There was a short, interesting little debate between a libertarian and a conservative on the question of Is government ever necessary? I have to say I probably fall somewhere in between. I am all for free markets and minimizing government, but I think that some things probably would not get done (or would not get done very well) if not done by government, for various reasons.
I think part of that is because there really is no such thing as a perfect free market, even when there is no government. This is because you then have some large business entities, such as corporations, and in my experience, the larger a company gets, the more it gets just as inefficient and crappy as the worst government. But at least the government can be somewhat responsive to the people, particularly local government, whereas a corporation is only beholden to a handful of people - the primary shareholders.
Where the line can be drawn - what must be done by government and what can be effectively privatized - I don't know. But it is an interesting discussion.