The fiasco of the state implies situations that arise due to the inability of the government to correctly distribute all public resources, as well as to monitor their effective use. Before you approach the study of 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 existence of a certain sphere 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 effectiveness of this economic object. The process arises due to the fact that the state uses the wrong system of pricing, and also intervenes in the procedure for using all resources that, as a result, are not so efficient.
The economy and all its processes directly affect the appearance of a certain inequality between different groups of the population. This is evidenced by the theory of public choice, which is quite popular among some people. It is on the basis of inequality that a fiasco appears, since the state is sometimes not able to take into account the interests of all groups.
The fiasco of the state: the main reasons
Basic situations where you can see the failure:
- A small amount of information entails 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, sometimes decisions are made in the country itself on the basis of some information that has not been fully verified. At times, some groups or public associations of a non-state nature help this to happen, because they interpret and spoil the original form of the available data.
- The fiasco of both the market and the state is due to the fact that the latter is simply unable to conduct its activities correctly, as there are some gaps. This is expressed in unreasonable decisions, in the assumption of the appearance of lobbyism in the country and in another.
- Strong development of red tape. This example is especially relevant for countries that are constantly building up their capacity and developing the state apparatus.
- The fiasco of the market and the functions of the state are highly interconnected. This is due to the fact that the last object makes decisions, the consequences of which are not able to foresee. It is important in this process to pay attention not only to look 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 whole society.
What is the concept of?
State failures or failures occur against the background of identical processes that occur during the “lags” in market relations. The latter appears because the markets themselves are imperfect. That is why it is fair to say that the state fiasco is the result of the existence of certain flaws in the coordination of private costs and revenues. Power spreads the data to the whole society.
Failing Factors
The main reasons for the fiasco of the state include primarily the separation between costs and revenues. They are expressed in such a way that they lead to the appearance of profit for certain organizations, but at the same time to the generation of expenses for others.
In microeconomics, this effect is noticeable, provided that income is detected only in a small part of society, and there are a lot of costs, as a result, people who pay taxes compensate for them.
As a result, it is noticeable that the state affects the market sphere extremely negatively, since a large part of the population makes up for 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 majority vote. The most interesting thing is that taxpayers do not belong to this number, since they are a minority. As a result of such “elections,” the government can, with a calm mind and motive, increase the processes of redistribution, despite the fact that they are sponsored by the same minority.
Thus, 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, problems and fiasco of the state are formed against the background of the fact that all the services provided by the government are compensated by an excess of costs from society that exceed the benefits. This also happens due to the fact that groups that receive more income lose any motive to introduce innovations in production, and accordingly, their success will not last long.
Insufficient time period
The reasons for the fiasco of the state include a narrow time period. The process occurs when politicians prioritize future probable benefits, while real ones ignore it. They do not appreciate the potential, as they believe that in the future time it will be much more. Also, power can focus mainly on smaller goods, which will last for a small amount of time. By virtue of such views, a state fiasco arises.
When the government makes certain plans in the current time, intervenes in the market system, it receives profit or profit from this process. But it is important that it is precisely because of such actions that the main guidelines of the politician, his views and preferences can shift.
Reward Intervention
When there is some kind of political “race” between the candidates, the voices to a greater extent overtake exactly the representative who is able to intervene in the market system and change anything 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, a failure occurs.
When everything happens in this way, it is said that the politician was incomplete able to influence this sphere. Society begins to doubt its abilities, believing that the authorities simply do nothing.
Confusion of concepts
Sometimes the society blames the market for what the state missed in its activities. For example, if criminalization occurs, this does not mean that a fiasco arises on the side of the market. Ensuring and maintaining order in society, that is, in any of its spheres, is one of the tasks of the state and, accordingly, of the government. If the process is not supported, then, as a result, serious costs arise in the market space.
Impact from non-governmental organizations
It is no longer news that in many countries the political process is being formed taking into account the opinions of various organizations (environmental protection, protection of the rights of the population). They sometimes can generally dictate how the state needs to carry out its activities. In particular, directions may relate to the market apparatus.
Everything is done in a rather banal way: a representative of the group takes up a post in the legislative branch, builds up status, and then seeks to establish certain laws that will bring substantial benefits to him. This is sometimes done by lawyers who want to receive a certain income, say, from dividends formed due to claims from enterprises.
Features
- The emergence of difficulties in the identification and calculation of products. It is difficult enough at times to coordinate output, since the quantity is varied, not to mention the quality of the goods. Until now, state funds such as various programs, protection, and distribution are of dubious nature. Non-market products do not imply related information that is necessarily provided when goods are released on the market. An insignificant number of such non-market entities are subject to measurement from the side of the state, therefore its failure or failure occurs.
- The manufacturer is one enterprise. For example, monopolistic organizations that are, so to speak, “under the wing” of the state. This is precisely where the difficulty lies, because it becomes extremely difficult to evaluate products if there is no competition among non-market products. When some public goods, such as educational ones, are created, then competition is likely to appear, but it is very small in comparison with the market.
- There are no means to regulate. Non-market goods are not particularly subject to settlement, because of which the state is not able to provide a complete reliable system for their protection.
The important part of the concept
Particular attention should be paid to such a feature as an unforeseen event. When market activity is implemented with the help of the state, then, as a result, situations may arise where there is a place for serious costs and lack of profit in general. It can influence such factors only indirectly. For example, it seeks to achieve the best performance of the market mechanism, and in the end receives a negative result. A simple parallel is that the government is trying to fight speculation, which sets certain prices for goods, but subsequently there is a serious deficit 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 market fiasco is exceptional, because it is it that is responsible for many failures. It is important to have a correct point of view on concepts in order to distinguish when a failure occurs on the part of the authorities, which subsequently is reflected in the market, and when the market apparatus itself causes serious failures. The information provided will help you figure this out.