Markets have long been accused of lacking morality. On February 10, the Vatican decided to supply one. The Institute for the Works of Religion (IOR), commonly known as the Vatican Bank, partnered with Morningstar to launch two stock market indices designed to guide Catholic investors. The Morningstar IOR US Catholic Principles Index and the Morningstar IOR Eurozone Catholic Principles Index are “built following market best practices and in accordance with Catholic ethical criteria, and intended to serve as a global reference point for Catholic investing.” 

According to reporting by Business Insider, the US index is heavily anchored, with more than twenty percent of the portfolio concentrated in firms such as Meta, Apple, Tesla and Alphabet. The European index remains more geographically and sectorally diverse, with holdings including ASML, Santander, Hermes and Deutsche Telekom. 

The move marks a notable shift in tone from just over a decade earlier. In 2014 Pope Francis openly criticized financial markets and speculation. “It is increasingly intolerable that financial markets are shaping the destiny of peoples rather than serving their needs, or that the few derive immense wealth from financial speculation while the many are deeply burdened by the consequences.” 

The Vatican is not the first religious institution to enter the world of faith-based investing. As MoneyWeek notes, smaller religiously oriented products already exist, including the FIS Christian Stock Fund ETF (ticker: PRAY) and Global X’s S&P 500 Christian Values ETF (ticker: CATH). Still, it is striking to see one of the world’s oldest moral authorities step directly into modern capital markets, no longer condemning them from the sidelines, but attempting to navigate them.

This raises a more basic question: what is the stock market actually for? However noble the intention, the organizing principle of equity markets is profit, pricing risk, aggregating information, and allocating capital accordingly.

That uncomfortable truth was captured in the 1980s by Gordon Gekko in the film Wall Street. “Greed, for lack of a better word, is good. Greed is right. Greed works.” The sentiment was never seen as a sermon on virtue. It was a provocation about incentives, the truth about how markets discipline behavior not through moral judgment, but through the signals of profit and loss.

The most prominent episode in which the Catholic Church became directly entangled with financial mechanisms occurred during the construction of St. Peter’s Basilica, which was financed in part through the sale of indulgences in the fifteenth and sixteenth centuries. That episode blurred moral authority and monetary exchange in the service of a concrete institutional project, with consequences that extended well beyond Rome. Scripture itself draws a clear boundary between spiritual and worldly domains with the passage Matthew 22:21: “Render unto Caesar the things that are Caesar’s, and unto God the things that are God’s.” 

Ironically, the Vatican Bank itself operates for profit. In 2024, it reported net income of €32 million (about $37.6 million), up seven percent from the prior year. Alongside this commercial reality, IOR’s investment policy for the new indices is explicitly moralized. The framework prioritizes the sanctity and respect for human life, environmental protection, and combating addictions, supplemented by an exclusion grid derived from social responsibility and sustainability criteria aligned with the United Nations Global Compact.

In practice, this approach closely mirrors Environmental, Social, and Governance investing. ESG frameworks place pressure on firms, and now religious institutions, to become vehicles for social objectives rather than providers of goods and services. While such an approach may appear more fitting for a moral authority than for a corporation, it still falls short of the profit-driven incentives that underpin capitalism’s effectiveness. Historically, broad-based capitalist growth has done more to improve human welfare than ESG programs have demonstrably achieved. As AIER contributor Russell Greene notes, “When it comes to results, the economic enlightenment enabled 128,000 individuals to escape abject poverty every single day. In contrast, it’s not clear if the ESG movement has accomplished anything of note.” 

Simple market participation such as investing in a broad benchmark like the S&P 500, with its long record and transparent construction, would have sufficed. For example, placing $1,000 into the S&P 500 twenty years ago would have quadrupled in value, “The index has grown by 448.7% since 2005, when you made your initial investment. So, your original $1,000 would now be worth $4,487, minus inflation adjustments.”

Writing in the same era that Gordon Gekko entered popular culture, economist Milton Friedman argued that the social responsibility of business is to increase its profits, not because profit is virtuous, but because it is accountable. 

“Only people have responsibilities,” Friedman wrote. “A corporation is an artificial person and in this sense may have artificial responsibilities, but ‘business’ as a whole cannot be said to have responsibilities, even in this vague sense.”

Given that the IOR operates for profit and has now entered public capital markets, the Vatican Bank would do well to remember that markets discipline behavior through loss and reward, not moral proclamation. Investors may act on conscience, but when markets are asked to serve moral ends, whether from the UN or the Vatican, price signals are replaced with certification and branding. 

Profit is not a moral failure; pretending it can be replaced is. Markets coordinate human activity through incentives, not intentions. Asking them to do otherwise misunderstands both economics and morality.

New York City’s new mayor Zohran Mamdani made housing affordability a big part of his campaign. On his first day in office, he signed three executive orders related to housing policy, and his subsequent housing ideas have mostly involved more regulation or more taxpayer spending. Mamdani may mean well, but government cannot fix the Big Apple’s housing problem.

Mamdani’s most recent setback is related to the City Fighting Homelessness and Eviction Prevention Supplement program, or CityFHEPS. Roughly 60,000 households participate in the voucher program, and its costs have exploded in recent years, rising from $176 million in 2019 to a projected $1.2 billion in fiscal year 2025. Mamdani promised to expand CityFHEPS eligibility but recently said his administration needs more time to evaluate its options given the city’s bleak budget outlook. But time will not solve Mamdani’s money problem.

New York City is facing a $2.2 billion budget deficit, and in addition to his housing dreams, Mamdani recently announced a plan to provide taxpayer-funded childcare for two-year-olds at a projected cost of $6 billion annually. The truth is that New York City does not have the money to provide the housing it needs.

The only way to make housing truly affordable is to build a lot more of it in places people want to live. New York City cannot do this without the private sector. One recent estimate of New York City’s housing shortfall finds it needs 473,000 more units by 2032. The average cost to build an affordable unit in big cities is around $500,000 per unit. Multiplying the two numbers together equals $236.5 billion, or $34 billion per year over seven years. New York City raised $81 billion in tax revenue in 2025, meaning it would take 42 percent of all the city’s annual tax revenue to build the housing it needs if it wants to go it alone.

Mamdani’s political philosophy will be his undoing. As a self-identified democratic socialist supported by the Democratic Socialists of America (DSA), he sees little use for private developers. The DSA wants housing to be expropriated from its current owners and given to the “working class.” They believe tenants should control housing. As they put it, “Social housing does not offer an equal seat at the table to developers, investors, or city councilors. Social housing prioritizes and makes real the collective will of tenants.” While their long-term vision is an end to “commodified housing”, in the short term they want state-provided and publicly owned free housing available to anyone.

Mamdani seems committed to realizing the DSA’s vision. On his first day in office, he revitalized the Mayor’s Office to Protect Tenants and named Cea Weaver as its director. Weaver has come under fire for some past statements about treating private property as a “collective good” and calling homeownership “a weapon of white supremacy”. While these statements are alarming to people like me who value property rights and the prosperity they generate, they are consistent with how the DSA views housing.

This way of thinking exemplifies Mamdani’s problem. Fewer people will want to build or manage rental housing if the city makes it too hard to remove unruly tenants or those who do not pay. The landlords who do stick around will charge higher prices. New York City already has some of the strictest tenant protections in the country, and these laws contribute to the city’s high housing costs. One study analyzing tenant protections finds that stricter protections reduce the supply of rental housing and increase an area’s median rent by six percent. Another study also finds that good-cause or just-cause eviction laws increase rents by six percent to seven percent, with lower-income renters experiencing larger rent increases.

Raising taxes to generate more revenue is always an option for socialists like Mamdani, but his taxing power is constrained by people’s ability to move. From 2020 to 2022, over $38 billion of adjusted gross income and 485,000 people left New York state. Research shows people, especially wealthy people, move when taxes get too high. Dallas mayor Eric Johnson is already predicting financial firms would flee New York City if Mamdani raises taxes.

Mamdani and his DSA comrades may not like working with private developers, but if he wants to make housing more affordable in New York City he does not have much of a choice. And if he is open-minded, he might learn something, too: Competitive markets often generate amazing outcomes for all involved. New York City’s housing crisis is fixable, but only if Mamdani lets the private sector do its thing.

Kevin Hassett’s recent call to “discipline” Federal Reserve researchers over a New York Fed study on tariffs is not just a political swipe. It is a troubling signal about the growing willingness of policymakers to delegitimize economic analysis they find inconvenient or unsupportive. 

Disagreement with research is a normal, healthy part of scientific inquiry. But attempts to intimidate researchers because their findings conflict with a preferred narrative undermine the credibility of policymaking itself. At a moment when trade policy is already generating uncertainty across markets, this kind of rhetoric risks turning economic debate into a loyalty test rather than an evidence-based process.

The New York Fed study in question found that US firms and consumers absorbed the vast majority of tariff costs in 2025, with importers bearing roughly 94 percent of the burden early in the year and still around 86 percent by November. These findings are not outliers. Similar conclusions have been reached by researchers at the Kiel Institute, Harvard University, Yale Budget Lab, and the Congressional Budget Office, all of which point to high pass-through of tariffs into US import prices. 

The basic economic mechanism is well understood: when tariffs are imposed, domestic buyers often face higher costs because foreign exporters rarely slash prices enough to offset the duties. Hassett may disagree with the methodology or emphasis, but calling the research “an embarrassment” that would fail a first-semester economics course dismisses a body of evidence that aligns with decades of empirical trade literature.

Hassett’s principal criticism — that the study focused on prices rather than quantities —  deserves debate, not disciplinary threats. Economists have long examined tariff incidence through price movements precisely because they reveal who ultimately pays. Quantity adjustments, wage effects, and currency adjustments can matter, but they are separate channels that require rigorous modeling and time to evaluate. Simply asserting that tariffs will raise domestic wages or improve consumer welfare does not invalidate evidence showing that price pass-throughs are substantial. Policy analysis requires grappling with tradeoffs, not declaring victory by ignoring uncomfortable metrics.

More concerning is the broader context. The administration has repeatedly attacked institutions and analysts whose conclusions diverge from its messaging, from pressuring private sector economists to dismissing unfavorable labor statistics. 

Federal Reserve officials, including Minneapolis Fed President Neel Kashkari, have warned that such attacks risk compromising the central bank’s independence, a cornerstone of credible monetary policy. Although the Federal Reserve’s current credibility may be open to debate, deliberately undermining it further is imprudent. A strength of the Federal Reserve system lies in its decentralized research structure, where district banks produce analysis that does not necessarily reflect official policy positions. Demanding punishment for economists who publish data-driven findings erodes that institutional integrity and sends a chilling message to researchers across the policy landscape.

There is nothing wrong with policymakers arguing that tariffs could produce broader strategic benefits, whether through reshoring, geopolitical leverage, or sectoral wage gains. Those claims should be debated openly, supported by models and evidence, and tested against real-world outcomes. But dismissing empirical research as “partisan” simply because it challenges a policy narrative turns economic discourse into political theater where bully pulpits have the advantage. 

If policymakers want to persuade markets and the public, they should present competing analyses. Hassett could have assailed the Fed study on the basis of tradeoffs, methodological assumptions, or competing interpretations of the data, rather than resorting to vacant dismissal.

Ignoring the economic effects of tariffs in the face of strong empirical evidence risks veering into a form of modern economic Lysenkoism where political loyalty takes precedence over analysis and communal scientific review. (Trofim Lysenko was a Soviet agronomist who rejected established genetic science, instead promoting politically-favored agricultural theories that aligned with Stalinist ideology. Under his influence, dissenting scientists were silenced, imprisoned, or purged, illustrating how injecting ideology into research handily squelches scientific progress.) 

The issue here is not whether tariffs are good or bad policy, although the administration has already conceded the harms associated with them. It is whether economic research can proceed without fear of reprisal when its conclusions prove inconvenient. Undermining that principle will surely generate a measure of sycophantic political applause, but carries long-term costs — not only for American economic health, but for scientific inquiry itself.

Despite what you’ve heard, first time homebuyers are not getting dramatically older.

Statistics are like hot dogs — often juicy but with sometimes questionable ingredients. A recent example is a story racing around the country: first-time homebuyers’ median age is 40 this year, versus just 28 years old in 1991. This alarming trend was explored in a November 6 New York Times article, citing survey data from the National Association of Realtors (NAR). 

But I fell into a trap of my own making, by ingesting a “wow” statistic that reinforced my own experience —  I bought my first house in 1991 at age 29. Now I’m hearing this stat everywhere, in news stories and recent conferences I’ve attended. Statistics like this go viral, by simultaneously carrying “factual weight” and yet stirring emotions. 

Yet the statistic, as compelling as it seems, is likely wrong. Housing economists Edward J. Pinto and Joseph S. Tracy at the American Enterprise Institute (AEI) have recently reported why. The two delved into the less-than-appetizing ways the NAR statistic was created. In July 2025, the NAR team sent out 173,250 surveys with 120 questions to answer online. 

Only 6,103 people bothered to answer, a response rate of 3.5 percent. Only 1,281 of that group were first-time homebuyers. 

Not only that, but the AEI team found that those under 35 were under-represented by 17 percent and those aged 45 to 74 were over-represented by 18 percentage points. 

The NAR economists claim their statistics have ninety-five percent confidence, plus or minus 1.25 percent, but statistical confidence for representing a US population of around 86 million homeowners collapses when the sample is no longer random. Fancy weighting techniques may give an aura of fixing the problem, but rely on subjective guesswork and hard-to-track biases. 

Pinto and Tracy at AEI instead used the New York Federal Reserve Bank Consumer Credit Panel (CCP), which uses a five-percent random sample of all credit reports tied to a Social Security number, and provides borrower age and home buying history.   

And guess what they found? The median age of the first-time homebuyer is approximately 33 years old — not 40 — and has been steady between 2001 and today. Research by The Cato Institute using the US Census Bureau’s American Housing Survey also “casts doubt” on the NAR data, revealing results similar to those reported by AEI researchers. 

The incorrect NAR fact nugget might rapidly dissolve if it didn’t carry so much emotional resonance with those who feel the housing market is “unfair.” But here’s the deeper problem: when a statistic feels true, because it fits in our narrative of how the world works, its power can rapidly sway public policies in the wrong direction. 

What Pinto and other housing experts agree upon (including the NAR economists) is a widespread housing affordability problem, but the larger lesson is that it is impacting people across all ages. Thanks to zoning restrictions on housing density and other challenges, we’re simply not building enough homes. 

What’s more, we make it very difficult for many to purchase homes in less-affluent areas, by making so-called “small dollar mortgages” less profitable for banks to issue. Dodd-Frank banking regulations in the wake of the 2008 Great Recession vastly increased the overhead for issuing these loans, resulting in a rapid drop in mortgage access at the lower end of the market, as The Wall Street Journal has previously reported.

My research with colleagues at New America shows that millions of inexpensive homes exist in the United States, but the financing is unavailable for many families. This leads to falling homeownership rates, and in some cases, property values. Only 23 percent of homes that cost below $100,000 (including condos) were purchased with a mortgage loan, according to a 2020 Urban Institute study. Cash buyers made up the rest.

Community banks, which are more likely to serve these customers, are particularly hard hit by the Dodd-Frank banking regulations. Since 2010 we have lost over 3,600 community banks, “a reduction of over 45 percent,”  according to Treasury Secretary Scott Bessent’s remarks at a conference in October 2025. 

In other words, if we want to concentrate on improving homeownership across all ages, we need to base our policies on statistics that are built upon rigorous methodological foundations. Otherwise, repeating an appetizing but incorrect statistic around first-time homeownership could lead to chronic economic heartburn.

By the time Mission: Impossible — The Final Reckoning hit theaters last May, the marketing narrative had become as famous as the franchise itself. The studio made sure we knew that when Tom Cruise hung off the wing of a biplane at 8,000 feet, he was actually doing it. There were safety riggings, sure, but there were no pixels where the human should be.

Compare that to the reception of recent VFX-heavy blockbusters, where armies of digital artists are employed to create spectacles, at grand scale but without stakes. The audience disconnects. We know nobody is in danger. Audiences struggle to empathize with purely artificial characters, even when the visuals are flawless, because we connect emotionally to agency and risk. When everything can be faked, the premium on what is real skyrockets.

In a previous article, Rise of the Curators, I argued that as AI commoditizes the mundane — automating logic, logistics, and basic creation — humans would ascend the “economic value ladder” toward high-touch, curated experiences. 

But there is a second half to that prediction, one that is now unfolding with surprising economic force. We not only seek human curators, we are actively rebelling against the digital itself. An “authenticity recoil” is underway — a consumer-driven pivot back to physical, imperfect, high-friction experiences.

Combine this dynamic with the lingering cultural counterreaction to the isolation of COVID-era restrictions of the early 2020s, and you have a perfect storm for an explosion of deliberately offline human engagement. We won’t all become Luddites and burn our laptops in bonfires; but these tools will likely be increasingly reserved for work and utility, while our recreation and human connection return to the physical.

The Data of the Analog Renaissance

If this sounds too theoretical, the market data beg to differ. The economic indicators of 2024 and 2025 show a distinct capital flow away from screens and toward the tactile.

Take the music industry. Vinyl records now decisively outsell CDs, and that gap only widened through 2024 and 2025. This isn’t just Boomer nostalgia buying. The trend is driven largely by people under 40, who are rejecting the algorithmic “perfection” of streaming playlists for the deliberate, tactile ritual of dropping a needle on a groove.

Simultaneously, a deliberate “dumbphone” is no longer a niche choice but a measurable market segment. Global sales of basic feature phones — devices that call, text, and do little else — hit 1.1 billion units in 2024. Buyers are desperate to reclaim their time and attention from the slot-machine mechanics of the smartphone.

Mark Manson presciently captured this thinking in a 2014 article, when he wrote:

Limitless access to knowledge brings limitless opportunity. But only to those who learn to manage the new currency: their attention.

Even photography is regressing, beautifully. Film photography has come roaring back, prompting Kodak to bring Ektachrome E100 back from the dead to meet demand. AI can generate a hyper-realistic image of a sunset in seconds, but people are waiting weeks and paying dollars to see a grainy, imperfect photo they took themselves. Why? Because the film photo is proof of life. They were there, physically, in that moment, creating something real.

Why This Matters: The Loneliness Paradox

This turn toward offline life isn’t just aesthetic. It reflects a growing health concern.

Researchers now describe a loneliness epidemic, intensified by pandemic isolation but rooted in earlier technological shifts. In The Anxious Generation, social psychologist Jonathan Haidt argues that the move from a “play-based childhood” to a “phone-based childhood” deprived young people of the in-person social experiences that build emotional resilience and empathy. 

Beginning in the early 2010s, rates of anxiety and depression rose in close correlation with smartphone-centered social life. AI threatens to extend this pattern in adulthood. As interaction becomes easier to simulate, the temptation to replace embodied relationships with digital ones grows — even as their emotional limits become clearer.

Face-to-face rebounded quickly once COVID-era restrictions were lifted. Zoom spiked from 82,000 customers in 2019 to 470,000 in 2020, down to 191K in 2021, as soon as people felt free to gather again. That rebound to the real revealed something fundamental: digital tools can transmit information, but they struggle to reproduce the full emotional bandwidth of physical presence.

Our brains evolved in physical communities, not virtual ones. The current revival of in-person experience is not nostalgia. It is adaptation — a response to a world where efficiency has outpaced meaning, and where presence has become scarce.

The “Offline Premium”

Both social research and market trends show people are actively pushing back against digital saturation. Clear economic signals indicate people value presence more than ever.

Digital detoxing, or intentionally limiting or stopping the use of digital devices, has become a mainstream cultural phenomenon. One recent Harvard-linked study found a one-week break from social media was associated with improvement in depressive symptoms (24.8 percent), anxiety (16.1 percent), and insomnia (14.5 percent). Unplugging can protect our mental health. 

Hybrid work, even for tech-heavy fields, indicates leaders are considering how to maximize in-person, undistracted connections.

Communal dining is increasingly popular, as Gen Z patrons have embraced the awkwardness of connecting with strangers over a meal. In doing so, they’ll rediscover a depth of conversation that inherently requires presence. 

These are not retrograde moves; they’re economically rational responses to what machines can’t do. AI struggles to generate genuine surprise, nuance, empathy, or emotional resonance. Humans are wired to.

The Rise of High-Fidelity Spaces

This recoil from the digital is even reshaping the “experience economy.” We are moving beyond “curated experiences” (like a travel plan) to “curated restrictions.”

Consider the explosion of vinyl “listening bars” across the US and Europe over the last year. Modeled after the Japanese kissaten, these venues are dedicated to high-fidelity audio. They often have strict rules: no shouting, no flash photography, sometimes no phones at all. You are there to listen.

Similarly, the use of Yondr pouches — locking phone cases that create phone-free spaces — has exploded. The company recently celebrated facilitating over 20 million phone-free experiences at concerts, schools, and comedy shows. Artists are realizing that to create a “transformation” (the highest rung of the economic ladder), the audience must be severed from the digital tether.

Until recently, curators excelled by helping you find the best digital content. In the new economy, the curator’s job is (at least sometimes) to build a wall against the digital content, creating a sanctuary where genuine human connection can occur.

The Economic Pivot in Perspective

Any business relying solely on digital scalability and optimization is betting against a rising tide of human desire. AI will drive the marginal cost of derivative, re-combinatorial content creation to zero, which means the monetary value of digital content will also approach zero.

The value is in using AI and other tools to migrate and gain efficiency in core offerings of things AI cannot forge by itself: the heat of a crowd, the scratch of a record, the risk of a stunt, the silence of a phone-free room.

I use digital tools constantly and deeply in all of my work. But last weekend I woke up on Saturday morning and I didn’t log into a digital world. I built a fire. I listened to records — full albums, side A to side B. I read a book. I talked with my wife, while our girls cuddled up close with floor pillows and some musical instruments. We spent hours enjoying each other’s company with nothing digital in sight.

It was beautiful and refreshing. But more importantly, it felt expensive. It felt like a luxury that the digital world is actively trying to steal.

If you aren’t prioritizing putting yourself physically in a room, across a table, around a fire with people you love and enjoy, you may be missing out on a great gift. And if you are an entrepreneur or investor, you might be neglecting the only asset class that AI cannot inflate away: reality itself.

The Congressional Budget Office just released its newest budget outlook. It isn’t pretty. The 2026 deficit is projected to hit $1.9 trillion and grow to $3.1 trillion in 2036. America’s slow-moving debt crisis shows no signs of waning.

But this isn’t solely a fiscal problem. It also has an unappreciated monetary dimension. If we’ve learned anything from the inflation surge of 2021–22, it’s that the boundary between fiscal and monetary policy can dissolve much faster than many economists once assumed. We had better come to terms with this quickly, or else money mischief and fiscal folly will become our new normal.

For years, concerns about “fiscal dominance” were largely theoretical possibilities discussed in graduate seminars. Things have changed. The pandemic response showed how fast large deficits and central bank balance sheets can become intertwined. Inflation is the most obvious consequence, but by no means the only one — nor perhaps even the most severe.

In normal times, monetary policy and fiscal policy are institutionally separate. Congress and the White House decide how much to tax and spend. The Federal Reserve controls the money supply and targets interest rates to stabilize prices and employment. The Fed is said to be “independent” because it can tighten policy even if doing so makes government borrowing more expensive. In truth, the Fed is not independent from political oversight. But this basic story is still a reasonable approximation of day-to-day operations.

Fiscal dominance flips that relationship. It occurs when large government deficits and debt burdens effectively constrain the central bank’s choices. Instead of focusing on price stability, the central bank must consider the government’s financing needs. Major monetary tightening might restore price stability, but it also drives up debt-service costs. If deficits are large enough and persistent enough, monetary policy becomes collateral damage.

We recently watched this happen in real time. In 2020 and 2021, Congress enacted extraordinary pandemic relief packages totaling trillions of dollars. Deficits reached levels not seen outside of world wars. At the same time, the Federal Reserve expanded its balance sheet dramatically, purchasing massive quantities of Treasury securities. The central bank defended these actions as necessary to stabilize financial markets. But the effect was unmistakable: deficits were effectively monetized.

To “monetize” a deficit means the central bank creates reserves to buy government debt, increasing the monetary base. When that expansion is large and persistent, it can spill into broader money growth, and hence aggregate demand. The result, combined with supply constraints and stimulus checks, was predictable: inflation climbed to 9 percent by mid–2022, the highest in four decades.

Yes, supply chains were tangled. Yes, transportation and energy prices spiked. But inflation of that magnitude required excess demand. And excess demand requires excess money and credit. The main culprit was the central bank’s financing of massive government spending.

The Fed ultimately reversed course, raising its interest rate target aggressively in 2022 and 2023. Inflation came down, but the damage was done. Fiscal matters have deteriorated even further since then.

Federal debt held by the public is near 100 percent of GDP. Annual deficits are projected to remain elevated for the foreseeable future, driven not by temporary emergencies but by structural imbalances: entitlement spending, demographic pressures, and insufficient revenues. With the low interest rates of the 2010s behind us for the foreseeable future, interest payments on the debt are becoming one of the fastest-growing components of federal spending.

That matters immensely for monetary policy. When rates rise, the Treasury must refinance maturing debt at higher yields. Higher yields mean higher annual interest costs. Higher interest costs mean larger deficits — which require more borrowing. The problem compounds.

In this unstable environment, the temptation to lean on the central bank becomes nearly irresistible. Political leaders may not explicitly demand monetization. But they don’t have to. Central bankers feel the pressure implicitly. When debt levels are high, tight monetary policy becomes fiscally painful.

Fiscal dominance subjugates monetary policy to political, and often partisan, needs. If markets begin to suspect that the Fed will ultimately accommodate deficits to avoid fiscal strain, inflation expectations can drift upward. Investors demand higher risk premia. The cost of stabilizing prices rises further.

The United States is by no means doomed. It has great productive capacity, deep capital markets, and global reserve-currency status. But those safeguards are not foolproof. At most, they are well-built storm walls — but the waves can topple them if they’re big enough.

Thanks not merely to an excessive pandemic response but also to decades of profligacy, the barrier between fiscal demands and monetary accommodation is getting very thin. Crossing it will create major economic pain. Once inflation takes hold, restoring credibility is expensive. And subjugating financial markets to government spending ambitions will destroy large amounts of wealth by diverting capital from productive to unproductive projects.

Sound money ultimately requires sound public finances. A central bank cannot permanently offset fiscal excess without courting inflation and facilitating economy-wide allocation problems. Nor can it remain focused on price stability if tightening policy threatens fiscal sustainability.

Only Congress can fix this. There’s no option besides spending less. If that sounds ominous, it should. The legislature has shown no appetite for any kind of fiscal reform. Yet any portfolio of policies to solve the problem must include it. So long as elected officials continue to treat the public purse with contempt, price stability and economic efficiency are at risk.

The finale of Stranger Things leaves viewers with an emotional cocktail: relief, nostalgia, bittersweet satisfaction — and perhaps confusion. What became of the military personnel and the compound? More puzzling, though, is a quieter moment near the end, when young adventurers Nancy, Robin, Steve, and Jonathan sit on a roof, reaffirming their friendship and readying themselves for adulthood. As a business professor and big fan of the show, I found myself frustrated when Jonathan shared his aspiration to make an “anti-capitalist” film. It is an odd note to strike in a series that has consistently portrayed markets and material progress in a largely positive light.

At its core, Stranger Things is a story about resisting control and reclaiming agency. Whether it is Vecna using people as vessels, government scientists exploiting children, Soviet agents operating through secrecy and force, or public-school systems enforcing conformity, the show repeatedly affirms the idea that no one has the right to commandeer another’s life. Free choice — and the defense of what one values — is treated as paramount. In the final episode, viewers are invited to cheer for better opportunities ahead for an unlikely band of friends.

Only a market-based system can enable progress, which is why Jonathan’s anti-capitalist stance feels so misplaced. Take Season 3, for instance, when capitalism was quite clearly on display. In “Chapter 8: The Battle of Starcourt,” Soviet agents operate in secrecy and with force in an underground base beneath a Midwestern shopping mall. The symbolism is unmistakable: a closed, authoritarian system hidden below an open commercial space. Above ground are voluntary exchange and decentralized activity; below ground are coercion and centralized control. The contrast could not be clearer.

Starcourt Mall itself is not depicted as a moral failing or cultural wasteland. It is where teenagers shop, socialize, and work. Steve’s friendship with Robin begins at Scoops Ahoy, their shared place of employment. Where we work, what we consume, and the process of an exchange or transaction often creates opportunities for human connection. Moreover, commerce facilitates responsibility, independence, and individuality.

Capitalism is featured throughout Stranger Things in the mundane choices that allow the characters to form identities and solve problems. From Nike sneakers and Members Only jackets to New Coke, cassette tapes, and record stores, the characters signal belonging, rebellion, and aspiration through what they wear and listen to. Max’s favorite song, “Running Up That Hill (A Deal with God)” by Kate Bush, became a favorite of many Stranger Things fans and went viral globally 40 years after its 1985 debut.

Consumer choices are expressive, not imposed: markets supply options rather than dictate meaning. Actually, Eleven’s attachment to Eggo waffles is a particularly telling example. It is not trivial product placement, but a symbol of preference, comfort, and agency — the opposite of the sterile control she experiences in Hawkins Lab. And the trips the kids take to stores like Radio Shack underscore how decentralized markets provide the tools for experimentation and creativity. The kids do not wait for institutions to rescue them; they buy, build, and improvise.

The finale reinforces this theme through Jim Hopper and Joyce Byers (Jonathan’s mother). Hopper shares news of a new job opportunity that offers better pay, more stability, and closer proximity to Joyce’s sons. The optimism that Hopper and Joyce share in that scene is not abstract or ideological; it is material. Hopper splurges on caviar and wine to celebrate, taking pleasure in providing for the woman he loves. Joyce, who spent much of the series barely scraping by, can finally imagine a life with less struggle.

For years, Joyce worked long hours at a convenience store for little pay, while Hopper stagnated in a run-down cabin, bored by routine policing duties. In the finale, both choose differently. Their desire to flourish is about wages, mobility, and the possibility that the past need not determine the future. Capitalism does not guarantee success, but it does make advancement possible through skill, effort, and risk-taking.

Even Jonathan’s own future rests on this foundation. He plans to pursue film studies in New York City, one of the world’s most dynamic cultural capitals because of its long history of entrepreneurship and consumer-driven growth. The creative freedom he seeks exists precisely because the city tolerates experimentation, dissent, and failure — though recent political shifts may test that tolerance.

Jonathan’s artistic ambitions, in fact, are enabled by capitalism. Creative industries thrive where property rights are secure and exchange is voluntary. The freedom to make an “anti-capitalist” film is itself a market luxury — possible because capitalism does not demand ideological conformity. Markets are social institutions, coordinating human plans without centralized command.

After seasons of interdimensional monsters and Cold War paranoia, Stranger Things ends by celebrating ordinary wins: better jobs, safer communities, chosen relationships, and the freedom to plan a life worth living. That makes Jonathan’s anti-capitalist declaration all the more puzzling. The true villains of Stranger Things are not found in market-based systems, but in systems of enforced coercion, stagnation, and the denial of choice. In reminding us how precious freedom is, the series inadvertently reveals an uncomfortable truth: capitalism is not the obstacle to the lives its characters imagine — it is the condition that makes those lives possible.

Introduction

Central planning — the idea that an economy can be rationally directed from the top down — has long appealed to reformers who seek to eliminate waste, inequality, and uncertainty. Its critics, however, have argued that no government can gather and process the vast, ever-changing information that markets generate spontaneously.

Among the most forceful opponents of central planning were two economists of the Austrian School: Ludwig von Mises and Friedrich A. Hayek. Though allies, they approached the problem from distinct, complementary angles. Mises argued that without private property and market prices, rational economic calculation is impossible. Hayek deepened the critique, showing that knowledge itself is dispersed and can only be coordinated through the market process.

This explainer examines their reasoning — where it overlaps, where it differs, and why the two scholars’ combined insights still matter in an age of big data and artificial intelligence.

The Rise and Appeal of Central Planning

The twentieth century saw governments attempt to replace broad market coordination with narrow, centralized direction. The idea gained traction amid the upheavals of the First World War and the Great Depression, when planned production seemed to promise stability and fairness. Lenin’s central planning administration Gosplan in the Soviet Union and later socialist models in Eastern Europe embodied the dream of a rationally ordered economy.

The same faith influenced Western intellectuals. If engineers could build bridges and factories, why couldn’t economists and bureaucrats design entire economies? To Mises and Hayek, this was a category error: the economy is not a machine, but a living network of human action and knowledge.

Mises and the Calculation Problem

In his 1920 essay “Economic Calculation in the Socialist Commonwealth,” Ludwig von Mises made a devastating claim: socialism is not merely inefficient — it is impossible.

Under socialism, the state owns all means of production. Because ownership is unified, there can be no buying and selling of capital goods, and therefore no market prices for them. Without prices, planners cannot determine whether resources are being used efficiently.

For example, should a new railway line run through the mountains or around them? The choice involves trade-offs — between labor, steel, and land — and only market prices can reveal them. In a socialist economy, there is no way to compare the economic cost of one option versus another. Without the guidance of market prices, planners “grope in the dark,” the Austrian economist wrote.

Mises’s point was not moral but logical: rational economic calculation requires private property, voluntary exchange, and monetary prices. Without them, the coordinating mechanism of the economy collapses.

Hayek and the Knowledge Problem

Two decades later, Friedrich Hayek expanded Mises’s critique. Writing in the 1930s and 1940s, Hayek argued that even if a central authority somehow possessed all available data and perfect computational power, it still could not plan effectively.

In his classic 1945 essay “The Use of Knowledge in Society,” Hayek explained that the crucial information needed to allocate resources efficiently is dispersed, tacit, and constantly changing. It exists not in databases but in the minds and experiences of millions of individuals — shopkeepers, consumers, engineers, and entrepreneurs — each responding to local conditions. 

Prices, in Hayek’s view, are signals that communicate this information. When the price of tin rises, consumers cut back, producers seek substitutes, and entrepreneurs search for new supplies — all without knowing (nor needing to know) why the price changed. This decentralized process coordinates countless decisions that no planner could ever collect or comprehend.

Where Mises showed that calculation was impossible without prices, Hayek explained why only free markets can generate those prices meaningfully: they embody real-time knowledge that no central authority can aggregate.

The Socialist Response and the Debate That Followed

The Mises–Hayek critique ignited what became known as the Socialist Calculation Debate. Economists such as Oskar Lange and Abba Lerner responded that planning boards could simulate markets by setting prices, monitoring shortages and surpluses, and adjusting accordingly.

To Mises and Hayek, this response misunderstood the essence of markets. Market prices are not arbitrary numbers to be guessed at by bureaucrats; they are the outcome of entrepreneurial discovery — a competitive process that tests profit and loss, risk and innovation.

Lange’s “trial and error” planning was, in Hayek’s eyes, a static imitation of a dynamic reality. Real markets continuously generate and revise knowledge through competition. Bureaucratic simulation lacks the incentives, ownership, and feedback that make this possible.

Where Their Theories Differ

Although united in their opposition to central planning, Mises and Hayek approached the problem from distinct perspectives:

Dimension	Mises	Hayek
Core Problem	Economic calculation is impossible without market prices.	Relevant knowledge is dispersed and cannot be centralized.
Focus	The logical and institutional preconditions of rational choice.	The epistemological and communicative limits of centralized control.
Method	Deductive reasoning (praxeology).	Empirical and evolutionary reasoning about complex systems.
Emphasis	Property and prices as necessary for calculation.	Competition and communication as necessary for coordination.

Mises showed why central planning cannot compute rationally; Hayek showed why it cannot know what to compute in the first place. Their insights are not substitutes, but layers of the same diagnosis.

How Their Ideas Complement Each Other

Mises and Hayek’s views form a single, coherent understanding of market order.

• Mises explains why the planner lacks a common ratio of exchange: without property rights and market prices, there is no basis beyond arbitrariness for allocative decisions.
• Hayek explains why the planner lacks the information to generate those prices in the first place: they are under constant revision by market actors with narrow, special knowledge.

The two arguments converge on the same conclusion: coordination in a complex society must arise from voluntary, decentralized interaction — not central command. The market is not an arbitrary human invention but the only known system capable of processing vast, scattered, ever-changing information.

Real-World Evidence: Planning in Practice

The twentieth century tested these theories at tragic scales, and at unimaginable human cost. Socialist economies like the Soviet Union attempted to coordinate production through massive bureaucracies such as Gosplan. The results confirmed Mises and Hayek’s warnings:

• Chronic shortages of consumer goods
• Surpluses of useless output (too many size-12 shoes, pants no one wanted)
• Distorted incentives to meet quotas rather than serve needs
• Falsified data to satisfy political superiors.

Each plan cycle created new misallocations, because planners could not adapt fast enough to shifting realities. As Hayek might have predicted, information traveled too slowly and too dishonestly in a system where truth was punished and incentives were skewed by politics.

China’s gradual reforms after 1978 — reintroducing private enterprise and market pricing to a tightly controlled state economy — marked an implicit concession: to make socialism “work,” planners had to scale back central planning.

The Soviet Collapse: A Tale of Two Explanations

When the Soviet Union dissolved in 1991, it was not only a political implosion but also an economic one — the largest centrally planned system in history collapsing under the weight of its own contradictions. For both Ludwig von Mises and Friedrich Hayek, the Soviet collapse would have appeared less as a surprise than as the inevitable outcome of systemic design flaws they had warned about decades earlier. Yet each would have interpreted the downfall in a subtly different way.

To Mises, the Soviet failure confirmed the calculation problem. Without private property and genuine market exchange, the administrators at Gosplan had no way to measure economic efficiency. The prices they used were arbitrary, disconnected from real scarcities or consumer wants. Their statistics could record physical quantities — tons of steel, miles of rail, bushels of wheat — but not value. Over time, the entire system became an elaborate façade: apparent order concealing mounting disorder. Factories met quotas by producing useless goods, local managers falsified reports, and the central plans themselves became exercises in make-believe and misinformation. For Mises, this was not accidental mismanagement. It was the unavoidable result of an economy that had abolished the very instrument of rational calculation — the price system.

To Hayek, the same collapse demonstrated the knowledge problem. Even if Soviet planners had access to accurate data, the knowledge required to allocate resources efficiently never existed in any central repository. It resided in the dispersed minds of millions of individuals — consumers, workers, and entrepreneurs — whose preferences and innovations could never be fully communicated through bureaucratic channels. The Soviet system’s rigidity was thus a cognitive failure: it could not adapt to change, learn from errors, or evolve through decentralized experimentation. The plan could issue orders, but it could not generate discovery. Hayek might have said that the Soviet economy did not so much break down as fail to learn.

In this sense, Mises and Hayek offered complementary autopsies of the same tragedy. Mises explained why rational allocation was impossible without prices; Hayek explained why no planner could ever know enough to set those prices meaningfully. The first diagnosis is institutional — a system without markets cannot calculate. The second is epistemological — even with data, central authority cannot know. The failure of Soviet socialism thus confirmed both men’s warnings: a planned economy can suppress error only by suppressing truth.

Lessons for the Digital Age

In the twenty-first century, some argue that big data, artificial intelligence, and high-speed computation have revived the dream of central planning. After all, if machines can process trillions of data points, why can’t they optimize production and distribution better than messy markets?

This view repeats the same fallacy that Mises and Hayek identified. The knowledge required for coordination is not static data but living information: changing preferences, unforeseen innovations, and subjective judgments of value. Machines can crunch numbers, but they cannot determine what those numbers mean in human terms.

Moreover, without property rights, competition, and entrepreneurial experimentation, there is no mechanism to reveal or validate the information that planners would feed into their algorithms. “Smart” central planning is still central planning, and still doomed — only with faster calculators.

Broader Philosophical Implications

Beneath their economics lay a shared defense of human freedom and humility.

• For Mises, the market system reflects the logic of human action: individuals using scarce means to achieve chosen ends. Coercive planning replaces choice with obedience.
• For Hayek, markets represent a spontaneous order: a social evolution shaped by countless interactions, not by deliberate design. Planning reflects what he called the “fatal conceit” — the illusion that reason can master the complexity of civilization.

Both saw freedom not merely as a right but as a practical necessity. Only through liberty can society continually learn, correct errors, and adapt to change.

Common Criticisms of Mises and Hayek

“They opposed all government.”
Both men recognized legitimate state functions — enforcing contracts, protecting property, and maintaining the rule of law. Their critique targeted economic control, not the legal framework of a free society.

“Computers can solve the problems they described.”
Computation cannot replace judgment. Prices emerge from voluntary exchange, not mathematical optimization. No computer can reproduce the creative discovery process of entrepreneurs in real time.

“They ignored inequality or social justice.”
Both understood that outcomes in free markets are unequal, but they argued that coercive equalization destroys the process that generates wealth. For Hayek, justice lies in fair rules, not guaranteed results.

“Their ideas are outdated.”
On the contrary, their insights explain modern failures of technocratic overreach — from failed industrial policies to rigid pandemic controls — all rooted in the same hubris that knowledge can be centrally mastered.

The Enduring Legacy

Mises and Hayek’s arguments reshaped modern economics, influencing fields from information theory to institutional design. Their insights inspired later thinkers — such as Israel Kirzner’s work on entrepreneurship and Elinor Ostrom’s studies of decentralized governance — that continue to illuminate how cooperation emerges without command.

The core message is timeless: the complexity of human society cannot be engineered from above. Markets, far from being chaotic, are the most sophisticated information system ever developed. They allow billions of people, all of whom hold dispersed and limited and sometimes highly specialized knowledge, to achieve coordinated prosperity through voluntary exchange.

Market Prices Are the Only Viable Coordinator

Central planning promises order but delivers confusion. Its failure is not a moral accident or a temporary flaw but a structural impossibility.

Mises showed that without market prices, planners cannot perform rational calculation. Hayek showed that without dispersed knowledge, they cannot know what to calculate.

Together, they demonstrated that freedom is not only ethically superior but economically indispensable. The market, for all its imperfections, remains the only mechanism capable of processing humanity’s infinite complexity.

Their warning endures today. Economic prosperity, and indeed civilization itself, depend less on what we can design than on what we can discover. And that discovery happens best via market prices as opposed to authoritarian directorates.