The presence of economic costs attributable to ill health per se does not necessarily mean that there is reason for government to act, from an economic perspective (see box 2.1 and box 2.2 for a discussion on the use of “economic cost” or “economic burden” evidence). A rationale for public policy intervention based on the economic perspective differs markedly from a public health rationale. According to standard economic theory, public intervention is justified when private markets fail to function “efficiently”. Efficiency is defined by economists in a very specific way: an allocation of resources is efficient if there is no way to increase benefits to an individual without making another individual worse off (this concept is known as “Pareto efficiency”). Likewise, an allocation is inefficient when it is possible to make one individual better off without harming anyone else. Intuitively, an inefficient allocation represents a certain waste of resources, either because there exist ways to produce more (or more generally, achieve better outcomes) with the same amount of inputs or because some resources are assigned to individuals who value them less than what other people are willing to pay for them. In these cases there are possibilities of reallocation that allow the economic system to prevent waste. When markets fail to achieve efficiency, there is scope for governments to intervene. Government interventions typically consist of regulations, direct production, taxation and, more generally, redistribution policies.