There are two schools of thought in economics. One preaches that if everything is left to the forces of free and competitive markets, resources will be distributed efficiently and that, therefore, it is more harmful than beneficial for the government to intervene in the markets through fiscal and monetary policies and through various regulations. Those who advocate this way of thinking are known as neoclassicists or conservatives.
While they admit that taxation cannot be done away with altogether because the government needs money to fund public services — such as defense, police, firefighting and elementary and secondary education — conservatives insist that income tax rates on individuals and corporations should be kept as low as possible, that an emphasis should be placed on indirect taxes like the consumption tax and that social welfare should be reduced to a bare minimum in order to encourage self-help.
Followers of the other school believe that it is an armchair theory to expect a free and competitive market economy to be efficient, and that in the real world imbalances such as unemployment and instability such as an economic cycle are unavoidable. Therefore they go on to say that the government's market intervention through fiscal and monetary policies is indispensable to rectify imbalances and avoid instability.