The government's involvement in economy serves what two purposes?

The government's role in a market economy is to protect consumers and to preserve private businesses. The government's first role of protecting the consumers came from the many unpleasantries of the late 1800's and early 1900's. When Upton Sinclair wrote 'The Jungle,' he displayed the disparaging way in which the meat packing industry was conducted. His book and calls by the public created the Meat Inspection Act and helped to establish the Food and Drug Act. In essence, the federal government must protect consumers from harmful products, and they accomplish this through inspections, regulations, and warnings to business and consumers.

In order for a market economy to work, the government must maintain a minimum interference in the private businesses making up the country. The government can accomplish this through many means, but the easiest is to allow businesses to produce the products demanded safely and with minimal regulations (privatized industry). In the event a private business can not produce a demanded good, the government can and should step in to provide it as a public good (in order to prevent market failure).