Nearly seventy years after its creation, the S&P 500 may be fit for purpose, but it is clearly no longer the narrow one of the 1950s. While the S&P was initially a tool for measurement and understanding, it has over time become a central actor in shaping investor behavior. The widespread use of S&P-based products now actively influences the market the index was intended merely to observe. Though not a true observer paradox in the quantum physics sense, the feedback loop between measurement and subject has become pervasive. The consequences have been many, but perhaps the most significant one has been the widening gap between investment in the stock market and actual ownership of businesses through the stock market. This phenomenon, in turn, is a distinguishing characteristic of “financialization,” a criticism leveled against Wall Street in recent decades for focusing on generating financial returns regardless of, or even in opposition to, outcomes in the real economy…

The history of the U.S. stock market is often explained with colorful anecdotes. There is the gathering of the NYSE founders by a buttonwood tree in lower Manhattan in 1792, Jay Gould cornering stocks in the nineteenth century, shoeshine boys handing out tips in 1929, and Jerry Garcia’s deathbed reaction to the Netscape IPO. Those…