I. Provide a proper legal atmosphere (rules) for capitalism

  II. Insure competition
       A. Antitrust laws protect against abuse of monopoly power.
       B. Natural (justifiable) monopolies such as AT&T were allowed because duplicating high-cost fixed investments is illogical.
       C. The emphasis on free markets discussed in chapter 3 has resulted in some natural monopolies being broken into smaller
            companies which had to compete against new companies touting  new technologies.

III. Provide for an equitable distribution of income
      A. Transfer payments where a government moves general revenue to a specific group, i.e., Aid to Families with 
           Dependent Children and college students are examples.
      B. Market Intervention (affecting supply and demand)
         1. Minimum wage decreases supply raising price and lowering quantity.
         2. Excise taxes on alcohol, cigarettes, jewelry, etc., deceases supply.
         3. Farm price supports, aid to small business and education increases supply.

IV. Adjust for market failures
      A. Adjust for spillovers (externalities)
          1. Effects of a market system often spillover onto non-participants who are external to the market transaction. 
          2. Both costs and benefits result.
              a. Pollution hurts (costs) society so government tries to affect the supply of, and demand for, pollution causing 
                  products such as automobiles. 
                  For automobiles, they lower supply by requiring catalytic converters and they lower demand with high excise taxes. 
              b. An educated workforce benefits society so government increases demand (aid to students) and supply (aid to colleges).

             c. Currently, our addiction to oil has and global warming has government's attention. Business Week February 26, 2007 page 13

         
       B. Providing public goods and services (parks, defense, etc.)

       C. Government does more in some countries than others.

           

Editors Note: Taken from The Big Picture blog, from October 18, 2007some governments bare the cost of health insurance which increases these percentages.

       D. http://www.usgovernmentspending.com/year2005_0.html has government spending by major category.

  V. Affecting total economic activity
       A. This includes a multitude of diverse topics. 
            1. Trying to limit the effects of business cycles by lowering unemployment and inflation 
            2. Assisting companies trying to compete in the new global economy 
            3. Using foreign aid to make sure we have stable oil prices  
                a. Israel-United States military relations
                b. US and Foreign Aid Assistance from GlobalIssues.org
         B. Opinions differ substantially as to the responsibilities or lack of responsibilities government has in these areas.

  VI. For more information visit
        A. The Size and Functions of Government And Economic Growth
             from the Joint Economic Committee of the United States Senate and
        B. The 2006 Transparency International Corruption Perceptions Index from Infoplease and
             Political Corruption from the University of Exeter