The economies of most countries of the world are mixed, in which both the market and the state carry out regulatory functions. It was the market fiasco and some external factors that determined the active participation of the state in the processes of economic life. Any government in all historical periods has always performed economic functions (collecting taxes and duties, protecting property, organizing cash flows), but only in the 20th century. the functions and role of the state have changed a lot. The public sector in a market economy produces a significant portion of the national product. The government regulates economic processes and the redistribution of income. Market imperfection often affects the entire economy of the country, and the entire market mechanism ceases to ensure the efficient distribution of various resources in society. To prevent crises in the economic sphere, it is necessary to strengthen the role of the state in controlling most of its processes. A market fiasco is its failure when all the mechanisms of the normal functioning of the economy are violated. The following reasons may lead to it:
- misallocation of available resources;
- monopolization of the economy (in this case, markets with imperfect competition prevail ) ;
- the inability of market entities to protect the environment and conserve difficult to reproduce resources;
- lack of market interests in the production of various public goods;
- uneven income distribution;
- lack of mechanisms that take into account external effects;
- unstable macroeconomic development.
In an effort to achieve an effective market economy, the state penetrates the economy and implements economic and administrative measures that provide the conditions for achieving the main macroeconomic goals. A fiasco is the introduction of state regulation in economic processes. It performs the following economic functions:
- providing the necessary legal framework according to which the market system will function effectively. The adoption of laws that protect property rights, regulate relations between labor and entrepreneurs, government and entrepreneurs, as well as enforce contracts, is the key to the effective functioning of the economy. Mandatory, justified, stable legislation for all participants in the process provides an opportunity for all business entities to make free choices and plan activities. Carrying out this function, the government helps to reduce transaction costs, which leads to the most rational allocation of resources;
- environmental protection with the aim of environmental protection of the entire human environment;
- protection of the competitive environment. With limited competition and increased monopolization of markets, the efficiency of redistribution of resources decreases, which leads to net losses of the whole society. For this reason, the state pursues an active antitrust policy, which is aimed at preventing the creation of new ones and in the fight against existing monopolies. The fight against the so-called "artificial monopolies" is carried out along with the regulation of the management of natural monopolies ;
- price controls for certain groups of goods;
- determination of minimum levels of remuneration, benefits, pensions and compensations;
- providing a certain level of education and health care;
- stabilization and stimulation of the economy;
- adjustments to the optimal allocation of resources and public goods.
A market fiasco often leads to a state fiasco. This happens when it cannot ensure the optimal redistribution and use of a limited resource base for society. For this reason, taking certain measures to eliminate the market fiasco, the state should carefully monitor all the possible consequences of the actions taken and adjust them according to the specific political and socio-economic situation in the country.