Among the most relevant aspects of economics as a science is its capacity to foster instruments for States and governments to assess the economic life of societies. As we know, although the market is seen with good eyes to regulate the movements of the economy alone, it is up to the government, or better, to the State, to seek efficiency and equity, two fundamental concepts for the promotion of growth and development economic.
In general terms, efficiency would be linked to the issue of optimizing production, use and allocation of resources (whether they are raw materials or capital) and the development of productive capacity in terms of development technological. Equity, on the other hand, would refer to the redistribution of income, the creation of conditions for a good quality of life, seeking conditions for all individuals to have access to the basic conditions necessary for well-being Social. However, seeking efficiency and equity in a context in which the capitalist system predominates is not an easy task, since the bases of capitalism are based on the accumulation of wealth, on private property and, therefore, on the inequality between the people.
In the eighteenth century, in the critique of mercantilism and the monopoly of commerce that Adam Smith made through his work Wealth of Nations (1776), the idea was defended. the invisible hand of the market, which would control the economy, balancing supply and demand, without the presence of state control as in the times of maritime expansion European. This would be the basis of the thinking of the so-called classical theory of economics. But what history has shown us, not only in the very distant past, but also in the early years of 21st century, was that the market without interventions can lead society to economic chaos, situations of crisis. Hence the need for State action, to some extent, when the “invisible hand” of the market is not sufficiently capable of regulating the economy stabilizing it, but increasing inequalities, making what has been defined here as efficiency and equity more and more distant from reality.
Therefore, in the search for economic balance and stability, the State has to face the failures of market and knowing how to deal with externalities and possible concentrations of economic power by some agents. Economists use the term market failure to refer to a situation where the market alone cannot allocate (invest, direct, direct) resources efficiently. As Nicholas points out Gregory Mankiw (2004), thehe market failures can be caused by at least two factors: externalities and concentration of economic power. Externality is the impact of someone's actions on the well-being of those around them. There are “negative” externalities, such as pollution, and other “positive” ones, such as a scientific discovery by a researcher. Regarding the denials, the government can fight to reduce the harm to society (one of the examples more current would be environmental issues and some measures taken in relation to development sustainable). Regarding the positive ones, the State can encourage them so that their results reach more and more individuals (an example of this is in the encouragement of biodiesel, the exploration of pre-salt, the creation of generic drugs, among others).
With regard to the concentration of economic power, it must be said that the latter is about the capacity that a individual or a group has to unduly influence market prices, contributing to the creation of monopolies. Thus, the State will be able to regulate the price so that there is no abuse, and, in this way, there will be greater economic efficiency (a a good example are the electric energy concessionaires, which each one in a certain region exerts a kind of monopoly).
So what should be clear is that the “invisible hand” is unable to ensure fairness in economic prosperity. Hence the importance of public policies to try to reduce differences. When we listen to the criticisms and analyzes that specialists around the world make regarding the crisis that is plaguing Europe, much of this is attributed to the absence of the strong hand of the state, given the predominance of liberal ideology in the economy. worldwide.
Paulo Silvino Ribeiro
Brazil School Collaborator
Bachelor in Social Sciences from UNICAMP - State University of Campinas
Master in Sociology from UNESP - São Paulo State University "Júlio de Mesquita Filho"
Doctoral Student in Sociology at UNICAMP - State University of Campinas
Source: Brazil School - https://brasilescola.uol.com.br/sociologia/o-papel-estado-como-agente-economico-contra-mao-invisivel-mercado.htm