EVEN the fiercest free-market advocates would concede that governments can justly intervene to curtail businesses that become too powerful. Most would allow that dominant firms with the clout to gouge their customers should be broken up or subjected to strict price regulations. Similarly a judicious regulator should penalise polluters for imposing costs on others by taxing their activities. When markets provide the wrong incentives, because there are too few competing firms (ie, a monopoly), or no market price (ie, pollution) or for some other reason, there is a case for the state to act.
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