> But the reason we need markets in the first place is that governments aren't able to discover the right levels of resource allocation on their own.
Markets don't discover "the right" (i.e. social welfare maximizing) resource allocation, they discover, under ideal conditions, a pareto-optimal allocation. This is a very weak condition: "Jeff Bezos owns everything" is pareto-optimal. You need redistribution if you want to turn that into a socially optimal one.
In realistic conditions, they don't even do that: market mechanisms will reliably underinvest in things with positive externalities, and the larger the externality the greater the degree of misallocation. The positive externalities of research are enormous compared to the value captured by the researchers.
Markets don't discover "the right" (i.e. social welfare maximizing) resource allocation, they discover, under ideal conditions, a pareto-optimal allocation. This is a very weak condition: "Jeff Bezos owns everything" is pareto-optimal. You need redistribution if you want to turn that into a socially optimal one.
In realistic conditions, they don't even do that: market mechanisms will reliably underinvest in things with positive externalities, and the larger the externality the greater the degree of misallocation. The positive externalities of research are enormous compared to the value captured by the researchers.