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.

Alexis de Tocqueville was born on July 29, 1805. Two hundred and twenty-one years later, he has become a man whom every political tribe seeks to claim as its own. The most ardent suitors at the moment are the post-liberals. Patrick Deneen and the national conservatives have made Tocqueville something close to a patron saint, finding in his portrait of democratic America an early glimpse of liberalism’s fatal contradiction. Liberal societies, they argue, dissolve the moral and communal supports on which they depend, until nothing is left but isolated individuals standing alone before an enormous state. The remedy, they say, is to recover virtue, religion, and community, and to enlist a government willing to form its citizens toward the common good.

The first half of this story is hard to argue with. Tocqueville indeed believed that a free society draws on reserves of virtue it does not itself create. And he believed that a people interested in nothing beyond its own comfort would eventually lose the capacity to govern itself. He sometimes put the point more strongly still. “Despotism may govern without faith,” he wrote, “but liberty cannot.” 

But the post-liberals have Tocqueville exactly backwards on the question that actually divides us, which is not whether free societies need virtue but where a free society is supposed to get it.

A careful reading of Tocqueville reveals that the cure he prescribed is very nearly the opposite of the one they are selling.

What Tocqueville Granted 

Tocqueville thought that religion was indispensable to American freedom. One of its most important roles, he believed, was to serve as a public institution that gave democratic citizens fixed points in a world of flux. Tocqueville believed that the mores of a people — their habits, beliefs, and settled ways of living — mattered more to the survival of free government than its written laws.

“There is no country in the world,” he wrote, “in which political institutions can prove a substitute for common sense and public morality.”

Notice, though, that there are two different claims tangled together here. One is that a free people need virtue. This is the sound core of the post-liberal worry. A liberalism that pictures the free individual as requiring no formation, no restraint, and no inherited traditions is living on borrowed capital, and eventually the loan comes due.

The other claim is that freedom requires not merely virtue but religious faith. This claim is far more contestable, especially in our secular age. Nevertheless, we can grant it without handing the argument to the post-liberals. That’s because the real debate is not about ends but about means.

In a free society, what is it that actually cultivates virtue and sustains faith? It turns out that Tocqueville had an answer to this question. But it is far from anything on the post-liberal agenda.

Where Virtue Comes From 

In America, Tocqueville found a wide variety of institutions aimed at improving the character of the people. Crucially, however, the vast majority of these institutions belonged to society rather than the state. The thing that struck Tocqueville most forcibly was the sheer density of voluntary association.

“Wherever at the head of some new undertaking you see the government in France, or a man of rank in England,” he wrote, “in the United States you will be sure to find an association.”

Americans banded together to build schools, churches, hospitals, and a thousand other things a Frenchman would have waited for the state to provide. These associations were a kind of practical school where people developed customs of cooperation, responsibility, and self-command. Virtue, for the American, grows out of habit, and habit out of free action repeated until it becomes second nature.

The same was true of self-government. Tocqueville called the New England township the place where Americans learned to be free.

“Town-meetings are to liberty what primary schools are to science,” he wrote; “they bring it within the people’s reach, they teach men how to use and how to enjoy it.”

The citizen who managed the affairs of his own town acquired the habits a free people cannot do without, and acquired them in the only way such habits can be acquired: by exercise.

And then there is religion, where his argument is sharpest and least convenient for the people now quoting him. American religion was powerful, Tocqueville thought, precisely because it kept its distance from political power.

“Religion in America takes no direct part in the government of society,” he wrote, “but it must nevertheless be regarded as the foremost of the political institutions of that country.”

He had seen what happened in Europe when churches climbed into bed with regimes, and he stated the lesson clearly: “The Church cannot share the temporal power of the State without being the object of a portion of that animosity which the latter excites.”

Tying a faith to the state only weakens it, binding its fortunes to a government that will someday fall and to all the resentments that government gathers on its way down.

The pattern here is clear. Every one of these institutions is local, participatory, and independent of central power. Each does its work from below, through free people acting for themselves. For Tocqueville, neither virtue nor faith is the kind of thing that can be handed down from above.

The Cure That Is the Disease 

Tocqueville would have been alarmed, then, by the post-liberal agenda, or at least by its most ambitious version. A post-liberal who wanted only to defend the family, the church, and the school against the forces dissolving them would find Tocqueville a friend, not a critic. The alarm comes with the further step of enlisting the central state in the work of moral formation.

Using the power of the state to make citizens good would, on his account, only deepen the very isolation and passivity of democracy that it promises to heal.

His most famous prophecy was of a new kind of despotism, gentler than the old and thus much harder to resist. He imagined “an immense and tutelary power” rising over a nation of busy private individuals and taking the whole business of living off their hands. The power would be “absolute, minute, regular, provident, and mild.” It would labor willingly for their happiness, but would insist on being “the sole agent and the only arbiter of that happiness,” and would keep them, he said, in “perpetual childhood.”

Tocqueville’s target was a state that frees its people from the burden of an adult responsible life, one that takes the trouble of living off their hands and leaves them little to do but enjoy themselves. This comforting paternalism is, of course, not what the post-liberals are after. But in making the state the arbiter of virtue, they produce the same infantilizing effect in the domain that matters most. The post-liberal state relieves its citizens of the hardest and most personal labor there is: the labor of working out for themselves how to live.

That labor is precisely the mechanism through which character develops. Virtue is the fruit of habit, and the habits a free people most need ripen only where they are practiced. Law can restrain vice and shore up the institutions in which such practices happen. What it cannot do is practice for us. A government that commands its citizens into goodness gets the outward act, but the active virtue Tocqueville admired has to be grown, and it grows only where people govern themselves.

To be clear, this is not an argument against coercion as such. Tocqueville was no libertarian, and the townships he praised as schools of virtue were, after all, institutions of coercive government. But the authority of the townships was local, plural, and answerable. It was an authority that citizens could influence through voice and, if necessary, escape through exit.

What Tocqueville feared was not government but administrative centralization — the drawing of every local and private concern into the central state. Let a centralized power “penetrate into the privacy of individual interests,” he wrote, and “freedom would soon be banished.”

The post-liberal virtue-state is that penetration carried to the soul: the formation of souls lodged in the central state, the one task he thought had to stay dispersed, handed to the institution he trusted least to hold it.

In the end, Tocqueville cared less about who held power than about how much of it had pooled in one place.

“There is,” he wrote, “and I cannot repeat it too often, there is in this matter for profound reflection for those who look on freedom as a holy thing, and who hate not only the despot, but despotism.” 

When he felt the hand of power lie heavy on him, he said, he cared little to know whose hand it was, and was no readier to bow because it was “held out to me by the arms of a million of men.” He might have added that it makes little difference whether such a power reaches for our property or for our souls.

Classical liberals have always feared concentrated power in the first of those domains, and met it with competition and dispersion rather than gentler masters. The post-liberal virtue-state asks us to make an exception in the second. But a government strong enough to make us virtuous is a government strong enough to make us anything it likes. That alone is reason to keep the making of virtue where Tocqueville found it: in the hands of free people, governing and improving themselves.

The idea of a “pink tax,” that women commonly pay more for equivalent goods, has sparked public debate and inspired various policy proposals. This concept gained prominence after the New York City Department of Consumer Affairs released its 2015 report From Cradle to Cane: The Cost of Being a Female Consumer, describing many examples of women’s products costing more than nearly identical men’s products. While the report documented many cases of women paying more than men for similar products, the causes of these differences are more complicated than the notion of a straightforward tax. Understanding how prices emerge in a market economy offers another way to interpret these disparities. 

The NYC study offers several examples intended to highlight real-world price differences for women’s products. Early in the study, the authors acknowledge that some price disparities are justifiable but claim that “these higher prices are ‘mostly unavoidable for women.’” 

Some cases raise as many questions as they answer. One example in the report compares two Radio Flyer scooters sold on Target’s website: a standard red version priced at $24.99 and a ‘pink sparkle’ version priced at $49.99. The report treats this difference as an unavoidable burden on women or parents of girls, yet consumers remain free to purchase either product. Paying for the higher-priced pink version reflects a preference for a particular product design, rather than an unavoidable tax. 

Even the study’s own data suggest a more nuanced picture. Women’s products were priced higher 42 percent of the time, men’s products were higher 18 percent of the time, and prices were equal in the remaining 40 percent. Such findings are more complicated than the notion of a uniform tax imposed on women. 

Critics might push back against the scooter example as an outlier. The strongest version of the pink-tax argument isn’t really about isolated items like a single scooter. Rather, critics point to broader patterns across categories where comparison is harder to avoid, such as dry cleaning that charges more for women’s shirts, or personal-care products like razors marketed to women at a premium. In these cases, critics argue, “choice” is a weaker defense, since substitutes aren’t always available and the men’s and women’s products do not appear, at first glance, to differ in production costs.

This is a fair challenge, but it still doesn’t establish gendered pricing as the cause. Dry cleaners often cite genuine cost differences; women’s shirts frequently require hand processing or different cleaning methods altogether due to design and fabric. Personal care markups may reflect smaller batch sizes, different formulations, or packaging costs rather than gender per se. However, even if production costs are identical, a price difference alone does not establish bias any more than airlines charging more for aisle seats constitutes discrimination against passengers who prefer extra legroom. 

Economists associated with the Austrian school, beginning with Carl Menger and later developed by Friedrich Hayek and others, emphasized that value is subjective rather than inherent in goods themselves. As Peter Boettke, Don Lavoie, and Virgil Storr observe, subjectivism lies at the center of the Austrian tradition and directs attention toward the meanings and preferences individuals attach to goods and services. Earlier theories, such as the labor theory of value, suggested that value derives from production inputs, but experience shows otherwise. A hand-turned chair requiring many hours of labor may still garner no buyers, while a designer handbag costing relatively little to produce may sell for thousands. 

More than a century before the Austrian school emerged, Adam Smith observed the famous water-diamond paradox. Water is essential to life, yet it is generally inexpensive because it is abundant. Diamonds, though far less necessary, command high prices because they are scarce and highly valued by consumers. 

These examples show why price differences between men’s and women’s products are not necessarily discriminatory. Prices emerge from consumer preferences, perceived value, and supply and demand. If pink items are valued more highly, companies rationally price them higher. Even identical production costs can result in different prices if a segment of consumers is willing to pay more for one variant. Conversely, if people do not value a product as highly, they will pay less. 

Price differences should not automatically be interpreted as evidence of bias. More commonly, they are signals, the accumulated result of millions of individual preferences and purchasing decisions made across countless transactions. No single firm sets these prices arbitrarily. Prices emerge from the interaction of producers and consumers responding to the information available to them. 

The pink tax framing, while an entry into an interesting discussion, is misleading. A tax is imposed from above and remains just as it was legislated. Unlike a traditional “tax,” no one is forced to pay markup for women’s items. Prices respond, however imperfectly, to what consumers actually value. If prices are to change, the most direct mechanism is not legislation, but the accumulated force of consumer choices over time. Prices are not obstacles imposed on consumer preferences, but reflections of them. 

The Federal Open Market Committee is expected to leave its policy rate unchanged at this week’s meeting, with CME FedWatch assigning close to a 65 percent probability that the FOMC will maintain the current target range of 3.5 to 3.75 percent. For the second meeting in a row, that expected outcome is at odds with the guidance provided by the leading monetary rules. This raises the question of whether the new Warsh-led Fed is prepared to follow through on its promise of delivering price stability.

What the Rules Say

The latest Monetary Rules Report from AIER’s Sound Money Project shows that the Fed’s current policy rate falls below the range recommended by leading monetary rules. All twelve estimates in the report indicate that the Fed should raise its policy rate at the upcoming meeting.

The strongest case for tighter policy comes from Taylor-type rules. These rules respond to both inflation and labor market conditions, raising the recommended policy rate when inflation exceeds the Fed’s target unless that pressure is offset by significant economic weakness. With inflation still well above 2 percent and little evidence of substantial labor market weakness, both factors point toward a less accommodative policy stance.

The original Taylor Rule produces the most aggressive estimate, prescribing a federal funds rate of 6.01 percent. A modified version, which places more weight on the current policy rate and uses a forecast of future inflation, produces a lower estimate of 4.24 percent. Even after incorporating those more gradual and forward-looking features, however, the rule still prescribes a federal funds rate roughly half a percentage point above the current target range.

Rules based on nominal GDP, or total dollar spending in the economy, tell a similar story. A nominal GDP growth rule, which calls for raising rates when nominal GDP growth exceeds 4 percent, points to a 4.25 percent policy rate. A nominal GDP level rule, which recommends raising rates when total spending exceeds a steady growth path, produces the lowest estimate, at 3.76 percent. That prescription is very close to the upper bound of the current target range. Nevertheless, it is also consistent with a 25-basis-point hike, especially when considered alongside the other rules.

A Test of the Fed’s Credibility

The first FOMC statement of the Warsh era plainly stated, “The Committee will deliver price stability.” With inflation still well above the Fed’s 2-percent target and every leading monetary rule pointing toward a rate increase, will Warsh and his colleagues follow through on that promise and tighten monetary policy? The market considers a hike possible but unlikely, with CME FedWatch pricing in roughly a 35 percent probability of a 25-basis-point increase.

The committee can offer several reasons for waiting at least one more meeting before raising rates. The latest inflation data showed a notable decline in June, with the year-over-year CPI inflation rate falling from 4.2 percent in May to 3.5 percent in June, while overall prices declined by 0.4 percent on a monthly basis. Officials may want to see whether that trend continues through the next September FOMC meeting before tightening policy. The Fed will also likely receive some assistance from a planned change in how the BEA calculates the Fed’s preferred inflation gauge, the PCE price index, which may trim a few tenths from the PCE inflation rate this fall. Estimates of second-quarter growth have also weakened. The Atlanta Fed’s GDPNow model currently puts real GDP growth at just 1.7 percent, down from the first quarter’s 2.1 percent pace. 

Taken together, these factors make a plausible case for waiting. If inflation falls toward 2.5 percent and real growth slows to roughly 1.5 percent, nominal GDP growth would return to the NGDP growth rule’s 4 percent benchmark by September. Under that scenario, the current policy rate might prove appropriate, and a July increase would look premature.

The problem with this argument is that it assumes too much. The conflict with Iran is re-escalating, and despite energy prices declining from May to June, average gas prices are already pushing back over $4 while diesel prices exceed $5. The Fed should generally avoid overreacting to a temporary supply shock, but it should also be cautious about assuming inflationary pressures will resolve on their own, especially given the uncertain path of the conflict. And while the BEA update may bring the Fed’s preferred inflation rate down slightly, Fed officials should not rely on methodological revisions to deliver price stability.  Lastly, even if real GDP growth in the second quarter comes in a bit below 2 percent, NGDP growth would likely still exceed 4 percent without any signs of imminent weakness in the labor market. Overall, if the Warsh Fed is serious about delivering price stability, it’s time to start backing up words with actions.

Words and Actions 

Chair Warsh has called for less groupthink and more open disagreement inside the FOMC. Dallas Fed President Lorie Logan may provide an early test of that commitment by making the case for higher rates at the July meeting. With nearly half of FOMC participants projecting at least one increase in 2026, she may find considerable support even if a majority is not yet prepared to act.

If the Fed leaves rates unchanged this week, the September meeting will take on added importance. Another two months of inflation near current levels would make it increasingly difficult for the Committee to reconcile its commitment to deliver price stability with its reluctance to raise rates. The leading monetary rules already indicate that policy is too accommodative. If inflation remains elevated, the Warsh Fed will eventually have to back its promise of price stability with action.

In September 2025, two months before the election, Democratic candidate for New York City’s mayoral Election, Zohran Mamdani, pledged to take on FIFA, the world’s largest soccer federation, with a bold proposal. Celebrating “Game Over Greed,” the campaign sought to end dynamic pricing, the practice of adjusting prices in real time based on market demand and scarcity. Zohran’s petition would made three demands: “No dynamic pricing, Reinstatement of the cap on ticket resales; 15 percent of tickets set aside for residents at a discount.” Much of the discontent among fans came from the fact that FIFA’s ticket pricing would allow seats initially sold for affordable prices to be marked up by thousands. Critics argued that these market practices were another form of price gouging by FIFA, exploiting historically high demand. 

Now, with the tournament finished, the debate has intensified among fans and officials. The attorney general of both New York and New Jersey issued subpoenas to FIFA, investigating ticketing practices and citing a 34-percent price hike across all ticket categories. Reports showed that prices for seats at the World Cup Final in MetLife Stadium in the New York/New Jersey area reached new heights. Questions of how to allocate that game’s 80,663 seats among five billion soccer fans invited scrutiny of FIFA’s pricing practices and the broader use of dynamic pricing. 

So what is dynamic pricing exactly, and how does it work? Unlike traditional ticketing, where prices are predetermined at a fixed rate regardless of conditions, dynamic pricing uses algorithms to adjust prices based on supply, demand, remaining inventory, and purchase timing. Companies adjust rates based on demand while also allocating scarce tickets to the consumers who value them most (as measured by willingness to pay). For example, if thousands of fans want to buy tickets to a playoff game, teams raise prices in response to stronger demand. It also helps consumers, though, by allowing them to get true market prices for tickets, especially in conditions that might drive down demand, such as a game on a hot Tuesday afternoon or a team performing poorly late in the season. Dynamic pricing allows prices to move (up or down and often both) toward a market-clearing price, as supply and demand change. 

Sports teams have employed demand-based and variable pricing models for decades. Teams set their ticket prices in response to team quality, fan interest, market size, and even business concentration. The Yankees, Cowboys, Knicks, Dodgers, and others have capitalized on that flexibility, setting prices based on team success, national branding, and broader economic activity. Sports ticket pricing has long been tied to tiered systems, with dynamic pricing adjusting those tiers in real time based on various indicators.

This is consistent with firms’ expected behavior. In a 2012 study, researchers Shapiro and Drayer examined ticket pricing behavior across MLB teams, accounting for both primary and secondary markets. Their results supported the hypothesis that baseball teams maximized ticket prices, like any other competing firm. MLB teams were responsive to ongoing shifts in demand, adjusting prices based on the strength of the matchup, day of the week, current team success, and seasonal milestones. In other words, teams will use dynamic pricing to gain up-to-date data about demand, maximizing the profitability of each transaction. Both teams and fans discover the market-clearing price. Fans evaluate the opportunity costs and may choose lower-demand games that better fit their budgets. 

Critics argue that the World Cup is different, as fans may travel around the world to find themselves priced out at the gate. With a limited number of games and incredibly high demand, few affordable options are available for fans to attend games without spending a fortune. Accusations of “price gouging” view the system itself is flawed, with prices continuing to rise given as evidence that FIFA exploiting its market power at consumers’ expense. 

We watched this scenario play out in real time as fans scrambled to purchase tickets to the World Cup final in New York/New Jersey. As defending champion Argentina prepared to take on Spain, Forbes reported an average ticket price of over $11,000 (the highest ever recorded for a sporting event). Few fans could afford to purchase tickets, prompting online backlash against FIFA and dynamic pricing. 

No failure of the market is necessary here. Prices are logical consequence of an extraordinarily high demand from fans chasing a fixed supply of seats. Allegations of “price gouging” by corporations, and attempts to fix them with policy, will do little to shift either factor.

(Some attorneys general are investigating allegations involving deceptive practices or broken promises in the ticketing process. Policymakers should distinguish between high prices caused by scarcity and deceptive or fraudulent practices, which are legitimate cause for official inquiry.)

More to the point, Mamdani’s proposal to FIFA to end dynamic pricing for the World Cup would not have “ended dynamic pricing,” but would likely make the problem worse. In fact, banning dynamic pricing would push more ticket sales off official sites and into secondary markets, where scalpers can capture the premium created by scarcity

Imagine FIFA sells tickets to a game at $100 apiece. The game may sell out immediately, with resellers and automated bots acquiring many of the available tickets. In turn, scalpers can charge prices close to or above the market-demand price that fans would have been willing to pay on FIFA’s own site, raking in a large profit margin on each transaction. The swap reduces FIFA’s potential revenue (by $500, if a $100 ticket were resold for $600), gained by the scalper rather than the federation itself. The buyer is no better off.

This may not seem like such a big deal for a global federation or national sports league; however, its effects will be greater on smaller franchises with tighter margins. Local clubs, newer leagues, and smaller venues rely on revenue from high-demand games to subsidize their high fixed operating costs. Stripping them of the opportunity to set prices based on demand may be destructive to many smaller operations. 

Perhaps the great irony of Mamdani’s proposal is that even the most well-intended price caps couldn’t reduce what fans ultimately pay. Demand remains unchanged, so some fans still pay the market rate for tickets regardless of the supplier, while others will be priced out, or encounter sellouts or lotteries. What price-fixing policy does is transfer FIFA’s “excess revenue” to a middleman reseller. By widening the gap between face value and resale value (resale premium), the attempted “fix” attracts professional scalpers and bot networks to purchase scarce inventory before regular consumers can access it, forcing them to buy on a less-transparent gray market.

While slogans such as “Game Over Greed” may resonate intuitively, policymakers should carefully consider the unintended economic consequences of restricting dynamic pricing. With states already reviewing bills to ban dynamic pricing across a variety of entertainment industries, alongside outdated or inconsistently enforced anti-scalping laws, these proposals are gaining more traction in mainstream policy debate. 

Dynamic pricing does not create scarcity. It exposes it. Banning market prices won’t create more seats in the stadium — it will only change who profits. If policymakers want to help fans, they should allow prices to reflect real market conditions.