Since the years of Reagan and That­cher, we have heard a steady drumbeat about the limitations of government. In turn, the free market has been extolled for its supposedly boundless benefits. Perhaps it is time—or past time—that we recognize that the market has its limits.

This isn't to say that the free market is without strong  advantages. As Adam Smith first articulated, the market works wonderfully in situations of strong supply and demand, with free exchange between the two. It increases productivity. It spurs competition that squeezes out waste. And it does all this by taking advantage of the self-interest so ineradicable in human nature. Somehow the market's "invisible hand" moves to apportion the results of self-interest to the benefit of the common good. In these respects, the market works more efficiently and productively than any other system imagined or implemented.

So far, so good. The danger arises when people think the market works best for all the realms of our lives and when people fail to recognize that there are different economies, some of which do not operate best according to the rules of the market.