In recent posts, the Importance of Distribution and Markets, Minimum Wages, and the Sins of Friedmania, I have noted the centrality to sustainable democratic institutions of corraling the market so that the power and wealth of the elite few does not work to impoverish the many. That means that government either rungs many programs for the benefit of the many itself--such as Medicare, Veterans' Care, public education, public utilities--or government ensures that it has systems in place to counter the power of the elite--such as redistributionist tax policies, social welfare policies that satisfy important needs such as health care and retirement security, with a good measure of "required self-help" through mandatory savings mechanisms.
Mark Thoma has a recent piece in the Fiscal Times that reflects the same ideas, from a slightly different perspective. He enumerates 7 ways that markets don't work and require government intervention: retirement savings, health care, carbon emissions, labor support, financial sector, government contracting, and economic and political power. See Mark Thomas, 7 Important Examples of How Markets Can Fail, http://www.thefiscaltimes.com/Columns/2013/06/18/7-Important-Examples-of-How-Markets-Can-Fail.aspx#page1, Fiscal Times ( 2013).
"When there are substantial departures from the conditions needed to approximate pure competition, markets usually perform poorly and government intervention can often help. In some cases, e.g. with a carbon tax or cap-and-trade, government intervention will reduce output and employment growth in the industry and many misguided market fundamentalists, or those with other agendas, will object to these “growth killing” policies. In other cases, e.g. in health insurance markets, government intervention will cause the industry to expand rather than contract. Here, the objection is generally about the growing size and power of government. "
" But in both cases what’s important is that government intervention is moving us closer to the competitive ideal, and true believers in the power of markets would endorse rather than object to these policies. " Id.