.

• 33:46Speaker 11

  And, uh, uh, you know, they're, they're doing what they have to do, but, or they think they have to do. Although actually I find it interesting that Wall Street, which is another source, you know, there's another big pile of money and influential people over there, they've been actually much less, uh, visible in all, not zero, but much less. And I thought it was really interesting that Jamie Dimon was asked why, you know, we have the people who are helping the destruction of the White House and its replacement with a grotesque ballroom. Um, uh, Jamie Dimon was asked why JP Morgan Chase isn't part of it. And he said, well, we need to think about what future DOJ's will do.

• 34:28Speaker 11

  So, which was an amazing thing actually to say, although couched in, in deliberately bland language, but he basically thinks that a lot of people, there's a real possibility that a lot of people involved in policymaking right now are going to end up going to jail. So, um, it's, uh, it's, it's a very strange situation, but there, there is no policy. I mean, if you ask, you know, who's, who's the point man on actual hard thinking about this? Um, well, I mean, maybe David Sacks.

• 34:56Ed Elson?

  Part-time employee.

• 34:57Speaker 11

  Yep. The policy and the personal interest are so enmeshed that it's not really policy as we knew it.

• 35:04Ed Elson?

  Why do you think we've seen this divide between Wall Street and Silicon Valley? It's an interesting point that you make. Silicon Valley has really grown its ties to this administration in a way that, you're right, it seems Wall Street hasn't done, or at least not in the same way or not as openly and outwardly. Why do you think that is?

• 35:25Speaker 11

  The Wall Street people in time in a particular, but in general, they've been dealing with government for a long time. I mean, Silicon Valley used to think that it was a libertarian paradise and didn't need government, and now all of a sudden they're throwing cash at the first family. But they're not sophisticated in this stuff, and they probably don't have much sense of where the risks lie, whereas Wall Street does. And there's also, there's a personal thing. I mean, one of the things that I find interesting about this whole tech story right now is that it is being led in the large, I'm going to get in trouble for saying this, but it's

• 36:09Speaker 11

  being led in large part by billionaires whose best days are behind them. Ten years ago, everybody loved Silicon Valley. Everybody loved tech. We thought it was a tool of liberation. We even had biopics made about Mark Zuckerberg. And now, everybody thinks of them as greedy monopolists. The word of the year, I guess, two years ago was Cory Dr. Rosen shitification. So, you know, part of what's driving all this stuff is, I think, these are people who are sort of looking for something really big to bring back the glory days of 2015 or so.

• 36:48Ed Elson?

  We'll be right back. And for even more markets content, sign up for our newsletter at profgmarkets.com/subscribe.

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• 38:42Ed Elson?

  We're back with Profty Markets. I think some people would say, I mean, we're seeing what appears to be certainly crony capitalism. Others would just say flat out corruption. And then on the other side, some people say, oh, well, America has always been corrupt. If it's Silicon Valley now, it was Wall Street 10, 15, 20 years ago. You know, our policymakers are always in bed with whoever has the most money. When you look at this administration and the economic policies in 2025, where does it rank in terms of corruption? How corrupt is this administration compared with history?

• 39:24Speaker 11

  It really is on a different scale. I think even the Gilded Age. Looks relatively clean by comparison, but certainly compared with, um, look, it, we went through, uh, I was very involved, you know, intellectually and certainly talking with all the players during the, the post two thousand eight financial crisis and the bank bailouts and all of that. And there was no question that big money on Wall Street carried a lot of political clout. Um, but it was not, there was very little outright bribery, uh, as far as we know, as far as I know. There, there wasn't, uh, the, the

• 40:05Speaker 11

  people weren't hanging, handing over, um, bags of cash. Uh, they weren't, um, you know, buying, buying meme coins or whatever, uh, which didn't, didn't exist yet. Um, it was more, there was a subtle, uh, not that subtle, but a relatively subtle influence. There was the revolving door. Government officials, you know, were always were thinking a little bit about their next job. Uh, the, there was, uh, just the prestige that comes with, with money. I mean, I did have, uh, a couple of meetings at the Obama White House where a couple of, you know, people like Joe Stiglitz and me were arguing for a harder line against

• 40:45Speaker 11

  the banks and, uh, the bankers were of course arguing against. And I came out at both meetings saying, you know, we have a fundamental disadvantage, which is that they have much better tailors. It was never the case that, that we were, you know, a deliberative democracy based on principle. There was money always talked, but, uh, billions of dollars in personal rewards for the first family, that's something new in American history.

• 41:14Scott Galloway?

  Of all the things going on, all the risks, whether it's geopolitical instability, deficit spending, AI, potentially an AI bubble.

• 41:23Scott Galloway?

  What worries you the most? Do you think it's not getting enough coverage? And then outline a scenario around the question we like to ask, what could go right?

• 41:31Speaker 11

  Environmental issues are, you know, should be top of the concern. And there's a terrible thing that's happening right now, which is that we've reached a moment when the technology actually makes, it's surprisingly easy and cheap to do a lot to limit climate change. And the United States is just totally turning its back on this miraculous technology, you know, so that, and which is also as geopolitical stuff, you know, China is taking the lead in green energy and the United States is keeping defunct coal plants running. So that's, that's what really scares me. Now, what could go right?

• 42:09Speaker 11

  You know, maybe AI really does generate a huge productivity burst, you know, and it, you can believe both that it's a bubble and that the companies, you know, the Mag Seven or the Mag Ten or whatever your group is, that, that they are massively overvalued and that the technology is really going to be transformative. It's like, you know, I, I spend time watching old ads from the nineties on YouTube. It's, it's one of those great, well, technology does some great stuff. And you look at the ads from Quest about all the wonders that fiber optics was going to bring. And, and they all came true. Quest

• 42:50Speaker 11

  then bankrupt. But, but, you know, the technology was, was for real. And it could, you know, if a, a persistent hundred fifty basis point rise in the rate of productivity growth in the United States would make a lot of our economic problems just melt away.

• 43:07Ed Elson?

  I'm surprised to hear on your, at the top of your list in terms of risk, you're worried about environmental issues. I, when we ask the question, the things that often come up are debt is often a really big one. Civil war in some capacity, largely as a result of inequality, the steepening inequality that we're seeing is often a big one. I think that's probably number one for me. I'm surprised to hear environmental issues. So I'd like to hear more about that.

• 43:37Speaker 11

  So let me just say, I wasn't going to get into the politics, but no, I mean, my immediate concern, to ask what, you know, what keeps me up at night, it's, will America still be a democracy next year? Not even so much the civil war aspect as to, you know, we've seen this movie before. We're like, quite a lot like Orbán's Hungary and at a couple of, you know, a year or two into into the Fedez takeover. So, you know, that's, that's what keeps me up at night, you know, our, that, that comes, I'm not sure about the civil war, more, more about just the, basically authoritarian coup. Let's just be frank about it. If you, if you're not worried about that,

• 44:19Speaker 11

  you're not paying attention. And that is, you know, we probably still have some running room on that. So, you know, that will get resolved first. But the environment, look, the world is still emitting a lot of greenhouse gases. The thing about greenhouse, about emissions is that they're cumulative. It's, it's, even if we stopped completely emitting carbon dioxide and methane today, temperatures wouldn't start to come back down for generations. So this stuff, and if we continue, you know, slowing the rate of growth of emissions, which is kind of the most that we can reasonably hope for right now, is not enough to avoid a, a really

• 45:04Speaker 11

  large set of consequences. So, you know, I don't own any, any real estate in Florida, because I don't think, I think that the, you know, just in economic terms, we are very likely to see a whole lot of, of property damage and economic damage. So this stuff has receded from attention, but the reality continues.

• 45:27Ed Elson?

  Why do you think it's receded from attention? I, I agree with you. This was sort of top and ma, top of mind for many, many people. I would say maybe seven, eight, probably a decade ago. And for whatever reason, we've forgotten about it, or at least it's certainly way down on priority lists. Why do you think that's happened?

• 45:46Speaker 11

  Well, if I think about myself and my friends, it's because.

• 45:52Speaker 11

  We may suffer really terrible environmental damage 10, 15 years from now. But America as we know it politically is on the line now. You focus on the most immediate danger. And that's, and it's also, you know, the fact that the political, you know, who are you talking to? I mean, is there anybody certainly in in US politics who is going to be moved by by what was said or wasn't said at the COP conference in Berlin the other day, right? It's, you kind of work with with where you where you are. And I will say also, more positive, the the fact that we, it looks like there is a path

• 46:37Speaker 11

  towards stabilizing the climate at a still tolerable level without sacrifice because of these miraculous new green energy technologies. That also does change the way that you think about it.

• 46:49Ed Elson?

  All right, just before we let you go here, more of a personal question. You were a columnist for the New York Times for many, many years. You now kind of make made the leap out into independent media, the new media sphere, which we kind of live in. You're on Substack, your Substack has exploded. People are absolutely loving it. General takeaways on what it's like leaving legacy media and now being in new media? What do you make of it?

• 47:21Speaker 11

  I will always be grateful to the Times for offering me that platform. And the new media can do lots of things, but one thing you can't do is the kind of steady, pound the pavement reporting that we still, I mean, if you look at what, you know, what do I reference in the Substack? And it's, it's a lot of stuff that's being reported by the New York Times and Bloomberg. And, you know, it's, so we still need all of that. But I will say that there is a, you know, there's a lot more, it's not just freedom to say what you want to say without without editors and being able to to, you know, not not be polite sometimes, but also just format.

• 48:05Speaker 11

  And the kind of stuff I do, which often involves a mixture of Of charts and statistics and occasionally gets a little wonky for, you know, I can do that, which I really couldn't. I was just talking with some, actually I just talked with Martin Wolf about this, the great liberation of not having to have my charts look pretty. And so not having to wait three days for the graphics department to produce a chart that looks up to time standards and being able instead to just bang a crude thing out of Excel and PowerPoint that makes the point and I can do within an hour or two.

• 48:48Ed Elson?

  Do you have any thoughts on just where media is headed? I mean, the New York Times is actually under fire just this week because they put out this article about David Sacks and all of his, all the ways in which he's compromised. And then suddenly you had this massive outpouring of pushback largely from David Sacks and his mates on the right, saying the New York Times is compromised, it's woke, it's, you know, has an agenda. What do you just make of like what is happening to media at large? And what do you think, where do you think it's all headed? And then we'll get you out of here.

• 49:22Speaker 11

  Yeah, assuming that we do manage to head off the authoritarian threat, then I think the Times should actually feel grateful. I mean, it's kind of an FDR, I welcome their hatred. I mean, this is the, and the Times, almost uniquely, I think in different ways, a couple of other organizations have managed it, but they, they've managed to make media a, you know, a financially sustainable proposition with a paywall that people are willing to actually subscribe to. So they're, they're actually a success story. I mean, in some ways, the problem is that only a handful of organizations can do that. And that is the great concern and how much we can rely on. I mean, it's great that, I mean, what I value from

• 50:07Speaker 11

  Substack is mostly actually the people who actually do reportage of some kind, people who actually know something and can tell me about it. And that's, that's great, but it's, it's got its limits. And we don't know. I mean, we, we used to have a media, you know, that did its job based upon advertising. Now we have a media based upon paywalls, which is works but for many fewer organizations. I mean, you know, local reporting has become, is a casualty. The fact that, that it used to be that classified ads were, were the great savior of local newspapers and now they're gone and so are

• 50:51Speaker 11

  the local newspapers. So I don't know how all this shakes out. I mean, eventually we have to find a model, but look, everything, in the end, technology and the internet have just shaken up everything.

• 51:04Ed Elson?

  Paul Krugman is the distinguished professor of economics at the Graduate Center of the City University of New York. He was a columnist for the New York Times from 2000 to 2024. In 2008, Krugman won the Nobel Memorial Prize in Economic Sciences for his contributions to new trade theory and new economic geography. Krugman was previously a professor of economics at MIT and later at Princeton University. You can check out his Substack for his notes on economics and more. Paul, really appreciate your time. Thanks so much for joining us. Thanks, Paul.

• 51:34Speaker 11

  Thanks for having me on.

• 51:37Ed Elson?

  This episode was produced by Claire Miller and Alison Weiss and engineered by Benjamin Spencer. Our research team is Dan Shalan, Isabella Kinsel, Kristin O'Donoghue, and Mia Silverio. Drew Burrows is our technical director, and Catherine Dillon is our executive producer. Thank you for listening to Prof G Markets from Prof G Media. If you liked what you heard, give us a follow and join us for a fresh take on markets on Monday.