Government's role, it seems to me, is to do two things:
#1: to regulate. The goal is to maximize freedom and opportunity. This means keeping markets working smoothly, preventing thieves and fraudsters from stealing from us, preventing psychos and angry folks from hurting us. Markets are capable of powerful things when they're operating properly. For example, insurance companies have more stringent rules and have done more careful studies of things like fire safety than government has, because it's in their interest to do so. Other things being equal, less regulation is better: it gives more opportunities and freedom. But other things are rarely equal. There's an optimal level of regulation in most things and it's rarely zero. it's almost never 100% either. Everything is different and needs its own level.
#2: to serve as a backstop when #1 fails. We need things like armies, fire departments, police departments, etc. All of these things have been tried as private enterprises and failed1, so we now provide them as public services. Public funding of roads and other infrastructure has worked spectacularly well. Private enterprise has always seen opportunities to build thoroughfares, but never very many. There was a lot more private tolling of natural thoroughfares, such as rivers2, than building new thoroughfares. Government has succeeded spectacularly at this, subsidising railroads, building highways, dredging seaports and canals. Building the road is good business, employing thousands, albeit at taxpayer cost. But having the road for everybody to use is even better, generally providing positive ROI after only a year or two and continuing on for decades.
For one reason or other, sometimes the free market falls into a morass of gouging or racing to the bottom, serving only their short term bottom line, against the public interest or even their own long term interest. At the present moment, there are four industries that are the poster child of this failure: Health Care, Banking, Fossil Fuel and Broadcast Media. This last is the most scarey, because it is the major host of the fourth estate. Five companies own over 95% of all mass media3, and one is in open collaboration with a pro-monopoly political movement.
There's a solution. In 1911, Standard Oil dominated the oil industry. Breaking it up into more than 20 pieces was incredibly good for for the little pieces, and for America. They've been allowed to coalesce again, and the gouging and corruption are back. AT&T once owned 90% of the telephone market. Strictly regulating it was incredibly good for it, and for America. These regulations have been lifted and now the gouging and corruption are back. At the start of WWI, there were hundreds of railroads, competing in a race to the bottom, providing barely adequate service at high cost and low profit. During the war they were nationalized, and became vastly more profitable and efficient, and this lasted until changes too big for them to adapt to occurred after WWII. The race to the bottom has returned, and instead of solving the problem, they've been allowed to coalesce.
Basically, there are two ways to win in the market. The good one is to have a better product than your competitors. The bad one is to become big and powerful, so your competitors, including those who have a better product, can't compete. This opens the door for gouging and poor service. There's a third way, which is really just a perversion of the second, which is where a bunch of very similar competitors fight each other for a limited, or very slowly growing market. Nobody has a clear advantage, so it becomes a race to the bottom on price. Quality and service suffer, because attempting to provide better puts you at a price disadvantage.
Once in a while, an enlightened executive will see this happening and figure out how to provide a better product. But that's very rare. Government intervention seems to be the only way.
1A good case can be made that the Roman Empire fell and plunged Europe into a millennium of dark ages because the armies were private. There were other causes too, but Roman armies seeking their own interests, often against those of Rome, were a big part of it.
2A favorite scam was for a band of armed men to offer to guard you through a known dangerous passage, for a fee. If you didn't pay, the same men would appear on your trip as bandits.
3Disney (ABC), NBC/Comcast (GE), NewsCorp (FOX), Viacom/CBS, TimeWarner,. #6 is Clear Channel, which controls over half of radio, but is less than 1/4th the size of #5 TimeWarner. Viacom and CBS are technically separate corporations but a majority of both is owned by the same holding company, Sumner Redstone's "National Amusements"
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