State economic regulation means:

- a set of measures and actions applied by the state to correct and establish the main economic processes;

- a system of measures to influence the state on the activities of economic entities and market conditions in order to ensure normal conditions for the effective functioning of the market mechanism, solve socio-economic problems of the development of the national economy and society as a whole.

Reasons for government intervention in the economy:

- creating conditions for the effective functioning of the market mechanism;

- elimination of negative consequences of market processes;

- protection of national interests in the global market;

- solving problems that the market mechanism is unable to solve or solves them inefficiently.

The objects of state economic regulation include spheres, industries, regions, phenomena, situations and conditions of socio-economic life in which problems arise or may arise and which cannot be solved arbitrarily or are solved inefficiently. These include economic cycles; the structure of the economy, conditions of accumulation; scientific and technological progress; innovation processes; money circulation and inflation; prices; balance of payments; the block of social problems (employment, income, social protection, training and retraining of personnel, etc.); competition conditions, the environment; regions.

Functions of state economic regulation:

- determination of goals, priorities and main directions of the national economy development;

- formation of regulators that can effectively influence the activities and interests of economic entities and stimulate economic processes in the right direction for society;

- the state, with the help of laws, legislative acts and regulations, establishes certain rules of activity for economic entities, determines the legal field;

- allocation of resources in the economy in order to develop progressive processes, minimize and eliminate negative external effects, and ensure normal socio-economic conditions of society;

- state regulation of socio-economic relations (between employees and employers), redistribution of income, provision of social protection and social guarantees, environmental protection and production of public goods and services, etc.;

- state control over the implementation of laws and regulations, environmental and social standards, etc.

Objectives of economic regulation: economic development; full employment; stable prices; economic freedom; fair distribution of income; balanced trade balance; economic efficiency.

Methods of state economic regulation:

- legal regulation – the establishment by the state of legislative norms and rules (rules of the «game») for producers and consumers, which determine the forms and rights of ownership, conditions for concluding contracts, mutual obligations in the field of labor relations between trade unions and employers, etc.;

- administrative regulation – the establishment of measures for regulation, licensing, quotas, etc., with the help of which control over prices, revenues, the discount rate, and the exchange rate is carried out;

- economic regulation – influence on the nature of market relations through the influence on aggregate demand, aggregate supply, the degree of capital concentration, the structure of the economy and social conditions, the use of economic growth factors.

Methods of state regulation of the economy – the influence of the state on entrepreneurship, market infrastructure, and the non-profit sector of the economy in order to create conditions for their effective functioning in accordance with the directions of state economic policy.

Methods of direct influence directly affect the functioning of market entities. These include:

- determination of strategic economic development goals and their reflection in plans and target programs;

- government orders and contracts for the supply of certain types of products, works and services;

- state support for programs, orders and contracts;

- regulatory requirements for the quality and certification of technology and products;

- legal and administrative restrictions and prohibitions on the production of certain types of products;

- licensing of export and import operations of goods.

Tools of direct state regulation: regulations, macroeconomic plans, target programs, government orders, centrally set prices, regulations, licenses, quotas, budget expenditures, limits, etc.

Methods of indirect regulation involve the influence of the state on the economic interests of commodity producers, the creation of such a framework for their activities in which it can be profitable or unprofitable, i.e. indirect regulation is the influence on economic interests. These include:

- taxation, the level of taxation and the system of tax benefits;

- price regulation, loan interest rates and credit benefits;

- customs regulation of export and import, exchange rates and currency exchange conditions.

Indirect regulation tools are the tools of fiscal, fiscal, monetary, investment, depreciation, innovation, and other policies, as well as methods of moral persuasion.

Thus, direct methods limit the freedom of economic choice, and in some cases completely exclude it. Indirect methods leave complete freedom of choice for economic entities, without limiting it in any way. This is their significant advantage. The fact that the state performs economic functions mainly on the basis of indirect methods shows that modern developed countries have a market economy. In this respect, they are fundamentally different from countries with centrally managed economies, where administrative methods of influence prevail.

Legal methods of regulation – the activity of the state to establish binding legal norms (rules) of conduct. The basis of legal regulation is the development and legal consolidation of norms (rules) of behavior of subjects of economic relations.

Administrative methods of regulation are instruments of direct state influence on the activities of market entities. They are divided into methods of prohibition, permission, and coercion. And administrative method simply the direct influence of state bodies or officials on the actions of performers through the establishment of duties, norms of behavior, an alternative choice of ways to solve problems; mandatory execution of orders; responsibility of business entities for evading orders. In some areas of business, administrative methods are quite effective, but their application is necessary. For example, control over monopolistic markets; ensuring the ecological safety of society and preserving non-reproducible natural resources; determining and maintaining the minimum necessary parameters of people's lives (minimum wages, social benefits and allowances). It is worth noting that administrative methods are not bad in themselves, but only when they are not economically justified.

Economic methods of regulation are economic regulation carried out by the instruments of fiscal, budgetary, monetary, depreciation and other areas of state economic policy.

Propaganda (moral and ethical) methods of regulation – appeal by the state to the dignity, honor and conscience of a person (entrepreneur, employee, civil servant, etc.). They include educational measures, explanations of the goals and content of regulation, methods of moral encouragement, etc. The essence of these methods is to form and support the development of a positive attitude towards the state. people have certain beliefs, spiritual values, moral positions and attitudes regarding the activities of the state.

Thus, the key purpose of the state system of economic regulation is to provide favorable conditions for continuous economic development and further economic growth in the country, achieve social stability, and increase the level of global competitiveness of the state.

 

Control questions

 

1. Define the state's economic policy and describe its goals.
2. Reveal the functions of state economic policy in a market economy.
3. Describe the main theoretical approaches to the formation of economic policy (Keynesianism, monetarism, etc.).
4. Describe the system of public authorities involved in shaping economic policy.
5. Provide a description of the main directions of the state economic policy.
6. Explain the essence of fiscal policy and the tools it uses.
7. Describe monetary policy and its main objectives.
8. Explain the differences between direct and indirect instruments of state economic policy.
9. Reveal the content of the state economic regulation system.
10. Discover the importance of strategic planning in regulating the economy.

 

Questions for discussion

 

1. To what extent does the institutional structure of state economic policy formation (government, parliament, National Bank, expert communities, lobbying groups) contribute or hinder the achievement of strategic economic goals?
2. How does the transformation of the global economic order (globalization, digitalization, deglobalization, sanctions) affect the formation and implementation of national economic policies?
3. What challenges and contradictions arise when trying to synchronize economic policy with other types of state policy – social, environmental, and foreign policy?

 

Case studies

 

Case 1. Theoretical foundations of state economic policy.

Country N has been experiencing economic stagnation over the past 5 years: GDP growth is close to zero, investment is declining, unemployment is increasing, and consumer activity remains low. Despite the stable macroeconomic situation, there are no tangible positive developments. Public discontent is growing. The economic block of the government discusses which model of state economic policy to use – Keynesian, neoliberal or institutionalist.

Tasks:

1) Conduct a comparative analysis of theoretical approaches to economic policy:

- Keynesianism;

- neoliberalism;

- institutionalism.

2) Determine which model is most applicable in the context of country Z, given the current economic situation.

3) Develop a list of possible economic measures within the framework of the selected model.

4) Justify the long-term and short-term consequences of the chosen approach.

 

 

Case 2. Institutional structure of economic policy formation.

In country M, economic policy is formed by several departments, including: the Ministry of Economy, the Ministry of Finance, the Ministry of Industry, as well as individual agencies. However, there is no single coordination mechanism. Some economic development programs are duplicated, contradict each other, or are implemented in fragments. The result is inefficient use of the budget, low investment attractiveness and deterioration of international ratings.

Tasks:

- analyze the existing institutional architecture (you can model it or use analogies with real countries);

- identify key issues: fragmentation, lack of horizontal interaction, duplication of functions, etc.

- develop a proposal to create a single coordination center or strengthen the role of an existing one (for example, the Government Council on Economics);

- formulate recommendations for involving the scientific community, civil society and business in the policy-making process.

 

Case 3. Main directions of state economic policy.

Country N is a resource-dependent economy, whose exports consist of more than 60% of raw materials (oil, gas, metals). Price volatility in global markets poses a threat to economic stability. Against the backdrop of falling oil prices, the government decides to launch a program of economic diversification: the development of the processing industry, the digital economy and the agricultural sector. Priorities, tools, and implementation milestones need to be identified.

Tasks:

- conduct a SWOT analysis of the current economic structure of the country;

- define key areas of AI diversification and goals for the next 5-10 years;

- develop priority areas of state policy: industrial, investment, innovation, regional;

- put forward mechanisms for stimulating industries (subsidies, clusters, preferential taxation, R & D);

- appreciate the socio-economic effects of the transition from the raw material model.