State failure

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Under state failure (also policy failures ) are understood in the economics of government intervention in the market caused, based on the neoclassical theory suboptimal results. These can manifest themselves, for example, as inefficient goods allocation , instability or inefficiency in production. In the New Political Economy , state failure is understood as the counterpart to market failure .

Problems

State failure leads in most cases to welfare losses , for example through:

  • One-size- fits-all solutions: treating individuals as if they had identical preferences . The resulting welfare losses are greater, the more differentiated the needs are.
  • Package solutions: Citizens vote for a party with an overall program (package) to which they rarely agree on all points.
  • Coalition solutions: After an election, measures based on the formation of coalitions may be implemented differently than previously announced by the individual parties.

Another problem may be the influence of interest groups on state decision-makers ( lobbying ).

causes

State failure is attributed to the fact that constitutionally determined rules of the decision-making process create inefficient conditions and that the exercise of power within these rules is inefficient. The delegation of tasks within the state apparatus leads to problems like this

  • Principal-agent problem : The commissioned bodies do not necessarily act in the interests of the client, but pursue their own interests.
  • Bureaucracies : The aim of bureaucracies is usually not to minimize costs, but to maximize the available budget. This tendency can be exacerbated by the monopoly of an authority and the lack of controllability.
  • Lack of information: Just like consumers, the state has limited information. This lack of information on the part of the state ensures that economic policy measures are rarely correctly dosed and thus do not necessarily lead to optimum welfare.

State failure and Keynesianism

The concept of state failure must be understood as a response to the Keynesian school , which assigned the state to the function of controlling the economic process ( economic policy ). Critics of a Keynesian economic policy refer, analogous to market failure, to situations in which state action systematically leads to inefficiency, especially in the provision of public goods . They give the following reasons:

  • As a self-utility-maximizing individuals politicians are making oriented primarily why they the common good only served if they would promise it an advantage
  • Short-term perspective: For politicians, it is primarily the next election that is decisive. Therefore, unpopular decisions would be delayed or postponed and long-term consequences would be insufficiently considered.
  • The orientation towards their own advantage makes economic policy decision-makers influenceable by interest groups such as business associations and trade unions . This behavior is difficult to control for voters. (See also lobbying, principal-agent theory , political rent ( rent seeking ))
  • The complexity of the market leads to uncertainty in the planning, execution and the short and long-term effects of economic policy measures.
  • Dictation of the bureaucracy : If the bureaucracy continues to expand into new fields of action and as a result no more cost-benefit analysis takes place, it prevents the efficient use of production factors .

literature

  • Daron Acemoglu , James A. Robinson: Why Nations Fail. The Origins of Power, Prosperity, and Poverty. Crown Publishing, New York, NY 2012, ISBN 978-0-307-71921-8 In German: Why Nations Fail : The Origins of Power, Prosperity and Poverty , translated by Bernd Rullkötter, S. Fischer, Frankfurt am Main 2013, ISBN 978-3-10-000546-5 .
  • Olivier Blanchard , Gerhard Illing: Macroeconomics. 3rd, updated edition. Pearson Studium, Munich et al. 2004, ISBN 3-8273-7051-5 , chapter 24.
  • Arne Heise : Introduction to Economic Policy. Basics, institutions, paradigms (= UTB. Political Science, Economics 8297). Wilhelm Fink, Munich et al. 2005, ISBN 3-8252-8297-X , chapter 8.
  • Wilhelm von Humboldt : Ideas for an attempt to determine the limits of the effectiveness of the state. (1792) (= Reclams Universal-Bibliothek. 1991). Emphasis. Reclam, Stuttgart 2010, ISBN 978-3-15-001991-7 , p. 30ff .: Error of the state.
  • Christoph Kaserer : The German banking crisis of 1931. Market failure or state failure? In: Bank historical archive. Journal of banking history. Vol. 26, No. 1, 2000, ISSN  0341-6208 , pp. 3-26.
  • Berthold U. Wigger : Fundamentals of public finance. 2nd, improved and enlarged edition. Springer, Berlin et al. 2006, ISBN 3-540-28169-X .