No politician has ever stood at a podium and declared, “We’re going to fund this program by printing money and causing inflation.” That would be political suicide. Instead, they promise popular spending programs while simultaneously pledging to keep taxes low. It sounds like magic—getting everything you want without paying for it. But as we explored in our last post, there’s no such thing as a free lunch, even when politicians make it seem otherwise. The political incentive structure is straightforward. Spending money on programs that benefit specific groups is extremely popular with those groups. Whether it’s farm subsidies, infrastructure projects, …

“Inflation is always and everywhere a monetary phenomenon.” Milton Friedman’s famous declaration sounds appropriately academic, but what does it actually mean for your grocery bill or your rent payment? And why should you care about monetary theory when you’re just trying to understand why everything seems to cost more than it did last year? Let’s start with the basics. In economics, inflation is simply defined as an increase in prices. But when you hear it discussed on the evening news, what people are really talking about is price increases beyond the normal fluctuations caused by supply and demand. You’re probably …

In our last post, we explored how government spending creates unavoidable trade-offs by redirecting resources from private uses to public ones. Today, let’s examine a specific type of market distortion that makes these trade-offs even more problematic: monopsony. Most people are familiar with monopolies—situations where there’s only one seller of a particular product or service and multiple buyers. But the flip side, monopsony, gets much less attention despite being equally important. A monopsony exists when there’s essentially only one buyer for a particular good or service. In truly free markets, monopsonies are almost impossible to maintain naturally. Imagine if there …

If recent events have taught us anything, it’s that the United States government spends an eye-wateringly large amount of money every year, and it’s not always clear where exactly all that money goes or why. Leaving aside the printing and borrowing of money (for the time being), the main way these gargantuan budgets get funded is through extracting money from other people—that is, taxes. Taxes come in a variety of forms, from income taxes to tariffs and everything in between. Some are baked into consumer pricing (like tariffs), some get automatically drawn from every paycheck (like Social Security withholding), and …