ABSTRACT
These results, that are now well established in the Theory of Industrial Organization, are not really surprising. There is no reason to expect, except under special conditions, that a free market will generate optimal results given that firms act as profit maximizers and not as social welfare maximizers. Those cases where the market equilibrium seemed to be furthest away from the optimum, especially when account was taken of the distribution of welfare, led, in most countries of the industralized world in the post-Second World War period, to the establishment of the Welfare State that is directly responsible for the production and distribution of a number of ‘necessary services’ (such as health and education) and goods that are produced and distributed by large public monopolies. Later on, in several countries, by a logical extension of the argument that profit maximization does not generally generate satisfactory results, direct state intervention (that is, state ownership) was extended to various other sectors of economic activity through the creation of state organizations of direct state involvement, such as OAE in Greece (see Xanthakis 1989). The role of such organizations has been to take over, under state ownership, a large number of ‘problematic’ firms in various industrial sectors.
