It’s Time to Unleash the Public Markets

Amar Bhidé

Jan 02, 2026, 10:07 am EST

Here is a new Barron’s op-ed endorsing the SEC’s “rapacious deregulatory zeal.” Lest you think me a MAGA fanatic, my previous op-ed attacked the lawlessness of Trump’s tariffs. John Authers approvingly remembers my 2010 book arguing for tough banking rules as  “straightforward polemic.” 

Free-thinking, open-minded discourse is also at the heart of a “Council for Transformative Enterprise” that some colleagues and I are promoting. We are inspired by Ned Phelps’s now defunct Center on Capitalism and Society. (A couple of us were founding members of the Center and I started and edited its eponymous journal.)  However, our renewal project emphasizes progress in Science, Technology and Art, more strongly. Its aims also align closely with my course on transformative medical advances.

Here’s a one-page summary. If you would like to help organize the Council and participate in its activities, please email me.

And if anyone would consider a “naming” gift–or housing it in an existing Foundation – and shaping its mission  we’d be immensely grateful.

Wishing you all a happy new year! The world was less awful in 2025 than in 2024. May it continue this trajectory.

Published Aug 23 2025

“By now, it must have dawned on elite universities that the Trump administration’s campaign against them won’t end soon. Even if the administration moves on, private universities will remain under pressure as long as they depend on public funding and they maintain untenable rules governing campus speech.

“Fixing those problems would require changes that go far beyond what many universities would consider. Yet battles over restricting speech appear to pose an existential threat. The only path to real academic independence is for universities to shed their dependency on big money and institute true political neutrality—changes few universities have seriously contemplated.

Read More here

Then I listened to KH’s “concession speech” from yesterday. Yes the declaration of a peaceful transfer of power was commendable — and the dig (without naming names) at DJT’s awfulness in 2020 well deserved.

Perhaps the self-congratulatory tone (“we ran a great campaign”) was also necessary if a bit absurd given the money spent and the outcome.

But what about the constant refrain of “fight” — about 16 times I think — with no mention of the need to “listen to,” “understand” or even “persuade” the other side.

I was at a dinner party a couple of months ago to celebrate the book of a liberal icon. I asked “you make a eloquent case that will strengthen the resolve of your followers. But what about those who are not predisposed to your views?” No real response was forthcoming.

Some, perhaps many, of Trump supporters are awful people. But I daresay not all are racists, fascists, or misogynists. People who pollsters describe as “shy” Trump voters, may also be “reluctant” Trump voters.

After nearly two years of focusing on book writing, I returned to an oped, to eject a bee that had been buzzing in bonnet. Published in Project Syndicate, the text is below..

The Boring Truth About AI

To think that artificial intelligence is advancing at warp speed and creating existential risks to humanity is to confuse a mania with useful progress. The technology is less like nuclear weapons than like many other slowly evolving technologies that have come before, from telephony to vaccines.

Experts who warn that artificial intelligence poses catastrophic risks on par with nuclear annihilation ignore the gradual, diffused nature of technological development. As I argued in my 2008 book, The Venturesome Economy, transformative technologies – from steam engines, airplanes, computers, mobile telephony, and the internet to antibiotics and mRNA vaccines – evolve through a protracted, massively multiplayer game that defies top-down command and control.

Joseph Schumpeter’s “gales of creative destruction” and more recent theories trumpeting disruptive breakthroughs are misleading. As economic historian Nathan Rosenberg and many others have shown, transformative technologies do not suddenly appear out of the blue. Instead, meaningful advances require discovering and gradually overcoming many unanticipated problems.

New technologies introduce new risks. Invariably, military applications develop alongside commercial and civilian uses. Airplanes and motorized ground vehicles have been deployed in conflicts since World War I, and personal computers and mobile communication are indispensable for modern warfare. Yet life goes on. Technologically advanced societies have developed legal, political, and law-enforcement mechanisms to contain the conflicts and criminality that technological advances enable. Case-by-case court judgments are crucial in the United States and other common-law countries. These mechanisms – like the technologies themselves – are evolutionary and adaptive. They produce pragmatic solutions, not visionary constructs.

The Manhattan Project, which developed the atomic bomb and helped end World War II, was an exception. It had a high-priority military mandate. With the Nazis seeking to develop a bomb of their own, speed and effective leadership were essential. And as all-out thermonuclear war became a real threat, statecraft and strategic deterrence helped avert doomsday. 

But nuclear weapons are a misleading analogy for AI, which has followed the typically diffused, halting pattern of most other technological transformations. AI spans disparate techniques – such as machine learning, pattern recognition, and natural language processing – and has wide-ranging applications. Their common feature is mainly aspirational – to go beyond mere calculation to more speculative yet useful inferences and interpretations.

Unlike the Manhattan Project, which proceeded at breakneck speed, AI developers have been at work for more than seven decades, quietly inserting AI into everything from digital cameras and scanners to smartphones, automatic-braking and fuel-injection systems in cars, special effects in movies, Google searches, digital communications, and social-media platforms. And, as with other technological advances, AI has long been put to military and criminal uses.

Yet AI advances have been gradual and uncertain. IBM’s Deep Blue famously beat world chess champion Garry Kasparov in 1997 – 40 years after an IBM researcher first wrote a chess-playing program. And though Deep Blue’s successor, Watson, won $1 million by beating the reigning Jeopardy! champions in 2011, it was a commercial failure. In 2022, IBM sold off Watson Health for a fraction of the billions it had invested. Microsoft’s intelligent assistant, Clippy, became an object of ridicule. And after years of development, autocompleted texts continue to produce embarrassing results.

Machine learning – essentially a souped-up statistical procedure that many AI programs depend on – requires reliable feedback. But good feedback demands unambiguous outcomes produced by a stable process. Ambiguous human intentions, impulsiveness, and creativity undermine statistical learning and thus limit the useful scope of AI. While AI software flawlessly recognizes my face at airports, it cannot accurately comprehend the nuances of my carefully and slowly spoken words. The inaccuracy of 16 generations of professional dictation software (I bought the first in 1997) has repeatedly frustrated me.

Large language models (LLMs), which have become the public face of AI, are not technological discontinuities that magically transcend the limitations of machine learning. Claims that AI is advancing at warp speed confuse a mania with useful progress. I became an enthusiastic user of AI-enabled search back in the 1990s. I thus had high hopes when I signed up for ChatGPT’s public beta in December 2022. But my hopes that it, or some other LLM, would help with a book I was writing were dashed. While the LLMs responded in comprehensible sentences to questions posed in natural language, their convincing-sounding answers were often make-believe.

Thus, whereas I found my 1990s Google searches to be invaluable timesavers, checking the accuracy of LLM responses made them productivity killers. Relying on them to help edit and illustrate my manuscript was also a waste of time. These experiences make me shudder to think about the buggy LLM-generated software being unleashed on the world. That said, LLM fantasies may be valuable adjuncts for storytelling and other entertainment products. Perhaps LLM chatbots can increase profits by providing cheap, if maddening, customer service. Someday, a breakthrough may dramatically increase the technology’s useful scope. For now, though, these oft-mendacious talking horses warrant neither euphoria nor panic about “existential risks to humanity.” Best keep calm and let the traditional decentralized evolution of technology, laws, and regulations carry on.

Amar Bhidé, Professor of Health Policy at Columbia University’s Mailman School of Public Health, is author of the forthcoming Uncertainty and Enterprise: Venturing Beyond the Known (Oxford University Press).

The WSJ story is interesting. Some WSJ reader comments even more so. They defend Musk on three grounds:

1. The news side of the WSJ is leftie and “has it in” for the Trump leaning Musk
2. Space X is “his” company so he is entitled to borrow from it as he wills.
3. Borrowing against your stock is perfectly legal.
4. Musk repaid the loans.

On the first point. I have some sympathy for the view that the news side of the WSJ has become heavily slanted. I find the other claims less persuasive.

• Space X is not “his” company. It has institutional investors who have a fiduciary responsibility to their shareholders. There is a clear question whether these insitutions have the capacity or the will to control Musk’s dealings with Space X. Full disclosure. In March I was removed from the board of a fund whose managers I believed might not have had this capacity or will — and the rest of the board was unwilling to question whether the managers did.
  
  Moreover, in a private company investors cannot free ride off governance enforced by SEC rules or “the market.”

• Borrowing against your stock held in a brokerage account is indeed perfectly legal. But regulators require an arm’s length credit review process, that sets credit limits, determines which stocks are marginable etc. It was the subversion of this process that led EF Hutton to fail in 1987 when I worked there.

• That Musk repaid is beside the point. Suppose I am an accountant and take money from company the till to bet on a hot tip. The horse wins. I repay. All good? Not really..

Zoning rules have become a target in many libertarian circles. Joel Kotkin who I believe is strongly inclined to libertarian views — as am I — points to dangers in this post.

https://www.spiked-online.com/2022/03/04/the-limits-of-libertarianism/

Id make the argument differently — invoking Jane Jacobs and Elinor Ostrom — but end up in the same place.There are many externalities in housing choices, financial, aesthetic and otherwise. And local conventions, communities, and governments are best positioned to control them. They can certainly get them wrong. Local communities can be racist and intolerant for example. And city governments can be captured by loonies. (I’m thinking of your, Cambridge and Berkeley) 

But override local traditions and rules at your peril.

Also, the cure for high prices is high prices. Housing in Cambridge may be “unaffordable.” But there is ample scope for commercial development a mile away in the run down parts of Somerville and Medford — which high Cambridge prices encourage. To the benefit of Somerville and Medford. Likewise if high SF prices encourage people to move away, whats wrong with that? SF itself was built up by people moving form elsewhere. I don’t live where I was born, nor did my parents, their parents…

This oped, just published in Project Syndicate memorializes Janos Kornai. I never met Janos but we published a couple of pieces he wrote for Capitalism and Society which I edited. I had the privilege of corresponding with him then. His Hungary’s U-Turn was a cry from the heart. I prodded him to conclude with a recommendation, but he sensibly and politely declined.
I had also meant to use “Subtle” instead of “Selective” but goofed up on that!

December 31 2021

MEDFORD, MASSACHUSETTS – Likening today’s capitalist economies to the communist bloc of yesteryear may seem far-fetched. What could the free market possibly have in common with Soviet-style central planning? In fact, the comparison increasingly offers useful insights into what has become of the winning side since the end of the Cold War.

Consider the “soft budget constraints” that socialist state-owned enterprises (SOEs) used to enjoy and that turned out to be one of the main reasons why Soviet-bloc economies failed. Similar financial conditions are becoming pervasive in capitalist America.

As the Hungarian Marxist apostate János Kornai famously argued, SOEs could ignore losses and consumer preferences because they could always count on the state to keep them afloat. Kornai’s thesis was popular with the Chinese reformers of the 1980s: seeking to make SOEs more responsive to the market, they “hardened” companies’ budget constraints. By contrast, capitalist America seems to be on the same misbegotten path as the Soviet economies. Though it is starting from a different place, the result is the same. Budget constraints are softening, and capital is increasingly being funneled toward the fashionable and the well-connected fantasists and schemers.

To be sure, borrowing can, up to a point, energize capitalist enterprises. Contrary to what one reads in introductory economics textbooks, real-world consumers’ budgets aren’t capped, and venturesome consumers can borrow to pay for the next new hot item. By consuming beyond their means, they boost the demand for iPhones and Teslas, creating incentives for innovators.

Likewise, Tesla and other upstart businesses often rely on external funding, not profits, to advance their innovations, just as governments issue bonds to help pay for highways, bridges, harbors, and airports. Savers also benefit. Instead of stuffing surplus cash into mattresses, they can profitably cover the financing needs of consumers, businesses, and governments.

But too much financial flexibility can be toxic. Though individuals, businesses, and governments can reasonably predict next month’s wages, revenues, and tax receipts (respectively), they can only guess at their capacity to meet obligations many years from now. The more optimistic one’s forecast, the greater one’s willingness to spend beyond one’s current means or invest more than just one’s retained earnings.

In principle, financiers’ due diligence should impose countervailing limits on this overextension. But estimating creditworthiness and investment returns is not an exact science, and competition in the financial sector can produce a race to the bottom as borrowers flock to the most lenient creditors.

Moreover, fractional banking and fiat money can further soften financing constraints. Banks do not lend out only the savings of their depositors; they leverage those deposits several-fold. And central bankers have even more potent powers to create funds out of thin air.

As traditional financing constraints have weakened in recent decades, the growth in households and businesses’ debt has exceeded the growth in their incomes and profits by a wide margin. Similarly, the growth in the US government’s debt – now exceeding $29 trillion – boggles the imagination. Yet while borrowing has jumped, interest rates have plummeted, encouraging even more borrowing and imprudent lending.

These lax lending standards have apparently spilled over into equity markets. Last year, some four million self-described “apes” bought billions of dollars of AMC stock, saving the movie theater chain from bankruptcy. Celebrities now float SPACs (special purpose acquisition companies) with a strangely effective pitch: “Give us your money, but we won’t tell you what for.” Hedge funds and private-equity firms have piled into venture capital (VC). Valuations have soared – nearly 340 new businesses raised funding at valuations exceeding $1 billion in 2021. And, the kind of due diligence that once took months has been compressed to days – or even to just hours with some “spray-and-pray” VCs.

This combination of manic investing and careless lending has not emerged spontaneously or resulted from the complacency that comes with an extended period of stability, as Hyman Minsky, the great theorist of financial crises, argued. The collapse of the internet bubble in 2000 and the global financial crisis eight years later should still be fresh in most financiers’ and investors’ memories. The problem, rather, is that central bankers have deliberately incited indiscriminate lending and “risk-on” trading on a historically unprecedented scale.

Worse, while central bankers have apparently dropped plenty of proverbial “helicopter money,” the funds have not been evenly spread. Monetary policies have been designed to lower credit standards, thereby favoring feckless borrowers. The central bank-furnished liquidity that has been pouring into stock markets has found its way to fashionable “meme” and SPAC stocks (in addition to a few trillion-dollar Big Tech firms). VCs favor well-connected founders with shiny resumes. Yet as they bid up the most glamorous ventures’ valuations, they fund less than 0.5% of all US start-ups. One well-known VC firm has even started a fund dedicated to buying cryptocurrencies.

Savers who are too sensible to speculate have fallen behind. So, too, have the businesses that resisted the temptation of cheap money. Under current conditions, their less prudent competitors can pay more for scarce employees and other resources.

What kind of reckoning capitalism faces – or when – is impossible to predict. In the end, Kornai’s Hungary failed slowly, not suddenly. It and other Soviet-style economies that fed the “investment hunger” of favored SOEs kept shop shelves bare of the goods that consumers wanted and that less-connected producers might have supplied. In the absence of wartime or 1970s-style price controls of the kind imposed by President Richard Nixon, such shortages and rationing regimes seem unlikely in the capitalist West. The current inflationary surge may yet subside as supply-chain bottlenecks ease, while the US Federal Reserve forestalls another financial meltdown.

But staunchly defending stock markets simply extends the state-sponsored misallocation of capital. And, unfortunately, the current crop of central bankers seem to lack the resolve that enabled the late Paul Volcker to harden financial constraints when he led the Fed four decades ago.

I had an inkling the barista might be from Afghanistan, so I asked him whether he was.

He was.

I asked if he still had family there.

He did.

I said I was very very sorry and hoped they would be unharmed.He seemed oddly unaffected.

He was there at Peet’s again yesterday. I asked him how his folks were.

He said that banks and other such services were closed, but for the rest it was fine.

They were safe?

Oh yes. The security situation was much improved. There used to robberies and murders before. All stopped now.

That I found discouraging, but I didn’t tell him that.

Sadly horrible regimes often get their start and staying power precisely because of prior disorder and capricious misrule.