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you point out one example of such intervention, namely, the granting of a temporary monopoly for inventions via the granting of a patent. more generally, government is needed to internalize externalities, i.e., to ensure that all participants in an economic transaction are appropriately compensated.
in the case of invention, without government intervention, competitors would benefit from any invention, and inventors would not benefit enough. one solution is the patent, whereby the inventor can be compensated by realizing monopolistic profits during the life of the patent. this internalizes the externalities as far as the competitors and the inventor go, but it introduces a new externality: consumers are have to pay monopolistic prices and are deprived of the benefits of a competitive market. this may be somewhat overcome if the inventor licenses the patent to competitors, thus reintroducing competition.
patents are probably the best way to deal with this problem. however, patents aren't the only way government could solve this problem. best for consumers would be to make the invention public knowledge and compensate the inventor some other way, e.g., by a simple payment from the government. one way would be to have a licensing fee on the sale of each widget, that goes to compensate the inventor. that way, the inventor is compensate, consumers get the benefit of a competitive market, and competitors are from to innovate without benefitting unnecessarily from the invention.
there are problems with this approach, too, and i'm not necessarily advocating it. i just wanted to point out that patents are merely one of many ways government could resolve the externalities that arise from invention.
i agree with your point about barriers to entry. however, as long as barriers to entry prevent competitors from removing excess profits from an industry, the market is not allocating resources efficiently. in the infamous long run, those excess profits will provide the incentive to overcome those barriers to entry. but in the short run, the market is inefficient, and government can theoretically help correct this, perhaps by taxing the excess profits or maybe providing assistance in removing the barriers to entry.
another place for government intervention is in the case of natural monopolies. it would not do to require competitors to all provide their own pipes or cables directly to your house, so it's not unreasonable to permit a regulated monopoly in the case of utilities. scarce, common resources are another example. competitors are real good at using up resources fast. but if the goal is to conserve that resource, a monopoly does that best. an example might be peak oil. as we run out of oil, competition might keep the prices low and further deplete our limited supply. monopolies are better at husbanding limited resources by keeping prices higher.
one thing for sure, a laissez-faire, unregulated, let-corporations-do-whatever-they-can-get-away-with market is NOT genuine capitalism. economic anarchy would be a better term.
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