THE KEY THEORETICAL AND PRACTICAL ASPECTS OF THE STATE FAILURES IN THE CONTEMPORARY ECONOMY

Dragan Petrovic

Faculty of Economics, University of Nis, Nis, Serbia

The subject of this paper is to analyze the evolution of approaches to the problem of the “state failure”. This phenomenon arose from the concept of “market failures”, which in economic theory can be seen in the context of searching for new strategies of the political and economic mechanisms of resource allocation. In this regard, special attention will be focused on the identification of the components of the institutional impact on the efficiency of economic processes, which first involves a general review of the role of the state in the economy. A multidisciplinary approach to the study of such a complex issue requires, among other things, that all information problems in the analysis of the economic functions of the public sector be taken into consideration, that the possibilities of financing public policy measures be appreciated, that the role and influence of the political process and the rent-oriented behavior of public officials be adequately evaluated, and ultimately that an attempt to identify the negative external effects caused by the absence, but also by the presence, of the state coordination in the economy be made.

Keywords: state failures, the theory of public choice, the mechanism of collective decision making,
informational problems

JEL Classification: D72, D73, D74, H41