Economic functions of government. The role and functions of the state in a market economy Analysis of the economic function of the government “Supporting competition”

Three functions of government

Three functions of government - in the economic field -
-1- maintaining efficiency, which consists in correcting market disruptions caused by monopolies, environmental pollution and disasters;
-2- maintaining justice, which consists in creating a mechanism for progressive taxation and redistribution of national income;
-3- maintaining stability, which consists in using macroeconomic levers to return the economy to its natural level.
All three functions must be performed in such a way as not to disrupt the functioning of the market mechanism.

In English: Three functions of government

Finam Financial Dictionary.

See what the “Three Functions of Government” are in other dictionaries:

What is the three-tier government structure- A three-tier government structure was introduced as part of the administrative reform in 2004 during the formation of the Cabinet of Ministers under the leadership of former Prime Minister Mikhail Fradkov and approved by the Decree of the President of the Russian Federation dated 9... ... Encyclopedia of Newsmakers

The UN considers its task to maintain international peace and security. RESOLVING CRISIS SITUATIONS Throughout its history, the UN has been able to take effective measures to prevent serious threats to peace. 1947. UN troops in... ... Collier's Encyclopedia

Structure and functions of academies of sciences in a number of foreign countries- The National Academy of Sciences of the United States was created in 1863 as an independent adviser to the government on scientific issues. NAS together with the National Research Council,... ... Encyclopedia of Newsmakers

Domestic and foreign policy of the government after the peasant war E. Pugacheva- Strengthening the administrative and police apparatus After the suppression of Pugachev's uprising, a brutal reaction of the nobility began in the country. Numerous punitive detachments operated in the Volga region, burning villages and hamlets, killing and subjecting... ... World History. Encyclopedia

Goals and functions of the Bank of Russia- defined by Federal Law No. 86 FZ of July 10, 2002 “On the Central Bank of the Russian Federation (Bank of Russia)”. According to this law, the Central Bank has three goals: protecting and ensuring the stability of the ruble; development and... Banking Encyclopedia

United States of America USA, state in North. America. Name includes: geogr. the term states (from English, state state), this is how self-governing territorial units are called in a number of countries; definition united, i.e. included in the federation,... ... Geographical encyclopedia

State of Israel, in the West. Asia, to the east Mediterranean coast. Established in 1948 on the basis of a decision of the UN General Assembly of November 29, 1947. The name of the Jewish state that existed approximately in these... ... Geographical encyclopedia

Europe- (Europe) Europe is a densely populated, highly urbanized part of the world named after a mythological goddess, forming together with Asia the continent of Eurasia and having an area of about 10.5 million km² (approximately 2% of the total area of the Earth) and ... Investor Encyclopedia

The political system of Canada is to some extent a combination of the English and American systems, but it also has its own unique features. Unlike the United States, Canada did not experience a revolutionary break with... ... Collier's Encyclopedia

Democracy- (Democracy) The concept of democracy, the emergence and forms of democracy Information about the concept of democracy, the emergence and forms of democracy, the development and principles of democracy Contents The term “democracy” comes from the Greek word ... ... Investor Encyclopedia

1. Economic functions of government

The economic functions of the government are diverse and boil down to the following:

1. Providing a legal framework and social atmosphere conducive to the effective functioning of the market system.

2. Protection of competition.

3. Redistribution of income and wealth.

4. Adjusting the distribution of resources in order to change the structure of the national product.

5. Stabilization of the economy, that is, control over the level of employment and inflation generated by fluctuations in economic conditions, as well as stimulation of economic growth.

As the political situation changes, changes in economic policy are observed.

Economic management is a purposeful influence on the process of social labor. It is designed to organize, coordinate, regulate and control the economic activities of individual workers and production enterprises and firms to achieve their intended goals.

In the process of managing economic processes at the level of the entire society, information is collected and analyzed on the progress and prospects of production activities, decisions, resolutions, and mandatory laws are adopted.

The government takes upon itself the task of providing a legal framework, which is a prerequisite for the effective functioning of a market economy. The necessary legal framework also involves measures such as providing legal status to private entrepreneurs with appropriate rights and guarantees of entrepreneurship. The government also establishes legal "rules of the game" governing relations between enterprises, resource suppliers and consumers. In accordance with the adopted laws, the government is able to act as an arbiter in the field of economic relations, identify cases of illegal economic practices, and exercise power to impose appropriate penalties.

The state also provides services to society in the form of maintaining government structures that ensure the maintenance of public order: court, prosecutor's office, police, etc., and also introduces standards for weight measurement, product quality, maintenance of money circulation and rules for the functioning of the market for goods, capital and labor. .

The state stands for the protection of competition, that is, it creates conditions for competition between entrepreneurs for more favorable conditions for realizing the results of their production, on the one hand, and competition between producers and buyers for the wallets of consumers of goods and services. In this case, competition itself is seen as a form of creativity and freedom, when all market participants submit to the dictates of the buyer or consumer demands. In competition, the issue of supply and demand for goods and services is resolved through market prices. This means that individualization of the manufacturer and resource suppliers can achieve the desired results only if they adapt to the desires and needs of consumers, buyers.

The force that opposes competition is monopoly. When a monopoly arises, the situation changes dramatically, since the interests of producers come to the fore and can set prices to the detriment of the entire society.

In Western countries, governments establish control over monopolies, and they do this in two ways.

Firstly, the government, with the help of “natural monopolies,” has a direct impact on the pricing of many types of goods, services, raw materials, etc. In these areas, the government forms commissions to regulate prices. In addition, the government sets standards for the provision of services.

Secondly, an important counteracting factor to the dictates of monopolies is the system of anti-monopoly and anti-trust laws in order to protect freedom of enterprise as an effective regulator of the behavior of small, medium and large businesses.

2. Redistribution of income

In developed capitalist countries, there is a deep differentiation of the population in terms of the amount of income received, which is the cause of certain social inequality in the relationships between different classes in society.

To reduce these tensions, the government is committed to reducing income inequality. This task finds its solution in a number of political and economic measures taken by the governments of countries with market economies. Among these measures, we should point out transfer payments that provide payments to those in dire need of the low-income, disabled, and unemployed. All of these programs transfer government revenues to economic entities that cannot exist without government support, such as agriculture.

An important area of income redistribution is government intervention in the process of formation of market prices. This is achieved through guaranteed prices for farmers' products, as well as legislation on minimum wage rates.

The state actively stimulates the demand and supply of goods and services, the consumption of which benefits society. There are certain types of goods and services, called government or public goods, that the market system is reluctant to produce due to their particular high cost or lack of profit.

A classic example of a public good provided to society by the state is environmental organizations, navigation systems - the construction of sea beacons that warn ships from shipwrecks. Other types of public goods are national defense, flood control, road construction, etc. Consequently, in order for society to enjoy these goods and services, they must be financed by the public sector through taxes that replenish the state treasury.

These types of services generate uncompensated costs, that is, costs greater than the revenue received from the sale of these services. In this case we are talking about the so-called spillover costs. The most well-known costs of overflow are related to environmental pollution (the costs of water and air purification facilities, maintenance of inspections, etc. are covered by the state budget).

The state is implementing a set of measures aimed at stabilizing the development of production through a policy of full employment of resources (capital, raw materials, labor and maintaining stabilization of the price level).

In order for government intervention in politics to be effective, the public sector of the economy receives appropriate development in society as the most important economic foundation of social development.

3. The public sector and its role in the country’s economy

Over the past few decades, the regulatory role of the state has increased significantly in a wide variety of areas of economic activity, such as production, employment, labor productivity, price levels, resource allocation, tax collection and government spending. There is a difference between the activities of the private and public sectors in the economy, but there are also common features that complement each other in solving the national, social, political, and economic problems of the country.

The government's impact on the economy is most felt through taxation and government spending. However, there are many other ways of government intervention in the economic life of the country, as mentioned earlier.

Among the most important reasons that generate the need for growth of the public sector in the economy are such as the increased socialization of production, the need for national defense, urban and population growth, environmental problems, egalitarianism (overcoming poverty and reducing income inequality, and others).

The extent of the government's economic role is evidenced by government purchases of goods and services and government transfer payments. In the US, transfer payments account for almost 30% of the national product. Their share in other countries is even higher, for example, in Switzerland they are 51%, in France - 46%, in the UK - 45%.

Government spending on goods and services in the United States has increased more than 100-fold over the past 60 years (from $9 billion in 1929 to $1 trillion at the end of the 1980s). In recent decades, government purchases have hovered at 20-30% of national output. Of the indicated amount of expenses, about half are transfer payments, that is, payments to certain segments of the population in the form of unemployment benefits, social insurance payments and benefits to war veterans, etc. During the period from 1929 to 1988, they increased from 3.7 billion dollars to 586 billion dollars, that is, almost 150 times.

There are important differences between government procurement and transfer payments. Through government purchases (purchases of weapons, construction of institutions, payments for the services of judges, firefighters and teachers), resources are redistributed from private to public consumption of goods. And through transfer payments, the government changes the structure of production of goods in the private sector (by purchasing goods and services, individuals and individual groups, with the help of the state, acquire goods paid for by society, influencing the production structure and activity through an increase in demand for the corresponding products). But in assessing the role of purchases and transfers in the influence of the state on the economy, the primary role belongs to government purchases.

Government intervention in the economy itself is carried out in three directions - this is the intervention of the federal government, state governments and local authorities. Each of these branches of the public sector has income, corresponding monetary sources and expenses of its budgets.

4. Public sector finances and their sources and expenses

Federal budget revenues are generated from several items: personal income taxes - 46%, payroll taxes - 35%, corporate income taxes - 10%, other taxes - 10%, which includes excise taxes, customs duties, gift taxes etc.

The federal personal income tax rate in the United States in the early 1990s is as follows.

Taxes levied on the payroll fund (on insurance contributions for pensions, free medical care) are paid by employers and employees. Each employer and each employee pays a 7.51% tax on the first $48,000 of annual income (wages); the corporate income tax rate is 34%.

Excise taxes are levied on a limited number of goods: alcoholic beverages, tobacco, gasoline. These rates of income tax and profit tax were introduced in the United States in 1989.

Federal budget expenditures are characterized by a wide variety and 80% are made up of three budget expenditure rates: 1. Assistance to the elderly, the unemployed, the disabled, and low-income citizens of the country, which is 40%. 2. National defense -28%. 3. Interest on public debt - 14%.

In 1987, $70 billion, or 7% of the budget, was spent on education and health care.

State finances are characterized by their own characteristics. Firstly, revenues are generated mainly from sales taxes (turnover taxes, excise taxes), which amount to about 50%. Secondly, taxes on individuals (income tax) is 31%, licenses, visas - 9%.

The expenditure side of the state budget covers the costs of education (24%), social insurance (12%), and public safety (7%). Each state, in accordance with its laws, sets spending standards for the listed needs, which gives rise to significant fluctuations in the amount of tax revenues and expenses.

Local government revenues (counties, municipalities, districts) come primarily from property taxes (74% in 1987), sales taxes, and excise taxes (11%). Currently, the source of income for local governments is the so-called “non-tax revenue” in the form of lotteries and subsidies from the federal and state governments.

The main items of expenditure of local budgets are financing of education - 43%, healthcare and social protection - 12%, needs for conservation and protection of the environment and housing costs - 11%.

Public sector finances are the most complete reflection of the economic activity of the state, since the public sector is increasingly becoming a subject of economic activity. Through the state of finances of government agencies, one can judge the level of production activity in this sector of the economy. Through the distribution of financial resources, the government reveals the content and nature of distribution relations in a society with a market economy. The fact is that the system of distribution of financial resources in the public sector is carried out in accordance with current legislation, which in itself is an example of the requirements of the law. On the other hand, the development of the public sector leads to its greater and greater influence on the general trends in the development of the country's economy, which gives grounds to assert the positive results of the impact of the public sector as a certain standard in relation to the field of economic activity.

5. Types of taxes, their distribution and social deficit

All taxes are divided into progressive, proportional and regressive.

It depends on those objects that are subject to taxation - income, products, buildings, plots of land, etc.

1. A tax is progressive if its average rate rises as income increases. In this case, his average rate increases as income increases.

2. A regressive tax is a tax whose average rate decreases as income increases. In this case, income growth is subject to a lower tax rate. In this case, it is possible to receive a larger absolute amount if the growth rate of income is significant. Or maybe it won't happen.

To make a choice, it is necessary to evaluate the initial data, determine opportunities and establish who is more interested in the public (state) interest - an official or a private citizen? How selfless are both? Is the state always able to achieve what it wants? Could voluntary exchange (free market) be the only incentive that induces people to cooperate? Who will be interested in producing and supplying goods if people can obtain these goods without paying for them (the free-rider problem in transport)?

The leading American economist John Galbraith answers these and similar questions as follows: “A reckless adherence to the ideology of free enterprise and the conviction that the state should not play any role in economic life could become disastrous even for us if we listened to it.” . (Conversation with F. Burlatsky. “LG” - February 1990).

In a mixed economy, the government is fully integrated into the circulation of material and monetary resources that form the economic mechanism. All actually functioning economic systems are “mixed” systems; Everywhere, government and the market system share the responsibility of answering the central questions of economics:
1. What and how much should be produced? How much or what proportion of available resources should be borrowed or used in the production process?
2. How should these products be produced? How should production be organized? Which companies should produce and what technology should they use?
3. Who should receive these products, how should they be distributed among individual consumers?

Different economic systems of the world and individual states differ from each other in the relationship between the roles of government and the market in managing the economy. The differences relate to the set of methods and forms of regulation, the limits of action of one or another form, as well as the direction of economic regulation. However, in all cases, the economic functions of the government play a very significant role in economic development.

It is difficult to quantify the economic role of government in managing the economy. This role is carried out on such a wide scale that it is in fact impossible to compile an exhaustive list of its economic functions. With some certainty it is possible to establish the share of the national product produced under the auspices of the government, the total volume of products purchased by the state, the share and absolute size of public investment. But how can we quantify government regulations designed to protect the environment, protect workers' health and safety, protect consumers from hazardous products, ensure equal access to vacant jobs, and control pricing practices in certain industries, etc.

Some economic objectives of government are intended to support and facilitate the functioning of the market system. These include:
1. Providing a legal framework and social atmosphere conducive to the effective functioning of a market economy.
2. Protection of competition.
3. Redistribution of income and wealth.
4. Adjusting the distribution of resources in order to change the structure of the national product.
5. Stabilization of the economy, control of employment and inflation, stimulation of economic growth. The tasks of ensuring the legal basis of a market economy are resolved by introducing rules of conduct that should guide producers in their relations with consumers. Government legislation concerns the definition of property rights, relations between enterprises, the prohibition of the sale of counterfeit products and drugs, the establishment of quality standards, product labeling, responsibility for compliance with contract terms, etc. State measures to protect competition have already been discussed.

Indeed, the growth of monopolies dramatically changes the market situation. A situation is created in which the number of sellers becomes limited and, because of this, each of them is able to influence the total volume of supply, and therefore the price of the product sold.

Monopoly by its nature generates irrational distribution of economic resources. However, there is a limiter on the path to the omnipotence of monopolies. The first of these is the market mechanism itself. If there is only one seller of product A, then the consumer will have no choice. Then he will look for alternatives, i.e. substitute for this product. And as the demand for these substitute goods increases, so will the supply. As a result, this single monopolist will have indirect competitors.

The second limiter to the dominance of monopolies is the government's efforts to protect competition. In industries where technological and economic conditions preclude the existence of competitive markets, governments regulate prices and set standards for services provided. Transport, communications, production and distribution of electricity and other public enterprises are, to one degree or another, subject to government regulation in most countries, and in many countries they are the property of the state.

One of the economic functions of government is related to the redistribution of income and resources. In the distribution of income, the market system can generate great inequality. During the short period of transition to market relations in the CIS countries, millionaires and billionaires quickly appeared, and tens of millions of people found themselves below the poverty line. Unlike civilized states, where the market system brings large and super-large incomes to individuals whose work is highly paid due to natural abilities, acquired education and skill, or to those who own large capital earned by the hard work of many generations, our newly minted millionaires for the most part They have neither intelligence nor positive experience in entrepreneurship and craftsmanship. Most of them took advantage of the chaos and anarchy against which the collapse of Soviet civilization took place.

In stable states, governments develop and implement social security programs, set minimum wages, unemployment benefits, fix prices in order to increase the income of certain groups of the population, and establish differentiated tax rates on personal income of the population. Thus, governments regulate the distribution of income through direct intervention in the functioning of the market and indirectly through a system of taxes and other payments. Through the mechanism of taxation and government social security spending, an increasing share of national income is transferred from the relatively rich to the relatively poor.

The fourth function is associated with adjusting the distribution of resources in order to change the structure of the national product. The statement that one of the advantages of a competitive market system is to ensure the efficient allocation of resources for the production of goods and services is true under one important assumption: all the benefits and costs associated with the production and consumption of each product are fully reflected in the market supply and demand curves.

Meanwhile, during the production and consumption of goods and services, side effects may occur, and the benefits or costs of such effects may be transferred to third parties who are not directly related to either the production or consumption of the goods or services. Most often, this “third party” is the population itself. When a chemical plant or metallurgical plant pollutes water bodies and the atmosphere with its waste, part of the costs are transferred to the population, to whom they are not compensated in any way. In order to prevent or reduce harmful effects on the environment, governments pass legislation requiring potential polluters to bear the costs of disposing of industrial waste. The government may impose a special tax that is equal to or very close to the spillover cost per unit of output. Adjustments can be made in the direction of increasing demand or supply. Thus, in the United States, the food stamp program is designed to improve the diet of low-income families. The idea behind the program is that better nutrition will help poor children do better in school and help low-wage adults do their jobs better. More productive work of participants in the economic process brings benefits for the entire society. The opposite approach is implemented on the market supply side, when the government subsidizes producers (gratuitous loans, subsidies for education, healthcare, etc.).

Government action to ensure rational distribution and use of resources is implemented through tax policy. Taxation of enterprises and the population, depending on tax rates, can in some cases cut off part of their income and reduce their investment and consumer spending, and in others increase them. Thus, taxes free up resources from the private sector or create conditions for their influx. Governments consciously redistribute resources in order to effect changes in the structure of the country's national product.

The government's function in stabilizing the economy is to help the private sector ensure full employment of resources and stable price levels. The level of production directly depends on the total volume of expenditures. A high level of total expenditure means that for many industries it is profitable to increase output; a low level will not ensure full employment of resources and the population. Any government must, on the one hand, increase its own spending on public goods and services, and on the other hand, cut taxes in order to stimulate private sector spending. Another situation may arise if society tries to spend more than the economy's production capacity allows. When total spending exceeds the full employment value of output, the excess spending will cause the price level to rise. Excessive total spending is always inflationary in nature.

specialty: Economics

and enterprise management

Vitebsk 2002

Introduction 3

Legal framework and social structure 3

Maintaining competition 4

Income redistribution 5

Resource reallocation 6

Stabilization 8

Literature 10

INTRODUCTION

All economic systems that exist in the real world are “mixed”: the state and the market system share responsibility for choosing the answers to five fundamental questions. The American economy is primarily a market economy, but the economic activities of the government are of great importance here too.

Some economic functions of government enhance and facilitate the operation of the market system; others complement and modify pure capitalism.

LEGAL FRAMEWORK AND SOCIAL STRUCTURE.

The government provides the legal framework and specific services necessary for the efficient operation of a market economy. The legal framework includes measures such as granting legal status to business enterprises, defining private property rights, and guaranteeing compliance with agreements. The government also establishes legal “rules of the game” that regulate the relationships between firms, resource suppliers and consumers. Through legislation, the government can act as a judge, or arbiter, in economic relations, detect cases of foul play and exercise the power to impose appropriate penalties.

Services provided by the government include policing to maintain internal order, administering a system of standards for measuring weight and assessing the quality of food, and providing a monetary system to facilitate the exchange of goods and services.

The Pure Food and Drug Act of 1906 is a good example of government enforcement of the market system. This law establishes rules of conduct that producers must comply with in their interactions with consumers. It prohibits the sale of adulterated and misbranded foods or drugs, requires labeling of the product's net weight and ingredients, imposes quality standards on canned food labels, and prohibits misleading labeling on branded drugs. These measures are designed to prevent possible fraud on the part of producers and strengthen public confidence in the reliability of the market system. Similar legislation regulates the relationship between employees and company management, as well as the relationship between companies.

Such government actions are supposed to improve resource allocation. By providing the market with a medium of exchange, guaranteeing the quality of products, defining property rights, and promoting compliance with contracts, the government increases the volume of trade transactions. This expands markets and allows for greater specialization in the use of material and human resources. And such specialization means more efficient allocation of resources. However, some believe that government interferes excessively in the relationships between firms, consumers and workers, thereby suppressing economic incentives and reducing production efficiency.

MAINTAINING COMPETITION.

Competition serves as the main regulatory mechanism in a capitalist economy. This is the force that subjects resource producers and suppliers to the dictates of consumers. In competition, buyers are the masters, the market is their agent, and firms are their servants.

Things are completely different in conditions monopolies. A monopoly occurs when the number of sellers is reduced so much that each seller has the opportunity to influence the total volume of supply and, therefore, the price of the product sold.

In a monopoly, sellers are able to influence or manipulate the market for their own benefit at the expense of society as a whole. Thanks to their ability to influence the overall volume of supply, monopolists are able to limit the production of a certain product, charge higher prices for it, and often receive constant economic profit. These prices and profits above a specific level are directly contrary to the interests of consumers. Monopolists do not obey the desires and will of society, as competing sellers do. To the extent that a monopoly suppresses competition, the dictates of sellers suppress the dictates of consumers. Under a monopoly, resources are distributed in the interests of sellers seeking to make a profit, rather than to satisfy the interests of society as a whole. Monopoly leads to irrational distribution of economic resources.

In the United States, the government tried to control monopolies primarily in two ways.

1. Regulation and ownership.

2. Antimonopoly laws.

In almost all markets, production efficiency can only be achieved with a high level of competition. Therefore, the federal government passed a series of antitrust, or antitrust, laws, beginning with the Sherman Act of 1890, designed to maintain and strengthen competition as a regulator of business activity.

A market economy has certain disadvantages and limitations that force the government to supplement and modify its activities.

REDISTRIBUTION OF INCOME.

The market system is impersonal. And the distribution of income in it may turn out to be much more unequal than is desirable for society. The market system provides very large incomes to those whose work, due to inherited abilities and acquired education and qualifications, requires high wages. Or the one who, as a result of hard work or easy inheritance, received valuable capital and land, also receives high income from his property.

But other members of society have less ability, have received a more modest education, and have not accumulated or inherited any property. Therefore their income is very low. Moreover, many elderly and disabled people, as well as single-parent families (single mothers), receive very little income in the market system or, like the unemployed, no income at all. In other words, the market system is characterized by significant inequality in the distribution of monetary income, and, consequently, in the distribution of the total product between households. Poverty amid general abundance remains one of the main economic and political problems of society.

The government's role in reducing income inequality is reflected in various policies and programs.

1. Transfers.

Transfer payments provide emergency assistance to people in dire need who have lost their livelihood, regular support for dependents and disabled people, as well as unemployment benefits for the unemployed. Social Security and Medicare Medicare serve to provide financial support to pensioners and elderly patients. These programs redistribute income from the government to those households that would otherwise have little or no means of subsistence.

2. Intervention in the market.

The government also changes income distribution by market interference, that is, through changes in prices set by market forces. Price support for farmers and minimum wage legislation are clear examples of how governments fix prices to increase the incomes of certain groups of the population.

3. Taxation.

The personal income tax has historically been used to take a larger share of income from the rich than from the poor.

REDISTRIBUTION OF RESOURCES.

Economists talk about a sharp disruption in the functioning of the market in two cases: when a competitive market system: 1) either produces the “wrong” quantities of certain goods or services; 2) or is generally unable to allocate any resources to create certain goods or services, the production of which is economically justified. In the first case, we are talking about “resource spillover”, or “side (external) effects”; in the second case, we are talking about “state” or “social” benefits.

What are the economic consequences of overflows? Recall that costs lie below the firm's supply curve. When a firm, by polluting the environment, transfers part of its costs to the population, its supply curve turns out to be to the right than when it bears its production costs in full. This leads to expansion of production and to excessive secretion resources for the production of this product.

Correction of overflow costs.

The government can correct this over-allocation of resources in two ways. Both are designed to transfer external costs into internal ones, that is, to force the violating company to bear these costs itself, and not shift them to society.

1. Legislation.

In water and air pollution, the most direct measure would be to pass laws prohibiting or limiting pollution. Such legislation forces potential polluters to bear the costs of proper disposal of industrial waste. Firms must purchase and install smoke eliminators and industrial wastewater treatment plants. The idea is to force potential violators, under threat of prosecution, to bear all costs associated with production.

2. Special taxes.

The government's less direct influence is based on the fact that taxes represent a cost and therefore determine the position of a firm's supply curve. The government can impose a special tax that is approximately equal to the cost of spillover per unit of production. Through this tax, it attempts to reimpose on the offending firm those externality or spillover costs that the private firm would otherwise avoid, and thus eliminate over-allocation of resources.

Correction of overflow benefits.

How can the under-allocation of resources that accompanies spillover benefits be corrected? You can either subsidize consumers (increase demand), or subsidize producers (increase supply), or, as a last resort, organize the production of the necessary product in the public sector of the economy.

1. Increase in demand.

In higher education, the government provides loans and grants to low-income students to enable these students to pursue their studies. Second example: The food stamp program is designed to improve the diets of low-income families. Government-provided food stamps can only be spent on food. Stores that accept food stamps receive cash reimbursement from the government. Part of the program's goal is to help poor children do better in school and help low-wage adults do better jobs through improved diets. By helping its failing members become productive participants in the economic process, society as a whole benefits.

2. Increase in supply.

In some cases, the government may find it more convenient and logistically much simpler to subsidize producers. This is true in higher education as well, with state governments funding a significant share of the budgets of public colleges and universities. These subsidies reduce costs for students and increase the supply of education. Providing government subsidies to vaccination programs, hospitals, and medical research are further examples of such government measures.

3. Public sector.

The state chooses the third policy option when the benefits of spillover are very large. In such circumstances, the government may take over the financing of such industries or even take them into public ownership and manage their activities independently.

STABILIZATION.

From a historical perspective, the newest function of government is to stabilize the economy—that is, to help the private sector achieve full employment of resources and stable price levels. Here we will only briefly outline (without going into exhaustive explanations) how the government achieves this goal.

The level of production directly depends on general expenses. A high level of total costs means that it is profitable for businesses to produce large quantities of goods. This also means that both material and human resources are used to the maximum extent. But total expenditures may be lower than the specific level of production that ensures full employment and price stability, or, on the contrary, exceed it. This in turn can lead to either unemployment or inflation.

1. Unemployment.

The level of total private sector spending may be too low for full employment. In this case, the government can supplement private spending so that total spending – private And government - was enough to ensure full employment. The government is able to achieve this using the same means - government spending and taxes - that it uses to reallocate resources to the production of public goods. In particular, the government can, on the one hand, increase its own spending on public goods and services, and on the other, cut taxes to stimulate private spending.

2. Inflation.

Another situation is possible when the level of spending in the economy exceeds its production capabilities. If this happens, that is, if total spending rises above the level of production at full employment of resources, then prices will rise. Excess aggregate spending leads to inflation. In such a case, the government is obliged to eliminate excess spending. It can do this by cutting its own spending and by raising taxes to reduce private sector spending.

Thus, we have defined and considered the following economic functions of government:

The government strengthens and facilitates the operation of the market system by providing the necessary legal framework and promoting competition.

Transfer payments, direct market intervention, and taxation are ways in which governments can reduce income inequality.

The government is able to correct the over-allocation of resources associated with spillover costs through appropriate legislation or special taxes; under-allocation of resources associated with spillover benefits can be addressed through government subsidies.

Government spending and tax revenue can be used to stabilize the economy.

The state is obliged to provide public goods, since they are indivisible and the principle of exclusion does not apply to them.

LITERATURE:

1. McConnell K.R., Brew S.L. Economics: principles, problems and politics: Trans. from 13th eng. ed. – Moscow, 2001

2. McConnell K.R., Brew S.L. Economy. – Moscow, 1995

3. Vechkanov G.S., Vechkanova G.R. Macroeconomics, St. Petersburg. 2001

The economic functions of the government play a very significant role in economic development. It is difficult to quantify the economic role of government in managing the economy. This role is carried out on such a wide scale that it is in fact impossible to compile an exhaustive list of its economic functions. With some certainty it is possible to establish the share of the national product produced under the auspices of the government, the total volume of products purchased by the state, the share and absolute size of public investment. But how can we quantify government regulations aimed at protecting the environment, protecting workers' health and safety, protecting consumers from hazardous products, ensuring equal access to vacant jobs, and controlling pricing practices in certain industries? Some government economic objectives are intended to support and facilitate the functioning of the market system.

1) ensuring a legal framework and social atmosphere conducive to the effective functioning of a market economy - development, adoption and organization of implementation of economic legislation;
2) protection of competition - maintaining the effective functioning of the market system, first of all this is the demonopolization of the economy;
3) maintaining justice - redistribution of income, wealth and resources in order to change the structure of the national product, i.e. adjustment of market actions, which is understood as both the policy itself aimed at a more equitable distribution of income in society, and the solution of environmental problems, tasks of ensuring the necessary defense capability, etc.;
4) stabilization of the economy - carrying out an effective anti-inflationary policy and combating unemployment, stimulating economic growth.

The tasks of ensuring the legal basis of a market economy are resolved by introducing rules of conduct that should guide producers in their relations with consumers. Government legislation concerns the definition of property rights, relations between enterprises, the prohibition of the sale of counterfeit products and drugs, the establishment of quality standards, product labeling, responsibility for compliance with contract terms, etc. State measures to protect competition were discussed in the microeconomics course.

One of the economic functions of government is related to redistribution of income and resources. In the distribution of income, the market system can generate great inequality. During the short period of transition to market relations in the CIS countries, millionaires and billionaires quickly appeared, and tens of millions of people found themselves below the poverty line. Unlike civilized states, where the market system brings large and super-large incomes to those whose work is highly paid due to natural abilities, acquired education and skill, or to those who own large capital, earned by the hard work of many generations, most of our millionaires successfully took advantage of the chaos and anarchy, against the backdrop of which the collapse of Soviet civilization occurred.

In stable states, governments develop and implement social security programs, set minimum wages, unemployment benefits, fix prices in order to increase the income of certain groups of the population, and establish differentiated tax rates on cash income of the population. Thus, governments regulate the distribution of income through direct intervention in the functioning of the market and indirectly through a system of taxes and other payments. Through the mechanism of taxation and government social security spending, an increasing share of national income is transferred from the relatively rich to the relatively poor.

The statement that one of the advantages of a competitive market system is to ensure the efficient allocation of resources for the production of goods and services is true under one important assumption: all the benefits and costs associated with the production and consumption of each product are fully reflected in the market supply and demand curves. Meanwhile, during the production and consumption of goods and services, side effects may occur, and the benefits or costs of such effects may be transferred to third parties who are not directly related to either the production or consumption of the goods or services. Most often, this third party is the population itself.

Function stabilization of the economy was discussed in detail in the course of macroeconomics, when fiscal and monetary policies were studied.

Based on world experience, the following can be distinguished: tasks, which can and should be resolved at the level of a modern state:

1) ensuring the development of basic industries: energy, metallurgy, fuel industries, stimulating new industries;
2) strategic forecasting of the development of science and technology, long-term forecasting of the development of the economy as a whole, assessment of the socio-economic consequences of scientific and technological progress (STP) from a national perspective;
3) coordination of society’s efforts to protect and improve the environment;
4) creation of industrial and social infrastructure: transport, communications, culture, education, healthcare;
5) development and provision of social guarantees, especially for groups of the population that cannot fully engage in socially useful work;
6) maintaining the monetary and financial system in good condition.

None of the listed problems can be solved at the level of an enterprise, corporation, industry or region. This is the prerogative of the state alone. To make a choice, it is necessary to evaluate the initial data, determine opportunities and establish: who is more interested in the public (state) interest - an official or a private citizen? How selfless are both? Is the state always able to achieve what it wants? Could voluntary exchange (free market) be the only incentive that induces people to cooperate? Who will be interested in producing and supplying goods if people can obtain these goods without paying for them (the free-rider problem in transport)?

1) what and how much should be produced; to what extent or what part of the available resources must be borrowed or used in the production process;
2) how these products should be produced; how production should be organized; which firms should carry out production and what technology should be used;
3) who should receive these products, how should they be distributed among individual consumers?

There are certain features in the solution of fundamental economic problems by the state. Thus, the problem of what to produce is the problem of choosing between private and public goods. How to produce - produce in private or public enterprises. For whom to produce is probably one of the main tasks of the state in a market economy, the task of maintaining social justice in society. Finally, a new problem compared to the market - how collective decisions are made - is what in economics is called public choice theory.

The question of how politicians should act is dealt with by a special branch of economic theory - normative theory of economic policy. Normative theorists study several central issues: Should government intervention be active in the economy, or should intervention be kept to a minimum so that the market can function freely? If policymakers decide that economic intervention is necessary, what are the most effective ways to achieve their goals, and how can they best determine the optimal policy measures to take?

Another branch of economic theory that overlaps with political science studies how government agencies operate in practice. It's called positive theory of economic policy. Specialists involved in positive theory try to explain why the bodies in whose hands economic power is concentrated act the way they do. Their actions are subject to political pressures, institutional constraints, influences from economic theories, and changing practical objectives. Theorists in this area study the practice of developing and implementing economic policies within individual countries and conduct a comparative analysis (from one angle or another) of the actions of government bodies in different countries.

The basic theory of economic policy was first analyzed comprehensively in the early 1950s. Dutch economist Jan Tinbergen. Tinbergen's theory puts forward the concept of economic policy and is normative in nature. Tinbergen carefully outlined the main steps developing optimal policies, according to which government agencies must:

1) set the ultimate goals of economic policy, which is usually done in terms of maximizing the social welfare function; Next, using the social welfare function, they will determine the targets they strive to achieve;
2) assess what political instruments are available;
3) have at your disposal an economic model that links target indicators and tools for achieving them, which will allow you to choose the optimal scale of applied policy measures.

Let us assume that the objective function consists of k elements. There are also s economic policy instruments and n market factors that influence the goals. Let us assume that the goal y, (i = 1, ..., k) acts as a function of the set of instruments x b..., x s and the set of market variables z b ..., z n:

Then the effect of applying the political instrument Xj (j = 1, s) can be expressed by the partial derivative of this function:

If, for example, we mean anti-inflationary regulation, then y denotes the rate of price growth, Xj is the supply of money, and z n reflects demand, supply, costs and other market characteristics that are outside the zone of direct government control. Mu will record the degree of impact of monetary policy instruments on the inflation rate. Indicators of this type are called animators. They describe the productivity of the entire apparatus of state regulation of the economy. The multiplier system reflects the transformation of political signals arriving at the “input” of the economic mechanism into changes in political goals appearing at its “output”.

Equations of the form (1.1) must be constructed so that the value of the multiplier turns out to be statistically determined and turns into a certain number. To solve this problem, it is necessary that the Tinbergen inequality s > k is satisfied. Its economic meaning is obvious: the state does not need to take upon itself what it is not able to do, and therefore the number of goals should never exceed the supply of economic policy instruments at its disposal .

Robert Mundell posed the problem of choosing economic policy differently than Tinbergen. He suggested that in reality, different instruments tend to be controlled by different government agencies. Monetary policy is the responsibility of the Central Bank, and fiscal policy is the responsibility of the executive branch. Suppose that these bodies do not coordinate their policies, as Tinbergen assumed, but, for various political or institutional reasons, prefer to independently select the necessary policies. Is there a way to solve the problem of choosing the optimal policy in conditions where policy development and implementation are carried out in a decentralized manner, i.e. when each instrument is under the control of a specific authority and the various authorities do not directly coordinate their actions?

Mundell defined the conditions under which each instrument can be “assigned” to one of the target indicators, as well as the rule for regulating the action of the instrument when the target variable deviates from the optimal value. He showed that if goals are properly linked to instruments, then the optimal policy package can be achieved under decentralized decision-making. Mundell's proposal was based on the concept of efficient market classification. Essentially, this means that each target should be “assigned” to the instrument that has the greatest impact on it and thus has a comparative advantage in terms of regulating the target.

Are there any restrictions on government intervention in the economy? Yes, no doubt. Firstly, any government actions that undermine the functioning of the market are excluded; total directive planning and universal control over prices are unacceptable. Secondly, influence on the market is permissible only through indirect, economic methods; administrative measures should play a limited role. Thirdly, it must be remembered that the use of economic methods can cause serious distortion of market processes, so they must be used with caution. Fourthly, among economic methods there are no ideal ones, and a method that works well in one market may be completely unacceptable in another.