&gt; we have a situation where a little girl gets raided for selling lemonade without a license.<p>So one bad law invalidates government?<p>&gt; Consumers can take care of themselves. [...] how does the government know more than the consumers? Are they privy to secret information?<p>They can, but this goes to the &quot;perfect information&quot; theory that you blithely dismissed.  How does the government know more?  Two possibilities: 1) As a unit, it doesn&#x27;t, but actual people running the government have seen negative consequences and, acting as our representatives, regulated against them, or 2) The government employs people whose job it is to assess risks and plan accordingly.  What do you know about mudslide prevention or sewage treatment, for instance?<p>&gt; [regarding choice of vendors:] which they are in a free market<p>How so?  A completely free market requires a willing buyer and a willing seller operating on the same set of information and meeting on a level platform.  Much like the &quot;uniform law of frictionless,&quot; this can never happen in real life.  I am always at a negotiating disadvantage with a large service provider or even with someone who is an expert in his field and I not.<p>&gt; [regarding economies of scale:] you need to clarify this.<p>It is not efficient, for example, to have multiple power lines serving a single structure.  Nor water, nor roads, nor sewer, and, increasingly, nor Internet access wires.  The regulation of such utility structure prevents pictures such as this: <a href="https:&#x2F;&#x2F;i.kinja-img.com&#x2F;gawker-media&#x2F;image&#x2F;upload&#x2F;hphmtnyak5ggjyeunnix.jpg" rel="nofollow">https:&#x2F;&#x2F;i.kinja-img.com&#x2F;gawker-media&#x2F;image&#x2F;upload&#x2F;hphmtnyak5...</a><p>Economy of scale, in many instances, means that only a monopoly is profitable but having two competitors would not be so.  Garbage pickup, for instance.  Or firefighting.<p>I believe that&#x27;s what OP was getting at: some things government does well--or at least contracts for a monopoly--on our behalf.  Other things, like telecommunications regulation, are unduly influenced by actors with more information and completely different incentives than their alleged customers.