Abstract

In the 20th century, as the night-watchman state was gradually abandoned in market economies, almost all governments intervened in markets increasingly to promote various goals. As a result, the role of the state in the capitalist economies has expanded significantly over time. Therefore, the debate on the proper role of the state in a market economy, which has been lasted for centuries, remains important today even more than before. This study describes the approaches of welfare economics and public choice to the state intervention in markets to correct market failures. In this context, the study aims to highlight the differences between traditional welfare theory and public choice theory, and thus to contribute the ongoing debates on the proper role of government in a market economy.