ich it can never be for the interest of any individual, or small number of individuals, to erect and maintain; because profit could never repay the expense to any individual or small number of individuals, though it may frequently do much more than repay it to a great society.”
Adam Smith’s statement can be interpreted to mean that the role of government is in the area of defense, administration of justice, public works, and in building and maintaining institutions in the public interest. It is easy to interpret the first three: government’s role is in defense, justice, and in public works. However, the fourth can have several interpretations. In any case, much of economics has maintained that market is far more efficient than government in allocating private goods and services---provided that the goods or services have no externalities or additional benefits or harm (Rosen, 1995, pp. 61-89). Supposedly, there are also public goods which can be in the best interest of the public that government provides. However, much of economics has said that although government has a responsibility in making public goods or services available, the government can mobilize the private sector to produce the goods or services. Thus, this is the rationale for privatization and public-private partnerships: to make available certain goods and services that would be in the interest of the public to make available.
On the other hand, Thomas Hobbes, John Locke, Bentham Mill, and Jean Jacques Rosseau emphasized a social contract between rulers and the ruled (Gaus & Kukathas, 2004, p. 23-24). However, given the possible variations of feasible interpretations that can be made on the statement of Adam Smith and given the range of needs that the ruled can demand on rulers on what constitute their obligations as rulers, the role of government in public policy can be anything that the public has successfully asserted politically. Of course, economists can talk of efficiency but as was