Diogo Costa, president of the Foundation for Economic Education, warns that AI-driven change is real but the bigger risk to prosperity right now is a revival of bad economic ideas. He says rising affordability fears are pushing younger Americans toward costly government solutions, and that teaching sound economics is the antidote. Costa draws on his upbringing in Brazil, lessons from the Austrian school, and simple demonstrations like the pencil to show why free markets deserve a vigorous defense.
As the head of a long-standing free-market think tank, Costa is focused on ideas, not just technology. He argues that the affordability squeeze creates political openings for policies that destroy incentives and reduce freedom. From a Republican viewpoint, the remedy is clear: defend markets, explain how they work, and push back on the policy fads that promise immediate relief but long-term harm.
“The biggest challenge today is the different ways that ‘anti-economics’ keeps reappearing. And this time, it’s reappearing through a new kind of socialism. So through the 20th century, we had different flavors of socialism, labor union socialism, environmental socialism, anti-globalization socialism. Now we see this cost-of-living socialism, affordability crisis socialism.”
Costa points out that young people, while preferring market outcomes in principle, are tempted by hands-on controls when prices bite. “Young people, they want to live in a market economy. They don’t want to move to Venezuela or Cuba, but they want price controls in everything. They want to freeze the rent, they want free rides in buses, they want to make sure that groceries are either run by the government or price controlled somehow. And this is not just a phenomenon in New York City or California. This is something that’s happening globally.” Those policies sound caring but lock in shortages and stagnation.
“We’re in a golden age for technology, not necessarily for the ideas behind it…the ideas behind the market economy are not as well understood. And when you talk about AI, people are thinking all the jobs are going to be gone. Humanity is on the verge of extinction.” Costa sees a strange mismatch: amazing technological progress and widespread pessimism about the economy. The political risk is that fear drives voters toward heavy-handed fixes rather than policies that expand opportunity.
“Joseph Schumpeter, the Austrian economist, said that capitalism would be economically powerful and at the same time culturally weak because you have companies that will be doing amazing things, but capitalism makes things more abstract…and at some point people stop seeing exactly how they are part of this amazing complexity.” That’s why Costa leans on small, tangible lessons to reconnect people to markets. “That’s why with FEE we sometimes go back to a pencil. We just ask people ‘do you understand how a pencil is made?’ Because if you see the complexity, the network, the amazing, marvelous market system around… Just building a single pencil, you start to understand how you are part of the complexity and you benefit from it.”
Costa’s childhood in Brazil gave him a firsthand sense of what bad policy looks like and why economic literacy matters. “I grew up in a country that had hyperinflation. When I was 10 years old, 11 years old, yearly inflation was above 1000%, 1200%, 1300%. That meant the prices were changing literally every day. And it’s hard to understand how if you live in a society that is that economically chaotic all your life is designed around those problems.” Those memories fuel his urgency to teach the next generation real economics.
“So as a child, when I was going to the grocery store because my mom gave me a $1,000 bill to buy a bag of chips, I had to think, ‘Oh, I need to get there before the price tagger starts changing the prices’.” He adds a human detail to the theory, showing how inflation warps daily life. “My parents had to turn a bedroom in our house into a pantry because when they got their paychecks the first thing they did was go to the grocery store and buy everything you can…So your life starts to be designed around these big issues. And this is something that some people take for granted.”
Protectionism left a mark too, shaping tastes and expectations in a closed market. “It’s the same thing with protectionism…as a young boy in the early 90s, I wanted video games. Brazil had strict protectionism. So I could buy these dupe video games, but I couldn’t get the real deal. And this was something that people now take for granted, but this was how the Brazilian economy was being shaped.” Those experiences explain why Costa believes generations must relearn basic economics to keep freedom and prosperity alive.
“Milton Friedman has this saying that he thinks that we never actually learn economics as humanity, we learn as individuals, we learn maybe as generations, but now that we don’t live under hyperinflation people forget what that’s like, now that we don’t live under hyperprotectionism people forget what it’s like. So it’s very easy to drift towards inflation, to drift towards protectionism, to drift towards anti-economics and economics needs to be re-taught every generation.” That’s the practical challenge Costa faces: make the case for markets in plain terms and keep the lessons alive so policies stay pro-growth and pro-freedom.
