Which economists argued that government intervention distorts the proper functioning of markets?

• A. John Maynard Keynes and Paul Samuelson
• B. Friedrich Hayek and Milton Friedman
• C. Karl Marx and Vladimir Lenin
• D. Adam Smith and David Ricardo

Answer: (B)

Markets rely on price signals to coordinate how resources are used, allocating them where they’re most valued. When the government intervenes—through price controls, subsidies, or heavy regulation—those signals can be distorted, incentives can be misaligned, and unintended consequences can follow. This is the idea Friedrich Hayek and Milton Friedman are best known for defending.

Hayek emphasized that knowledge about how resources are used is dispersed among many people, and central planners can’t know enough to set prices and rules perfectly. Intervention disrupts the spontaneous order that emerges from voluntary exchange, leading to less efficient outcomes. Friedman took a related position from a monetary and policy perspective, arguing that discretionary government actions often misallocate resources and fuel inflation or booms and busts; he favored limited, predictable rules for policy to keep markets functioning smoothly.

The other thinkers mentioned are associated with different views. Keynes and Samuelson argued for active stabilization and government spending to smooth economic cycles, viewing intervention as sometimes necessary and beneficial. Marx and Lenin focused on fundamental changes to the economic system through planning rather than arguing that market intervention simply distorts it. Smith and Ricardo supported free markets in many respects but didn’t center the claim that government intervention inherently distorts market functioning in the way Hayek and Friedman do.