Can a government intervene in a market economy?

There are many different definitions of a market economy, some of which allow for government intervention. In a laissez-faire free market economy, the government plays no role in economic decision-making.

Many would consider the United States to be a market economy, despite its heavy levels of government control and regulation.

In a certain sense, a government can intervene in a market economy up to the point that it is no longer considered a market economy. Elements of capitalism still exist as long as private individuals are allowed to own property and profit from its use.

Economic systems are divided into three broad categories: free market, mixed and command. The determining factor comes down to who owns and controls property and the factors of production.

In a free market economy, private individuals or groups are in control. The government is in control in a command economy. Mixed economies have elements of both. Most economies in the world today are mixed, though some are command.

An example of a command economy would be communist North Korea. The North Korean government owns and controls all property, production decisions and allocation of resources. The old Soviet Union was also a command economy. These are not considered market economies.

The purest free-market economy would conceivably lack a monopolistic government and coercive taxation. Historical evidence struggles to come up with concrete examples of a government-less free market system. The closest well-documented examples in modern history would be Hong Kong in the 1950s and the U.S. during the 19th century (excluding the Civil War period).

Clearly, even the most free-market economies by historical standards have some level of government influence. Some libertarian and free-market proponents, known as minarchists, suggest that a true market economy would only have three government functions: courts, police and military.