Externalities as a manifestation of the market fiasco. The main types of market failures. Current Market Failure Theory and Externalities

Introduction

In the modern economy of any state, the leading place is occupied by the market. The market allows manufacturers to enter the international arena and provide their goods and services at a high professional level. The state constantly intervenes in the conduct of a market economy, regulating the market with the help of the state budget, taxation, the creation of bills, and antimonopoly policy. Because Russian Federation referred to as a mixed type of economy, for the citizens of our country, such state intervention in the market is the norm and does not cause absolutely no surprise. Many believe that in the presence of civil society, that is, the presence of democracy, producers have the right to freedom in conducting their market policies, but few people think that such control is necessary for the market in order to smooth out the so-called "failures", or as they are also called - "market fiasco", which can seriously harm the country's economy. State regulation complements and corrects the market mechanism. Based on market failure theory, the government's main economic role is to intervene where the market fails to allocate its resources efficiently. Each type of market failure involves a certain type of government intervention, in the event of a market failure, the state will act as the sole producer until the market mechanism is balanced. I consider the topic of my work to be relevant, since right now the Russian market needs state intervention and the establishment of the country's economy. The purpose of the abstract is to consider the problem of market failures, to study the theory of market failures and the concept of the importance state regulation.

The concept of "market" and "state"

In economic theory, there are many definitions of the market. Various definitions highlight different aspects of such a complex and multifaceted phenomenon of the socio-economic life of mankind, the market, and express different approaches of scientific schools or individual authors to this phenomenon.

We will consider the market as a form of private organization. economic activity people, based on mandatory features: private property, voluntariness, economic interaction of independent and independent entities and competition.

Subjects of market relations. The main subjects of the market are people (individuals) and groups of people specially created for the joint implementation of economic activities. In the modern economy, these groups are usually taken for legal entities. State-owned enterprises can also act as subjects of the market, if the state establishes for them such rules that are close to the conditions of activity in the market of individuals and legal entities.

Market subjects freely, relying on their own decisions, preferences, enter into economic relations with each other, which in economic theory are called contracts. Contracts are not only those written agreements concluded between the seller and the buyer, but any form of cooperation and agreements between independent and independent participants in the economic process.

The more developed the legal system of a society, its culture of tradition, the more diverse the organizations and institutions functioning in the national economy, the greater the share of implicit, implied conditions and obligations in contracts. For example, when hiring, it is usually not stipulated that the employee has the right to pay for sick days, since this right is provided for by national law. Therefore, the theory argues that relations between participants in the economic process, especially in developed societies, are built on the basis of imperfectly formulated contracts.

Entering into contracts, market entities pursue the goal of maximizing profits, although this statement is somewhat simplified and therefore often criticized by modern theory.

The state as a subject economic relations- this is a set of organizations endowed with the right and duty to establish and protect the conditions of economic activity that are binding on other market participants and redistribute the results of their activities.

A set of organizations is understood as an interconnected and hierarchical system of governing bodies of the economy and society. In the modern world, this is the government, parliament, central bank, state departments of the regional and local levels and other state bodies. Them the most important feature- in that they forcibly set the conditions for economic activity.

Conditions refer to laws, procedures and regulations. Laws determine the state's requirements for economic agents. These requirements take the form, firstly, of restrictions (prohibitions) and, secondly, prescriptions (mandatory, for example, the need to register a company). Procedures establish the order, sequence of actions, rights and obligations of participants in economic or legal interaction. The norms fix mandatory economic parameters (for example, the minimum wage or the proportions of the exchange of the national currency for a foreign exchange rate).

The state is endowed with the right and obligation to perform certain economic functions by society. In other words, the state receives a "mandate" from society and is its economic "agent".

First, the conditions established by the state are relative for economic agents. Although in law, as is known, there are not only imperative (obligatory) and dispositive norms that allow choice, the latter expand the field of possibilities for economic agents, but do not remove the restrictions for this wider field of possibilities.

Secondly, the state not only determines the conditions of economic activity, but also protects them. In a modern market economy, the state provides such protection through the courts.

Thirdly, the definition and protection of the conditions of economic activity is not only a right, but also, first of all, the duty of the state.

Fourthly, the state is not guided by market principles of profit maximization and exchange equivalence. Therefore, it cannot be considered as an ordinary market entity. In the field of legislative and economic activity, the state is guided by the goals of harmonizing the interests of various strata of the general maintenance of social justice, ensuring economic growth, and many other goals that go far beyond market principles.

One of the fundamental characteristics of the market is competition. The subjects of the market are striving to gain the upper hand over the allies. Therefore, the competitive environment is internally unstable and needs protection from the state. It must fight the monopolization of the market and achieve such conditions that producers operate in a competitive environment. It is formed not only by antitrust laws, but also by special economic measures, such as lowering barriers to imports and encouraging new entrants to enter the market. Competitive environment - necessary condition successful economic development.

The positive effect of competition largely depends on the conditions in which it operates. Usually, there are three main prerequisites that are necessary for the functioning of the competition mechanism: first, the equality of economic agents, acting agents in the market (this largely depends on the number of firms and consumers); secondly, the nature of their products (the degree of homogeneity of the product); third, freedom to enter and exit the market.

There are several types of competition, or so-called forms of market structures.

Perfect (pure) competition arises under the following conditions: there are many small firms offering homogeneous products on the market, while the consumer does not care which firm he purchases this product from;

The share of each firm in the total volume of the market supply of this product is so small that any of its decisions to increase or decrease the price is not reflected in the market equilibrium price;

The entry of new firms into the industry does not encounter any obstacles or restrictions; entry and exit from the industry is absolutely free;

There are no restrictions on the access of a particular firm to information about the state of the market, prices for goods and resources, costs, quality of goods, production techniques, etc.

Competition that is associated to some extent with a marked restriction of free enterprise is said to be imperfect. This type of competition is characterized by a small number of firms in each area of ​​entrepreneurial activity, the possibility of any group of entrepreneurs (or even one entrepreneur) to arbitrarily influence market conditions. With imperfect competition, there are rigid barriers to entry of new entrepreneurs into competitive markets, and there are no close substitutes for products produced by privileged producers.

Between perfect and imperfect competition lies the type of competition that is very often encountered in practice and is, as it were, a mixture of the two noted types - this is the so-called monopolistic competition.

It is a type of market in which a large number of small firms offer a variety of products. Entering and exiting the market is usually not associated with any difficulties. There are differences in quality appearance and other characteristics of goods produced by different firms that make these goods somehow unique, albeit interchangeable.

The opposite of competition is monopoly (from the Greek monos - one and poleo - I sell). In a monopoly, one firm is the only seller of a given product that has no close substitutes. Barriers to entry into the industry for other firms are almost insurmountable. If the buyer is singular, then such competition is called monopsony (from the Greek monos - one and opsonia - purchase).

In a monopoly, as a rule, the seller wins; monopsony provides a privilege for buyers. Pure monopoly and pure monopsony are relatively rare phenomena. Much more often in a number of industries in countries with a market economy, the so-called oligopoly develops. This type of competition implies the existence of several large firms in the market, whose products can be both heterogeneous and homogeneous. Entry of new firms into the industry is usually difficult. A feature of an oligopoly is the mutual dependence of firms in making decisions about the prices of their products.

The totality of the norms of economic law and measures to maintain a competitive environment are united by the concept of “framework conditions for economic activity”. Creating favorable framework conditions is the main task of the state in a market economy.

The concept of market failures

A market failure, or "market fiasco" as it is also called, is a situation in which the market fails to coordinate the processes of economic choice in such a way as to ensure efficient use. The moment when the market is unable to ensure the efficient use of resources and the production of the required amount of goods, then they speak of market failures. The situation when the market mechanism does not lead to the optimal distribution of society's resources is called market failure or fiasco.

There are usually four types of inefficient situations that indicate "failures" of the market:

1. Monopoly;

2. Imperfect information;

3. External effects;

4. Public goods.

In all these cases, the state comes to the rescue. It tries to solve these problems by implementing antimonopoly policy, social insurance, limiting the production of goods, stimulating the production and consumption of economic goods. These areas of state activity constitute, as it were, the lower limit of state intervention in the market economy. However, in the modern world, the economic functions of the state are much broader. Among them: infrastructure development, education financing, unemployment benefits, different kinds pensions and benefits for low-income members of society and more. Only a small number of these services have the properties of public goods. Most of them are not consumed collectively, but individually. Usually the state pursues an anti-inflationary and antimonopoly policy, seeks to reduce unemployment. In recent decades, it has become more and more active in regulating structural changes, stimulating scientific and technological progress, and striving to maintain high rates of development of the national economy.

World experience testifies to the important role of the state in the management of socio-economic processes. The modern economy is a “mixed” economy based on market principles of organizing economic life (private property, freedom of entrepreneurial initiative, market methods of distributing limited resources) with the active regulatory influence of the state on the behavior of economic entities.

The need for state regulation of economic processes is due to the inability of the market through self-regulation to solve a number of problems that undermine the foundations of the market economy system and reduce its effectiveness. In conditions of market competition, there are so-called "market failures"- situations where an economy based on private property and free enterprise does not ensure the efficient use of resources and dynamic development.

Traditionally, market failures include:

Monopoly;

Lack and asymmetry of information;

External effects (externalities);

Production of public goods.

Monopoly, which makes it difficult for other economic entities to enter the market, as well as distorting the market pricing mechanism, is a phenomenon that violates the fundamentals of the market and the principles of free competition.

Under these conditions, the state, through its activities, must ensure the conditions of free competition, carry out antimonopoly regulation.

As a rule, it is the monopolies that inflate prices for goods and services, and the state is forced to make appropriate adjustments to the prices they set. In some cases, for certain socially important goods and services, the state acts as a price regulator, including those set by non-monopolists, by regulating the amount of the trade markup or by establishing taxation for these goods at a preferential rate.

Under market conditions, economic agents operate under conditions imperfect(asymmetric and incomplete) information. This gives rise to inefficiencies in ongoing market transactions.

Lack of information can block the interaction of market entities. The result is the incompleteness of markets, which manifests itself primarily in the financial sector. Markets valuable papers and futures contracts component capital markets, as a rule, are not all-encompassing and perfect. It is extremely difficult to predict long-term changes in them. Furthermore, financial markets operate relatively independently from markets for consumer goods, labor, land, and physical capital. All this leads to the fact that most transactions are carried out in conditions of uncertainty.

Usually the state is unable to completely overcome the problem of incomplete information. But it can partially mitigate the risks of decisions made by distributing them among taxpayers, which is not available to private investors. The state can finance long-term investment projects or act as a guarantor for their implementation, introduce compulsory insurance deposits by banking institutions, take other actions that can improve the efficiency of public use of resources.

Information asymmetry manifests itself in many areas of economic activity. Thus, a classic example is health care and medical care. The patient, turning to the doctor, relies on him in the diagnosis and choice of treatment methods. The consumer of medical services does not have the ability to control the manufacturer. If manufacturers were guided solely by the principles of personal gain, then expensive and ineffective medical care would become widespread.

An equally similar situation is possible in the field of education. Here the consumer is forced to choose a manufacturer before the actual service is delivered. Payment for services is made on the basis of an insufficiently accurate estimate, which is based on assumptions based on experience. Information asymmetry also occurs in hiring; the employer obviously knows less about the capabilities of the job seeker than the potential employee himself.

The problem of information asymmetry can be solved without the participation of the state, on the basis of reputation. However, in difficult situations more productive is the intervention of the state, which can take various forms. One of them is licensing, which is a prerequisite for the implementation of certain types of activities, for example, in healthcare, in the provision of educational services, production of medicines, etc. Possibly also direct participation of the state in the production of goods and services, which are associated with significant information asymmetry. Finally, various tools can be used to prevent information asymmetry or block its consequences. state control over the production and marketing of relevant goods and services.

The obvious market failure is externalities (externalities)– costs or benefits associated with a particular activity that are not reflected in prices. They are called external because they concern not only the participants in a particular market transaction, but also third parties.

Distinguish negative and positive externalities. Market self-regulation does not eliminate negative “externalities”, i.e. the negative impact of the activities of some business entities on others. An example here is pollution environment, which brings economic losses to the whole society (pollution of rivers, air). In this case, through administrative fines or additional taxation, the state forces producers to avoid such effects for other market participants.

With positive externalities, the activity of some economic agents brings certain benefits to outsiders. So, if a person has been vaccinated against infectious disease, the risk of infection is reduced not only for him personally, but also for those who come into contact with him. In this case, marginal social benefits are higher than marginal private benefits. Another example of a positive externality is the development of education, which benefits not only individuals, but society as a whole. If the areas that generate positive externalities developed solely on the basis of the principles of the free market, there would be an underproduction of the corresponding goods compared to the efficient level.

Goods that generate positive externalities are created mainly in the areas of education, health and culture. These socially significant benefits have a positive impact on society as a whole, therefore it is justified governmental support their consumers and producers by providing tax incentives and subsidies.

The limiting case of activity that generates positive externalities is creation of public goods. These are goods produced at the expense of society and consumed by all members of society. They differ in two properties: non-rivalry and non-excludability in consumption.

non-rivalry means that the good is available simultaneously to many consumers, and the marginal cost of its provision to an individual consumer is zero. Under non-excludability in consumption implies the technical impossibility or prohibitively high costs of preventing new consumers from accessing the good. Goods that have both of these properties are called purely public goods. If at least one of these properties is not fully manifested, there is mixed public good.

Examples of purely public goods are national defense, law enforcement, and legislation. Thus, an increase in the population does not require additional changes to the civil, family or administrative code. Laws define the rights and obligations of everyone, and the amount of "benefits" received does not depend on the number of "consumers". At the same time, not a single resident of the country can be excluded from the operation of the legislation, since it is simultaneously addressed to all members of society.

Purely public goods cannot be produced and sold in parts, their production and consumption takes place collectively.

The state is called upon to correct the flaws in the market. At present, mechanisms for correcting the market mechanism have been developed that have been tested in various states. These include measures to maintain macroeconomic balance, while the very concept of "balance" extends not only to economic, but also to social elements, primarily the system of social guarantees for citizens. The main debate is about the scope of such regulation.

Lecture 4 Fiasco (defects, failures) of the market

4.1 Externalities

4.2 Inefficiencies in the production of public goods

4.3 Information asymmetry. Cyclical development of markets

4.4 Transaction costs

The market mechanism is not always able to automatically come to optimality. There are problems that the market mechanism is not designed to solve, and therefore is not able to solve them effectively. Such cases, when the market allocates resources inefficiently, are called market failures or fiascos.

Market fiascos are:

1) externalities;

2) inefficiency in the production of public goods;

3) information asymmetry;

4) cyclical development of markets;

5) transaction costs

6) the trend of monopolization of markets

The operation of the market mechanism may generate externalities, or externalities. Under external effect implies the impact of a transaction or economic activity on third parties, not taken into account in the contract. This impact manifests itself in the form of costs or benefits not reflected in the market price. Externalities, or external effects, are divided into positive, i.e. bringing additional benefits to third parties, or negative, bringing additional costs to third parties. For example, production that harms the environment and other producers generates negative externalities. Health services, education, irrigation, landscaping, etc. generate positive externalities.

Externalities disrupt the efficiency of the market mechanism. Negative externalities in a competitive market give rise to overproduction in comparison with the socially effective volume of production (a manufacturer, refusing to use expensive environmentally friendly technologies, can produce more goods. However, using the dirty production cycle, he transfers his missed costs- expensive environmentally friendly technologies were not purchased - for third parties who, through the fault of the manufacturer, have costs associated with diseases, the purchase of medicines). With positive externalities, on the contrary, there are cases of underproduction of goods and services (the company, carrying out the improvement of the adjacent territory - landscaping, laying paving slabs, fountains and artificial waterfalls - diverts part of the resources from the actual production, which leads to a decrease in the volume of goods produced, a decrease in the level of profit).

How to handle the problem of inefficiency created by externalities? What compensates society for the damage from negative externalities, and the creator of positive effects for the lost benefit? The solution of these problems, as it was assumed before the wide recognition of R. Coase's ideas, is assumed by the state, using its traditional tools - taxes and subsidies. If, to eliminate negative externalities, the government introduces a tax withholding (or forces the producer to buy a license or install cleaning equipment) in the amount of marginal external costs, then the internal costs of the producer will increase and bring output in line with the socially optimal. This approach is called internalization(from English. internal - interior) external effects.

In order to internalize the positive externality, the government uses incentive subsidies. They are paid in the amount of marginal external utility and transform it into internal, increasing the marginal utility of the producer. The subsidized producer will expand output to a socially efficient level.

However, if the property rights to resources are clearly defined (specified) and observed, including the possibility of free exchange of these rights, then the market will be able to resolve the problem of externalities on its own, without the participation of the state, by buying and selling these rights. This idea was put forward by R. Coase, who studied the relationship between externalities, property rights and efficiency, which led to the creation of a theorem (1960), named after the scientist. Coase theorem states that externalities can be internalized by clearly specifying ownership of resources and freely exchanging those rights. The theorem is satisfied only with such a number of participants in the exchange of rights, in which the transaction costs of negotiating the transfer of property rights do not exceed the benefits from the results of the exchange. In other words, the number of participants in the negotiation should not be too large (suppose you would like to negotiate an exchange of clean air rights with all car owners passing on the highway near your home; the transaction costs of such negotiations will be prohibitively high).

The Coase theorem helps to understand the meaning of the internalization of externalities. For example, two factories use the same resource, say a river, for mutually exclusive purposes: one for waste disposal, the other for fish farming. It does not matter which of them was the first to receive the right to use the river. What is important is the very achievement of an agreement on compensation: the one who receives the prize pays for the damage caused to the other. Then the output volumes and profit margins of both plants will be adjusted. a factory that pollutes the river will cut down on excess production, compensating for lost profits to the affected fish factory. The latter, due to compensation, will be able to increase the output of fish products compared to the pre-contractual situation.

The main conclusion of the Coase theorem is that externalities arise only in the case of vagueness, uncertainty of ownership of resources. Where a clear definition of rights is possible, the problem of externalities is addressed by voluntary negotiations on mutually beneficial sale of these rights. In the end, the rights will go to those who can manage them more effectively. The role of the state is reduced only to establishing the "rules of the game" in the exchange of ownership of resources.

The condition for the fulfillment of the Coase theorem (limiting the number of participants by the value of the transaction costs of negotiations, which should not exceed the benefits from the result of the exchange of rights) is a general condition for the efficient operation of the market mechanism. It makes it possible to determine the volume of demand and determine the market price of products, which is always feasible for private goods, when the seller contacts each consumer.

However, there is such a category of goods and services for which it is either impossible or unprofitable to identify demand and determine the optimal price by the market method due to the extremely high costs of such identification. . We are talking about public goods and services, or public goods.

Public Goods are called, the main characteristic of which is non-exclusivity from consumption and noncompetitiveness in consumption. Those public goods and services that fully meet these properties are called pure public goods. The classic example of a pure public good is national defense, city lighting, lighthouses, scientific knowledge (with free education).

Non-excludability from consumption means that the very nature of a pure public good is such that it is impossible to separate "payers" from "non-payers". And it's not just that such benefits are indivisible (national defense, street lighting, etc.). There are quite a lot of indivisible blessings in our life: a theatrical performance, a discotheque, public transport. But in all the examples given, there is no Problems"stowaway"i.e. situations where a person enjoys a benefit without paying for it. You can't go to a disco, subway or theater without buying a ticket. But the property of non-excludability from consumption suggests that the very creation of public goods (and not their purchase, in contrast to private goods) generates positive externalities. However, it is impossible to resolve the problem under consideration through negotiations, i.e. in a private manner, since the conditions of the Coase theorem are not met. Due to the huge number of participants, the transaction costs of identifying who pays and who enjoys public goods for free are too high, which gives rise to the free rider problem. That's why market production of public goods is inefficient.

Let us assume that the national defense is financed by a group of certain individuals who seek to secure only themselves from an external enemy. However, the air defense system created, for example, cannot protect only the persons who financed this event. It protects all citizens of the country, including those who did not pay anything ("free riders") to build a defense capacity. The free rider problem does not capture the full amount of demand and undermines market incentives either to provide such goods or to provide them in a socially optimal amount.

Pure public goods are not competitive in consumption: an increase in the number of consumers does not reduce the utility of this good for others, therefore, the marginal cost of providing such goods is zero. For example, because the light of a beacon is used by another sea vessel, there is no decrease in the usefulness of lighting for other ships, and for each additional vessel passing, it is not necessary to build an additional lighthouse. We can say that non-rivalry is an extreme case of positive externalities.

So, for the production of public goods in the optimal amount, it is necessary to charge a fee from all citizens of the country, which can only be done by the state, which has the instruments of taxation and the mechanism of redistribution in the form of the state budget.

The market distribution mechanism is impartial, since it is based on the principle of equality of the marginal productivity of a resource to the marginal income from its use. It's a mechanism equitable distribution: each owner has an equal right to receive income in accordance with the productivity of the resource. However, the market distributes income only among those who participate in the mechanism of market competition, without affecting those who are outside it (for example, losers in the competition).

Market distribution - equal but unequal. Its participants have equal rights to receive income in proportion to their contribution, which is objectively unequal, since from birth everyone has different strengths, abilities, striving for work, etc. Equality should be understood as equality of opportunities (rights), and not equality of results. In a command economy, equality in distribution means receiving the same income, regardless of the contribution of forces, knowledge, money, etc.

The market copes with the tasks for which it is designed. It is impossible to speak about the fiasco of the market in cases that are outside the scope of the market mechanism. Therefore, the solution of social problems, first of all, providing the disabled part of the population with the right to a decent existence, namely, obtaining a certain income without corresponding factor costs, is the scope of another, non-market mechanism that the state has as an instrument of social regulation.

Another problem that distorts the operation of the market mechanism is asymmetric information under conditions of imperfect competition. Asymmetry refers to the uneven distribution of market information among market participants and this problem is generated by the monopolization of markets. Information asymmetry not only increases transaction costs, but can also lead to overproduction of some goods and underproduction of others. If the consumer has only partial information about the product and its quality, then, firstly, this will lead to the displacement of quality goods from the market, and, secondly, it generates internals(benefits or costs of the participants in the transaction, not reflected in the contract). For example, the producer's monopoly on information (the producer knows everything about his product, and the consumer only partially) makes it possible to reduce production costs due to product quality and expand the production of environmentally hazardous goods. Part of the producer's costs is transferred to the consumer and they become "internal" costs to the consumer, not stipulated by the terms of the transaction, that is, not reflected in the price. So, having bought a food product contaminated with radioactive elements, you will suffer from poor health, spend money on buying medicines, etc. The marginal utility of the product for the buyer decreases by the value of the internaly. The state can contribute to solving this problem by accumulating and providing market information, for example, by creating information centers, as well as establishing and protecting, through legislation, the right to receive complete and truthful information about a product.

A serious problem of the market is the cyclical nature of its development - the alternation of crises and economic upswings, that is, the movement from upswing to upswing through crises. During a crisis, the scope of the market mechanism narrows: employment decreases, incomes fall, losses grow, risks increase, incentives for production disappear. Separate markets may simply disappear during a deep and protracted crisis. In critical conditions, the state should just extend a saving hand to the markets, helping them survive, stabilize and modernize their products.

Transaction costs(transact - to conclude an agreement, to conduct business; transaction - doing business) - the costs associated with finding a counterparty, concluding a business contract with him and monitoring the fulfillment of the obligations undertaken by the other side of the contract (support of the contract). These costs are not associated with production, but with the costs associated with it. The term was first introduced into economics by an American economist, laureate Nobel Prize Ronald Coase in The Nature of the Firm (1937).

Types of transaction costs

1. Information search costs - the costs of searching for counterparties of business transactions and finding the most favorable terms of sale. Before concluding a transaction, an economic entity collects information about the counterparty. Prices for the same good can vary significantly in different shopping malls, city districts, regions. The costs of searching for information may be associated with visiting stores, working with catalogs of goods and services, visiting the websites of trade organizations.

2. Costs of concluding a business agreement (contract)– associated with time costs, negotiations, costs for the legal execution of the contract, transportation costs, payment for the restaurant, saunas, hotel expenses, etc.

For example, you are about to publish your literary work. You will need an agent who will negotiate with the publisher, and therefore will require the cost of paying for his services. The negotiations themselves will take some time. Signing the contract, a friendly dinner with the publisher - all this will be included in the costs of concluding a contract).

3. Measurement costs- associated with the need to identify the level of quality and the degree of compliance of the product (service) with the requirements. Due to the fact that the benefits have a variety of properties that bring different benefits to their owner, the buyer has to bear the costs of examining the product for environmental friendliness, analyzing certificates of conformity, assessing the authenticity of the product, and whether it meets international quality standards. The cost of measurement makes it difficult to buy for someone who does not have specific product knowledge. The task of minimizing measurement costs is largely carried out by the trade mark (“brand”) of a well-known company, as well as certificates of conformity.

4. Cost of specification and protection of property rights- the costs of establishing the object and subject of ownership, the functioning of the judicial system, law enforcement agencies, ensuring the protection and inviolability of the property of an individual, a company.

5. Costs of Opportunistic Behavior- related to ensuring that counterparties fulfill their obligations under the concluded agreement, coercing them to fulfill their obligations, identifying and punishing the violator of the agreement.

Opportunistic behavior means dishonesty, deceit, concealment of information, or, as the American economist O. Williamson explained this category, “calculated efforts to lead astray”; it entails tangible costs as before (ex ante), so after (ex post) making a deal. Costs are required for counterparties to protect themselves from opportunistic behavior.

So, in currency exchange offices there are special devices that check the authenticity of banknotes.

Transaction costs permeate the entire fabric of the economic life of society, individuals are constantly faced with them. J. Stigler, an American economist, argued that "a world with zero transaction costs turns out to be as strange as a physical world without friction forces."

K. Arrow gave a broader definition of transaction costs: transaction costs are the costs of operating an economic system. Both the market economy and alternative systems face transaction costs.

Having considered the advantages and disadvantages of the market, we see that it is effective in those areas that are subject to the free price mechanism, but the market does not work where it cannot penetrate. Therefore, together with the "invisible hand" of A. Smith, it turns out to be necessary and the action is quite visible hand states. Thereby government regulation complements the market.

There are not only failures, or fiascos of the market, but also failures of state regulation. The saddest thing for society is the incompetent intervention of state bodies in situations related to market failure. Society needs government intervention where and when the market is unable to effectively allocate resources.

Market failures are such manifestations of the operation of market mechanisms that induce market participants to make economic decisions that are not optimal or undesirable for society, i.e. when market mechanisms direct the activities of firms or independent entrepreneurs in a direction that is subjectively beneficial for them, but not optimal for the whole society.

Important!!! Such decisions are not the result of errors of market participants or extraneous reasons, but the result of the actions of the market itself.

Typically, the following market failures are distinguished:

1. Tendency towards the establishment of monopolistic control over the markets by individual economic entities. A competitive environment can lead to the formation of oligopolies or monopolies. The market system does not have internal mechanisms that counteract the monopolization of the market. Hence the need for antitrust law and regulation.

2. uneven distribution of information in the economic environment. The seller has much more information about his product than the buyer. This phenomenon is called information asymmetry. Costs for obtaining information are not available to all market participants. These costs are one of the main types of transaction costs. Recognition of the cost of transmitting and receiving information is one of the main differences between modern economic theory and neoclassical doctrines. The amount of profit depends not only on resource ...

The principle of exclusivity does not apply to public goods; the consumption of a good by one member of society does not diminish the ability of others to enjoy that good.

The market itself is not able ... because it is very difficult to measure the utility received by each member of society in the consumption of a public good. Accordingly, it is impossible to determine how much everyone should pay for the use of a public good. Failure to respect socially acceptable boundaries of inequality in income distribution…. The market is neutral and we distribute benefits.

New income..result

The market system is characterized by a tendency, the concentration of wealth at one pole ... does not contradict the principles of the market, if it occurs

5. A special place is occupied by the inability of the market ... Externalities are additional benefits or costs that arise as side effect from the activities of others .. Externalities are not the result of the activities of those

(something missed)

Lack of motivation for efficient and rational business management in the government or production structure

The main economic functions of the state:

1. Production of public goods.

2. Regulation of the activities of natural monopolies is a sphere of economic activity where the unit costs of production are steadily decreasing with an increase in the volume of supply of goods and services, i.e. the more goods produced, the lower the cost of producing a unit of output and, accordingly, the price.

In the US, the government controls the prices of these products.

The most common prices.

Tax equalization of income.

Maintaining macroeconomic stability is the activity of the state aimed at eliminating inflation, unemployment, and the economic crisis.

Business cycle - rise, peak, fall, crisis, trampling

Intensive and extensive economic growth. An extensive type of economic growth involves an increase in the volume of production resources used on the basis of already existing technology. Almost all states went through an extensive type of economic growth, in particular, during the period of industrialization, when the foundations of the modern economy were being created.

Intensive type of economic growth involves an increase in the volume of output, involves an increase in production by improving the use of existing resources of existing resources. We can say that the extensive type emphasizes quantitative factors, and the intensive type emphasizes qualitative factors.

Improving technology involves increasing labor productivity, resource and energy saving. Strictly speaking, in practice there is no purely extensive or purely intensive type of economic growth. AT real life there is a close interaction of various factors, in particular, it would be more correct to speak of a predominantly extensive and predominantly intensive type of economic growth.

In the Soviet Union in most of its history was predominantly extensive. During the period of industrialization, a huge amount of resources and labor force was involved in the trade turnover at the expense of economic resources, at the expense of various resources and rural residents.

As you know, the Soviet Union had a huge number of natural resources and until a certain time (approximately until the beginning of the 70s) by large labor resources. However, since this period, the problem of labor shortage has become more and more acute.

In the developed countries of the West, more (starting from the second half of the 20th century) begins the transition to a predominantly intensive type of economic growth. This was expressed in the creation of new industries, such as electronics, and the transition to ever more advanced technologies. Modernization and reconstruction of production took place on a massive scale, as a result of which, with practically the same volumes of production resources, primarily due to labor productivity, there was a sharp increase in output.

Much has been said in the Soviet Union about the need for a similar transition from the extensive to the intensive type. But in practice, we continued to develop along an extensive path. As a result, the backlog of the Soviet economy (in terms of quality indicators) from the Western one (labor productivity, material consumption, energy intensity of manufactured products) begins to increase.

The conducted studies in the leading developed countries show a steady trend of increasing these factors in providing economic facts. Thus in modern Russia the task of large-scale modernization, among others, is designed to solve the problem of transition to a qualitatively new type of economic growth.

Economic integration.

Economic integration implies close interaction and interweaving of national economies, resulting in a single reproduction process, i.e. the national economies participating in it create a single multinational economic complex.

To date, the most striking example of regional economic integration is the European Union, which includes 27 countries (the eurozone operates within its framework, which includes 17 countries). The signing of the Treaty of Rome in 1957 in Rome is considered the official beginning of the creation of the European Union. It was signed by France, Italy and the Benelux countries (Belgium, the Netherlands, Luxembourg). Each of these 6 countries have been closely connected with each other for a long time, complementing each other.

Reasons for the collapse of the market economy. The planned economic system is characterized primarily by the monopoly role of the state in all economic issues. The state is the owner of all economic resources. Distributes them, determines the range and volume of products. Sets prices and wages for all participants in production. All economic entities in a planned economy are strictly subject to instructions from the center. Such a system, like everything else, has its pros and cons. The "+" planned economy includes:

1. The ability to concentrate the necessary resources in the shortest possible time for the implementation of major projects. Example: The task arose to create nuclear weapons - money is allocated and then everything is solved, and so on with all the most difficult tasks.

2. The ability to solve the most complex social problems (the creation of free healthcare, the absence of unemployment)

Disadvantages of a planned economy:

1. Lack of an effective system of motivation for the majority of participants in the economic process. (equal distribution)

2. Lack of competition

3. Inefficient use of available resources

The main achievements of the planned economy in the Soviet Union:

1. Created one of the most powerful economic systems in the world, not inferior to the United States

2. Major social issues have been resolved

3. Outstanding results have been achieved in the development of fundamental science and space exploration.

As the planned economy developed and reached a new level, negative trends began to appear in the 1970s. In particular, the transition from intensive to intensive course of development. As a result, the Soviet economy in the 1970s began to enter a period of stagnation. The country's leadership emphasized the need for a transition to a new quality of economic growth, however, in practice this is not observed. In the 70s Soviet Union begins to experience a shortage of labor to continue extensive growth, since its main source (the rural population) has been practically exhausted. In addition, in the 70s, the Soviet Union faced unfavorable trends in the world oil market (Oil jumped in price by 4 times, we received income, and the United States put pressure on Saudi Arabia). In the 1980s, the Soviet economy experienced the negative impact of the following factors:

1. Sending troops to Afghanistan, which required huge budgetary expenditures

2. Elimination of the consequences of the Chernobol accident

3. Gorbachev's ill-conceived anti-alcohol campaign, which led to a massive reduction in budget revenues

4. Deployment of the SDI (Star Wars) program and the need for Reagan's response to it.

Under these conditions, the question more and more often arises in Soviet society: Why can't our country, which has achieved universally recognized outstanding success in fundamental science in creating an education and healthcare system, provide the same high level life for its citizens, which has already been achieved in Western European countries. And gradually society comes to the conclusion that it is necessary to change the economic system

"Failures" of the market are cases when the market fails to ensure the efficient use of resources. Usually, four types of inefficient situations are distinguished, indicating "failures" of the market:

a monopoly

imperfect (asymmetric) information;

External effects

production of public goods.

1. The presence of monopolies,

first of all, natural monopolies, as well as oligopolies in certain sectors of the economy, leading to a lack of competition among producers and damaging public welfare and consumers.

This necessitates:

State intervention in the form of the creation of state and municipal enterprises in industries with a natural monopoly and oligopoly,

State regulation and control of prices, production volume and quality of relevant economic benefits.

Because monopoly leads to suboptimal use of resources, government intervention can lead to significant improvements. In many cases, this is achieved through legal regulation alone. They facilitate the free entry of competitors into the market or even provide for the separation of monopoly firms. In such cases, the role of the public sector is reduced to the activities of legislative and law enforcement agencies.

The situation is more complicated in a situation of natural monopoly. An example is city water supply. Bringing the communications of several competing water companies to houses and apartments would mean increasing costs to an incomparably greater extent than the beneficial effect. Dividing a water company into a number of independent divisions usually doesn't make sense either. It will not provide competition, since each of the divisions will be a monopolist in one of the districts of the city. At the same time, the costs of operating the water pipeline, in particular the management, are likely to increase.

2. Another type of market failure is information asymmetry among producers (sellers) and consumers (buyers) of economic goods.

3. External and internal effects

3.1. externalities, or externalities - costs (negative externalities) or benefits (positive externalities) attributable to persons not participating in a particular market transaction.

If someone exploits limited resources without compensating for their full cost, the costs are borne by the rest of the participants in economic life. In this case, there is a negative externality.

For example, when an enterprise uses river water for free, polluting it, and those who live downstream are forced to invest in the construction of treatment facilities.

However, positive externalities are not uncommon. If, for example, a farmer built a road connecting his farm to a highway at his own expense, and residents of a neighboring village travel free of charge along this road, a positive externality arises.

Problems related to externalities can be solved on the basis of an adequate establishment of the rights and responsibilities of the Participants in economic activity. In practice, this is usually achieved through the legislative and regulatory activities of the state. However, in many cases it is more expedient to spend state resources not on creating cumbersome control mechanisms, but on the direct performance of functions that generate positive externalities, or on the formation of tax regulators for activities accompanied by negative externalities.

At the same time, the choice of the optimal form of intervention is determined by the specifics of a particular situation and practical expediency. In the public sector, as well as in a private enterprise, it is necessary to carefully compare different options for solving a problem, striving to achieve the desired result at the lowest cost.

In the case of negative externalities, such as environmental pollution, the state introduces appropriate environmental taxes that encourage manufacturers to implement treatment facilities and environmentally clean technologies. In the presence of positive external effects (in education, culture, healthcare), the state allocates subsidies to producers of relevant economic goods (services) to expand their production and increase accessibility for consumers.

3.2. internal effects, or internals, which are costs or benefits received by one of the parties to a market transaction due to the vagueness of the wording of contracts, which can bring undeserved benefits to one of the parties to the transaction, and cause economic damage to the other party. This type of market failure also requires state intervention to balance the interests of the parties in the conclusion and execution of contracts, which is the basis of contract law.

4. Public goods are a set of goods and services that are provided to the population free of charge, at the expense of state financial resources.

The production and distribution of public goods is one of the main functions of the state, its primary tasks. Here, the orientation of the state to reflect and realize the interests of the entire population of the country is manifested.

The form in which the state today assumes responsibility for public goods took shape only in the 20th century. Today, the normal functioning of the national economy cannot be imagined without such generally accepted benefits as a free healthcare system, education, external and internal security of the state, social security and insurance. The work of civil defense services and the elimination of emergency situations are also public goods. The significance of public goods lies in the fact that they are needed not by a part, but by the entire population.

Regarding the mechanism of production and distribution of public goods, the laws of the national economy are powerless - they are not able to work effectively in this area of ​​the market. Therefore, objectively, this task is assumed by the state - the state apparatus.

Public goods are a type of economic goods that have properties opposite to private economic goods (market goods and services). Exist:

Net public goods that the market does not produce at all (national defense),

Mixed public goods (club, socially significant and quasi-public goods) that the market can produce, but in insufficient quantities. The source of their production can be civil society (club goods (telephone, pay TV, pool)), municipality or the state on a certain scale (socially significant goods, quasi-public goods in natural monopoly industries).