One morning in Boston in 1895, as K. C. Gillette stood before the mirror, a brilliant idea flashed across his mind. “As I stood there with the razor in my hand, my eyes resting on it as lightly as a bird settling down on its nest — the Gillette razor was born. I saw it all in a moment, and in that same moment many unvoiced questions were asked and answered more with the rapidity of a dream than by the slow process of reasoning. I stood there before that mirror in a trance of joy at what I saw.”
He quickly wrote a letter to his wife, “I have got it; our fortune is made.”
Simple ideas often appear obvious in retrospect, but simplicity is usually the far edge of genius.
Men’s facial fashions were shifting rapidly in the late 1800s: the beard was out, the clean-shaven chin was in, and the mustache had to be perfect. To maintain this look, men either visited the barber two or three times a week, or shaved themselves, a risky alternative. The “cutthroat” straight razors demanded constant sharpening, and punished even small mistakes — especially for beginners or anyone pressed for time.
Gillette’s insight was simple: don’t sharpen the blade — replace it with something safe, affordable, and convenient.
The Long Road to Innovation
King Camp Gillette was born in 1855 in Wisconsin and grew up in Chicago in a family of tinkerers. His father was a part-time patent agent who encouraged experimentation and invention, while his mother obsessed over efficiency and avoiding wasted time.
After the Great Chicago Fire destroyed the family business in 1871, Gillette went to work as a clerk before moving to New York City and becoming a traveling salesman. For nearly two decades he worked various jobs while constantly trying — and mostly failing — to invent useful products.
In 1890, he joined the Baltimore Seal Company, where the company president had invented the disposable Crown Cork bottle cap. He told Gillette: “Why don’t you invent something that, when once used, is thrown away, and the customer keeps coming back for more?” Gillette never forgot the advice.
It took Gillette six years to transform his brilliant shaving revelation in Boston into reality.Gillette noted, “The razor was looked upon as a joke by all my friends. A common greeting was, ‘Well, Gillette, how’s the razor?’ If I had been technically trained, I would have quit.” He visited metallurgists at the Massachusetts Institute of Technology (MIT), who assured him his idea was impossible.
Building the Impossible Razor
He finally found engineer William Emery Nickerson, who believed the idea was possible, and together they worked several years to perfect the thin blade, double-edged safety razor.
Gillette applied for a patent in 1901, but struggled to raise the capital to begin production until John Joyce, an old friend and businessman, invested $5,000 in the venture.
An invention and a patent are only the beginning. They do not become true innovations until they can be produced profitably, and at scale. Perhaps even more important than the blade itself, Nickerson designed the machinery that made mass production possible. Gillette understood that learning curves, precision manufacturing, and scale would not merely improve shaving — they would revolutionize it.
The company produced its first razors in October 1903. Sales for the inaugural year: 51 razors and 168 blades. The patent was formally issued in 1904, and the company sold 91,000 razors and more than two million blades that year.
Transformation is often invisible before it becomes inevitable.
Mass Production Arrives
A big break came in World War I when Gillette was able to sell the US government 3.5 million razors and 32 million blades. Clean-shaven faces ensured a proper seal for gas masks. Gillette had to hire more than 500 new employees, who worked around the clock to fulfill the order.
An invention became infrastructure.
Gillette became forever associated with the famous phrase: “Give ’em the razor; sell ’em the blades.” There is no evidence he actually said it, but no sentence better captures the revolution he unleashed.
Engineering Repeat Consumption: a New Business Model
Ever obsessed with efficiency, Gillette viewed the old barber-shop culture as an enormous waste of human time and productive energy. One 1906 advertisement boldly claimed: “If the time, money, energy, and brain-power wasted in the barber shops of America were applied in direct effort, the Panama Canal would be dug in four hours.”
Gillette was not merely inventing a product to save time. He was inventing a business model. The razor was the platform; the blades created the recurring stream of revenue. More than a century before subscription software and hardware-as-a-service, Gillette understood the power of repeat consumption driven by convenience, affordability, and habit.
To sustain recurring blade sales, Gillette needed more than utility. He needed ritual, loyalty, and identity.
This is where advertising became his accelerator. His advertisements were among the first to harness the persuasive power of celebrity culture. One ad featured John McGraw, legendary manager of the New York Giants, declaring: “It makes shaving all to the merry.” Another showed George Washington holding a safety razor beside the slogan: “George Washington Gave an Era of Liberty to the Colonies. The Gillette Gives an Era of Personal Liberty to All Men.”
Gillette later enlisted baseball star Honus Wagner — perhaps the most famous athlete of his generation — and the campaign was a sensation. Gillette helped pioneer a new era of advertising in which products were no longer sold merely for their utility, but for the image and lifestyle they projected.
Under Gillette, shaving ceased to be a tedious chore performed with a dangerous blade. It became part of the modern masculine ideal. The right razor promised confidence, precision, cleanliness, and success — the same virtues embodied by the athletes and heroes in his advertisements.
Later, using an elaborate formula, Gillette figured that the monetary value of the time men saved each year using his razor was equal to the entire capital of US Steel, valued at around $1.5 billion at the time.
Unlocking Abundance Through Innovation
Yet beneath the marketing was a deeper insight: wealth is measured in liberated human time. Gillette’s true innovation was not the razor itself, but the gift of time — our scarcest resource.
Today, there are almost three billion adult men on the planet. If Gillette’s razor innovation saves each of them just five minutes a day, that amounts to 250 million hours liberated every single day.
Saving five minutes a day shaving was nice, but the biggest savings involved the time it took to earn the money to buy a shave.
In 1906, entry-level workers — equivalent to today’s fast-food restaurant employees — were earning around 10 cents an hour. At the time, it typically cost 10 cents to get a shave at a barber shop. Work an hour, get a shave. That year, you could buy the new Gillette safety razor with 12 blades for $5, a time-price of 50 hours. At the recommended ten shaves per blade, the price of a smooth face dropped 75 percent, to 2.4 cents.
There has been lots of razor innovation over the last 120 years. In fact, King Gillette said, “We’ll stop making razor blades when we can’t keep making them better.”
Today, you can get the Gillette Fusion5 ProGlide with six blade cartridges for $29.97. With average earnings at a limited-service restaurant today closer to $19.00 an hour, the time price is around an hour and 35 minutes for these workers. For the time it took to buy one in 1906, you get 31.6 today. Having tried one of the original Gillette blades and the Fusion 5, I can testify it’s like the difference between driving a ‘69 VW bug and a 2026 Lexus.
Believe it or not, there’s still a market for the original type of Gillette razor. Amazon sells a double-edged razor for $7.66. There are only five blades instead of 12, but the blades last much longer. This would put the time price for our limited-service restaurant workers at around 24 minutes. For the time it took to buy one in 1906, you get 125 today.
The best deal is Dollar General. They will sell you a 12-pack for $1.00, or 8.33 cents per razor. A five-pack would be around 42 cents. For the time it took to buy a Gillette in 1906, our capitalist friends at Dollar General will now sell you 2,262.
Depending on how you want to compare, since 1906 shaving-razor abundance has increased by a factor of 31.6 to 2,262. Anyone today can have a pretty good razor for just a few minutes of time.
From Luxury to Ubiquity
What began as a dull blade before a mirror in Boston became a revelation: knowledge can redeem time. Gillette became a global engine for transforming human ingenuity into billions of dollars of value and billions of liberated hours.
In 1903, Gillette sold 51 razors. A century later, Procter & Gamble purchased the company for $57 billion. Steel did not become more valuable. Steel is abundant and nearly worthless without the mind. The value resided in the invisible architecture of human creativity — metallurgy, machinery, chemistry, branding, logistics, engineering, and trust — accumulated across generations and poured into a single morning ritual. Accumulated manufacturing knowledge compressed time prices downward, making what was once a luxury nearly universal.
I have three sons. One of my great pleasures as a father has been teaching them to shave when they first sprouted whiskers. In that simple act lives a century of accumulated discovery passed from one generation to the next.
Gillette did not merely improve shaving. He helped reveal the central truth of economic progress:
When free minds are allowed to create, knowledge compounds.
When knowledge compounds, time is liberated.
And when time is liberated, abundance pours outward to everyone.
The conflict in the Middle East has pushed prices higher this year. But the latest data from the Bureau of Economic Analysis suggests the worst of the price hikes may be in the rear-view mirror. The Personal Consumption Expenditures Price Index (PCEPI), which is the Federal Reserve’s preferred measure of inflation, grew at an annualized rate of 4.9 percent in April 2026, down from 8.3 percent in the prior month. The PCEPI grew at an annualized rate of 4.8 percent over the last six months and 3.8 percent over the last year.
Figure 1. Headline and Core Personal Consumption Expenditures Price Index Inflation, April 2021 – April 2026
Core inflation, which excludes food and energy prices and is thought to be a better gauge of the underlying rate of inflation, also declined. Core PCEPI grew at an annualized rate of 2.9 percent in April 2026, down from 3.6 in the prior month. It grew at an annualized rate of 3.8 percent over the last six months and 3.3 percent over the last year.
Although inflation has declined on a month-over-month basis, the year-over-year rate has ticked up. Headline PCEPI inflation climbed from 3.5 percent to 3.8 percent, whereas core PCEPI inflation increased from 3.2 percent to 3.3 percent. What — if anything — the Fed should do about the higher inflation depends in large part on why inflation is above target.
The pass-through from energy prices to everything else certainly explains a portion of the difference between inflation and the Fed’s two-percent target, and the Fed should not respond to that portion. When constrained supplies — of energy, or anything else — push prices higher, those higher prices help individuals make appropriate decisions about whether and how much of the more-scarce item to buy. Unless the Fed has a secret stash of oil, natural gas, or fertilizer lying around, it won’t be able to improve matters on that front.
Constrained supplies cannot explain all of the difference between inflation and the Fed’s target, however. Some of the excess inflation is due to excess nominal spending. When the amount of money being spent in an economy grows faster than the real value of goods and services being produced, prices must rise. And when nominal spending growth outpaces real output growth, prices rise more rapidly. Hence, a surge in nominal spending growth results in higher inflation. To improve matters, the Fed can bring nominal spending growth back down to a rate consistent with its inflation target and the expected growth rate of real output.
Over the five years preceding he pandemic, nominal spending grew around 4.1 percent per year. Loose monetary policy allowed nominal spending growth to surge from 4.3 percent for the year ending 2021:Q1 to 11.3 percent for the year ending 2022:Q1. Then, as the Fed tightened monetary policy, nominal spending growth declined. Nominal spending grew 7.8 percent, 5.5 percent, and 4.6 percent over the three years that followed. As nominal spending growth declined, so too did inflation. Over the 12 months ending in April 2025, PCEPI inflation was just 2.3 percent.
Alas, that disinflationary process has not merely stalled, but reversed. Nominal spending grew 5.9 percent from 2025:Q1 to 2026:Q1. And, with more money chasing after the same amount of goods, higher nominal spending growth has brought higher inflation.
It is tempting to attribute the increase in inflation to the salient supply shocks we have experienced over the last year or so, including the tariffs levied last year and the conflict in the Middle East beginning earlier this year. But here’s the thing: constrained supplies do not push nominal spending growth higher. Rather, faster nominal spending growth is the telltale sign of a demand-side problem.
Unfortunately, Fed officials do not appear to see it that way. As the minutes from the Federal Open Market Committee (FOMC) meeting held in April reveal, FOMC members attribute the higher inflation to the conflict in the Middle East, tariffs, and other supply-side factors:
Participants observed that overall inflation had moved up, in part because of recent global energy price increases, and remained above the Committee’s two percent longer-run goal. Participants generally noted that core inflation had also moved further above two percent. Several participants noted that the rate of increase in core goods prices remained elevated, at least in part reflecting the effects of tariffs. Some participants observed that higher fuel prices had caused a number of other prices to increase, including shipping costs and airfares. In addition to energy price increases, several participants noted that supply disruptions associated with the conflict in the Middle East had caused prices for fertilizer and some other non-energy commodities to rise. Some participants noted that recent price increases in the information technology sector had contributed to higher inflation. A few of these participants remarked that, while price increases in the software category were contributing meaningfully to the increase in core inflation, price increases in that category may not be good predictors of future overall inflation.
Furthermore, they “anticipated that high energy prices would continue to put upward pressure on overall inflation” and “generally expected that the effects of tariffs on core goods inflation would diminish over the course of this year” so long as tariff rates are not “increased above present levels, leading to additional upward pressure on inflation.”
It is somewhat odd that FOMC members did not explicitly acknowledge that excess demand has also pushed up inflation. At the meeting, members “generally observed that economic activity appeared to be expanding at a solid pace” and “generally anticipated that the pace of real GDP growth would remain solid this year.” Those observations are inconsistent with a supply-driven inflation story, wherein prices rise more rapidly as real output growth slows.
FOMC members even identified specific sources of demand at the meeting, noting “that business fixed investment remained robust, largely reflecting strength in the technology sector” and that “high levels of household wealth and fiscal policy” had supported consumer spending. They just did not connect the dots from robust demand to higher inflation.
There is a silver lining, however. Despite suggesting inflation is largely supply-driven, which would not typically warrant a monetary policy response, FOMC members thought the situation “could necessitate maintaining the current policy stance for longer than previously anticipated.” That change in the projected path of monetary policy amounts to a modest tightening, though probably not enough to meaningfully slow nominal spending growth. Moreover, a “majority of participants” agreed “that some policy firming would likely become appropriate if inflation were to continue to run persistently above two percent.” The Fed may tighten monetary policy further, and reduce nominal spending growth as a consequence, without ever acknowledging the demand-side problem.
Ideally, policymakers will implement the right policies for the right reasons. Barring that, however, I would certainly prefer they implement the right policies for the wrong reasons than implement the wrong policies. There is a risk that, by not fully understanding the situation, Fed officials will not react as they should to incoming data. But at least they are headed in the right direction.
As German forces launched what would become their final major offensive on the Western Front in March 1918, President Woodrow Wilson’s Food Administrator, Herbert Hoover, identified what he called “one of the most vital problems confronting the nation”: a shortage of sugar. Demand had surged. Soldiers needed sugar in their rations, while producers and civilians relied on it to preserve and can food for the war effort. At the same time, supply had collapsed due to Europe’s engulfment in war, the disruption of Cuban cane fields during the 1917 Chambelona War, and German U-boats threatening Atlantic shipping.
What followed became one of the clearest examples in American history of price controls spiraling into creeping interventionism — and a textbook demonstration of why such schemes fail, even when administered by capable and patriotic officials pursuing a common wartime goal.
Hoover was commissioned as Food Administrator of the United States on August 10, 1917. A successful mining engineer and humanitarian, he seemed the ideal public servant for such an important task. He wasted little time, setting out to “assure to the American consumer a fair and just price” of sugar. Blaming rising prices on speculators rather than on underlying economic conditions, he ordered the suspension of trading in sugar futures on August 16 until “further notice.” And, by the end of the month, he had pressured American beet sugar producers “to limit the price of their product” with an expected savings of $30 million within the next year.
But replacing the flow of information and the structure of incentives supplied by the price system was far more difficult than Hoover, a graduate of Stanford University, imagined. Hoover’s attempts to adjust the system to unexpected changes in economic conditions were frustrated by the sugar industry’s attempt to divert the program to their own benefit. Hoover ultimately created a tripartite bureaucratic apparatus: the Sugar Division of the Food Administration, the International Sugar Committee, and the Sugar Distributing Committee. He set prices by signing agreements with producers and refiners under the threat of revocation of their license if they charged “excessive” prices.
But artificially low prices did exactly what economics textbooks predict: they encouraged consumption while discouraging production. Pre-war per-capita consumption stood at roughly 85 pounds annually, much of it in candy, soft drinks, condensed milk, canned goods, ice cream, and ketchup. Even at the beginning of the program, administrators acknowledged the predictable difficulties of holding prices low by urging consumers to limit consumption in the face of increased demand and decreased supply. By mid-October, a sugar famine was already causing sugar-using factories to shut down, and Hoover was forced to order cuts in candy production. The low price of sugar discouraged retailers from stocking it, especially given that it would not cover the increasing costs of transporting it from refineries.
Under Hoover’s informal price ceilings, demand stayed high while beet growers watched competing crops become more profitable. As economist Joshua Bernhardt (1919) noted, mounting production costs and unregulated prices for other foods made sugar beets progressively less attractive. In desperation, Hoover tried to enlist schoolchildren and boys’ and girls’ clubs in sugar production, offering families an allotment of sugar in exchange for planting an acre of sugar beets. Pledge cards, circulars, and monetary incentives were deployed with patriotic fervor.
Hoover also formed local commissions to investigate spiraling production costs, producing thousands of pages of testimony from planters, nearly all of whom recommended higher prices. Testimonies from over 100 planters in California alone filled nine thick volumes (Bernhardt 1919). Planters rejected a flat price because it gave an advantage to low-cost producers, especially foreigners. Cuba could deliver sugar for about 5.5 cents per pound, while domestic beet sugar planters required nine cents and Louisiana cane sugar planters needed ten. Hoover’s political solution to these competing special interest groups was to buy cheap foreign sugar, along with domestic output purchased at higher prices, and then resell it to American refiners at an average price.
Price controls on sugar gradually expanded the scope of intervention. Transportation priorities, refinery allocations, export quotas, and distribution zones were imposed. Louisiana sugar failed to reach New England refineries because regulated prices made it more profitable for Louisiana mills to sell lower-grade sugars directly to confectioners than to ship to Atlantic refiners. Centrally prioritizing sugar allocation without market prices led to accusations of misallocation. While households went without sugar for canning and baking, Hoover argued in Senate testimony that the candy industry employed 250,000 Americans and that further diversion of sugar would put them “entirely out of work.” Yet, as Blakey (1918) notes, the knowledge problem cuts the other way: candy might have deserved a higher priority “in view of the national campaign for prohibition,” given its potential as a substitute for alcohol.
The Food Administration proudly claimed it had saved consumers millions. Yet as Roy Blakey (1918) observed, gratitude evaporated when sugar simply sporadically disappeared from tables in regionalized shortages. Senator Henry Cabot Lodge’s mocking refrain captured the public mood: “What comfort is there in a low price when no sugar can be obtained?” Searches for “Sugar Famine” on Newspapers.com yield over 20,000 matches during the years 1917-1920, the years Hoover’s sugar programs were operative, yet only 284 in 1916 and 370 in 1920.
The dilemma Hoover faced was classic: he needed “capable and informed representatives” who inevitably had skin in the game, or “uninformed ones who were disinterested.” Neither produced efficiency. Instead, the plan spawned a clerical army, including state-level certificate systems classifying industrial sugar use into five categories (A through E), population-based allocations, and transportation zones, which required a system of prioritization as well, designed to match supply to “equitable” demand. As Frank Rutter (1902) earlier recognized about attempts to regulate the sugar industry, any regulation would pit the concentrated interest of producers against the dispersed costs faced by consumers, “Opposed to these demands [of the sugar industry] there is only the diffused interest of the consuming public, with no detailed knowledge concerning trade conditions or the inner workings of the tariff, and without organization….”
The sugar episode was not an isolated wartime curiosity. It was a microcosm of the broader logic of Ludwig von Mises’ interventionism. Regulate the price of one commodity and you must regulate its inputs, its substitutes, its transport, and its distribution. “From the few instances cited,” Blakey wrote, “as well as from one’s daily observation, it is easy to see that the regulation of the price of one thing involves the regulation of the prices of all constituent factors and competing commodities, which in the last analysis means the regulation of wages, as well as the regulation of the prices, the supply and the distribution of everything else.”
Today’s policymakers would do well to revisit this forgotten chapter before reaching for price controls, “equitable allocation” schemes, or industrial policy boards. Price ceilings create shortages, which in turn necessitate rationing. Rationing requires bureaucracy, which opens the door to lobbying and favoritism. The consumer — the very citizens Hoover was commissioned to serve — ultimately pays in empty shelves and higher overall costs.
Herbert Hoover was a brilliant engineer and a sincere public servant. He believed he could “stabilize” markets through expert administration. The sugar famine suggested otherwise. Markets are not problems to be solved by committees; they are discovery processes that coordinate millions of decisions without central direction. When governments try to override that process, even with the best of intentions and the full powers of wartime emergency, the result is not order but the very chaos they sought to prevent.
For years now, a persistent narrative has circulated in American political discourse: China is quietly buying up vast swaths of US farmland, threatening food security, undermining sovereignty, and gradually gaining strategic control over America’s agricultural base.
It is an emotionally resonant story, one that combines geopolitical rivalry, declining trust in institutions, and anxieties about national decline. Yet like many claims that gain traction through repetition, its empirical foundations are weak.
The short version: Chinese ownership of US farmland exists, but the scale is dramatically smaller than commonly portrayed, the economic implications are muted, and any genuinely important concerns are narrower, more specific, and less sensational than the public narrative machine alleges.
We begin with the numbers. Chinese-linked investors own somewhere between roughly 250,000 acres of US agricultural land, depending on the year and reporting method used. That may sound substantial in isolation, but context matters. The United States contains roughly 880 to 900 million acres of farmland. Chinese ownership therefore amounts to approximately 0.02 percent of total US agricultural land: a rounding error in macroeconomic terms. Even within the category of all foreign-held US farmland, China represents well under one percent. Put differently, the claim that China is “buying up American farmland” is not supported by the available data.
Indeed, the broader story of foreign ownership looks very different from the one often implied in political debates. Foreign entities collectively own approximately 43 to 46 million acres of US agricultural land, or roughly three to four percent of the national total. Yet the overwhelming majority of this ownership comes not from geopolitical adversaries, but from long-standing allies and trading partners. Canada alone owns roughly one-third of foreign-owned US farmland: 13 to 15 million acres, or forty to sixty times more than China. The Netherlands, the United Kingdom, Germany, Italy, Portugal, and other European countries collectively account for millions more acres. If acreage alone constituted an economic threat, political attention would look very different.
Moreover, much of what is classified as “foreign-owned agricultural land” is not traditional cropland at all. Large portions consist of timberland, renewable energy projects, grazing areas, or institutional investment holdings. Particularly in states such as Texas, foreign-held acreage is often tied to wind or solar developments rather than farming. In many cases, land ownership reflects pension funds, long-term asset diversification, or industrial activity rather than strategic attempts to influence agricultural production. This distinction matters because public imagination tends to conjure images of foreign governments quietly accumulating Midwestern cropland, when the reality is often corporate ownership structures tied to energy, forestry, or vertically integrated agribusiness.
The Chinese component of this story is especially concentrated. More than eighty percent of Chinese-linked agricultural holdings are associated with only a handful of entities, the most notable being the 2013 acquisition of Smithfield Foods. That transaction alone brought approximately 146,000 acres under Chinese ownership. Yet even here, the political symbolism tends to outweigh the underlying economics. Smithfield remains a US-based producer, operating largely through American supply chains, workers, facilities, and domestic production. Although its ownership structure changed amid heated opposition from interest groups, the firm did not suddenly transform into an instrument of foreign agricultural control. The firm primarily produces for US consumers and functions within American regulatory and legal institutions.
Geographically, Chinese-linked holdings are concentrated in a relatively small number of states, including Texas, North Carolina, Missouri, Utah, and Florida, with smaller holdings scattered elsewhere. Even in these states, however, Chinese ownership typically represents far less than one percent of total agricultural acreage. There is little evidence that such ownership materially influences agricultural output, commodity pricing, food availability, or broader land markets. The United States remains one of the largest and most productive agricultural exporters in the world. No plausible reading of the data suggests Chinese land ownership threatens American food security in any meaningful sense.
Still, dismissing the matter entirely would be a mistake. There are concerns, but they are much narrower than fearmongers tend to imply. The first involves proximity to sensitive military or strategic sites. Several proposed or completed Chinese-linked land purchases have raised scrutiny because of their location near military installations or critical infrastructure. A frequently cited example involved land near Grand Forks Air Force Base in North Dakota, where national security objections ultimately helped block development plans. In these cases, acreage is less important than geography. A few hundred strategically placed acres may matter more than tens of thousands of remote ones.
Second, there are reasonable questions regarding ownership transparency. Land can be acquired through subsidiaries, partnerships, shell corporations, or joint ventures that obscure beneficial ownership. This creates legitimate challenges for regulators attempting to distinguish between normal commercial investment and potentially sensitive acquisitions. Yet here too, the appropriate response is targeted transparency and review mechanisms, not broad exaggerations about foreign domination of American agriculture.
Third is the issue of reciprocity, though its significance is open to debate. The United States remains one of the world’s most desirable destinations for investment precisely because of our stable institutions, relatively open markets, and strong protections for private property. Other countries, including China, operate under far more restrictive legal and ownership systems, particularly with respect to land. Yet it is not immediately obvious that differing rules necessarily constitute a problem. A country that attracts global capital because investors trust its institutions occupies a different position than one in which investment is constrained by legal uncertainty or state control. The relevant policy question, then, is not merely whether reciprocal access exists in a formal sense, but whether particular forms of foreign investment create identifiable national-security or strategic risks that outweigh the broader benefits of openness.
If one argues that Chinese purchases of agricultural land should be prohibited categorically, the logic quickly expands to foreign direct investment as a category. Should foreign firms be barred from investing in American factories, warehouses, logistics networks, commercial real estate, or manufacturing facilities? Should allied pension funds be prohibited from owning timberland? Should energy investments be restricted simply because ownership is foreign? Such questions illustrate why precision matters. Nearly $6 trillion of cumulative foreign investment underpins swaths of the American economy. The policy issue is not foreign investment per se, but how to distinguish productive capital inflows from genuinely sensitive national security risks.
The conclusion is far from dramatic, which may explain why it struggles to compete politically. Chinese ownership of US farmland is tiny, highly concentrated, and irrelevant to both America’s agricultural production and food security. The broader narrative of sweeping foreign control is substantially overstated relative to the facts and data. National security concerns can exist in specific cases, especially near sensitive infrastructure, and reciprocity deserves thoughtful debate. But neither concern justifies abandoning proportionality or confusing a handful of narrow issues for a sweeping economic threat that does not exist.
Almost 250 years ago, a group of revolutionaries published a document declaring their independence from the world’s largest empire. The Declaration of Independence clearly articulated a set of principles that had been developing for centuries — namely, that people are born free and possess an inherent right to life, liberty, and the pursuit of happiness. Seven years later, after a long and arduous war, they realized their dream, and the United States of America began its grand experiment: a nation governed by its citizens rather than a monarch or dictator, with liberty placed firmly at its center. Contemporary defenders of liberalism are the progeny of that generation. We are the revolutionaries carrying this dream forward.
Today, many on both the Right and the Left — national conservatives and so-called progressives alike — seek to undermine the American experiment. They claim it has failed the middle class, minorities, women, and other groups. They argue that their ideas — tariffs, class warfare, and greater state control over the economy — will make us safer, restore jobs, and reduce poverty. But these ideas are old, and when nations have relied on them in the past, they have faltered.
Take trade. Peter Navarro and others in and around the Trump administration believe America needs to pull back from international commerce. They advocate high tariffs on imports to restrict Americans’ access to foreign goods, raise revenue, and boost domestic manufacturing. This is not new thinking. It is very old thinking.
From 1815 to 1846, the United Kingdom had a series of policies, known as the Corn Laws, that in effect imposed a 28 percent tariff on imported grains. These laws benefited landowners at the expense of workers and consumers who paid 9 percent more for food, leaving less money for clothing, shelter, and everything else. These laws made the United Kingdom poorer, not richer.
In 1434, the Chinese Emperor Xuande issued the Edict of Haijin. It suspended official ocean-going voyages, effectively isolating China from much of the outside world. Privately owned ocean-going vessels were destroyed, and the empire’s naval fleet was allowed to decay. For much of the next 350 years, China remained largely inward-looking and self-sufficient — an outcome that might please many Republicans these days. Some purported justifications for China’s isolationist swing were to end piracy and to put pressure on Japan, which was a large importer of Chinese goods.
Unfortunately for China, the policy backfired. By the time it re-engaged with the West through contact with England in the late 1700s and early 1800s, it had fallen significantly behind in both technological and military development. England easily defeated China in the Opium Wars, kickstarting China’s “century of humiliation.”
Protectionism is an old idea with periods of widespread support across the globe. The newer idea, the innovative idea, is realizing that international trade brings benefits to all involved. Supporters of freer trade are the true radicals in the best sense of the word. They are the ones pushing a counterintuitive idea that makes people better off.
Class warfare is another old idea that is back in vogue. Progressives make their living denouncing billionaires and big business. Republicans used to largely avoid such rhetoric, but now folks on the Right are okay with higher taxes on corporations, “Big Tech,” and the wealthy.
The novel idea is not going after the rich just because they are successful. That has been done in countries all over the globe. The communists in Cuba do it, the socialists in Venezuela do it, and the European progressives do it, too. The revolutionary idea is allowing people to keep the fruits of their labor. Successful entrepreneurs in America have a lot of money because they have created a lot of value for society. Their wealth is a just reward for the value they have created.
Paying taxes to support essential government programs is one way we help the least fortunate among us. But levying punitive taxes on the rich reflects a more primitive impulse, appealing to base instincts of envy and resentment. The real innovation was overcoming those instincts to build a system that respects individuals, encourages success, and protects private property. American capitalism, born of our Revolution, has largely achieved this, and we continue the work of the Founders when we defend it.
State-owned enterprises are also making a comeback. After World War II, the United Kingdom nationalized dozens of industries as part of the post-war consensus. This consensus, promoted by progressive intellectual heavyweights such as John Maynard Keynes and William Beveridge, argued for a mixed economy with significant government involvement in industry. Coal, telecommunications, railways, canals, steel, and shipbuilding were just a few of the industries the UK government took over. Nationalization was supposed to generate full employment, and along with a robust welfare state, prevent the type of conditions experienced by Europeans and Americans alike during the depression of the 1930s.
The reality was different. As John Moore, former UK Financial Secretary to the Treasury, discussed in a Harvard Business Review article, nationalized industries had low returns on capital, high costs, bad labor relations, and were generally unable to satisfy consumers. According to Moore, by 1979, government-controlled industries were costing taxpayers £3 billion per year, or nearly $24 billion in current US dollars. The United Kingdom’s economic woes in the 1970s gave former Prime Minister Margaret Thatcher the opening she needed to privatize these industries. Her actions improved the industries previously crushed by government mismanagement and boosted the larger economy.
This year marks the 250th anniversary of the Declaration of Independence. There will be no shortage of celebrations, but as we commemorate the occasion, we should remember what exactly we are celebrating: a group of radical thinkers who demanded liberty, not paternalism; trade, not protectionism; and a government that protected rights rather than one that determined them. America has not always lived up to those ideals, but our pursuit of them has enabled us to extend freedom to more people than any other nation in history. The result, though imperfect, has been extraordinary prosperity.
Today’s defenders of liberalism are the true revolutionaries, and we must do our part to advance the ideals of the American founding.
A new study of federal court filings suggests that artificial intelligence may be transforming one of the oldest — and most expensive — services in American society: representation in court.
The paper, now circulating for comments before publication, reports a nationwide surge in civil lawsuits filed by people acting pro se (as their own attorneys). The researchers conclude that many of these filings were researched, drafted, or otherwise heavily assisted by large language models (LLM) such as ChatGPT and Claude.
The study examined millions of federal court docket entries across multiple years and dozens of categories of litigation. Using large databases of filings, linguistic analysis, statistical comparisons with pre-ChatGPT baselines, and software to detect AI-generated language patterns, the researchers conclude that the rise of generative AI coincides with a major increase in pro se litigation in federal courts.
That increase is substantial. Federal civil filings surged after the public release of advanced LLMs. The overwhelming majority of the increase came from pro se plaintiffs. The authors report:
In the post-[AI] period, we find that the AI detection rate rises consistently, from near zero at the end of 2022 to 18 percent by early 2026, tracking the trajectory of LLM capability gains and diffusion of LLM adoption rather than any single event. By early 2026, roughly one in five complaint filings contains text that the detector classifies as AI-generated [emphasis added].
The right to represent oneself in federal court dates to the founding era and was codified by the First Congress in the Judiciary Act of 1789. In practice, however, the right often existed more in theory than reality. The Sixth Amendment and subsequent rulings assured a right to an attorney for those accused of a criminal offense, but no such protection exists in civil or administrative courts. Federal litigation is intimidating, technical, document-heavy, and expensive. Filing fees may be affordable, but legal representation often is not.
For generations, many Americans who believed they had been cheated, harassed, wrongly terminated, denied compensation, defamed, discriminated against, or otherwise mistreated under the law reached the same reluctant conclusion: it simply was not worth paying a lawyer and risking unpredictable legal costs to pursue a civil case. Artificial intelligence abruptly alters that calculation.
Chatbots Enter the Courtroom
A plaintiff can now ask ChatGPT to explain filing requirements, organize facts, summarize precedents, draft motions, prepare responses, and generate properly formatted legal documents at little or no cost. What once required thousands of dollars and weeks of expert legal work can be meaningfully attempted at home in an evening. (For what it’s worth, ChatGPT scored a 297 out of 400 on the Uniform Bar Exam, easily exceeding the passing score in nearly all US jurisdictions. Some 10 percent of US law school graduates never pass the exam.)
The jump in AI-assisted filings occurred across a wide range of legal categories, from real estate disputes and employment law to slander and libel claims, insurance matters, disability cases, and immigration proceedings. Of particular note, perhaps, is the rapid growth in filings related to detention and deportation, where detainees increasingly appear to be using AI tools to navigate the federal legal system without attorneys. Amid accelerating (often erratic) immigration enforcement, habeas corpus lawsuits have increased 8,400 percent. In other words, a market-generated AI technology may be broadening de facto access to constitutional protections for the groups least able to defend themselves within the legal system. From that perspective, this looks like an impressive democratization of access to justice.
For decades, reformers have argued that lower-income Americans effectively lack equal access to civil courts because professional legal services (“legal cognition”) are too expensive. Lawyers cost money because legal work requires highly trained cognitive labor: research, drafting, procedural knowledge, formatting, and endless paperwork. Legal aid programs and pro bono services help some people, but many are turned away because the basic economics remained unchanged.
Now, LLMs have dramatically reduced the cost of producing all that legal text and navigating legal procedure. The result may be a profound expansion of practical access to civil litigation in American history.
The Risks of AI Litigation
US courts evolved under the assumption that legal services would remain “scarce” and therefore expensive. That scarcity acted as a filtering mechanism. Lawyers didn’t merely draft documents. They discouraged weak claims, translated emotional grievances into legally actionable arguments, imposed professional discipline, and absorbed enormous procedural burdens before cases reached judges.
AI removes much of that friction.
The legal profession, for now, is deeply divided over the impact of what they call “robo-litigation” on the future of American justice. Some lawyers and judges see a coming wave of frivolous filings, fabricated citations, and procedural chaos. Others, including many organizations devoted to expanding access to legal services, see something closer to a breakthrough.
The American Bar Association recently conceded that generative AI could provide “affordable legal guidance” to people unable to hire attorneys but warned about inaccurate advice, ethical problems, and the unauthorized practice of law. Courts increasingly caution litigants that they remain fully responsible for errors generated by AI systems, including fabricated legal citations and imaginary precedents. Several lawyers already have been sanctioned after submitting briefs containing nonexistent cases hallucinated by AI tools.
Legal aid organizations are more enthusiastic than alarmed. The ABA’s own Center for Innovation has described AI as a potentially transformative tool for improving access to justice. The Thomson Reuters Institute recently called AI a “generational opportunity” to narrow the justice gap (unmet civil legal needs of Americans) by helping underserved populations navigate legal systems that historically have been too expensive and complex for ordinary citizens. One survey discussed by the Legal Services Corporation found that legal aid organizations are adopting AI tools at roughly twice the rate of the broader legal profession.
In short, the groups most directly confronted with unmet legal demand seem naturally eager to use AI. For legal aid attorneys and reform advocates, the advantages are obvious. A tenant facing eviction, a migrant contesting detention, a worker challenging dismissal, or a disabled claimant denied benefits suddenly can obtain procedural guidance, draft filings, organize evidence, and prepare legal arguments at little or no cost. What elite lawyers may view as a destabilizing automation can look different to people who previously had no practical access to legal representation at all.
Will Automation Overwhelm the System?
Critics reply that lowering the cost of legal access is also lowering the cost of producing legal “noise.” Federal judges complain of growing quantities of AI-assisted filings containing procedural errors, invented authorities, and poorly grounded legal arguments. Even accurate filings, however, increase pressure on courts that already struggle with overloaded dockets and limited judicial capacity. In many ways, the system’s stability relies on most people not exercising their rights. “Justice delayed” is one of the most politically sensitive measures of a court system.
And unlike private firms, the federal judiciary cannot rapidly gear up in response to surging demand. Adding more judges requires congressional action. Court procedures are governed by law, precedent, and elaborate procedural rules designed for consistency and due process — explicitly not for rapid adaptation.
In this sense, the federal courts may be confronting a classic problem identified decades ago by the economist Ludwig von Mises in Bureaucracy. Market institutions can respond dynamically to technological innovation because they are guided broadly by profit, loss, and competitive adaptation. Bureaucratic institutions operating under law necessarily move more cautiously because their authority depends upon rules, procedure, and limited discretion.
The courts now face precisely that asymmetry. The market has produced a revolutionary technology capable of dramatically lowering the cost of legal cognition. But the judicial system must respond through new legislation, revised procedures, modified administrative rules, and constitutional safeguards. Recently, for example, courts ruled that attorney-client privilege doesn’t apply to chatbots, even if the user is relying on them for legal counsel.
From Disruption to Democratization
Not so long ago, headlines about AI and law focused on whether ChatGPT could pass the bar exam and whether AI would threaten the jobs of junior associates drafting legal briefs.
Across profession after profession, AI is reducing the cost of cognitive labor once performed only by highly trained people. Journalism, accounting, customer service, education, finance, medicine, and software development — to name a few — all are confronting versions of the same disruption. Institutions built around expensive expertise suddenly face technologies capable of reproducing portions of that expertise at near-zero marginal cost. That we knew.
But few considered the more consequential finding that millions of ordinary citizens suddenly possess tools capable of helping them navigate the legal system. The relationship between ordinary Americans and the legal system is changing fundamentally. The constitutional right to represent oneself existed long before AI. What AI may now be doing is operationalizing that right on a mass scale for the first time in American history.
Hasan Piker, the far-left political commentator and streamer, has enjoyed a remarkable rise into the mainstream left media ecosystem. He has now campaigned alongside Democratic Senate candidates, been a guest on some of the largest podcasts in America, and appeared on CNN and NBC News. Most recently, the New York Times published a conversation between Piker, the paper’s culture editor Nadja Spiegelman, and the New Yorker writer Jia Tolentino. The topic: is theft ever justified?
In their conversation, Tolentino argues that “stealing from a big box store … [is not] very significant as a moral wrong.” Piker’s response in agreement: “I’m pro stealing from big corporations, because they steal quite a bit more from their own workers.”
Piker and his interlocutors are at least self-aware enough not to want to justify theft against everyone, so they conveniently set limits to when stealing is acceptable. When asked if it would be acceptable to steal from Zohran Mamdani’s city-owned grocery stores, Piker responds, “No, I would not, because I feel like that’s taxpayer-funded, it’s union labor, and the prices are also adjusted regardless.”
In other words, theft’s only okay when it comes to the bourgeoisie — they have no right to property because the system is unjust. As Spiegelman puts it, “Jeff Bezos has too much money — he’s a billionaire — so why should I have to pay for organic avocados?”
Microlooting, as they call it, “has a slight political valence to theft, as opposed to just the thrill of getting away with something.” Microlooting, in other words, is theft as a form of political protest. But fundamentally, microlooting is still just theft. “[I]f it was as easy as pirating intellectual property, I would” steal a car, Piker clarified. Thus, there may be an appeal to “political protest” but the practical criteria just seems to be viability.
And whether the Times’ trio only justifies stealing from the wealthy or justifies stealing broadly, the same result emerges — that they are dismantling the building blocks of our civilization. Liberal democratic capitalism — the system that all three have benefited immensely from — relies on some basic precepts. John Locke articulated these as natural rights to life, liberty, and property. Adam Smith argued that commerce and manufacturing cannot flourish “in which the people do not feel themselves secure in the possession of their property.” And property rights aren’t even just economically useful, but they’re also a necessary condition for liberty broadly. As F.A. Hayek argued, “There can be no freedom of the press if the instruments of printing are under government control, no freedom of assembly if the needed rooms are so controlled, no freedom of movement if the means of transport are a government monopoly.”
And the natural rights at the center of liberal democratic capitalism are not given or taken away, based on who the right-bearer is. The Declaration of Independence’s radicalism was in part because it promised “inalienable rights” to “all men.” The promise of natural rights was never just to people of only a certain ethnicity, nationality, or religion. So too with wealth. Everyone can agree the poorest in our society deserve the same rights to life, liberty, and property as the most wealthy. But reverse that statement, and agreement becomes far less universal. But there’s no difference. If you believe that wealth shouldn’t be a determining factor in someone’s rights, then you should believe that in all cases.
And even putting the moral question aside, the preservation of property rights — with its attendant injunction against stealing — provides us with the predictability necessary for economic flourishing. Piker assumes that the stability of our society is naturally occurring. It is not. Each time he receives payment from Twitch, swipes his credit card, or purchases a service, he assumes that the set of rules necessary for a functioning capitalist society will persist. And the preservation of property is fundamental to that predictability. One study, for example, found that governments going from no cadastral system (records of land ownership) to a full cadastre system is associated with an immediate 2.86 percentage point increase in GDP per capita.
Piker’s dismissiveness of the very foundations of our society suggests that there is some better alternative to liberal democratic capitalism. As yet, there is not.
For 250,000 years, the average person — everywhere — lived off effectively no more than $3 a day. But that all changed roughly 300 years ago, with an unprecedented explosion in global prosperity that lifted the vast majority of people out of poverty.
The alternative to our current prosperity is poverty, disease, authoritarianism, tribalism, violence, and an early death — staples of pre-capitalist human existence.
But Hasan Piker isn’t the first person to feel resentful for the conditions created by capitalism — not nearly. Joseph Schumpeter in Capitalism, Socialism, and Democracy was pessimistic about the future of capitalism because of the potential anti-capitalism of a modern intellectual class. For Schumpeter, capitalism unlocked so much productivity that it freed a portion of humanity from the direct world of commerce and work. In other words, capitalism creates a class of people who deal in ideas but are disconnected and alienated from the very system that made it possible for them to deal in ideas. And eventually that disconnect leads to criticism of capitalism.
Discontent breeds resentment…. and it often rationalizes itself into the social criticism which … is the intellectual spectator’s typical attitude toward men, classes and institutions…. The role of the intellectual group consists primarily in stimulating, energizing, verbalizing, and organizing this material [of anti-capitalist sentiments and resentments]…. The intellectual group cannot help nibbling … at the foundations of capitalist society.
Schumpeter’s analysis applies to Piker to be sure but Piker’s only the most recent example in a long train of privileged activists and revolutionaries. Among others, Fidel Castro, Salvador Allende, Pol Pot, and Mao Zedong were all born into wealthy families. And this trend is visible from the very beginning of Marxism. As the historian Sean McMeekin pointed out in his 2024 book on the history of communism: “Marx’s social radicalism did not arise from his own economic situation or any unpleasant experience of business or factory life.” In fact, Marx was “kind of a perennial student,” McMeekin wrote, both chronically in debt and financially dependent. Marx’s income came from collaborator and patron Friedrich Engels, who could only afford to fund Marx’s freeloading lifestyle with profit from his factory and cotton trading. Marx’s work was directly supported by the capitalist system both men resented.
This pattern also holds true demographically. A 2018 study on the breakdown of American political factions found that progressive activists “are nearly twice as likely as the average [American] to make more than $100,000 a year,” and “are nearly three times as likely to have a postgraduate degree.” An earlier study of student political organizations found that far-left student activists came predominantly from upper-middle-class backgrounds, while far-right activists were more often lower-middle-class or working-class.
And the problem’s only getting worse at some of our most elite educational institutions. Writing for The Harvard Crimson, Julien Berman found that in 2000 “the opinions of student writers at elite universities … weren’t all that more progressive than those at non-elite ones.” But “[o]pinion sections at elite universities have gotten significantly more progressive,” he writes, with The Crimson being “over three times more progressive in 2023 than it was in 2001.”
Some may object that the relative affluence and education of progressive activists proves the truth of their views — after all, shouldn’t we take more seriously the opinions of the most educated in our society? But to even ask the question requires assuming that left-wing activists arrive at their positions based on well-reasoned arguments rather than, as Schumpeter points out, a resentment for the very system that made their status, comfort, and influence possible in the first place.
Education doesn’t displace human nature. And to take a line from another great thinker, “[e]xperience suggests that if men cannot struggle on behalf of a just cause because that just cause was victorious in an earlier generation, then they will struggle against the just cause.” That is human nature — and no amount of education will change that. And ultimately, Hasan Piker is just the latest left-wing activist to take advantage of that fact in appealing to affluent, educated left-wingers who would rather struggle in resentment against our system than to be grateful for their deliverance from poverty.
Many discussions of the ongoing decline in fertility end up treading on the grounds of “family policy” when discussing remedies (or, if one believes there are too many people on Earth, incentives) to fertility decline. Commonly debated items include subsidized childcare, income tax credits, housing reform, divorce laws, welfare policy, and the possible trade-offs of “quantity” and “quality” when investing in children. What is rarely, if ever, included is the role of monetary policy.
Fertility decisions are primarily based on lifelong considerations. Because monetary policy mostly affects the short-run, even large unexpected monetary expansions or contractions are unlikely to matter much for such long-run fertility decisions. In extreme cases, an unexpected monetary expansion can cause a real wealth reduction that affects timing. If extreme enough, the delay may push older possible parents out of their prime years for having children. In other extreme cases (think hyperinflation) we can expect some effects. But both examples are extreme cases.
Available estimates of the role of monetary policy on fertility in non-extreme cases show something,but it is a small something (although not negligible). Thus, the role of monetary policy seems properly sidelined in countries like the United States.
A recent book by Jeffrey Degner* argues that these results understate the true damage. In Inflation and the Family, Degner argues that monetary institutions (which could include state-issued monies as well as competitively issued ones under a free banking regime) end up shaping people’s time preferences. Our habits (greater indebtedness, increased inequality, and greater moral hazard) are influenced by the economic environment. “Time preferences” refers to how people value present consumption relative to future consumption or, more broadly, how willing they are to defer gratification. Related habits include the age at first marriage, the number of children, and the spacing between children, among other factors. Ultimately, he argues that political control of the money supply gives politicians incentives to overissue money, fueling an “inflation culture” which depresses fertility.
There is much to say about such an argument. Economists, in general, are reluctant to argue in terms of “preference changes.” One of the fathers of family economics, Nobel laureate Gary Becker, famously argued that we should take preferences as given and never invoke preference changes to explain social or economic change. Not because such changes never occur, but because it is a facile argument. “Preference change” can be used to explain too much, and it’s difficult to falsify.
Being somewhat of a Becker devotee, I tend to admonish my students the same Becker did. At the same time, there is always a little voice in my head that makes me somewhat reluctant to say that preference changes should never be used. After all, dictatorial regimes invest significant resources in propaganda precisely to reshape people’s preferences so that they acquiesce. So it cannot be fundamentally wrong to argue about preference changes, but we should set the standard required to make a convincing case extremely high.
Degner’s case has parts that respect Becker’s admonition but also parts that violate it in order to take the more difficult road. In the parts where the admonition is respected, the case is fully convincing. In the parts where it is not, Degner does not quite make that case, but he does make a convincing case that the issue deserves more attention.
For example, with respect to instances of following Becker’s admonition, Degner points out that we measure inflation for the poor very poorly, which likely explains why we understate the damages of inflation. The consumer price index (CPI), when one looks at how it is constructed, tends to resemble the inflation experience of households in the top income quartile of the population. Attempts to create “group-specific” inflation measures generally find higher rates of inflation at the bottom than at the top of the distribution. Degner argues that this is due in part to how money enters the economy — loose monetary policy actually fuels inequality. Since inequality has been shown to have some connection to fertility, monetary policy may affect fertility through its contributions to inequality. This well-anchored claim indicates the “usual” assessments understate the role and importance of monetary policy.
Straying from Becker’s advice about positing shifting preferences, Degner invokes the idea of an “inflation culture.” In this framework, monetary policy does not merely influence prices; it also shapes the incentives and behavioral responses (like indebtedness, low savings rates) that arise under an inflationary monetary regime and ultimately influence household decisions, including family formation. The intriguing link merits further investigation, and in Degner’s treatment it largely serves as an invitation for future research rather than as a fully developed empirical demonstration.
Indeed, Degner highlights earlier efforts at making the “inflation culture” argument – including one by Joseph Schumpeter in Capitalism, Socialism, and Democracy — as well as potential avenues to connect economics with biology, psychology and sociology to explain preference formation. But in this, Degner only hints at future research, and in fact omits some obvious empirical arguments in his favor.
Take, for example, the habits of people in former Soviet bloc countries, notably in East Germany. Despite now having lived under a liberal democracy with relatively stable monetary policy and open markets — and for many having grown up in that environment — East Germans still exhibit a much stronger aversion to inflation than people in West Germany. This is despite a literature showing that, before Soviet division, there were few socio-economic discontinuities at the border between what later became East and West Germany.
That last criticism notwithstanding, Inflation and the Family makes for a worthy addition to one’s library. What it does well is genuinely valuable, and even where it is less fully developed, the book provides a useful starting point for future inquiry. All in all, it is a valuable contribution.
*This review was commissioned and completed before Jeffery Degner joined the AIER staff.
As a seventeen-year-old high school student in Trier, Germany, Karl Marx wrote a religious essay to fulfill a graduation requirement. Titled “The Union of the Faithful with Christ,” it explained the human need for the divine as an “unsatisfied longing for truth and light.” A loving relationship with God not only filled that longing but also brought virtue as a benefit.
“Then every repulsive aspect is submerged,” Marx continued, “everything earthly suppressed, everything crude extinguished, and virtue is more enlightened as it becomes milder and more humane.”
Although the essay feels somewhat more analytical than heartfelt, along with Marx’s other work, it was easily good enough to graduate. He finished eighth in a class of 32, ready for college.
Parents naturally fret when children leave home. What if they fall in with a bad crowd or adopt destructive ideas? Pity Marx’s parents, Heinrich and Henriette; young Karl was an edge case of this. Within two years of his family turning out at 4 a.m. to see him off to university aboard a river steamer, Marx was living a life notably short on virtue, mildness, or humanity. In fact, a tsunami of egotism and wrath toward God had consumed him. Those who have had their own battles with self-absorption and anger can relate.
Between 1835 and 1841, Marx studied at the University of Bonn and the University of Berlin, during which time he was jailed for drunkenness and disturbing the peace, was accused of carrying weapons, and reportedly fought a duel.
His parents, who were financing this mischief, worried, with Heinrich carrying on a correspondence with Karl that degenerated into conflict. Believing his son’s heart was “enlivened and governed by a spirit that is not given to all men,” in 1837, he frankly asked Karl whether that spirit was “of a heavenly or a Faustian nature.”
“Do you think,” he wrote, “that you will ever be capable of feeling a truly human, a domestic happiness?”
Karl wrote back a long, solipsistic reply which signaled that a momentous battle inside him had been decided. He described an illness that seemed to be partly physical and partly spiritual. It had led him out of Berlin into the countryside to recuperate. For several days he was unable to think at all.
“I ran like a madman around the garden beside the dirty waters of the Spree,” Karl wrote.
Literary Ambition and Swallowing Fury
In 1838, the very next year, Heinrich died. He was 61. Karl didn’t attend the funeral. Any substantive relationship with his family ended at that point.
What brought on Karl’s remarkable college transformation? Perhaps a Marxist would say he was overcome by rational objectivity. But as the biographer Werner Blumenberg notes, in the end Marx was less an objective scientist than (quoting Marx’s friend and collaborator Friedrich Engels) “a revolutionary politician.” His intellectual work was designed to serve political ends. Beneath the claims of objective rationality lay a tortured, artistic soul.
Marx’s first college ambitions, in fact, had been literary. At Bonn, he was active in a poetry group. Today his verse serves as a window into the emotional storm that drove him.
In “Invocation of One in Despair” (1836-37), Marx describes wanting to avenge himself on a god whom he claimed had “snatched from me my all.” In “The Pale Maiden” (1837) he quotes the titular character as saying “Thus Heaven I’ve forfeited, I know it full well. My soul, once true to God, Is chosen for Hell.” And the later poem “The Fiddler” (1841) reads like a bizarro version of the Charlie Daniels’ song “The Devil Went Down to Georgia.” Marx describes a violin player turning against God, who had lent him his art: “Till heart’s bewitched, till senses reel, With Satan I have struck my deal. He chalks the signs, beats time for me, I play the death march fast and free.”
In 1837, when an editor rejected his poems for publication, Marx had written his father that he “swallowed it with fury.” That was when his primary ambitions pivoted to philosophy and history. Exhaustion from this intense study seems to be what led to the illness that drove him out of Berlin to run like a madman beside the river.
It also arguably drove the work that would make Marx famous.
The Gospel of Marx
Marxist philosophy is a reimagined New Testament, with Marx in the role of Christ. After all, Jesus had first spoken of a kingdom in which the last would be first, and vice versa. Marxism even has its own perverted eschatology, with violent socialist revolutions paving the way to a utopian state of communism that supposedly marks the end of history.
Creating this system of thought came at a cost. Marx’s drive and intellect could have secured a much more comfortable life for his family, who lived in profound poverty. Four of his children died before reaching adolescence. His wife, Jenny, who had been raised in wealth, had to beg a neighbor for money just to bury one of them. Marx himself died in 1883 at age 64, with eleven people attending his funeral — many of his growing number of disciples, one imagines, were too busy promoting his work to the world.
Jesus said you could know a tree by its fruits, and those of Marx did not fully ripen until the twentieth century. At one point, over a third of humanity lived under Marxist governments. Utopias they were not.
Fortunately, today the ratio has declined to less than one-twentieth, if you exclude China, which remains nominally socialist but with a significantly different economic model.
Instead of rewriting the Gospels, Marx’s life might have been better spent trying to live them out, cultivating something he had written about in his high school essay: “…a heart full of love for humankind, open to everything noble, everything great, not out of ambition but for the sake of Christ.”
At seventeen, Karl knew the words of a better way to live, even if he had not yet learned the tune. The dreams of youth are sometimes lost with tragic results.
The March 2026 AIER Business Conditions Monthly (BCM) points to a mixed, still uneven economic outlook. Forward-looking data improved from the prior month, though not convincingly; measures of current activity were somewhat firmer; and lagging indicators remained the strongest of the three categories. At the same time, at least one data point in the coincident group appears unusually large relative to the surrounding series, so the month’s results should be read with some caution.
LEADING INDICATOR (50)
The Leading Indicator came in at 50, with six of 12 components improving, none unchanged, and six deteriorating. Positive movement was spread across several demand-sensitive and forward-looking series. US Average Weekly Hours All Employees Manufacturing SA rose 0.2 percent. US Initial Jobless Claims SA fell 5.1 percent and counted as a positive after inversion. Conference Board US Leading Index Manufacturers’ New Orders Consumer Goods and Materials increased 0.7 percent. Conference Board US Manufacturers New Orders Nondefense Capital Goods Ex Aircraft advanced 4.1 percent, US New Privately Owned Housing Units Started by Structure Total SAAR rose 4.9 percent, and Adjusted Retail and Food Services Sales Total SA increased 1.8 percent.
Those gains were offset by weakness elsewhere. University of Michigan Consumer Expectations Index fell 8.7 percent, while Conference Board US Leading Index Stock Prices 500 Common Stocks declined 3.4 percent. Inventory to Sales Ratio Total Business eased 0.8 percent, United States Heavy Trucks Sales SAAR dropped 2.4 percent, and Debit Balances in Customers Securities Margin Accounts decreased 2.6 percent. The 1-Year to 10-Year US Treasury Yield Spread widened 43.0 percent, but because that measure is one of the inverted series, it was scored negatively.
On balance, the leading data suggest an economy that is not uniformly weakening, but still lacks broad-based thrust. Strength in orders, housing, and retail activity was offset by softness in sentiment, equities, and selected financial indicators.
ROUGHLY COINCIDENT INDICATOR (58)
The Roughly Coincident Indicator registered 58, with three of six components improving, one essentially unchanged, and two declining.
The strongest contributions came from Conference Board Coincident Manufacturing and Trade Sales, up 1.5 percent, and Conference Board Consumer Confidence Present Situation SA, up 4.5 percent. US Employees on Nonfarm Payrolls Total SA also posted a large increase in the file and scored positively. Conference Board Coincident Personal Income Less Transfer Payments was effectively unchanged, rising just 0.05 percent. Offsetting those gains, US Industrial Production SA declined 0.5 percent, and US Labor Force Participation Rate SA edged down 0.2 percent.
The roughly coincident data were somewhat better than the leading group in March, but the picture remains uneven. Current activity measures show some resilience, though the unusually large payroll increase in the workbook may reflect a reporting or data-entry issue and may overstate the apparent strength of the group.
LAGGING INDICATOR (83)
The Lagging Indicator stood at 83, with five of six components improving and one declining.
Most lagging series moved in a direction associated with continued underlying firmness. US CPI Urban Consumers Less Food and Energy YoY NSA increased 5.6 percent. US Commercial Paper Placed Top 30 Day Yield rose 1.5 percent. Conference Board US Lagging Commercial and Industrial Loans advanced 0.7 percent, and US Manufacturing and Trade Inventories Total SA rose 0.9 percent. Conference Board US Lagging Avg Duration of Unemployment fell 1.6 percent and was scored positively because it is inverted. The only declining component was Census Bureau US Private Construction Spending Nonresidential SA, which slipped 0.1 percent.
Overall, the lagging data continue to depict an economy still carrying momentum from prior conditions. Even so, because lagging indicators tend to confirm rather than anticipate turning points, their relative strength does not fully offset the more divided message coming from the leading and coincident indicators.
DISCUSSION (April/May 2026)
April’s inflation data suggest that the Iran conflict is pushing headline prices higher, but the broader inflation picture remains more contained than the top-line figures imply. Headline CPI rose 0.64 percent in April following March’s 0.87 percent increase, while headline PCE climbed 0.66 percent in March, driven largely by gasoline prices, which surged more than 20 percent amid the conflict. Beneath the surface, however, core inflation remained comparatively restrained: core CPI rose 0.38 percent, though much of that reflected a temporary jump in rents tied to delayed Bureau of Labor Statistics housing surveys following last fall’s government shutdown. Excluding that shelter distortion, core inflation would have been materially softer, while core PCE — the Fed’s preferred gauge — slowed to 0.29 percent as weaker goods inflation offset firmer service categories such as health care and air transportation. Producer prices point to mounting supply chain pressures rather than overheating demand, with headline PPI jumping 1.4 percent in April as higher fuel, freight, and manufacturing input costs rippled through the economy and firms increasingly moved to protect margins. Still, some PPI components feeding into core PCE, including weaker portfolio management fees tied to March’s equity selloff, are likely to restrain near-term inflation readings.
Labor market data continue to point to an economy that is cooling gradually rather than deteriorating outright, with hiring holding up better than expected even as broader measures of labor demand soften beneath the surface. Nonfarm payrolls rose a stronger-than-expected 115,000 in April, above both consensus expectations and estimates of roughly 50,000 jobs needed to stabilize unemployment, though hiring slowed from March’s upwardly revised 185,000 pace. Private-sector hiring accounted for the gains, while government payrolls continued to edge lower. Most notably, trade, transportation, and utilities emerged as the largest source of job creation, adding 60,000 jobs and overtaking health care as the dominant contributor to employment growth — a development consistent with recent improvements in freight activity, purchasing managers’ surveys, and regional manufacturing data that suggest an emerging recovery in portions of the industrial economy. At the same time, job gains elsewhere were less convincing: manufacturing slipped back into contraction, professional and business services cooled, and information and financial activities shed jobs, likely reflecting a combination of cyclical moderation and structural adjustments tied to automation and artificial intelligence. Wage growth remained subdued at 0.2 percent in April, helping to contain labor-cost pressures, though a modest increase in the workweek pushed weekly earnings higher and supported household income.
Beneath the stronger headline payroll figures, however, several indicators suggest labor-market conditions continue to soften incrementally. The unemployment rate edged up to 4.34 percent in April from 4.26 percent, even as labor-force participation declined, with household-survey employment falling and the number of unemployed rising — a reminder that the pace of job creation required to stabilize unemployment may be materially higher than Federal Reserve assumptions imply. March JOLTS data reinforced the view of slower but still-stable labor demand: job openings declined modestly to 6.87 million, layoffs increased slightly, and the vacancy-to-unemployment ratio remained below pre-pandemic norms, signaling reduced tightness and limited inflationary pressure from labor markets. Yet workers showed somewhat greater confidence than expected, with the quits rate ticking up to 2.0 percent. Weekly jobless claims likewise continue to portray a labor market marked more by stability than stress. Initial claims remained historically low through May, consistently below year-earlier levels, while continuing claims stayed contained and the insured unemployment rate held steady at 1.2 percent. Even as AI-driven restructuring increasingly reshapes hiring patterns — particularly in technology and white-collar occupations — layoffs remain concentrated rather than systemic, suggesting employers are adjusting staffing cautiously rather than retrenching broadly. Taken together, the data point to a labor market that remains resilient in the near term but is gradually losing momentum, supporting expectations that the Federal Reserve will remain on hold for now before potentially easing policy later in the year if unemployment continues to drift higher.
Business activity data continue to point to an economy in expansion, though momentum is becoming increasingly uneven as firms contend with rising costs, softer demand in some areas, and cautious hiring. The ISM Services PMI eased modestly to 53.6 in April from 54.0 — still consistent with moderate economic growth — but underlying details softened meaningfully. New orders fell sharply to 53.5 from 60.6, likely reflecting the fading of earlier pull-forward demand ahead of expected price increases, while employment remained in contraction for a second straight month despite an improvement from March. At the same time, price pressures remained intense and broad-based, with the services prices index holding at 70.7 — among the highest readings since 2022 — as firms increasingly cited diesel, gasoline, fuel surcharges, and tariff-sensitive materials as sources of cost pressure. Manufacturing also remained in expansion territory, with the ISM Manufacturing PMI unchanged at 52.7, though the composition of activity was less encouraging. New orders improved modestly, but export demand weakened, production failed to accelerate materially, and factory employment slipped further into contraction. Supplier deliveries slowed, likely reflecting Iran-war-related disruptions and tighter logistics conditions, while the manufacturing prices-paid index surged to 84.6 — its highest level in four years — underscoring mounting pipeline inflation. Taken together, the April ISM reports suggest growth continues but is increasingly constrained by rising input costs, softer demand, and more selective hiring, reinforcing expectations that the Federal Reserve will remain on hold in the near term.
Against a backdrop of still-expanding but increasingly cost-constrained business activity, sentiment data point to growing caution among both firms and households. Small-business optimism remained subdued in April, with the NFIB Small Business Optimism Index edging up only marginally to 95.9 as elevated uncertainty and weakening sales expectations offset modest improvements in profitability and hiring plans. The share of owners expecting stronger real sales over the next quarter fell to its lowest level in a year, underscoring concern that rising prices — particularly for fuel and other inputs — may increasingly weigh on customer demand, while modest improvements in profits appear to be giving some firms room to absorb higher costs through margin compression rather than fully passing them through to consumers. Capital spending and hiring intentions improved slightly but remained historically subdued, reflecting caution around future demand even as labor quality continues to rank among firms’ most persistent challenges. Consumers, meanwhile, grew notably more pessimistic in May, with the University of Michigan sentiment index falling to a record low of 44.8 as elevated gasoline prices and uncertainty surrounding the Iran conflict intensified concerns about the cost of living. Inflation expectations moved sharply higher, with households expecting prices to rise 4.8 percent over the next year and 3.9 percent annually over the next five to ten years, suggesting growing concern that inflation pressures may spread beyond fuel. Measures of current conditions, future expectations, and household finances all deteriorated to record or near-record lows, even as labor-market expectations remained comparatively resilient — helping explain why spending has thus far held up better than confidence. Taken together, the data suggest an economy in which sentiment is weakening faster than underlying activity, with both businesses and households becoming increasingly cautious even as growth continues to hold up in the near term.
Consumer spending data, meanwhile, suggest that households continue to absorb higher costs without materially retrenching, though the composition of spending increasingly reflects pressure from elevated fuel and food prices. Nominal retail sales rose 0.5 percent in April, but with more than 40 percent of the increase driven by higher gasoline expenditures, while retail sales excluding gas rose a more modest 0.3 percent. Even so, underlying demand remained firmer than anticipated: control-group retail sales — a key GDP input — increased a solid 0.5 percent, while restaurants, grocery stores, and online retailers led gains, suggesting consumers continue to spend despite rising cost pressures. Elevated tax refunds and household wealth effects appear to be cushioning activity for now, helping prevent a more meaningful pullback in discretionary spending. Big-ticket purchases, however, show clearer signs of moderation. Light vehicle sales cooled to a 15.92 million annualized pace in April, reflecting affordability pressures from higher gasoline costs, though sales remained above the first-quarter average and growing interest in fuel-efficient and electric vehicles points to some underlying resilience. Housing activity also remained subdued, with existing home sales rising only marginally as elevated mortgage rates, stretched affordability, and rising inventories weighed on demand, while home price appreciation slowed to just 0.9 percent year over year. Consumer spending looks likely to remain resilient in the near term, though higher energy costs are increasingly reshaping spending patterns and weighing on interest-sensitive purchases.
Even as consumer confidence weakens and spending patterns become more selective, business investment and production data suggest firms entered the second quarter on firmer footing than sentiment alone would imply. Industrial production rose a stronger-than-expected 0.7 percent in April following a revised March decline, driven primarily by durable goods output, with motor vehicle production surging 5.3 percent and accounting for roughly one-third of the headline gain. Manufacturing output increased 0.6 percent, business equipment production rose 1.5 percent, and stronger activity in transportation equipment, metals, minerals, agricultural equipment, and electronics pointed to relatively healthy capital spending and industrial demand despite higher energy costs and elevated uncertainty. Softer output in consumer goods excluding autos and energy, alongside declines in mining activity and oil-and-gas drilling, suggests more price-sensitive sectors remain cautious. Productivity data reinforce the picture of a business sector continuing to adapt rather than retrench: nonfarm productivity rose at a 0.8 percent annualized pace in the first quarter, lifting year-over-year growth to 2.9 percent — the strongest reading in two years and consistent with the possibility that technology investment and early AI adoption are beginning to appear in aggregate data. Output growth continued to outpace hours worked, while unit labor costs rose just 2.3 percent annualized, sharply below the prior quarter and easing to 1.2 percent year over year, reinforcing evidence that labor markets are not generating broad inflationary pressure. US firms appear willing to invest and expand production selectively, while stronger productivity growth is helping offset labor costs and cushion the economy against rising input prices and softer consumer sentiment.
The broader policy and financial backdrop points to an economy that continues to expand but faces growing constraints from tighter monetary conditions, elevated inflation risks, and mounting fiscal concerns. Credit availability remains broadly supportive, with the Federal Reserve’s latest Senior Loan Officer Opinion Survey showing only modest tightening in business lending standards, largely stable consumer credit conditions, and some easing in commercial real estate lending terms. Demand for credit, however, has softened in several consumer categories, suggesting borrowing appetite, rather than supply, may increasingly limit activity. The Federal Reserve has recently shifted further in a hawkish direction. Minutes from the April FOMC meeting showed diminishing support for eventual rate cuts, growing discomfort with maintaining an easing bias, and a majority of policymakers indicating further tightening could become appropriate if inflation remains persistently above target. By mid-May 2026, market implied policy rates showed rate market participants placing a 60 percent chance on a one-quarter increase in the Fed Funds rate by December 2026. Energy-related inflation from the Iran conflict, tariffs, supply disruptions, and resilient labor-market conditions have reinforced the Fed’s caution, leaving policymakers in no hurry to ease.
Financial markets have increasingly aligned with this higher-for-longer outlook, though concerns now extend beyond inflation alone. Treasury yields surged in May, with the 30-year yield briefly exceeding 5.2 percent — its highest level since 2007 — as investors reassessed both inflation persistence and the sustainability of US fiscal dynamics. Mounting deficits, rising debt-service costs, and heavier Treasury issuance are increasingly pushing investors to demand greater compensation for holding long-term debt, particularly as higher rates themselves threaten to worsen fiscal pressures. The unusual leadership of the long end of the curve in the recent selloff suggests markets are increasingly pricing fiscal risk alongside monetary restraint. Taken together, the policy outlook points to a Federal Reserve likely to remain on hold for an extended period, balancing elevated inflation risks against the possibility that tighter financial conditions and rising borrowing costs eventually weigh more heavily on growth.
In May 2026, the US economy confronts a difficult but not wholly unfavorable balancing act: robust enough to continue expanding, yet increasingly pressured by higher energy costs, tighter financial conditions, and record levels of policy uncertainty. Headline inflation has been pushed higher by the Iran conflict and energy prices, yet underlying inflation pressures remain more contained than surface-level readings admit; labor markets, consumer spending, and business activity continue to expand despite growing indications of moderation. Households and firms appear to be absorbing higher costs for now — supported by accumulated wealth, stable credit availability, productivity gains, and selective business investment — though confidence has deteriorated notably, and more interest-sensitive sectors such as housing, autos, and portions of discretionary spending are beginning to soften. At the same time, rising long-term Treasury yields, mounting fiscal concerns, and increasingly cautious Federal Reserve rhetoric suggest financial conditions may become a more meaningful headwind in coming quarters, particularly if elevated energy prices persist or inflation broadens beyond fuel and supply-chain-related categories.The near-term growth path remains one of slower but continued expansion rather than outright contraction, with the US economy appearing more vulnerable to policy missteps or external shocks than to an immediate cyclical downturn.
