ABSTRACT
This chapter presents a historical overview of what has been the real activity of states and of the theories that have arisen about what it should have been. Over time, the aim of the state control over the economy has changed from merely serving the interest of the lord to serving those of the nation as a whole and later also becoming concerned with the interests of each member of society. The latter did not happen until the end of the 19th century. Regarding economic theory, the work of Adam Smith and his “invisible hand” marks a turning point (and not a starting point) in the construction of a system capable of evaluating the efficiency of the market. After Smith, all the major currents of economic thinking have taken a position on the debate regarding whether public intervention is necessary to increase social welfare. The gradual construction of the theory of externalities (later broadened into the market failure theory) and the public choice theory are notable milestones in this history.
