Economic policy and its failure

The development of neoclassical economics has brought a marked change in the perception of the state's role as an effective coordinating power. The realities of economic life reveal the need for the specification of the conditions required to ensure market efficiency and determine the factors that cause deviation from its optimum state. Under these circumstances, economic policy is designated to address the adverse effects of the market functioning. In this paper we analyze the scientific views that characterize the problems of decision-making in economic policy and that demonstrate the fact that the state is not always a well-intentioned, neutral and competent regulator due to some reasons. The first aspect considered is related to the statement concerning the ephemeral nature of collective decision-making because there are no conditions for the aggregation of individuals' preferences. The electoral process in a democratic society, based on both the majority principle and the dichotomy of actors' motives, makes it difficult to project the public interest onto economic policy. The second line of considerations is associated with the organization and representation of interest groups in economic policy. Collective actions of such groups occur due to deriving potential benefits through the political process and affect the economic development of the state. Rent-seeking behavior of political actors subjects society to wasteful cost. Import quotas, tariffs, duties, licensing, certification, etc. act as sources of maximizing political rent income. The desire to impose burdensome constraints that hinder business or worsen the position of the regulated industry encourages politicians to form interest groups. This leads to an increase in economic and social costs. The consequences of the rent-seeking behavior pose a potential threat to short-term macroeconomic stability and long-term economic growth, thus undermining the legitimacy of the government and the efficiency of the private sector. It is carried out through the legislative process, both in terms of the creation of the "essential" regulations for interest groups, and the use of existing rules and procedures for personal advantage. It is obvious that these scientific approaches are not exhaustive and envisage further investigation of such matters as special aspects of delegation of regulatory authority and bureaucracy, which establish unequal relationship between different actors and pose informational challenges Deliberate alteration of incentives and restrictions of activities and the rules for "the game", as well as the division of responsibilities between actors monitoring and verifying their implementation are indispensable conditions for addressing tasks requiring specific expertise within the scope specified by goals and the logic of the state economic policy.

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