Market failure is a consequence of the imperfection of market instruments and institutions.At the same time there is a failure to satisfactorily resolve these components of socio-economic issues that are important to society.If for any reason the essential elements of the market mechanism at work in standalone mode do not provide the social efficiency, in this case there is a necessity of state intervention in the economy.On trade relations fiasco say that if they do not contribute to the rational allocation and use of resources.
Market failure is an obstacle that does not allow the economy to achieve social efficiency.
Usually, there are four inefficient situation.They point to the failures of the market.These include imperfect (asymmetric) information monopoly, public goods, externalities.
It should be noted that the market is not able to lead to a public performance in the case of some activities of consumers or producers affects the prosperous state of others.When this influence is positive, then there are external benefits.If the impact is negative, the external costs generated.They, in turn, are connected with the production of any good.Social costs include private costs and externalities of production.
Usually when there is a market failure in the economic relations of entering the state.Addressing is carried out by various means.Thus, the state carries out anti-monopoly policy, limits the production of goods with negative externalities.This is done to stimulate the production and consumption of economic goods, have a positive effect.
These areas of state activity is to some extent a bottom border, in accordance with which the intervention of government in the market.Today, however, the state has broader economic functions and is able to more effectively eliminate market failures.Among the main functions of government are the following: the introduction of unemployment benefits, infrastructure development, the establishment of various types of allowances and pensions for low-income citizens and others.It should be noted that a small number of these activities has only properties of public goods.Most of them are not designed for collective and individual consumption.
States to pursue anti-trust and anti-inflation policy, seeks mainly to reduce unemployment.Authorities in recent years more and more actively involved in the management of structural change, it encourages and supports scientific and technical progress, trying to maintain a high level of development and the national economy.Together with the foreign trade and regional regulation of these activities indicate the degree of importance of the role of the state in the economy.During the 20th century, the apparatus of power sought to effectively solve the two problems are interconnected.First of all, the government sought to ensure stable operation of the market.Secondly, the apparatus of power, if not trying to decide what to soften the acute social and economic problems.All these actions were aimed at preventing market failures.
However, as noted by many analysts, the rapid growth of government regulation can not go on continuously.Thus, in a market economy function of the apparatus of power have certain limitations.