ABSTRACT
This chapter examines the reasons why the state assumes certain functions in the development of economic activity. If the real activity of the market (understood as a black box containing all specific markets) is evaluated, the conclusion is that the results are not generally efficient. Moreover, the market needs rules to be enforced for it to function properly, and in the long term, the model can be unsustainable. Beyond efficiency, the market may not respect the moral criteria that society agrees on, and wealth distribution is usually far from any standard of equity. If the activity of specific markets is evaluated, sometimes circumstances arise that hamper efficiency. This includes the difficulty in actually creating the market (public goods), the impact that the activity has on third parties (externalities), competition failures, incomplete markets and problems in the flow of information. Another reason for public action, unrelated to efficiency, is the existence of socially desirable goods and services (merit and protected goods). Just because a catalogue of reasons theoretically justifies public activity in the economy does not mean that states will always feel obligated to act.
