Microeconomic Policy

Abstract

Marshall believed that the State could and should intervene to do work ‘specifically its own’ and in that way help to secure ‘social ameliorations that are not fully within the range of private effort’.¹ Adam Smith before him had introduced a similar caveat into his theory of laissez-faire when assigning to the State (alongside the less controversial obligations of law and order and national defence) ‘the duty of erecting and maintaining certain public works and certain public institutions, which it can never be for the interest of any individual, or small number of individuals, to erect and maintain’.² Milton Friedman after him, although undeniably a libertarian with a strong intellectual commitment to minimal State intervention, stated categorically that ‘the consistent liberal is not an anarchist’,³ and assigned a number of positive functions to Government — while indicating clearly that these must be modest, limited, and above all complements to (not substitutes for) voluntary contracts made by rational individuals, ‘within the range of private effort’.