The Two Big Issues Keeping Nobel Laureate Paul Krugman Up at Night
For most people, the biggest economic worries right now revolve around the price of groceries or the cost of a mortgage. But when a Nobel Prize-winning economist looks at the world, the dangers that truly keep him awake are far more structural, speculative, and, frankly, existential.
Paul Krugman, the renowned economist and public intellectual, recently pointed to two towering risks that he believes are not receiving the serious attention they deserve. They represent two extremes of the current economic environment: a massive, short-term speculative bubble and a slow-motion, catastrophic collapse of planetary systems.
The Quiet AI Bubble
Krugman’s first big concern is the feverish investment surrounding artificial intelligence, which he warns bears an “unmistakable resemblance” to the dot-com bubble of the late 1990s. While the technology is undeniably impressive, he argues that the financial returns are not yet living up to the monumental hype and valuations.
According to his analysis, the AI boom, primarily driven by enormous capital expenditure on data centers and specialized hardware, is single-handedly boosting the economy and masking underlying weaknesses. He has gone so far as to describe the current economic environment as “schizophrenic,” where a tech boom is colliding with depressive factors like policy uncertainty. If the massive investment in AI capital spending goes bust, Krugman warns the consequences would be “extremely ugly” for the broader economy. This risk is compounded by the fact that a handful of companies, and their investment decisions, are now driving a disproportionate share of global growth.
The Unpopular Environmental Crisis
The economist’s second major worry is less about a market crash and more about a societal policy failure: the widespread lack of urgency in addressing climate change. When asked what worries him the most, Krugman explicitly stated that environmental issues should be at the “top of the concern.”
His frustration stems from a political and popular misbelief that aggressive climate action would devastate the economy. Krugman refutes this, arguing that responding to the crisis with the vigor it deserves would not be “devastating for the economy as a whole.” He believes that the technology and economic pathways to limit global warming are surprisingly cheap and easy to implement, but they are consistently ignored by policymakers.
In his view, the real barrier is not economic cost but political resistance. While climate action would certainly “shuffle the economic deck,” creating new opportunities, it would hurt some “powerful vested interests” who have an overwhelming influence on policy. For Krugman, the economic analysis of climate change is dominated by what he calls the “nonnegligible probability of utter disaster,” a low-likelihood, high-consequence event that should compel immediate and aggressive policy moves to curb emissions.
Ultimately, Krugman sees the modern economy caught between two enormous threats: a precarious, speculative technology boom that risks sudden reversal, and an existential crisis of the climate that we have the power to solve, but lack the collective political will to embrace. Neither scenario, he implies, offers much in the way of restful sleep.
