Chronic absenteeism is defined as a student missing 10 percent of classes, roughly 18 days in a typical school year. About one in five American kids now fall into that category. In New York City public schools, the figure climbs to roughly one in three.

Chicago Public Schools reported more than 40 percent of students as chronically absent in the 2024-25 school year. Among black students, the rate hit 45 percent; among Latino students it reached 41 percent. Ninth-graders logged 48.5 percent chronic absenteeism, while seniors hit an astonishing 72 percent.

These numbers are not random. They are the predictable result of a government-run monopoly that faces no real competition, and therefore has little reason to meet the needs of families or keep students interested in attending. When the local assigned school is the only option, administrators and teachers’ unions can coast. They collect funding whether the building is full of engaged learners or filled with empty desks.

Assigned schools aren’t holding students accountable for their behavior, so students take the easy road when they can. Shame on public schools for exercising the soft bigotry of low expectations.

Douglass Academy High School on Chicago’s West Side was designed for more than 1,000 students. Today it enrolls 27. The school employs 28 staff members, nearly a one-to-one student-to-staff ratio. Per-pupil spending exceeds $90,000. With that kind of money, one might expect stellar academics and high engagement. Reality is the opposite. Nearly 66 percent of the enrolled students are chronically absent. Not a single child scores proficient in math or reading.

Pouring more money into a broken structure does not fix the underlying problem. It simply subsidizes continued failure.

Contrast that with the evidence from private-school choice. The most recent gold-standard evaluation of the D.C. Opportunity Scholarship Program, released in 2019, found that winning a lottery for a private-school scholarship reduced chronic absenteeism by 27 percent. The same study showed that scholarship winners were 34 percent more likely to report attending a very safe school than their peers who remained in public schools. The program also raised students’ satisfaction with their schools by 18 percent, another clear reason for improved attendance. 

There are no doubt many reasons some schools suffer from chronic absenteeism while others do not, but evidence suggests that a school’s environment plays a role. Research shows that students are more likely to miss school when they fear bullying or violence.

This is why giving parents choice in where they send their kids to learn is so important, and research suggests the benefits of school choice extend beyond the students who exercise the power of exit to switch schools. A peer-reviewed study published in the American Economic Journal in 2023, titled “Effects of Maturing Private School Choice Programs on Public School Students,” examined Florida’s expanding choice programs. The researchers found that greater competition from private options reduced chronic absenteeism inside the public schools themselves. When families can walk away and take the funding with them, public schools suddenly face pressure to improve. School choice functions as a rising tide that lifts all boats.

Policy design matters as well. Basing public-school funding on actual attendance rather than simple enrollment creates a direct financial incentive to get students through the door. Tracking attendance more frequently would give educators early-warning signals so they can adjust instruction or outreach before absences become chronic. These mechanical fixes, however, only work when the underlying product is worth attending.

Some districts have tried a different route. Detroit has paid students up to $1,000 simply for showing up. That approach wastes taxpayer dollars, produces temporary results that vanish once the cash stops flowing, and never touches the root cause. The schools themselves remain unattractive and low-value. Families and students notice.

Paying troublesome kids a weekly stipend for avoiding fights might reduce incidents for a short stretch, yet no serious observer would call that a solution to deeper behavioral and academic problems. The same logic applies to attendance bribes.

The government school monopoly’s insulation from market pressure explains why chronic absenteeism has become endemic. Families trapped by zip code have nowhere else to go. Students who find the curriculum irrelevant, the environment unsafe, or the teaching uninspiring vote with their feet – or rather, by keeping those feet at home.

Expanding education freedom changes the calculus. When every child can choose a school that matches their needs, schools of every type gain an incentive to earn attendance rather than take it for granted. The data already show that competition cuts absenteeism, raises safety perceptions, and boosts satisfaction.

The monopoly model has had decades to prove itself. The empty desks across the country are its final report card. 

In a 2021 AIER essay, “Liberating Yourself from Faucism,” I wrote: “The issue isn’t Anthony Fauci’s failings. The problem is Faucism, the fantastical belief that wise and beneficent experts should rule.”

Five years later, many remain committed Faucists — not just in support of Dr. Fauci, but in support of the failed idea that Americans should conform to expert rule.

John Stuart Mill would say Faucism took hold because, even before the pandemic, many Americans had already weakened the habits that make liberty possible: independent judgment, moral courage, and resistance to the “tyranny of the prevailing opinion.”

Dr. Scott Atlas, who, during the pandemic, served as a COVID advisor to President Trump, was one of those attacked by Fauci for holding a different view on pandemic policy. 

In a recent speech, Atlas argued Fauci didn’t create moral cowardice during the pandemic; he exposed the rot that was already there. Atlas pointed out, “Institutions that existed to protect freedom instead suspended it, and did so not only from the top down, but with the willing compliance — often the enthusiastic compliance — of free people themselves.”

Atlas spoke not to “relitigate grievances… but because the silence that followed the pandemic malfeasance, silence that is still here today, is itself the real danger.”

I share Atlas’s alarm because I see the same moral rot in the unwillingness of many institutions to confront their capture by illiberal forces.

The Tyranny of Conformity

Atlas’s warning is powerful because it points beyond the failures of one official or one policy. It raises the deeper question that Mill spent much of On Liberty answering: What happens to a people when they become accustomed to measuring truth and conscience by the opinion currently rewarded by respectable society?

Mill observed that the impulse to impose our opinions on others “is so energetically supported by some of the best and by some of the worst feelings incident to human nature, that it is hardly ever kept under restraint by anything but want of power.”

When we don’t have coercive power, we constrain ourselves, but that no more proves our character than claiming a person who never drives is a safe driver. We may feel certain about our opinions, but what do we do with those “certain” opinions when we have power over others?

When we think of tyranny, we think of the coercive power of government. But Mill warned that when society itself becomes the tyrant, its means “are not restricted to the acts which it may do by the hands of its political functionaries. Society can and does execute its own mandates.” When “penetrating more deeply into the details of life,” such “social tyranny” can be “more formidable than many kinds of political oppression” because “it leaves fewer means of escape.” This tyranny ends up “enslaving the soul itself.”

People stop developing and consulting their moral convictions and instead ask what opinion is required of them in their position. Mill writes that when going down this path of accommodation, “it does not occur to [us] to have any inclination, except for what is customary.” What happens next is that “the mind itself is bowed to the yoke,” until “by dint of not following [our] own nature, [we] have no nature to follow.”

There it is. If you have been wondering how anyone can still carry water for Dr. Fauci, Mill offers a penetrating answer: Prolonged conformity can leave people with little independent moral character to consult when it matters.

The Death of Independent Judgment

Mill is scathing. He argues that those who make no choices but follow “custom” lose their humanity: “The human faculties of perception, judgment, discriminative feeling, mental activity, and even moral preference, are exercised only in making a choice.”

Mill reminds us of what should be obvious but to many no longer is: “The mental and moral, like the muscular powers, are improved only by being used.”

What Faucism produces is not simply a nation of liars. It is arguably worse because it seems respectable: a nation of people who learn to put private judgment in one compartment and public speech in another.

People shaped by such a regime, Mill says, are “mere conformers to commonplace,” whose arguments on “great subjects are meant for their hearers” rather than drawn from their own convictions. Those who avoid that fate do so by shrinking their attention to small matters that are safe to discuss “without venturing into the region of principles.”

Consider the academic who says one thing in the hallway and another in the faculty meeting; the pediatrician who thought emergency vaccines and masks for children were a potential disaster but still posted the recommended language for public consumption; or the epidemiologist who had doubts about Fauci’s claims but stayed silent.

How to Recover Moral Courage

Liberation begins by recovering the human faculties weakened by conformity: judgment, conscience, and the courage to stand apart.

Don’t wait for others to go first. We increase our moral courage by recognizing our vital duty to humanity. Mill declares, “The mere example of non-conformity, the mere refusal to bend the knee to custom, is itself a service.”

Be eccentric. Be noticed. Mill argues, “Precisely because the tyranny of opinion is such as to make eccentricity a reproach, it is desirable, in order to break through that tyranny, that people should be eccentric.”

Standing against the cheering crowd requires engaging the mind rather than surrendering it, because, as Mill pointedly writes, “He who lets the world, or his own portion of it, choose his plan of life for him, has no need of any other faculty than the ape-like one of imitation.”

The Courage to Be Wrong

Dare to be gracefully wrong. Ultimately, the moral courage to stand alone is justified by the immense value of truth-seeking rather than the cheap pleasure of being “right.” I find Mill’s words inspirational:

To discover to the world something which deeply concerns it, and of which it was previously ignorant; to prove to it that it had been mistaken on some vital point of temporal or spiritual interest, is as important a service as a human being can render to his fellow-creatures.

You may have noticed how few people, perhaps including yourself, are capable of being gracefully “wrong.” Our ego equates being wrong with losing its unique identity. Few of us have taken to heart David Hume’s great lesson that, since our self-identity is ephemeral, there is rarely a reason to get defensive about our opinions. We can argue our position, when necessary, but trying to control others to get our way is dysfunctional behavior. Worse still is harming others to get our way.

Beyond Tribal Loyalty

Surrender tribal loyalties in favor of classical liberal principles. Mill recognized that human beings naturally seek the comfort of their sect or party. Those who stood by Dr. Fauci when he proclaimed that criticizing him was “criticizing science” did a disservice to public health. Doctors who approved “transgender body modification requests,” even when doing so went against “their best medical judgment,” irreparably harmed vulnerable teenagers. Prioritizing tribal conformity over humanity is demonstrated by those on the right who ignore antisemitism cloaked in nationalist or conspiratorial rhetoric, or those on the left who ignore it when cloaked in anti-colonial or anti-Zionist rhetoric.

Mill understood that liberty is not sustained merely by laws or institutions; it is sustained by men and women willing to choose moral responsibility over comfortable conformity.

Faucism did not begin with Fauci, and it will not end with him. It will end only when enough people refuse to let prevailing opinion do their thinking for them. The foundation of a free society and a fully human life rests on our commitment to the independent use of conscience.

The dispute between Treasury Secretary Scott Bessent and Stanley Druckenmiller is more important than a technical disagreement over Treasury buybacks. It is a disagreement about what financial markets are for. 

In one corner are the bond vigilantes: investors whose buying and selling impose a market price on fiscal profligacy, inflation risk, and deteriorating credibility. In the other are the bond bureaucrats: policymakers who increasingly regard adverse market prices as problems to be managed rather than information to be absorbed. Bessent increasingly appears to occupy the latter camp. Druckenmiller’s position is considerably more market-oriented: rising long-term yields are information. They reflect the collective assessment of millions of global investors confronting inflation, fiscal policy, debt issuance, growth expectations, and political risk. Suppressing that signal does not eliminate the underlying problem. It merely interferes with the price mechanism communicating it. 

The philosophical divide is increasingly clear: Druckenmiller sees markets as institutions through which participants express views and discover prices, while Bessent appears to regard the Treasury market, perhaps because it trades the government’s own securities, as another avenue through which government policy may legitimately be conducted.

The immediate controversy concerns Treasury’s decision to double the maximum size of long-duration bond buybacks from $2 billion to $4 billion after the 30-year yield reached its highest level in nearly two decades. Bessent has portrayed the intervention partly as a response to yields that he believes are inconsistent with economic fundamentals and has emphasized that Treasury has additional tools available. Druckenmiller sees something much more troubling. There was no failed auction, seizure in dealer balance sheets, or disorderly liquidation comparable with March 2020. Markets were functioning. Investors simply demanded higher yields. In Druckenmiller’s formulation, this was not liquidity management but price management.

But even the distinction between “functioning” and “dysfunctional” markets should be treated cautiously. Governments and central banks have spent decades expanding the circumstances under which extraordinary volatility, widening spreads, falling asset prices, or rapidly rising yields are characterized as market failures requiring official action. Yet violent price movements are not necessarily evidence that markets have ceased functioning. They may instead be markets functioning particularly efficiently, rapidly incorporating information that policymakers, issuers, or leveraged investors would rather not confront. Once officials assume the authority to decide which prices constitute legitimate price discovery and which require correction, markets cease to be entirely markets. Prices become partly political decisions.

That is the deeper problem with Bessent’s approach. If Treasury regards some yields as unacceptable, investors inevitably begin trying to determine where the government’s pain threshold lies. The bond bureaucrats may therefore wind up summoning the very bond vigilantes they hope to suppress. Every implied ceiling becomes something the market can test, and every intervention provides additional information about how much political discomfort a particular price is causing.

Bessent, of all people, should appreciate the danger. In 1992, he worked alongside Druckenmiller and George Soros when their fund attacked an unsustainable British exchange rate policy. Britain attempted to defend sterling’s position in the European Exchange Rate Mechanism despite economic fundamentals increasingly inconsistent with that price. The government effectively drew a line in the sand. Markets attacked it. On Black Wednesday, September 16, 1992, Britain capitulated and withdrew from the ERM; Soros’s fund reportedly made roughly $1 billion. Bessent himself played a role in analyzing the vulnerability that made the trade possible.

There is an uncomfortable lesson here. Announcing, explicitly or implicitly, that Washington intends to hunt short sellers or defend particular Treasury yields can produce precisely the behavior it is supposed to discourage. Government efforts to establish preferred financial prices create targets. If underlying economic conditions ultimately support the speculators rather than the government, officials must devote ever-greater resources to defending an increasingly artificial price or eventually retreat. As Druckenmiller put it, governments fighting fundamentals eventually lose; the question is how much they expend before admitting it. The irony is difficult to miss: a man who once helped exploit a government’s attempt to impose an artificial price on a financial market now risks helping Washington establish one of its own.

More fundamentally, blaming short sellers is a pathetic substitute for confronting why investors might be selling Treasuries in the first place. The United States has accumulated record nominal federal debt, continues running enormous annual deficits, and must continually place extraordinary quantities of new securities into global markets. The fiscal 2026 deficit had already reached roughly $1.8 trillion through its first ten months. Against issuance on that scale, manipulating the maturity structure or adding several billion dollars of long-bond buybacks is not fiscal reform. It is an attempt to manipulate the market response to the absence of fiscal reform.

That risks transforming the dollar and Treasury market into instruments of a kind of financial industrial policy, a policy trend being actively pursued to some extent or other. Instead of asking what economic and institutional conditions would make the United States the world’s most attractive destination for capital, policymakers begin asking how Treasury can engineer the prices, yields, maturity structure, exchange rates, and investor behavior Washington prefers. The inversion is profound. Markets are no longer permitted to discipline policy; policy is increasingly deployed to discipline markets.

Historically, America’s financial advantages required far less engineering. Dollar dominance and deep Treasury demand ultimately rested on an enormously productive economy, constitutionally protected property rights, deep and liquid capital markets, comparatively predictable institutions, and a government that, however imperfectly, was once substantially more reluctant to intervene in private economic decisions. Those characteristics made investors want dollars and Treasuries. The strength of the system was precisely that Washington did not have to compel, cajole, subsidize, threaten, or manipulate investors into wanting them.

That distinction matters far beyond the present controversy. A Treasury security should be attractive because investors trust the fiscal capacity and institutions of the country issuing it, not because officials stand ready to punish people who sell it or manipulate its yield when markets deliver an unwelcome verdict. Likewise, the dollar should dominate because the economy behind it is productive, property rights are secure, capital can move freely, contracts are respected, and political interference with markets is limited. Once policymakers begin treating demand for dollars and Treasuries as something that must itself be manufactured, they are treating symptoms while progressively weakening the institutional foundations that created that demand.

Druckenmiller’s prescription is therefore both simpler and more radical: let the bond market speak. The bond vigilantes are not the disease. They are participants in a price-discovery process conveying information that political institutions have powerful incentives to ignore. Rising yields impose a visible price on borrowing, inflation risk, fiscal deterioration, and declining confidence. If long-term yields are flashing a warning about deficits, debt, inflation, or institutional credibility, policymakers should not send in the bond bureaucrats to silence the alarm. They should remove the policies that set it off and allow markets to determine the price.

On July 11, Congress passed the Twenty-First Century ROAD to Housing Act, a rare display of bipartisan action aimed at addressing affordability concerns. An amendment incorporated into the bill, however, undercut that effort by blaming institutional investors, feeding Washington’s near-insatiable appetite for cheap villains and easy fixes to multifaceted challenges.  

Homeownership may be the ultimate signifier of the American Dream: private property serving as both shelter and investment. But that dream may be out of reach for a growing number of young people. The central explanation, an undersupply of roughly 10 million homes, is statistically correct and yet seemingly emotionally unsatisfying. Stringent building regulations artificially increase the cost of construction or outright ban new developments. A shortage of homes causes stronger competition for the existing units. This increased buyer competition is reflected in the Home Price to Income Ratio which in recent months has surpassed the levels recorded during the peak of the housing bubble.  

The 21st Century ROAD to Housing Act eases these tight restrictions on the supply of housing by streamlining permitting processes and providing public funds to convert underutilized commercial buildings. But the bill also reflects economically ill-informed idealism: a provision restricts institutional investors from directly or indirectly owning single-family homes. “Homes are for people, not corporations,” reads the catchy title of Section 1001.   

Blaming institutional investors for escalating housing costs is ostensibly coherent. If investors are gobbling up the alarming number of units politicians often imply, how can the average family compete with Blackstone? But such claims are not just statistically unfounded; they are logically inconsistent.  

The American Community Survey found that only 0.5 percent of all single-family homes are owned by large institutional investors (companies owning more than 1,000 homes). This market share does not give investors, let alone any one firm, the power to increase average prices substantially. But even if it did, it is worth asking: what are investors doing with all of these homes? 

Institutional investors are not capable of inhabiting a house; purchasing a home is not the same as occupying it. Institutional investors renovate then either sell or rent the units they own, to the same American families with whom they compete at closing. The Urban Institute found that, contrary to popular belief, institutional investors increase the supply of housing and expand affordability through build-to-rent projects that reduce the cost of development. 

Later amendments to the Senate bill narrowed the scope of the ban to allow for build-to-rent and other kinds of exempted purchases, including grandfathering in all the stock institutional investors already owned. With these significant carveouts, the ban symbolically attacked institutional investors without expanding the number of listings available to American families.

But broadening the supply of housing is politically feasible. In November, Massachusetts residents will vote on a “Legalize Starter Homes” proposal to reduce the onerous building regulations that make their state one of the hardest places to buy a house. Currently, the state government delegates most of the zoning and permitting power to its more than 300 municipalities. The land-use regulations created by these local governments in turn reflect the interests of a few established and involved homeowners. The National Zoning Atlas reported that the state’s average minimum lot size for single-family homes is over 40,000 square feet, one of the highest in the nation. Such regulations can add 20 percent to home prices, making it impossible to build starter homes and strongly tipping the scales in favor of established homeowners and against those entering the housing market. The ballot measure would cap the minimum at 5,000 square feet statewide, which advocates estimate will increase home building by thousands of units each year. 

For incumbent owners, this increased density evokes fear of plummeting home values and construction chaos. With seemingly innocuous ideals like neighborhood aesthetic and historical preservation, these “not in my backyard” naysayers often block the “undesirable” development that young buyers desperately need. While local planning is valuable in that it responds to the needs of constituencies, the unintended consequence is often freezing whole communities in amber and closing the urban frontier for those unremittingly pursuing the American dream.

Institutional investors can act as a bridge between housing units in relative disrepair and prospective future buyers. Institutional investors can better afford the upfront costs of repairs and use economies of scale to renovate more efficiently. One plumber is hired to work on ten properties, and the tiling team follows him, reducing transaction costs. Disincentivizing this kind of investment could diminish the quality of the housing stock and exacerbate unaffordability rather than give American families a competitive edge. 

The appearance that institutional investors contribute to higher prices may be a classic case of correlation and not causation. Institutional investors own a greater percentage of single-family rental units in areas with a higher cost of living, including cities like Atlanta (28.6 percent) and Charlotte (20 percent). But this relationship only shows that investors are attracted to popular and growing areas. Jerusalem Demsas said it best: “Investors are not driving unaffordability; they are responding to it.” 

Compared to the small local landlord, large investors are more likely to own newer and larger properties and operate within higher-income census tracts. The prevalence of mega-operators in relatively wealthier areas may signal that these institutional investors are not revamping deteriorated houses but rather improving the quality of the housing stock by building newer units. Moreover, these investors aren’t simply building luxury condos in strictly wealthy areas. The Urban Institute reported that, in Atlanta, the median tract income for mega operators was $6,512 more than for small rental investors. This phenomenon shows that to the extent that large institutional investors have an effect on single-family home prices, this effect would be concentrated in units that are presumably not starter homes. 

Limiting the presence of institutional investors in the housing market isn’t likely to expand homeownership for first-time buyers. And that misdirection, along with the wasted effort and political will in the housing bill, is not without cost. As Demsas wrote for The Atlantic, institutional investors serve as a scapegoat that exempts politicians from grappling with the real drivers of high home prices — institutional constraints that inhibit residential development. Housing narratives and bills that don’t grapple with these constraints will never touch the problem. 

Policies like “Legalize Starter Homes” flatly name the real source of high prices. For all its fable-like allure, blaming institutional investors distracts the national conversation from the real drivers of high home prices. The goal of federal and state action on housing should be to unbind the complex mesh of local interests and restrictions that keep neighborhoods from becoming dynamic environments capable of absorbing new families. Penalizing institutional investors may be emotionally satisfying, but it cannot build a single home. In this economy of attention, it is important to focus on what is really exacerbating the housing crisis. Until policymakers confront the local rules that keep homes scarce, affordable housing will remain a flickering chimera, further receding into the distance.

Many years ago I came into the habit of offering (and taking) bets on absolutely everything. Conversationally, it could be anything from factual and statistical statements to principles or author names, often when I thought I knew something better than my conversation partner.

The point was not the money. It was what happened after losing a few bets: I learned that I often overestimated the things I so confidently knew. Sometimes, convictions held too strongly will cost me. 

That is a useful corrective in a time when everyone seems to know everything, or will blindly defer to what a handy LLM produces. From fact-checking to fake news, mythbusting to AI-generated slop, it is getting progressively harder to know what we know. Everyone has an opinion; fewer people have an incentive to find out whether they are right.

Prediction markets have put this ethos and emphasis back on the menu. They’re “civilization’s way of knowing what it knows,” said Eliezer Yudkowsky hyperbolically at a who’s who gathering of the prediction market world in Berkeley, California, in June. That’s a pretty tidy, idealistic summary of largely unregulated sports gambling.

Participating in prediction markets forces people to put a price on their beliefs. And sometimes that is enormously valuable.

Words are Cheap

Economics at its very essential, even metaphysical, core is about human actions — entrepreneurially making choices for an uncertain future.

We act even though we do not know the future. Entrepreneurs raise and deploy capital today in the hope of satisfying customers tomorrow. Consumers make purchases based on perceived future circumstances. Every commercial transaction is, in some sense, a wager on an uncertain future.

Doing things, then, particularly as it pertains to commercial transactions, is the subject matter of the discipline. At high enough a level, it’s what financial markets do, too; investors buy securities in hopes of future cash flow. When they guess correctly and don’t overpay for the assets, they profit. When they’re wrong, the (short) seller benefits. Dynamically, asset prices are our collective, capital-backed, best guesses about the future state of the world.

Prediction markets likewise leverage this money-tested, skin-in-the-game, best-guess model for the future. 

Prediction market contracts are zero-sum: one trader’s gain is another trader’s loss, with some slippage for trading fees and the platform itself. So why should society care? Why should we regard a market where two people bet on whether the Fed will cut rates, whether a hurricane will hit Florida, or whether Trump will say “tariff” in a speech as anything other than gambling? How could zero-sum contracts possibly enrich society?

Because relevant, correct information is valuable. And as it is created by these priced transactions, it spills over to the rest of us, free of charge.

Knowledge Creation Is Valuable

The social value of a marketplace isn’t limited to the assets changing hands and the profits of (a few) participants. Prices transmit information, coordinate expectations, tell others whether to deploy more capital or less on a certain idea, whether to expand production or try something else. Prices tell people something about what other market participants know, believe, fear, or expect.

One trading party wins, another loses, but we understand that the system as a whole — asset prices, relocation of capital, a deep and liquid market for issuing securities — is positive sum for society. The spillover knowledge generated by a prediction market contract or an oil price option exploding in price has positive meaning for market actors everywhere. Information is valuable; knowing what it means, probabilistically speaking, for various states of the uncertain future is precisely what financial markets are here to do.

Friedrich Hayek’s famous example in “The Use of Knowledge in Society,” revolved around the market for tin; economics textbooks usually use orange crops and Florida. Prices for goods convey what’s going on. Asset prices do, too. 

An oil producer gains valuable information by seeing futures six months out move in price. As a consumer, seeing those moves helps me estimate costs for a tank of gas or airfares, and to judge whether or not to take a certain trip. Traditional financial markets cover some of that, no problem. But the variety of valuable information in a future state isn’t limited by what a regulated exchange or traditional market maker is willing to support. Prediction markets work on the same basic principle, with a much wider definition of what’s potentially tradable.

Contracts traded on prediction markets, however quirky and frivolous, have that same element to them. But just because Kalshi and Polymarket, the two most well-known platforms, are in this sense mostly regulatory arbitrage for sports gambling, it doesn’t mean nothing important is happening underneath all this apparently frivolous speculation.

“Insider” Information and Externalities

Another line of objections to prediction markets is that they make insider trading easier. Prediction markets are riddled with insider trading, say the casual and morally indignant critic. They’re narrowly correct about that claim.

Last month a teleprompter operator working for Trump reportedly made almost $100,000 on Kalshi via mention markets. Through his work, he knew in advance what words would be in a speech, and bet accordingly.

While this feels wrong on some fundamental level — insider enrichment by trading on specific knowledge — it also illustrates that the existing information is valuable. As one virtue of prediction markets is the spillover information it conveys to everybody else, having accurate inputs reflected in public asset prices earlier should be a good thing.

The Trump teleprompter story is just one story among many indicating that yes, prediction markets are rife with insiders profiting off confidential information.

We can think of it as growing pains for a future industry, or as a whistleblower bounty. One purpose of prediction markets, the more anonymous and unregulated they are, is to financially incentivize insiders to disclose important information to the world. 

And their existence has positive externalities for everybody else. 

The point is that nobody is obliged to bet; traders taking the other side of that bet (at least the more sophisticated ones) are well aware of the possibilities for insider trading and asymmetric information. Also, the information still leaks to the rest of the nontrading public: Because somebody else is willing to put their funds at risk, I can gain some information by seeing what the smart money thinks.

Rewarding the occasional insider is a tolerable price for society to gain access to, and spread more widely, information that benefits us all.

If the price of contracts about whether a leader will be toppled or Israel will launch missiles against Iran suddenly shoots up, lots of people directly or indirectly affected by such events receive vital information that something is coming. Even in the pretty horrid and extreme examples of forest fires, military invasions, bombings, and assassination markets, information is valuable. Large, sudden moves in the odds of these events could, at best, give advance warning and time to prevent disasters, and at least, provide a financial trail for law enforcement to follow later. 

Being Confidently Wrong Should Cost More

In an AI age of infinite generation but limited attention, the economic value of information also explains why I don’t find the proliferation of increasingly bizarre prediction markets quite as troubling as their critics do.

Take Trump’s social media posts, access to which is now sold opportunistically to some Wall Street firms in advance. There is obvious value in knowing what the president has said before everyone else does. News organizations pay for speed (Reuters, Bloomberg); traders pay for speed (high-frequency trading). As outlined popularly in Michael Lewis’ book Flash Boys, the race to place computers closer to a financial exchange’s main servers, or indeed running fiber-optic cables between New York and Chicago for trading information microseconds faster, seems largely wasteful to society and closely approximates economic rent to insiders. 

If it’s critical enough information to have market value, the earlier some semblance of it can exist in the public domain — clearly, milliseconds count — the better off is humanity. 

If you think Truth Social selling early access to posts reeks of pay-for-play and insider enrichment, you’ve already conceded the point that valuable information is otherwise kept away from people and the market, mistakenly leading people to transact on insufficient information. A widespread financial market including contracts on all manner of things (prediction markets) decentralizes and erodes the scarcity value of such advance information and distributes it — meritocratically, we might say — to everyone with skill, devotion, and patience to find it (and profit off it).

Plenty of ideologically motivated commentators in the noisy landscape that is media appearances and opinion pages — plus economists, journalists, think tanks, political strategists, and certainly central bankers — never pay a price for being wrong. They miss currency inflation, recessions, elections, wars, AI timelines, housing crashes, or the value of bitcoin, yet return next week with another similarly confident forecast. Reality rarely seems to discipline them toward humility. Prediction markets can help here, too. 

When someone predicts that housing markets will crash this winter, or proclaims there’ll be a government shutdown by October 1, we shouldn’t be afraid to ask: “What are you willing to bet?”

Prices resumed rising in July, and this time energy had nothing to do with it.

The Personal Consumption Expenditures Price Index (PCEPI), the Federal Reserve’s preferred measure of inflation, rose 0.2 percent in July, according to new data from the Bureau of Economic Analysis (BEA), reversing the 0.1 percent decline recorded in June. The index has risen at an annualized rate of 4.1 percent over the last six months and is 3.7 percent higher than a year ago — unchanged from June.

Core PCEPI, which excludes volatile food and energy prices, increased 0.2 percent in July. It has risen at an annualized rate of 3.5 percent over the last six months and is 3.3 percent higher than a year ago, also unchanged from June.

June’s decline was an energy story. Energy prices surged this spring after conflict in the Middle East disrupted oil shipments, then fell sharply as supplies recovered, briefly pulling the headline index negative. In July, energy prices fell again, yet the headline index rose anyway. Services prices increased 0.3 percent. When energy stops boosting the headline number, what remains is the underlying trend.

Swings in energy prices can make headline inflation volatile, especially from month to month, because energy is included directly in the index. These swings primarily change the price of energy relative to other goods and services; they do not necessarily signal a broad change in the rate at which prices are rising. Moreover, they often reflect supply conditions outside monetary policy’s control. An energy-driven rise or fall in headline inflation therefore does not, by itself, tell us whether monetary policy is on the right track. The more relevant question is whether total spending is growing at a rate consistent with price stability.

July’s own numbers hint at the answer. Consumers spent 0.2 percent more last month but bought no more than in June: adjusted for inflation, spending was flat. The quarterly data say the same. Nominal spending, the dollar value of all final goods and services produced in the economy, grew at an annualized rate of 8.0 percent in the second quarter, according to the revised estimate the Bureau released with the inflation data. From the second quarter of 2025 through the second quarter of 2026, nominal spending rose by 6.6 percent. By comparison, nominal spending grew at an average annual rate of roughly 4.1 percent from 2015 through 2019.

Nominal spending cannot consistently outpace the economy’s productive capacity without ultimately leading to higher inflation. If real output grows around 2.5 percent per year, then nominal spending cannot rise by more than roughly 4.5 percent if the Fed hopes to hit its 2 percent inflation target. Growth of 6.6 percent leaves a gap of about two percentage points, meaning that monetary policy is currently too loose.

There has been progress. Over the last six months, headline inflation has fallen from 5.4 percent in May to 4.1 percent today, and the core measure has eased as well. Since monthly figures fluctuate, and monetary policy affects the economy with a lag, the Fed should not react mechanically to a single report. Nonetheless, inflation is currently double the Fed’s target, and with nominal spending growing at nearly 7 percent, it won’t come back down without tighter monetary policy.

At its July meeting, the committee held its target range for the federal funds rate at 3.5 to 3.75 percent, with three members dissenting in favor of a quarter-point increase. The minutes, released last week, reveal how contingent that hold was: “Many participants assessed that policy tightening would likely be necessary if inflation did not decline.” Participants also judged that inflation risks “were skewed to the upside,” meaning inflation was more likely to exceed their forecast than to fall below it. Yesterday’s report from the BEA suggests that the Fed should raise its policy rate at its meeting next month, although the CME Group’s FedWatch tool indicates that market participants still expect the Fed to hold steady.

One month of rising prices no more dooms the inflation fight than one month of falling prices ended it. However, the pattern suggests that the work to bring inflation back to target is not done: headline inflation remains well above 2 percent, core inflation remains elevated, and nominal spending continues to grow too rapidly. The inflation fight will not be over until nominal spending settles onto a path consistent with the economy’s productive capacity.

September’s meeting will show whether the committee believes its own minutes.

Major news outlets and publications have devoted significant attention to the rise of “post-liberalism,” a political and ideological movement in defiance of classical liberalism.  Its central claim — that individual rights and free markets have degraded social cohesion and damaged traditional moral order — is increasingly popular. Even Vice President JD Vance is calling himself “post-liberal.” 

A crucial aim for postliberalism is to reorient politics toward the “common good.” But that formulation conceals the movement’s central problem: what constitutes the common good, who decides, and what happens when officials’ views of “common good” conflict with individual liberty?

Patrick Deneen — perhaps the most prominent postliberal thinker — told The New York Times that postliberalism “seeks to promote, especially, an idea of the economy and markets that serve ordinary people…broadly called … the common good.” Offering a jurisprudential vision for postliberalism, Adrian Vermeule of Harvard argues courts and other institutional actors should interpret the Constitution, statutes, and administrative decrees in ways that advance the “common good.”

Postliberals rarely firmly declare what the common good means. Vermeule does cite the ragion di stato (“reason of the state”) tradition, which describes the legitimate ends of government: justice, peace, and abundance. But that explains little. For one, these precepts of the classical tradition are so general and abstract that in practice it would be possible to justify almost any positive law. Even more difficult for the postliberals to address, however, is that the American constitutional order rejected ragion di stato, instead charging government with promoting “life, liberty, and the pursuit of happiness,” with “property” also protected by due process in the Bill of Rights. 

That tension leaves postliberals with two approaches: argue that the American founding’s liberal nature means it was inherently flawed, or reinterpret the Founding to claim the founders did not value individual liberty as a primary component of the common good.

Criticizing the Founding

Many take the first option. Deneen’s Regime Change: Towards a Postliberal Future offers a paradigmatic example. In that work, he writes:

The American constitutional order… represented belief in a ‘new science of politics,’ specifically, a system in which a designated elite would govern with an aim to advancing an ideal of progress while rendering tractable any recalcitrant popular resistance.

This criticism of the founding closely mirrors Charles Beard’s famously progressive reading of the Founding in his book An Economic Interpretation of the Constitution of the United States. There, Beard argues that the government was “so constructed as to break the force of majority rule and prevent invasions of the property rights of minorities.” Deneen writes similarly in Regime Change that “the constitutional design was originally created to allow the ascendance of an economic elite.”

On this point, Deneen arrives surprisingly close to Beard’s progressive interpretation of the Constitution: both portray its institutional restraints as mechanisms through which elites were empowered to suppress popular resistance to the resulting unequal economic order.

But Deneen’s Beardian account mistakes the refinement of popular judgment for its suppression. In the Federalist Papers, Publius grounded the Constitution’s authority in republican government and ultimately in the people. Representation, bicameralism, separated powers, and federalism were intended to transform immediate political passions into the deliberate sense of the community, not to silence popular opposition for the benefit of an economic elite. Deneen also reduces the Declaration to deracinated individualism, while largely ignoring its grounding of equality and liberty in natural law, divine authority, and duties that precede government. His account substitutes a class-based caricature for serious engagement with the founders’ conception of ordered liberty. Deneen acknowledges the liberal character of the founding and rejects it openly.

Mischaracterizing the Founding

Vermeule takes the second approach: denying the centrality of individual liberty to the founders’ vision of the common good, while attempting to conscript its institutions into the postliberal project. But the common good is not so determinate, and few set out to advance the “common bad.” Liberals, libertarians, progressives, and conservatives all identify goods they regard as shared — peace, prosperity, justice, health, security, and ordered liberty. The dispute occurs over how those goods should be ranked and by what means (and what degree of coercion) government may legitimately pursue them. Vermeule largely evades this question. As the law professor Lawrence Solum observes, although Vermeule says much about the common good, he says very little about its substantive component, “happiness or flourishing.” This vagueness allows Vermeule to present a preferred bundle of substantive outcomes as if it followed from a neutral classical formula.

More fundamentally, his account treats liberty as a rival to the common good rather than one of its constitutive elements. As the professor James Stoner observes, liberty “antedates the rise of liberalism and is part of the common good, not its opponent.” In this framework, even liberty need not always prevail — the common-law and founding traditions recognized police powers, moral regulation, and public necessity. But they also required government to justify intrusions on liberty through established law, enumerated powers, due process, and popular consent. Vermeule reverses that presumption, subordinating individual rights to officials’ judgments about communal flourishing. 

Ordered Liberty Is a Common Good

For the founders, government did not define human flourishing and then distribute rights accordingly. The Declaration identified life, liberty, and the pursuit of happiness as prepolitical rights and made their protection the purpose of legitimate government, while grounding governmental power in popular consent. The Constitution translated that principle into limited and enumerated powers, federalism, separated institutions, due process, and express protections for individual liberty. These arrangements did not reduce the common good to atomistic autonomy. They assumed that ordered liberty would permit families, churches, associations, markets, and political communities to pursue genuine human goods without requiring officials to impose a single comprehensive account of flourishing. 

Liberty was not seen as one private good competing with a collective good, but an essential part of institutional arrangements that allow people with vastly different conceptions of “flourishing” to live in tolerance and cooperation. Government could, and did, preserve order, punish wrongdoing, provide for the common defense, and promote the general welfare. But the constitutional order was an attempt to constrain governments and officials from treating an invocation of public good as sufficient constitutional warrant for coercive action. 

A pluralistic society needs a common institutional framework precisely because its members will disagree about ultimate ends. The rule of law, ordered liberty, private property, free association, and other constitutional restraints explicitly allow people to pursue many genuine “goods” without first requiring political agreement about the highest form of human flourishing. 

Liberal constitutionalism embodies a conception of the common good — one centered on ordered liberty, peaceful cooperation, plural institutions, and limits on coercive power. Postliberalism attempts to reverse that relationship, making liberty contingent on officials’ judgments about what is conducive to flourishing. To do so, postliberals must either reject the American constitutional tradition (Deneen) or rewrite it beyond recognition (Vermeule). 

The common good postliberals prescribe — in which individual liberty is merely a revocable concession from the state — is not the common good the founders sought to secure.

Hours after the trade negotiations collapsed and the United States imposed a 50-percent tariff on roughly $20 billion worth of Canadian goods on August 22, Canada’s prime minister, Mark Carney, stood before reporters and told them what lesson Canada had drawn from 18 months of dealing with Washington. In his words, Canada understood that America “would put a series of tariffs on its closest allies and use economic integration as a weapon. That its signature was written in pencil.” 

Canada will match US tariffs dollar for dollar, starting on September 8.

For a man who delivered a rousing speech at Davos calling for the “middle powers” to stand up to “hegemons” and be “at the table,” not “on the menu,” the “written in pencil” line might just be the most powerful line in his tenure as prime minister to date. Tariff rates can be haggled over and retaliation can be unwound, but a signature written in pencil means that there is no real reason for anyone to negotiate, because there is no commitment. Canada did not arrive at this position quickly. It got there the hard way, by giving Washington what it asked for three times and watching a trade deal spearheaded by the very same man evaporate and be replaced by new tariffs.

Start with fentanyl, the original stated justification for tariffs on Canada. Despite the fact that less than one percent of the fentanyl seized at American borders comes from the northern border, Canadian officials took the complaint seriously. They implemented a $1.3 billion border security plan, appointed a fentanyl czar, and designated drug cartels as terrorist organizations. In response, Washington paused tariffs in February 2025 only to impose them anyway in March. The border was hardened, but the tariffs still came.

In September of 2025, Canada unilaterally dropped its retaliatory tariffs on USMCA-compliant American goods, removing these countermeasures as a gesture of good faith. Shortly thereafter, the US imposed tariffs on Canadian softwood lumber and other wood products such as upholstered furniture, kitchen cabinets, and vanities. In these most recent talks, Canada extended a second olive branch, offering to drop their remaining steel, aluminum, and automotive retaliatory tariffs if the US would reciprocate.

Last October, Ontario ran a television commercial during the baseball World Series in which Ronald Reagan, in his own voice from his famous 1987 radio address, explained why tariffs cost American jobs. The president called the ad “FAKE” and terminated trade talks over it. Ontario then pulled the ad to let negotiations resume, complying with the president’s demands, but was then met with an extra 10-percent tariff — all for pointing out that President Reagan, who at the time Trump had been comparing himself to, was against the use of tariffs.

So really, what Canadian trade officials learned over the last 18 months is that if they concede, they get a tariff. If they offer an olive branch, they get a tariff. And if they point out the hypocrisy, try to appeal to the American people, and still pull the ad when feathers get ruffled, they get tariffs. On top of all of that, they were then accused of lax enforcement against forced labor practices, making them subject to additional Section 301 tariffs. And now, they face 50 percent tariffs on a wide range of products. At this point, no one should be surprised that US trade policy has pushed away one of our closest allies.

Trade agreements are valuable not just because of the rates they set over certain products. They are valuable precisely because they are binding commitments. If a signature can be undone whenever one party imagines a new slight, then the value of any agreement plummets. Certainty is exactly what trade agreements like the USMCA are supposed to provide. But, as Canada, Mexico, and the rest of the world has learned, even a deal that President Trump himself negotiated and heralded as “the fairest, most balanced, and beneficial trade agreement we have ever signed into law. It’s the best agreement we’ve ever made,” was signed in pencil.

Canada is our closest ally and one of our largest trading partners. Supply chains between the US and Canada — especially in Michigan, a state that the president has visited several times and promised to revitalize — are so tight that a car part can cross the border seven times before it becomes a car. If any country could reasonably expect its own concessions to matter and its agreements to hold, it was Canada.

Every government now negotiating with Washington, including Tokyo, Brussels, New Delhi, and Beijing, has seen these developments. If a full trade agreement passed by Congress and signed by this president couldn’t protect Canada from tariffs, the “frameworks of a deal” that other countries around the world have are even less secure.

Tariffs that can be predicted can be survived, priced in, and in some cases, engineered around. Unpredictable tariffs and trade agreements that expire at whim cannot be. Carney’s point about America’s signature being written in pencil is a powerful one. Canada has stopped negotiating for promises and started building new trade deals to work around us. And the rest of the world is increasingly following.

When my recent flight was canceled unexpectedly, Delta Air Lines, its operator, gave no reason for the cancellation, only, “Sorry that your flight was canceled.” The aftermath of my travel disruption offers a hands-on lesson in sound economic thinking — if we choose to see it. 

The airline industry is highly regulated. Laws and regulations affect practically everything they do. Those regulations create high barriers to entry, meaning incumbents are largely protected from the competition of innovative entrepreneurs. Without that pressure, airlines can (and do) impose rules that do not seem to serve their customers. 

Many of those rules limit or minimize the airline’s expenses but do not provide any value to customers. The rules are well aligned with what is legally required of the airlines. Airlines are required by law to compensate travelers for delays or cancellations within the airlines’ control, but the mandate exempts delays due to weather. Millions of passengers each year are left stranded this way, and receive neither a meal nor a place to stay. Coincidentally, this had happened to me earlier the same week, after a thunderstorm forced me to spend the night in the Atlanta airport (Delta generously provided blankets, at least).

After canceling my flight, Delta offered me several options in the airline’s app: a full refund, a five-year e-credit with the airline, or rebooking on a later flight. For the airline’s bookkeeping, these are essentially equal options. But this is not how customers see it.

From an economic perspective, this makes complete sense: no voluntary trade is an exchange of equally valued options. The very reason my fellow travelers and I chose to pay the fare to fly was that each of us valued flying (getting to the destination) more than we valued the fare paid. So it should be no surprise that flying (arriving) would still be of more value than the money we chose to exchange for a ticket, unless circumstances have changed due to the delay. The 20 or more passengers choosing to stand by for the next flight strongly suggest that this is so. Their ranking of flying, even with the delay, was still higher than the amount paid, and so, more than a full refund.

In other words, the options offered as solutions to the canceled flight are not equal to the airline’s customers. 

Firms are in economics understood as value-neutral, because for them a dollar is a dollar. As profit maximizers, it does not matter to them how the dollar is earned or from whom. But for customers, who give up dollars for a service, that decision is based only in terms of the opportunity cost: whether the amount can buy more value elsewhere. Theirs is a subjective value ranking of available alternatives.

Businesses should not expect that offering to pay the customer back in full makes the customer whole. Of course it doesn’t: customers chose to pay for the product or service because they considered it to be of higher value. The value of what they bought, or at least the value they anticipated receiving and that motivated the purchase, is higher not only than the dollar amount, but also than whatever alternative goods and services that sum could have bought instead. 

Getting the money back, then, is definitionally of lower value than getting what they paid for. Certainly, it is a nice gesture to return the customer to their position before the exchange, but that is a loss in the customer’s eyes. Business managers and entrepreneurs should not be surprised if their customers, when paid back in full, might still be disappointed. They have ended up with less value than they expected from the exchange — in their own terms, albeit not in dollar amounts.

A canceled flight is, to travelers, a clear loss. The money back puts them back at square one, without the expected value. Even if the airline manages to find seats on a later flight, the delay is still a loss of the anticipated value.

Decisions about refund procedures are often made in C-suites, by MBAs armed with Excel spreadsheets, far removed from the point of contact with the customer. Their proper goal is to maximize profits for the business, but this can become risky. From that distance, it is easy to forget that behind every canceled flight are broken promises and people waiting in line, waiting overnight, trying (or failing) to get where they are going. Flesh-and-blood customers act on personal valuations of Delta’s offerings. That valuation can and does change over time, across situations, and in response to how the business operates.

Failure to recognize that customers choose to become customers because of the value they expect rather than the product itself is a competitive disadvantage for any firm. And it is a mistake that can be exploited by innovative entrepreneurs and new entrants who find better ways of serving consumers. But highly regulated businesses are insulated from competition, and major airlines are more so every day. Competitive pressure to satisfy customers is weakened, the product becomes standardized, and profit comes down to cost-cutting. And as a result, customer value is not a top priority in earning profits.

This failure to recognize that customers pay for something they personally value, which is often not the product per se, is essentially a failure to understand the role that the business plays in the economy. Travelers rarely value only getting to the destination, but place value in how, when, by what means, with what comforts, and so on. And they are traveling for a reason. Canceling a flight may make economic sense for the airline, looking at only money in and money out, but it can undo the value that customers originally saw and that motivated them to purchase the ticket. A full refund, or even being rebooked on a later flight, can still leave the customer at a loss. The result is customer disappointment and damage to the firm’s reputation.

In the open market, firms are kept in check by the threat of entrepreneurs who better serve consumers. But not so in regulated markets, which protect incumbents from competition — and therefore also from the need to reliably serve and satisfy customers. Firms in such industries can easily turn into mere production units of standardized products, and focus shifts to cutting costs instead of creating value.