Thoughts on Something Milton Friedman Said

[Exsubmariner]

Milton Friedman once said something to the effect that corruption is government intervention in market efficiencies in the form of regulation.

This is often ballyhooed as the argument against government regulation in any form. That premise, in turn, is used as the basis for an arguement that in a completely market driven society, government is wholly unnecessary.

I submit that government intervention in the market is a necessity, however. I base this on the premise that there are certain market inefficiencies. One market inefficiency occurs in the case of fraud. Widespread bank and securities fraud sparked the great depression. Most recently, Sarbanes-Oxley was passed in the wake of widespread fraud regarding financial statements. The stage was set for this fraud to continue indefinately unabated without the action of government. Participants in markets are human. There will always be less than honest and ethical actors in a market. The government is the mechanism through which these actors are forced out of the market. Therefore, government intervention in the form of regulation is not a bad thing in the face of market inefficiency.

Thoughts/opinions/controversy/arguements?