What role for the government?

The COVID crisis has led to a sharp increase in the role of the government and led to questions, from a normative point of view, of what that role should be. We see four legitimate roles for the government. Helping, through public borrowing, households and companies to maintain their income during recessions, since the government is more easily able to transfer income from the future to the present through public borrowing than the private sector. Helping finance long-term or low intrinsic return investments, but which are useful thanks to a lower return on equity requirement than in the private sector. Correcting externalities related to the spontaneous functioning of markets and the private sector (e.g. climate, employment, research, etc.) either through regulations and standards, or preferably through price incentives. Correcting income and wealth inequalities ex ante and not ex post (before they appear, not after).