Edmund S. Phelps, the 2006 Nobel laureate who taught central banks that the trade-off between inflation and unemployment depended on what workers and firms expected, died May 15 at his Manhattan home of Alzheimer's disease. He was ninety-two. [1]

Phelps's 1960s work at Yale's Cowles Foundation cracked the Phillips curve. Workers and firms set wages and prices against the inflation they anticipated, not the inflation they had seen. Push unemployment below the rate the expectations supported and you got more inflation, not lower joblessness, until the next round of bargaining. Friedman reached the same conclusion in parallel. Central banks took the lesson and built modern inflation targeting on it. [1] [2]

His later work was the harder sell. Mass Flourishing, in 2013, argued that prosperity comes from grassroots innovation by ordinary people inside private firms — not from state-directed investment, not from corporatist coordination, not from the technocratic capex programs governments now write into law. The book read better in 2013 than it does in 2026, which is the point: Phelps spent his last decade saying the engine had been put in the wrong vehicle. [1]

This week the thirty-year Treasury yield closed at 5.198%, near a nineteen-year high, and Google priced six-times AI capex on Day Two of I/O. The paper's capex thesis has a quiet counter-position now in the obituary column. [3]

-- THEO KAPLAN, San Francisco