The state is not the cause of the fiasco. Failures (fiasco) of the state. Opportunistic behavior. d) split in the trade union movement

A fiasco, a flaw in the state, is a situation in which government intervention in the economy does not ensure the effective allocation of resources, as well as the compliance of the distribution policy with the ideas of justice accepted in a given society.

The concept of government failure is less developed than the theory of market failure. To date, the following manifestations of such imperfections have been identified in the literature:

1. Limited information available. The public sector is usually better at redistributing information (overcoming information asymmetries) than at steadily increasing its volume. Meanwhile, each specific government decision, before being made, needs a comprehensive analysis from the point of view of probable losses. In those cases where the government clearly lacks objective data that allows it to predict with sufficient reliability the results of its regulatory impacts on socio-economic life, it should refrain from excessively expanding the area of government responsibility and expanding the public sector.
2. The inability of the state to fully control the reaction of counterparties to its actions. The public sector, as noted above, is only one of the components of a modern market economy. State actions, including those related to coercion, are interwoven into a complex structure of interactions between other subjects of the economic system. Consequently, the final results of the initiatives undertaken by the state depend not only on itself.
3. Imperfection of the political process - due to the rational ignorance of voters, the adoption of arbitrary, voluntaristic decisions, the influence of special interest groups and their constant pursuit of rent. Rent seeking is the expenditure of resources by lobbyists in order to obtain from the state exclusive rights and advantages that bring benefits to their owners at the expense of other members of society.
4. Limited control over the state apparatus. It is a great illusion to be naive to think that the state apparatus always operates within legal, legitimate frameworks and unswervingly pursues exclusively the interests of society, and not its own. The traditional theory that defends such a view denies the possibility that some part of society can use the state to realize their private interests at the expense of public ones. An alternative approach, on the contrary, explains government intervention not by “failures” of the market, but by the so-called “political game”, that is. attempts by organized social groups to use the power of the state in order to maximize the income of group members and their share of national income. At the same time, a politically influential group may become interested in diminishing the role of natural market mechanisms and excessively strengthening government intervention in economic life. For example, groups of entrepreneurs, in their desire to maximize profits, may call for price fixing, excessive state protectionism, and thereby a weakening of competitive pressure that infringes on the interests of consumers.
5. Overestimation of the volume of production of public goods and the associated waste of resources. This non-market failure may manifest itself, for example, in excessive militarization of the economy, or in unbridled spending of scarce budget funds (in conditions of crisis and growing budget deficit) on ambitious projects to decorate capitals and bureaucratic offices, etc.
6. Formation by the state through redistribution processes of new forms of inequality and discrimination. Thus, an uncontrolled increase in the volume of tax and other benefits for various social groups (for example, deputies, government officials, monopolistic groups, etc.) can lead (and leads in our country) to the fact that the main mechanism of enrichment becomes the self, in theory directed to smooth out market differentiation of the population, the budget process.
7. Increasing costs of maintaining the bureaucratic apparatus beyond the optimal level (for the preparation of legislative acts, monitoring their implementation, equipping tax services with equipment, etc.). In this regard, the tendency towards a steady relative (and sometimes absolute) increase in that item of Russian budget expenditures that is allocated to managing the economy seems very characteristic.
8. Distraction of lawyers, economists, managers, etc. from participation in the production of products and services in firms. Attracted by relatively high wages in the field of management, as well as a considerable amount of other benefits and privileges, qualified specialists willingly “flow” into the government apparatus in our country, violating certain optimal proportions in the use of the country’s labor resources.

Proponents of the theory of public choice come to the conclusion that the cause of the fiasco of the state is political inequality between certain groups of the population.

Let's analyze the most important reasons for the fiasco of government regulation:

1) Violation of the proportions between marginal costs and marginal benefits, discussed above, can lead to incorrect, from a social point of view, economic decision-making.
2) Inequality in obtaining information.

People with high incomes and well-organized lobbying groups are better informed. Consequently, they maximize their profits by extracting political rents. Inequality in the receipt of information is also associated with a phenomenon present in the system of representative democracy and called rational ignorance. Suppose we need to evaluate a government decision that, if implemented, will benefit society as a whole, although certain groups of the population may lose (for example, the abolition of subsidies to some sector of the economy). However, each individual voter will receive little benefit from this (the total benefit will be distributed among the entire population). In such circumstances, voters behave apathetically or indifferently, which is called rational ignorance - it makes no sense for a large number of people to collect and evaluate information about a given project, to organize for the sake of almost imperceptible benefits. But the disadvantaged minority, which will suffer from the abolition of subsidies, will organize into the pressure groups mentioned above.

3) Unscrupulousness of government officials (state bureaucracy), who, pursuing their private interests, strive to get the most votes in the next elections and make decisions that will help them achieve this (publicly popular decisions), although they may be unprofitable from an economic point of view efficiency. In addition, they may be subject to purely personal interests, like all ordinary people, and these personal interests may at some point exceed the sense of duty as a public official.
4) Disproportionality of time horizons. Thus, elections will be held this year, and the consequences of implemented election promises will appear later. In the long term, the tax rate, above which there is no point in raising the bar, ends up at a lower level. But the decision to change tax rates is made by legislators today, and it can be made incorrectly. Proponents of public choice see the solution to all these problems in the free development of market processes, although they do not deny the positive role of the state, which is capable of correcting the imperfections of the market mechanism within certain limits.
5) Incompatibility in the timing of making certain decisions. This means that what is optimal for the government today may not be optimal in the future.

Due to time intervals, the problem of internal and external lags arises, which can also lead to a fiasco of the state. We are talking about the lag effect, that is, the time gap between awareness of the problem, the adoption of government decisions and the results of implementing the government program.

The internal lag is understood as the period of time that passes between the moment of occurrence of any economic phenomenon and the moment of taking a response measure. Internal lags are divided into recognition lags and decision lags.

Lag of recognition (awareness) - its occurrence is due to the fact that it takes time to understand the very problem of regulating any sphere of economic life. So, in order to take measures aimed at combating inflation, it is necessary, first of all, to assess its sources and possible options for anti-inflationary policies, and this takes time.

Decision lag is the time that passes between recognizing a problem and making a specific decision. For example, in order to make any decisions related to changes in tax legislation, it is necessary to think through and discuss the situation in detail, and approve the draft decision in the necessary authorities.

External lag is the period of time that passes between the moment a measure is taken and the moment its results appear. External lags include impact lags - this is the period during which the object of government regulation begins to actually change under the influence of one or another macroeconomic government action. For example, the government decided to reduce tax rates, but real economic recovery does not occur immediately, but after some time.

Especially in connection with the government fiasco, one should remember the law of unintended consequences. Its essence lies in the fact that as a result of the implementation of any measures, the desired result is not achieved or is achieved at great cost. The desire to improve market performance often leads to the opposite result. For example, the state sets fixed prices for food products in order to combat speculation. However, the results of these measures are a commodity shortage, the expansion of the shadow economy, etc.

Proponents of public choice see the solution to all these problems in the free development of market processes, although they do not deny the positive role of the state, which is capable of correcting the imperfections of the market mechanism within certain limits

Currently, the share of government spending in GDP is increasing, which is not always favorable for the country's economy. The state budget essentially determines the scope of government policy.

In 2002, a group of experts led by Yevgeny Yasin prepared a report, “The Burden of the State and Economic Policy,” which stated that excessive government spending was slowing down reforms and hampering business, and that Russia might miss the chance for an economic breakthrough that appeared after the default. Economists proposed halving the number of civil servants, making the system of government procurement and transfers transparent, moderating the appetites of state monopolies, reforming state unitary enterprises, and reducing administrative barriers. According to experts, then the state would be able to reduce expenses to the optimal level of 27-29% of GDP, which, in turn, would bring Russia in 2006-2007 to one of the highest GDP growth rates in the world - 8-9%. However, the current Russian government has chosen a different path. Federal budget expenditures only grew from year to year (Tables 1-2).

Table 1 Share of government spending in GDP. 2000-2006 (for 2000, data was taken from the budget execution report, for 2006 - from the Budget Law).

Table 2 - Government Expenditures]

Expense item	2000 (billion rubles)	2006 (billion rubles)	How many times have expenses increased?
Interbudgetary transfers
Government expenses
National economy
Healthcare and sports
Judicial system
Education
Culture, cinematography and mass media
National Security and Law Enforcement
Social politics
National Defense

State failures are cases when the state is unable to ensure the effective distribution and use of public resources. Fiasco or failure of the state is an area in which state intervention in economic life leads to a decrease in economic efficiency as a result of distortion of pricing mechanisms and a decrease in the efficiency of use of production resources. In fact, the areas of state fiasco include all those areas of economic life in which the market mechanism turns out to be a more effective regulator of economic proportions than direct government intervention.

Proponents of the theory of public choice come to the conclusion that it is precisely for economic reasons that there is political inequality between individual groups of the population and it is possible to make ineffective decisions, i.e. fiasco of the state. Let's analyze the most important reasons for the fiasco of government regulation.

First of all, it should be said once again about the violation of the proportions between marginal costs and marginal benefits, which can lead to ineffective, from a social point of view, economic decision-making, i.e. to the fiasco of the state.

Inequality in obtaining information also gives rise to this negative phenomenon. People with high incomes and well-organized lobbying groups are better informed. Consequently, they maximize their profits by extracting political rents. Inequality in the receipt of information is also associated with a phenomenon present in the system of representative democracy and called rational ignorance. The highlighted term means the avoidance of individuals from participating in the voting and election processes if the benefits that they will receive in the event of a favorable outcome for them are lower than the costs associated with participation in the voting process. Suppose we need to evaluate a government decision that, if implemented, will benefit society as a whole, although certain groups of the population may lose (for example, the abolition of subsidies to some sector of the economy). However, each individual voter will receive little benefit from this (the total benefit will be distributed among the entire population). In such circumstances, voters behave apathetically or indifferently, which is called rational ignorance - it makes no sense for a large but scattered number of people to collect and evaluate information about a given project, or to organize into lobby groups for the sake of almost imperceptible benefits. But the disadvantaged minority, which will suffer from the abolition of subsidies, will concentrate and form the pressure groups mentioned above (“agrarian lobby”, “defense lobby”, etc.).

Another reason for the fiasco of the state is the dishonesty of government officials (state bureaucracy), who, pursuing their private interests, strive to get the most votes in the next elections and make decisions that will help them achieve this (so-called populist decisions), although they do not meet the criterion of economic efficiency. Moreover, politicians pursue their personal interests, like all ordinary people, and these personal interests may at some point exceed their sense of duty as public officials.

It should also be noted that there is incompatibility in the timing of making certain decisions, leading to the fiasco of the state. For example, before an election, a politician promises to increase social spending, reduce taxes, and carry out many other similar measures that will help him gain voter support. However, populist promises are proclaimed today, and their implementation after the elections is often postponed or directly opposite decisions are made, leading to a decrease in the material well-being of the population. Thus, time incompatibility means that measures that are optimal from the government’s point of view today may turn out to be suboptimal in the future, especially after economic agents have already responded to the announced election promises, i.e. formed their expectations.

Due to time intervals, the problem of internal and external lags arises, which can also lead to a fiasco of the state. We are talking about the delay effect, i.e. the time gap between awareness of the problem, the adoption of government decisions and the results of implementing the government program.

1) Lag of recognition (recognition, awareness). Its emergence is due to the fact that it takes time to understand the very problem of regulating any sphere of economic life. So, in order to take measures aimed at combating inflation, it is necessary, first of all, to assess its sources and possible options for anti-inflationary policies, and this takes time. In this case, the duration of the lag will be influenced by factors such as the competence of the government, experts, and the state of macroeconomic science.
2) Solution lag. This is the time that passes between recognizing a problem and making a specific decision. Sometimes this period lasts quite a long time. For example, in order to make any decisions related to changes in tax legislation, it is necessary to think through and discuss the situation in detail, and approve the draft decision in the necessary authorities.

External lag is the period of time that passes between the moment a measure is taken and the moment its results appear. External lags include impact lags.

Impact lag. This is the period during which the object of government regulation begins to actually change under the influence of one or another macroeconomic government action. For example, the government decided to reduce tax rates, but real economic recovery does not occur immediately, but after some time.

Especially in connection with the government fiasco, one should remember the law of unintended consequences. Its essence lies in the fact that as a result of the implementation of any measures, the desired result is not achieved or is achieved at great cost. The desire to improve market performance often leads to the opposite result. For example, the state sets fixed prices for food products in order to combat speculation. However, the result of these measures is a commodity shortage, the growth of the shadow economy, queues, etc.

Market fiasco (market failure, imperfection or inconsistency of the market) is a situation when the market mechanism for creating wealth does not ensure social optimum, efficient and fair use of resources and distribution

First of all, we should once again say about the violation of the proportions between marginal costs and marginal benefits , which can lead to ineffective, from a social point of view, economic decision-making, i.e., to a fiasco of the state.

Inequality in obtaining information also gives rise to this negative phenomenon. People with high incomes and well-organized lobbying groups are better informed. Consequently, they maximize their profits by extracting political rents. Inequality in the receipt of information is also associated with a phenomenon present in the system of representative democracy and called rational ignorance. The highlighted term means the avoidance of individuals from participating in the voting and election processes if the benefits that they will receive in the event of a favorable outcome for them are lower than the costs associated with participation in the voting process. Suppose we need to evaluate a government decision that, if implemented, will benefit society as a whole, although certain groups of the population may lose (for example, the abolition of subsidies to some sector of the economy). However, everyone individual voter will benefit little from it (the total benefit will be distributed among the entire population). In such circumstances, voters behave apathetically or indifferently, which is called rational ignorance - it makes no sense for a large but scattered number of people to collect and evaluate information about a given project, or to organize into lobby groups for the sake of almost imperceptible benefits. But the disadvantaged minority, which will suffer from the abolition of subsidies, will concentrate and form pressure groups.

It should also be noted that there is incompatibility in the timing of making certain decisions, leading to the fiasco of the state. For example, before an election, a politician promises to increase social spending, reduce taxes, and carry out many other similar measures that will help him gain voter support. However, populist promises are proclaimed today, and their implementation after the elections is often postponed or directly opposite decisions are made, leading to a decrease in the material well-being of the population. Thus, incompatibility over time means that measures that are optimal from the government’s point of view today may turn out to be suboptimal in the future, especially after economic agents have already responded to the announced election promises, that is, they have formed their expectations.

Due to time intervals, the problem of internal and external lags arises, which can also lead to a fiasco of the state. We are talking about the lag effect, i.e. the time gap between awareness of the problem, the adoption of government decisions and the results of implementing the government program.

Especially in connection with the government fiasco, one must remember the law of unintended consequences. Its essence lies in the fact that as a result of the implementation of any measures, the desired result is not achieved or is achieved at great cost. The desire to improve market performance often leads to the opposite result. For example, the state sets fixed prices for food products in order to combat speculation. However, the result of these measures is a commodity shortage, the growth of the shadow economy, queues, etc.

State failure refers to situations that arise due to the inability of the government to correctly distribute all public resources, as well as monitor their effective use. Before studying the issue more extensively, it is necessary to learn about the very essence of this concept.

The essence of the definition

The fiasco of the state, or, more simply, failure, implies the presence of a certain area where the decisions of the authorities are implemented. Thus, there is an impact on economic life, and it is negative in nature, since it leads to a significant decrease in the efficiency of a given economic object. The process arises due to the fact that the state uses an incorrect pricing system and also interferes with the procedure for using all resources, which ultimately do not work as efficiently.

The economy and all its processes directly affect the emergence of certain inequalities between different groups of the population. This is also evidenced by the theory of public choice, which is quite popular among some people. It is on the basis of inequality that fiasco arises, since the state is sometimes unable to take into account the interests of all groups.

State fiasco: main reasons

Basic situations when you can spot a failure:

A small amount of information leads to the inability of the state to make a good decision. For example, the market itself is sometimes guided by dubious information, which can lead to serious consequences. For this reason, decisions are sometimes made in the power itself on the basis of some incompletely verified information. At times, some groups or public associations of a non-state nature help this happen, because they interpret and spoil the original form of the available data.
The fiasco of both the market and the state occurs due to the fact that the latter entity is simply unable to conduct its activities correctly, since there are some gaps. This is expressed in unfounded decisions, in allowing the emergence of lobbying in the country, and in other ways.
Strong development of bureaucracy. This example is especially relevant for countries that are constantly increasing their potential and developing their state apparatus.
The fiasco of the market and the functions of the state are strongly interconnected. This occurs due to the fact that the latter object makes decisions whose consequences it is not able to foresee. It is important in this process to pay attention not only from the inside, but also to look at everything from the outside, that is, how the market will behave. The absence of such a view of things can cause serious problems that have a negative impact on the entire society.

What does the concept come from?

State failures or fiascoes occur against the background of identical processes that arise during “lags” in market relations. The latter arises because the markets themselves are imperfect. That is why it is fair to say that government fiasco is the result of certain flaws in the coordination of private costs and income. The power distributes data to the entire society.

Factors shaping failure

The main reasons for the government's failure include primarily the division between costs and revenues. They are expressed in such a way that they lead to benefits for certain organizations, but at the same time to costs for others.

In microeconomics, this influence is noticeable, provided that income is revealed only for a small part of society, and costs become large, and they are eventually compensated by people paying taxes.

As a result, it is noticeable that the state influences the market sphere extremely negatively, since the majority of the population makes up for the expenses, and a small number of people receive income.

In macroeconomics, this process is noticeable, since the state coordinates its activities taking into account the votes of the majority. The most interesting thing is that taxpayers are not included in this number, as they constitute a minority. As a result of such "elections", the government can, with peace of mind and existing motive, increase the processes of redistribution, despite the fact that they are sponsored by that same minority.

So it is fair to say that the process is twofold. In the first case, at the micro level, taxpayers seem to be above those who benefit. In this example, it is obvious that the former are “subordinate” to the majority.

As a result, the problems and fiascoes of the state are formed against the backdrop of the fact that all the services provided by the government are compensated by an excess of costs on the part of society, which exceed the benefits. This also happens due to the fact that groups receiving more income lose any incentive to introduce innovations into production, and accordingly, their success will not last long.

Insufficient time period

The reasons for the state's fiasco include a still narrow time period. The process occurs when politicians prioritize future probable benefits and ignore actual ones. They do not value the existing potential, because they believe that in the future there will be much more. Also, the authorities can focus mainly on smaller benefits that will last for a short amount of time. Due to such views, the fiasco of the state arises.

When the government makes certain plans in the current time, intervenes in the market system, it receives benefit or profit from this process. But it is important that it is precisely because of such actions that the main guidelines of a politician, his views and preferences can shift.

Reward Intervention

When there is some kind of political “race” between candidates, the votes go to the representative who is able to intervene in the market system and change something in it. Sometimes a number of dubious laws appear that are not able to guarantee a person stability in the economic space. As a result, failure occurs.

When everything happens like this, they say that the politician was not able to fully influence this area. Society begins to doubt his abilities, believing that the authorities are simply not doing anything.

Confusion of concepts

Sometimes society blames the market for what the state has missed in its activities. For example, if criminalization occurs, this does not mean that the fiasco occurs on the market side. Ensuring and maintaining order in society, that is, in any of its spheres, is one of the tasks of the state and, accordingly, the government. If the process is not ensured, then, as a consequence, serious costs arise in the market space.

Impact from non-state associations

It is no longer news that in many countries the political process is formed taking into account the opinions of various organizations (environmental protection, protection of public rights). They can sometimes generally dictate how the state should carry out its activities. In particular, the instructions may concern the market apparatus.

Everything is done in a rather banal way: a representative of the group occupies a position in the legislative branch, increases his status, and then seeks to establish certain laws that will bring significant benefits to him. This is sometimes done by lawyers who want to receive a certain income, say, from dividends generated through claims from enterprises.

Peculiarities

The emergence of difficulties in identifying and calculating manufactured products. Sometimes it is quite difficult to coordinate the release, since the quantity varies, not to mention the quality of the product. Until now, state funds such as various programs, protection, and distribution are of a dubious nature. Non-market products do not imply accompanying information, which is necessarily provided when releasing goods on the market. An insignificant number of such non-market formations are subject to measurement by the power, which is why its failure or fiasco occurs.
The manufacturer is one enterprise. For example, monopolistic organizations that are, so to speak, “under the wing” of the state. This is where the difficulty lies, because it becomes extremely difficult to evaluate products if there is no competition among non-market goods. When some public goods like educational ones are created, competition is likely to appear, but it is very small compared to the market.
There are no means for regulation. Non-market goods are not particularly subject to regulation, which is why the state is unable to provide a full-fledged reliable system for their protection.

Important part of the concept

Particular attention should be paid to such features as an unforeseen event. When market activities are implemented with the help of the state, as a result, situations may arise where there are serious costs and a lack of profit in general. It can influence such factors only indirectly. For example, it strives to achieve the best performance of the market mechanism, but ultimately receives a negative result. A simple parallel - the government is trying to fight speculation, which is why it sets certain prices for goods, but subsequently there is a serious shortage in society, and this leads to the emergence of a “black” market and other things.

Generally speaking, it can be clarified that the role of the state in the fiasco of the market is exceptional, because it is responsible for many failures. It is important to have the right point of view on concepts in order to distinguish when a fiasco occurs on the part of the authorities, which is subsequently reflected in the market, and when the market apparatus itself gives serious failures. The information provided will help you figure this out.

Situations when the state is unable to ensure optimal (Pareto) distribution of goods.
Usually, four groups of factors are distinguished that reduce the effectiveness of public choice and, therefore, determine F.g.
The first group of factors is the limitation and distortion of information available to government agencies. Each specific decision of a particular government body, before being adopted, must undergo a thorough analysis from the perspective of costs and benefits. Where there is a lack of objective data to predict results with sufficient reliability, one should refrain from collectivizing this type of activity. In addition, when information moves along the executive vertical, data losses and distortions inevitably occur. The more centralized a society is, the greater these losses and distortions.
The second group of factors consists of imperfections in the political process (rational ignorance of voters, the possibility of making arbitrary and manipulated decisions, the influence of special interest groups, rent-seeking, etc.). As a result of these factors, the effectiveness of the process of coordinating interests in the course of public choice and public policy in general is reduced.
The third group of factors includes limited control over the state apparatus. The bureaucracy plays an important role in the operation of the state machine, however, due to its position, it is much less interested in making effective decisions about the allocation of resources than the possible (with a different distribution of property rights) owners of these resources. Corruption, profiteering in official position, defending narrow corporate interests and other similar factors contribute to the emergence of significant FG.
And finally, the fourth group of factors is the inability of the state to fully control the consequences of its decisions. Government policies inevitably influence the behavior of its citizens, but it is not always possible to predict their reactions. Consequently, the effect of a particular government decision is determined not only by the characteristics of this decision, but also by factors that are difficult to quickly regulate, such as traditions, ideological attitudes, social inertia, etc.
Due to the existence of F.g. the scale of societies, sectors must be effectively limited. The state should be present only where losses from market failure exceed losses from F.G. However, in some cases F.g. may intensify the market fiasco. Then government intervention must be immediately suspended.