Gontar N.V. “Failures of the State”: Factors of Formation and Mechanisms of Influence on Economic Processes


Gontar Nikolay Vladimirovich
Candidate of Geographic Sciences, Associate Professor, Leading Researcher,
North Caucasian Scientific Research Institute of Economic and Social Problems
of Southern Federal University
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Pushkinskaya St., 160, 344006 Rostov-on-Don, Russian Federation

Abstract. The article is devoted to the problem of genesis and influence on real economic processes of “failures of the state”. The article designates the objective functions inherent in the state the realization of which can increase the efficiency of economic interactions reducing transaction expenses. Besides, the key factors of non-optimal activity of the state as well as actual “failures of the state” are considered. The approaches to the definition of “failures of the state” are analyzed. Taking into account functional approach the author proposes the model definition allowing to separate “failures of the state” from factors and conditions of their emergence. Among the emergence factors of “failures of the state” the author analyzes in detail the key division of economy subjects to net-payers and net-recipients of the income, the fact of distribution of consequences of state regulation to the sectors which are not direct objects of regulation as well as the influence of short-term decisions for long-term prospects are designated.
The author also analyzes the range of “failures of the state”, including such as formation of monopolies, tax discouraging, failures of social security, nature of “state business”, derivation of resources and workers from economy, formation of an inequality and calculational (price) chaos in economy. The key consequences and volume of the economic damage formed by “failures of the state” are considered, the corresponding quantitative estimates are given. The most important vectors of optimization of activity of the state which provide minimization of “failures of the state” and the related economic damage are designated. According to the author, such vectors include the priority of market self-regulation under the condition of refusal from substitutes in the form of “approach” of public sector to market standards. The minimization of public sector activity aimed at the exclusion of price information distortion as the indicator providing processes of market regulation and the adaptation of market mechanism to the needs of consumers, is also essential in general.

Key words: state regulation, “failure of the state”, “failure of the market”, economic development, economic efficiency.

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“Failures of the State”: Factors of Formation and Mechanisms of Influence on Economic Processes by Gontar N.V. is licensed under a Creative Commons Attribution 4.0 International License.

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