Fiasco of the market

The economies of most countries in the world are mixed, in which both the market itself and the state exercise regulatory functions. It is the fiasco of the market and some external factors that caused 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 very much. The public sector produces a significant part of the national product in a market economy . The government regulates economic processes and the redistribution of income. Imperfection of the market often affects the entire economy of the country, and the entire market mechanism ceases to ensure the effective allocation 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. Fiasco of the market is its failure, when all mechanisms of the normal functioning of the economy are violated. The following reasons can lead to it:

• Irrational allocation 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 preserve hard-to-reproduce resources;
• Lack of market interests in the production of various public goods;
• Uneven distribution of income;
• The absence of mechanisms that take into account externalities;
• Unstable macroeconomic development.

In an effort to achieve an effective market economy, the state enters the economy and implements economic and administrative measures that ensure the conditions for achieving the main macroeconomic goals. The fiasco is the introduction of state regulation into 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 the relationship between the labor force and entrepreneurs, the government and entrepreneurs, and ensure compliance with contracts, is the key to the effective functioning of the economy. Mandatory, reasonable, sustainable legislation for all participants of the process provides an opportunity for all business entities to make free choice and plan activities. In carrying out this function, the government helps to reduce transaction costs, which leads to the most rational allocation of resources;
• Protection of the environment for the purpose of environmental protection of the entire environment of people;
• Protection of the competitive environment. With limiting competition and increasing the level of monopolization of markets, the efficiency of the redistribution of resources decreases, which leads to net losses of the whole society. For this reason, the state conducts an active antimonopoly policy, which is aimed at preventing the creation of new ones and in combating existing monopolies. The struggle against the so-called "artificial monopolies" is carried out along with the regulation of the management of natural monopolies ;
• Control over prices for certain groups of goods;
• The definition of minimum levels of wages, benefits, pensions and compensation;
• Providing a certain level of education and health;
• Stabilization and stimulation of the economy;
• Adjustment of the optimal allocation of resources and public goods.

Fiasco of the market often leads to a fiasco of the state. This happens when it can not provide the optimal redistribution and use of a limited resource base for society. For this reason, taking certain measures to eliminate the market failure, the state should carefully monitor all possible consequences of the actions taken and adjust them according to the specific political and socio-economic situation in the country.