Two outstanding situations sometimes warrant government intervention in the marketplace. First, “natural monopoly” providers, such as public utilities, would charge all the market could bear without government regulation. Second, unprofitable markets, such as those for orphan drugs and certain types of research and development, would not exist to meet certain public needs absent government subsidies or donor contributions.
Yet, confusion and “market failures” abound when government-subsidized or nonprofit entities compete in the marketplace with private, taxpaying entities. Consider the mid-20th-century prospects of private U.S. railroads, which purchased all the land and laid all the rail on their own roads, competing against truckers operating on government-provided roads.
