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States do not solve problems. They create them, and they create them the more the stronger the states - or their meta-organisation on supranational level - become. especially you should know that, ikalugin, more than most others here.
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I know many instances where the state actually decreases transaction costs and fixes market failures. Thus strong state in some form must exist (if only to combat market failures), it's measure is dependent on a specific economy.
p.s. pure free, non regulated market does not lead to effective distribution of resources due to transaction costs/market failures.