At its most recent meeting, the Federal Reserve held rates constant, as most investors were expecting. Prior to the meeting, which resulted in a split 9–3 vote, there were rumblings of discontent among members of the Federal Open Market Committee (FOMC), mostly over Chairman Warsh’s controversial views on inflation, interest rates, and the Fed’s balance sheet.

What do we know about Warsh’s views? In a 2018 paper, he argued that “the central bank and the academic community should engage in a fundamental rethinking of the Fed’s strategy, tools, governance, and communications.” In this article, I discuss three points made by Warsh as well as the evidence from economic research.

The Tyranny of Forward Guidance

Fed officials try to make their future plans clear to the public, a policy known as forward guidance. Setting the public’s expectations can, at least in theory, improve the efficiency of monetary policy. One problem, however, is that the more specific Fed officials are about their plans, the harder it is to change them.

This was a major problem in the post-pandemic period. Chair Powell promised “ample warning” before any changes in policy, but when it became clear in late 2021 that loose monetary policy was driving the highest inflation in 40 years, Powell was reluctant to change course. His failure to act made inflation worse, which eroded the value of the dollar and reduced the real incomes of average Americans.

To prevent the lock-in effect of forward guidance, Warsh has argued that the Federal Open Market Committee (FOMC) should have a long-term strategy that is not altered by fluctuations in short-run economic conditions. “It would scarcely require Fed speakers to rush to update their guidance to market participants,” allowing them the flexibility to adopt the best policy in the face of a changing economy.

Groupthink at the Fed

The FOMC relies on discussion and debate to formulate its monetary policy decisions. At each meeting, the members share their opinions about the state of the economy and are briefed by Fed staff economists who share their economic forecasts. According to Warsh, however, the staff presentations may lead to excessive conformity among FOMC members. “The most common forecasting error,” he says, “is groupthink.”

“There is a tendency to try to find an anchor,” Warsh describes, “and FRB/US — the dynamic, stochastic, general equilibrium model that has served at the core of the Fed’s thinking for decades — ends up being the leading device through which a lot of discussions are conducted in formulating policy.”

The problem of groupthink is evident from the FOMC’s Summary of Economic Projections. Four times per year, the FOMC members publish projections of what they expect in the coming years for the rates of inflation, unemployment, and GDP growth. Despite some recent dissent, Warsh rightly notes that their projections have historically tightly converged on the economic forecasts presented by the Fed staff. “The dot forecasts from members of the FOMC are nearly on top of one another.”

Indeed, groupthink has become a serious problem at the FOMC. Research confirms that the projections by FOMC members conform closely to the forecasts of the FRB/US model. The lack of intellectual diversity has likely led to suboptimal monetary policy decisions. In addition, the FOMC’s forecasts have been very wrong, which may also have led to policy mistakes.

Rethinking the Fed’s Tools

Warsh wants to reconsider the Fed’s use of its monetary policy tools, especially its large balance sheet. The payment of interest on reserves that banks hold at the Fed and the rate on overnight reverse repurchase agreements have caused the Fed’s total assets to explode from less than $900 billion in 2007 to almost $9 trillion in 2022, which Warsh notes is “markedly different than projected” when this policy was first proposed.

Warsh has argued that the Fed’s “bloated” balance sheet gives it an outsized footprint in financial markets, which inhibits financial intermediation and distorts market prices. “We should not encourage the financial markets to be the handmaiden of the central bank,” he said. “We should allow asset prices to be an independent source of economic insight and discipline.”

Overall, Warsh seems correct on all three points. It is refreshing to see a Fed Chairman take an objective look not only at Fed policy but at the institutional arrangements that hinder good policy decisions. Warsh’s criticisms are fair and supported by evidence from economic research. Now, we will see if those insights will translate to better policy.

Few areas of public spending generate as much controversy as government funding for the arts. From the debates surrounding the US National Endowment for the Arts’ support of Andres Serrano’s Piss Christ and Robert Mapplethorpe’s exhibitions in the late 1980s to more recent disputes over publicly funded artistic projects, questions about the relationship between art, politics, and taxpayer support continue to resurface. Critics ask why taxpayers should finance works that appear to appeal to only a narrow audience — or that sometimes seem more like political activism than artistic creation. Supporters reply that great art has always depended upon patronage and that markets alone cannot sustain a vibrant cultural life.

Surprisingly, Adam Smith offers a useful perspective on this debate.

This year marks the 250th anniversary of An Inquiry into the Nature and Causes of the Wealth of Nations. The anniversary has inspired renewed interest in Smith’s ideas on free markets, international trade, and the division of labor. Yet one important aspect of his work remains surprisingly neglected: his insights into the political economy of the arts.

Smith is rarely associated with artistic life. Historians of aesthetics usually turn to The Theory of Moral Sentiments, while economists reading The Wealth of Nations tend to focus on prices, trade, taxation, and economic growth. As a result, Smith’s remarkably sophisticated explanation of how commercial society transforms artistic production has received comparatively little attention.

Although The Wealth of Nations contains no chapter devoted to painting, music, theatre, or literature, it offers a coherent explanation of why commercial societies become fertile ground for artistic achievement. Far from viewing commerce as hostile to culture, Smith understood that expanding markets fundamentally changed the conditions under which artists could live and work.

Smith begins with one of the best-known ideas in economics: the division of labor is limited by the extent of the market. As markets expand, individuals can specialize. In small and isolated communities, producers must perform many different tasks because demand is too limited to sustain highly specialized occupations. As commerce connects towns, regions, and eventually nations, specialization becomes increasingly profitable, raising productivity and creating entirely new occupations.

This insight extends far beyond manufacturing. The same economic forces that allow highly specialized craftsmen to emerge also help make possible occupations devoted entirely to intellectual and artistic pursuits. Commerce does not merely increase material wealth; it creates professions that could not exist on the same scale in smaller societies.

Today, we take it for granted that someone can earn a living as a novelist, concert pianist, sculptor, or film composer. Smith reminds us that this is historically unusual. Such careers require large numbers of paying customers. Without sufficiently large markets, few artists could support themselves independently. Many would instead depend upon wealthy patrons, religious institutions, or political authorities.

Smith explicitly classifies painters and sculptors among what he calls the “ingenious arts” (Book I, Ch. X). Like lawyers and physicians, these occupations require years of costly education before practitioners can hope to earn a living. Their training represents an investment in highly specialized human capital, and their compensation must eventually justify that investment.

Yet Smith immediately adds an intriguing observation. The average financial rewards in the “ingenious arts” are often surprisingly modest — not because society undervalues artistic talent, but because so many ambitious young people willingly accept poor economic prospects in pursuit of distinction, reputation, and excellence. Artists, in other words, participate in the same labor market as everyone else, but they are motivated by more than money alone.

This leads to one of Smith’s most profound insights about culture. Before the rise of commercial society, many artists depended primarily upon courts, churches, or wealthy aristocratic patrons. Their livelihoods rested upon the favor of relatively few individuals. Commercial society gradually transformed this relationship. As markets expanded, artists increasingly earned their living through voluntary exchange with a broad public. Instead of serving princes, they served audiences. Instead of pleasing patrons, they competed for consumers.

This transformation represented far more than an economic change. It fundamentally altered the institutional basis of artistic independence. Commercial society made it possible for artistic production to rest upon decentralized demand rather than political or aristocratic favor. In this sense, commerce did not simply commercialize the arts — it democratized their patronage.

Smith nevertheless refused to romanticize commercial civilization. The same division of labor that made artistic specialization possible also created new dangers. His famous warning that workers performing the same simple operations throughout their lives may become “as stupid and ignorant as it is possible for a human creature to become” reflects a broader concern about the intellectual foundations of civilization itself. Extreme specialization increases productivity but may also erode the habits of mind upon which a flourishing culture ultimately depends.

This concern explains Smith’s support for public education. Basic education helps preserve the intellectual and civic virtues that commercial society itself may weaken. Likewise, Smith defends public amusements, including theatres, music, and other forms of entertainment, not because they maximize economic output, but because they cultivate sociability, soften manners, and reduce the appeal of fanaticism. A prosperous commercial society, in Smith’s view, requires more than wealth. It requires an educated and culturally engaged citizenry.

Smith’s analysis also offers an interesting perspective on today’s debates about cultural policy. If commercial society created the conditions under which artists became economically independent, what happens when artistic life once again becomes dependent upon institutional patronage?

In many countries today, governments finance museums, orchestras, theatres, film production, and universities on a scale unimaginable in Smith’s time. Such support is often defended on grounds not entirely foreign to Smith himself: preserving education, encouraging cultural excellence, and sustaining activities that markets alone may not adequately provide.

Yet political patronage can change incentives. Institutions dependent upon government funding become sensitive to changing political priorities, bureaucratic procedures, and prevailing cultural fashions. Public support undoubtedly enables worthwhile artistic projects that might otherwise never exist. But it also influences which projects are likely to receive support in the first place.

Smith’s discussion of the “ingenious arts” highlights another aspect of this transformation. Commercial society asks aspiring artists to bear considerable personal risk. Like lawyers or physicians, they invest years acquiring specialized skills without any guarantee of success. Indeed, Smith notes that the hope of distinction often outweighs purely pecuniary considerations. There is something almost heroic in this willingness to sacrifice economic security for the uncertain prospect of future recognition.

Public funding changes this entrepreneurial dynamic. By reducing some of the economic risks associated with artistic careers, it can undoubtedly encourage valuable creative work. At the same time, however, it may shift part of the artist’s attention away from persuading audiences and toward satisfying the expectations of grant committees, cultural agencies, or public institutions. Patronage has not disappeared; it has simply changed its institutional form.

This does not prove that public funding is undesirable. But it does suggest that the central question is no longer simply whether society should support the arts. It is whether the institutional forms of that support preserve — or gradually erode — the independence that commercial society originally made possible. Contemporary disputes over publicly funded art, especially when artistic expression becomes difficult to distinguish from political advocacy, suggest that Smith’s question remains highly relevant.

Two hundred and fifty years after the publication of The Wealth of Nations, Smith’s forgotten political economy of the arts deserves renewed attention. His real contribution is not a theory of artistic taste but a theory of the institutions that make artistic independence possible. Commerce does more than create prosperity. It enlarges the audience for art, allowing artists to earn their living through voluntary exchange rather than dependence upon powerful patrons. The challenge for our own time is to preserve that institutional independence while continuing to cultivate the rich cultural life upon which every free and civilized society ultimately depends.

Prices fell in June, but inflation did not disappear. 

The Personal Consumption Expenditures Price Index (PCEPI), the Federal Reserve’s preferred measure of inflation, declined 0.1 percent in June, according to new data from the Bureau of Economic Analysis. It was the first monthly decline in the index since April 2020 and a sharp reversal from the 0.5 percent increase recorded in May. Even so, the PCEPI rose at an annualized rate of 4.4 percent over the last six months and is 3.7 percent higher than a year ago.

Core inflation, which excludes volatile food and energy prices, continued to rise. Core PCEPI increased 0.1 percent in June and has risen at an annualized rate of 3.8 percent over the last six months, and is 3.3 percent higher than a year ago.

June’s decline was largely an energy story. Energy prices surged earlier this year after conflict in the Middle East disrupted oil production and shipments through the Strait of Hormuz. In June, tanker traffic resumed and supplies began to recover, pushing crude prices sharply lower. The resulting drop in energy prices is welcome news for consumers. But it tells us little about whether inflation has been brought under control. 

An energy shock changes relative prices. When supplies contract, energy becomes more expensive relative to other goods and services. When supplies recover, some of that increase reverses. These swings can push headline inflation sharply higher or lower from one month to the next without resolving the broader question: Is total spending growing at a rate consistent with price stability?

The clearest sign that monetary policy may remain too loose comes from nominal spending — the dollar value of all final goods and services produced in the economy. Nominal spending grew at an annualized rate of 7.9 percent in the second quarter. Measured from the second quarter of 2025 to the second quarter of 2026, nominal spending increased by 6.5 percent. By comparison, nominal spending grew at an average annual rate of roughly 4.1 percent from 2015 through 2019.

Over time, nominal spending cannot consistently outpace the economy’s productive capacity without generating inflation. If real output can grow around 2.5 percent per year, nominal spending growth of roughly 4.5 percent would be consistent with the Fed’s 2 percent inflation target. Spending growth near 6.5 percent leaves a gap of about two percentage points.

Quarterly figures fluctuate, and monetary policy affects the economy with a lag. The Fed should not react mechanically to a single nominal spending report any more than it should react mechanically to a single inflation report. But if nominal spending continues to grow near its current pace, it will exert persistent upward pressure on prices. Recent core inflation data reinforce that diagnosis: underlying inflation has run close to 4 percent over the past six months despite June’s decline in the headline index.

At its meeting earlier this week, the Federal Open Market Committee held its target range for the federal funds rate at 3.5 to 3.75 percent. Three members dissented in favor of a quarter-point increase. Fed Chair Kevin Warsh also warned against declaring victory on the strength of one favorable report. More than five years of above-target inflation, he said, “cannot be cured in nine weeks—or by a single month of modest price decreases.” Later, when asked how much June’s favorable consumer price index report influenced the decision to hold rates steady, he answered: “not much.”

That warning applies just as well to the latest PCE report.

One month of falling prices is welcome. It is not the same as restored price stability. 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.

The Fed bears primary responsibility for putting it there.

The Federal Reserve held its target range for the federal funds rate at 3.5 to 3.75 percent on Wednesday, over the objections of three committee members, Beth Hammack of Cleveland, Neel Kashkari of Minneapolis, and Lorie Logan of Dallas, who preferred a quarter-point increase. A hold was the likelier bet but far from a sure one: on the eve of the decision, futures put the odds of a quarter-point increase at 31 percent.

The statement could have been mistaken for June’s. Economic activity is “expanding at a solid pace,” inflation “remains elevated relative to the Committee’s two-percent goal,” and supply shocks again take part of the blame. What changed was the vote. Six weeks ago the committee’s decision to hold rates steady was unanimous; on Wednesday, three of the 12 members voted to tighten.

At his second press conference as chairman, Kevin Warsh described an economy showing “impressive resilience,” with job gains keeping pace with the workforce and unemployment little changed. On inflation, he conceded that “five years of high inflation have left a mistaken impression that is hard to shake: that the Fed’s implicit inflation target was somehow above two percent.” His answer: “There is no soft inflation target, there is no soft implicit target — not on this Committee’s watch. There is only a target, and it is two percent.”

The development he chose to highlight was in the bond market. Nominal and inflation-adjusted “real” yields moved “materially higher across the Treasury curve” between the meetings, increases “among the most significant in the last two decades.” The ten-year Treasury yield rose from 4.43 percent to 4.61 percent, and the real ten-year yield climbed from 2.14 percent to 2.41 percent.

Warsh welcomed the move. Now that the Fed has stopped telegraphing its next moves, the practice known as forward guidance. Investors are pricing the data rather than parsing the Fed, “learning to play the ball, not the referee.” He called the shift “a change for the better — and we are just getting started,” adding that “the central bank need not always and everywhere be the center of attention.”

But consider what the market is saying. Yields rose because the data, inflation still well above target and growth still solid, point toward higher rates, the same conclusion three of Warsh’s colleagues reached inside the meeting room.

The dissenters had the stronger case. Inflation has run above two percent for more than five years, and the committee’s own June projections put it at 3.6 percent this year, revised up from 2.7 percent in March. Warsh himself sketched the relevant rule for reporters: a central banker who has met the employment side of his mandate and sees underlying inflation moving higher leans toward tightening.

On the eve of the meeting, standard policy rules, formulas that translate inflation and economic conditions into a recommended interest rate, prescribed a federal funds rate between 3.76 and 6.01 percent, every one of them at or above the top of the Fed’s current range. By any of those rules, Wednesday’s vote should not have been close.

The best argument for waiting was June’s consumer price report, which showed prices falling 0.4 percent. However, Warsh acknowledged that five-plus years of above-target inflation “cannot be cured in nine weeks — or by a single month of modest price decreases.”

Standing still, moreover, is not the same as standing firm. Interest rates across the economy have been rising because borrowing demand is strong and inflation has stayed high. When the going rate for money rises and the Fed keeps its own rate fixed, policy does not stay put; it gets easier, the way someone standing still on a down escalator drifts lower. On Wednesday the Fed did not simply decline to tighten. It let policy loosen, with inflation still running well above its target.

Asked why the funds rate should not already be higher, Warsh answered that rates are higher than they were 42 days ago, the market saw to that. But the market cannot do the Fed’s job. Treasury yields rose in part because investors expect the committee to deliver the increase it just declined to make: futures put the odds of a quarter-point hike in September at 62 percent. If the Fed never follows through, those market rates will come back down, and the tightening Warsh welcomed will disappear with them.

To be sure, Warsh has led the Fed for barely two months; the inflation problem he inherited is more than five years old. But inflation, as he has long argued, is a choice the central bank makes, and on Wednesday he said the Fed’s credibility “rests on performing our duties, and delivering on our responsibilities.” For a central bank that has missed its target for five years, performing means one thing: getting inflation back to two percent. Wednesday’s decision moved policy away from that goal, not toward it.

Since 2024, seven states have made it a crime to sell lab-grown meat. Florida went first, in May of that year. Texas became the seventh to do so, with fines that can reach $25,000 a day. The meat in question is grown from cells in a bioreactor tank, and most of these states banned it before a single package reached a store. Meanwhile, in Washington, a bill called the DAIRY PRIDE Act would strip the word “milk” from the almond and oat cartons in your grocery cooler. Each measure comes wrapped in the same promise: it is here to protect you from confusion. And in each case, the people who asked for it are the ranchers and dairy farmers who sell the older product.

This is the usual shape of a consumer-protection law. On the label it is a shield for you. In practice, though, it is a weapon for whoever already holds the market. I study how industries capture the rules meant to bind them, and the tell is almost always the same: the law does less to inform the buyer than to disarm a rival. It is also an old trick. A little over a century ago, a President of the United States had to sit down and rule on what the word “whiskey” means, because a fortune rode on the answer.

The year was 1909, and the President was William Howard Taft. The word had two owners. One was grain spirit aged for years in charred oak, slow and dear to make. The other was a neutral spirit cut with water, touched up with color and flavor, ready by evening. Both sold under the name “whiskey,” and a buyer holding a sealed bottle could not tell which he had paid for. Economists call that the Market for Lemons: the seller knows what the buyer cannot, and the cheap version drives out the good. The grievance was real. Some of the cheap stuff was rotgut.

A real grievance is exactly what a rent-seeker needs — someone who seeks government privilege instead of earning customers. The economist Bruce Yandle named the pattern Bootleggers and Baptists. Sunday liquor bans last, he noticed, because two camps want them: the Baptists, who want the sin stopped, and the bootleggers, who want the competition closed. The moralist brings the votes and the halo; the interest brings the motive and the bill. The whiskey fight is that pattern in its purest form, because here the bootleggers were real distillers and the Baptist was a chemist.

His name was Harvey Wiley, and he believed. As the government’s chief chemist he had built his fame hunting tainted food, feeding his young “Poison Squad” measured doses of the preservatives then common in the American pantry, borax and formaldehyde among them. To Wiley, blended whiskey was a counterfeit, and he wanted the word reserved by federal order for aged straight whiskey alone. Everything else would be stamped “imitation.” That was exactly what the old bourbon houses, led by Colonel E. H. Taylor, had spent years trying to arrange.

They had already won the first half. The Bottled-in-Bond Act of 1897 offered a bargain. A distiller who aged his whiskey four years under federal lock could seal each bottle with a green government stamp bearing the face of Treasury Secretary John Carlisle. It was the United States vouching for what was inside — the country’s first federal consumer-protection law, helping to inspire the Pure Food and Drug Act nine years later. The rivals who could not meet the terms would get the other half of the deal: the word “imitation” on their label.

Here is the uncomfortable part. Nobody bought Wiley. He was sincere, and when Taft’s ruling let blends keep the name so long as they disclosed their contents, he was furious, fought it, lost, and left the Bureau within a few years. He was not corrupt; he was aligned. A true believer and a purchased official leave the same fingerprints. One wants the rival’s name erased, the other is paid to erase it, and both push the same way. The coalition never has to bribe anyone. It only has to find a crusader whose convictions already point its way. You do not need villains for capture. You need alignment.

And alignment does its damage by moving the choice from the market to the state. Beat a rival with a better bottle and a producer lives to compete tomorrow. Beat him in the federal regulations, and his product is a fraud by decree, on every shelf, all at once. That is why a fight over one word drew more money than any advertising campaign could. Winning the government’s definition beats winning a customer, because it binds the whole market at a stroke. The state, not the buyer, picks who may sell.

Back to the cooler. In 2025 a bipartisan group of senators reintroduced the DAIRY PRIDE Act, which would reserve “milk,” “cheese,” and “yogurt” for products that come from an animal. Its sponsors call the plant-based versions of dairy “imitation,” the very word the bourbon men wanted, and they claim it prevents “consumer confusion.” But the FDA’s own consumer research found the confusion was not there; no shoppers think almond milk comes from a cow. The confusion was never the point. The label was.

The meat bans run the same play with a heavier hand. Seven states have outlawed cultivated meat outright, most of them before it was even for sale, in the name of defending “real food.” The push comes from the cattle industry. Nebraska, where cattle and livestock are a $31.6-billion business, banned cultivated meat at the governor’s request. Grown meat may or may not have a future on its merits — these laws make sure the question never reaches a shelf. Win the definition, and you win the market by decree. Taylor understood that in 1897. So do the ranchers now.

The honest worry underneath all of this is simple: is the thing what it claims to be? That worry has an answer that needs no ban. You can watch it work in the kosher aisle. Kosher certification is private, and competitive: the Orthodox Union is one of roughly 300 organizations that inspect a product and stake their name by stamping it. The uncertified box is not outlawed or branded a fraud. It just sits on the shelf for the shoppers who don’t care about the mark. “Organic” started the same way, before Washington absorbed the label. A private mark informs, and lives or dies by whether you trust it. A government mark decides who is allowed to sell.

So the next time a quality or safety standard arrives with a promise that it is there to protect you, put one question to it. Ask whether it gives the good product a way to speak, or takes the rival’s name away. A rule that has to outlaw the other man’s product, or brand it a lie, has stopped describing the milk, the meat, or the whiskey. It has started describing the market, and who is allowed to compete.

Do you know about the Colville Reservation in Washington state? Few do except locals, or those familiar with American Indian affairs. What Colville can teach the rest of the nation stems from its recent experience with broadband, which illustrates a great deal about who really gains from technological innovation.

A federal report found that in 2013, one third of those living on tribal lands lacked broadband access. A federal program was introduced, and the staggered expansion allows us to see the effects of broadband access on per-capita income, participation in the labor market, and employment rates. In 2026 Thomas Stratmann and Pradyot Sharma released new research that found income per person rose by $5,500 relative to reservations nearby. Employment rates and labor force participation also rose, 6.1 percentage points and 10.3 percentage points, respectively.

None of this implies that every government infrastructure project creates comparable value, or that public investment is the best way to expand access. The point is narrower: when people gain access to a genuinely valuable innovation, most of the resulting gains accrue to those who use it rather than those who provide it.

Once these communities were granted licenses for wireless data service, connectedness brought opportunity. Better information facilitated job searches and promoted better job matches. Lower prices and lower transaction costs extended household budgets and improved business margins just as e-commerce has elsewhere. As a result, costs fell.

Who gained, and how much, when broadband came to town?

In one sense, it’s almost the wrong question. The average cost of a US broadband internet package is between $35 and $150 per month. Colville gives us a rough indication of the economic value of that service — to consumers rather than providers.

Asked another way, how much would you need to be paid to never have internet access again? Students in my principles of economics course routinely claim they’d require $10,000 a month or more. By any measure, broadband looks to be a bargain.

The monthly bill for connectivity, in other words, vastly understates the social value of the internet. Broadband providers may charge a monthly fee, but the value created by connectivity shows up elsewhere: better job searches, better matches, easier access to forms and services, faster organizational coordination, and higher participation in wage work.

Many innovations that enter the market follow similar trajectories. In the nineteenth century, barbed wire sold for four cents a pound, but allowed farmers to prevent considerable losses from animal escapes and to protect high-value crops. By reducing the cost and increasing the utility of fencing, barbed wire is estimated to have increased the value of farmland by a full one percent of GDP. National food brands charge a few cents more by offering consumers the assurance of reputation. Others pioneered preservation methods, eliminating many costly problems of adulteration and food poisoning. The same logic applies to computers, cellphones, landline phones, telegraphs, meatpacking, pharmaceutical drugs, automobiles, fax machines, tractors, coal engines, electrical utilities and appliances, air conditioning, and hundreds more inventions.

Each of these innovations produced massive gains to society, and most of the value is captured by the consumer, not the inventor or even the producer. Nobel laureate William Nordhaus tried to calculate how much value is captured by innovators and producers, and relative to how much is passed on to consumers. Using different assumptions and approaches, he found that 1.3 to 2.2 percent of the total value generated is captured by innovators of the technology, and the rest is passed on to consumers. Buyers ultimately receive this value in lower costs, time savings, better quality goods and services, and entirely new opportunities.

What Nordhaus found tells us why the Colville microcosm shouldn’t surprise us — nor should the gains from barbed wire, branded, computers, and all the others. Innovations rarely benefit their inventors the most. Profit comes from the value created by those who adopt the innovation, though those outcomes may be quick and obvious or slow and subtle.

So, when someone sermonizes about free markets enriching only capitalists, remember that a reservation in Washington gave us yet another iteration of the rebuttal: profits make innovation worthwhile for entrepreneurs, but the largest gains usually flow to everyone else.