One way to understand the strengths and weaknesses of markets is to ask, “What should an economy do?” Many of the differences in the evaluation of markets can be traced to differences in emphasis in the kind of problems that the proponents and critics of markets believe an economic system must address.

In a classic essay from the 1920s, Frank H. Knight outlined five problems that any economy must address. For our purposes they can be grouped into two categories. The first category – including problems one, two, four, and five in Knight's list – concerns what is to be produced, how it is to be produced, how much of production goes to immediate consumption and how much to investment, and how to adjust consumption when production in the short run is greater or less than usual. These are the issues where the discipline of economics has historically felt most at home. Thus, one quite standard definition of economics in the introductory textbooks is as follows:

The second category, Knight's third problem to be solved, is what he calls “the function of distribution,” the social determination concerning who gets what goods and services produced in the nation. Although the moral issues surrounding distribution are universally noted by economists, economics itself has in general limited its work to identifying the empirical results of who gets what without entering into the more fundamental question “Who should get what?”