Economists from Adam Smith onward have understood that free markets don’t exist or thrive in a state of nature. They are nestled within a framework of governance that defends societies against outside threats, writes and enforces common laws, and provides public goods – those that all people need but that private actors would have little incentive or ability to develop on their own.
Unlike private investments, investments in public goods generate benefits that accrue not to individual investors but rather society as a whole. Thus, the responsibility for investing in public goods falls on government: the one institution that represents all citizens and therefore has an obligation to act in the common interest. Public investments such as education, infrastructure, and scientific research lay the foundation for long-term economic growth and shared prosperity. Only by making these investments can governments facilitate the success of private enterprise and free markets.