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18th June, 2007 Economics and Management Department at University in Białystok1 Redefinition of economic functions of contemporary state Ph.D. Renata Przygodzka.

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Presentation on theme: "18th June, 2007 Economics and Management Department at University in Białystok1 Redefinition of economic functions of contemporary state Ph.D. Renata Przygodzka."— Presentation transcript:

1 18th June, 2007 Economics and Management Department at University in Białystok1 Redefinition of economic functions of contemporary state Ph.D. Renata Przygodzka

2 18th June, 2007 Economics and Management Department at University in Białystok2 Aim of the lecture: An attempt to indicate state economy functions at the beginning of 21st century, with reference to traditional views of Classical school as well as Keynes’s school

3 18th June, 2007 Economics and Management Department at University in Białystok3 The structure of the lecture: State economic functions according to Classical school State economic functions according to Classical school State economic functions according to Keynes’s school State economic functions according to Keynes’s school Conceptions of economic functions of contemporary state Conceptions of economic functions of contemporary state Conclusions Conclusions

4 18th June, 2007 Economics and Management Department at University in Białystok4 State economic functions according to classical school The view, that conduct aiming at profit magnification and utility in conditions of excellent rivalry will convert activity of many subjects into social optimum through the medium of market strenghts, determined the role of the state in economy for a long time.

5 18th June, 2007 Economics and Management Department at University in Białystok5 State functions as a ‘guardian’: - External defence, - Being on guard of private property and justice administration, - Maintenance of some public appliances.

6 18th June, 2007 Economics and Management Department at University in Białystok6 The most important views and theories of Classical School - Classical theory - sensu stricte (A. Smith, D. Ricardo, J.B. Say); - „Social liberalism” (J.S. Mill); - German school (F. List, A. Wagner); - Ordoliberalism (F. Böhm, H. Grossman- Dörth, W. Eucken, W. Röpke, A. Rüstow, L. Erhard, A. Müller-Armack);

7 18th June, 2007 Economics and Management Department at University in Białystok7 The most important views and theories of Classical School– sequel - The Conception of Welfare State(A.C. Pigou, G. Myrdal); - Monetarism (M. Friedman); - Economics of supply in economy aspect (I. Kristol, Laffer); - School of Rational Expectations (R. Lucas); - Austrian school (L. von Mises, F.A. von Hayek); - Public Selection Theory (J. Buchanan, G. Tullock)

8 18th June, 2007 Economics and Management Department at University in Białystok8 State functions according to Classicists: taking interventional actions only in distinctly stated cases of inefficiency of the market, in the situation in which private sector actions are not in accordance with public policy, whereas this intervention should depend on the usage of instruments with parametrical type (ie. taxes, subsidies) and favour creation of private markets; taking interventional actions only in distinctly stated cases of inefficiency of the market, in the situation in which private sector actions are not in accordance with public policy, whereas this intervention should depend on the usage of instruments with parametrical type (ie. taxes, subsidies) and favour creation of private markets;

9 18th June, 2007 Economics and Management Department at University in Białystok9 State functions according to Classicists: providing „fine public goods”, ie. law and public order, national defence, public infrastructure as well as defining and executting of property rights; providing „fine public goods”, ie. law and public order, national defence, public infrastructure as well as defining and executting of property rights; provides stable and predictable makroeconomical conditions by proper fiscal politics, monetary and curency coordination; provides stable and predictable makroeconomical conditions by proper fiscal politics, monetary and curency coordination; Liberalisation of an international trade. Liberalisation of an international trade.

10 18th June, 2007 Economics and Management Department at University in Białystok10 State economic functions according to Keynes’s school Main Keynes’s school trends: J. M. Keynes Theory - sensu stricte; J. M. Keynes Theory - sensu stricte; neokeynesism (P.A. Samuelson, J. Tobin, B.C. Greenwald, J.E. Stiglitz); neokeynesism (P.A. Samuelson, J. Tobin, B.C. Greenwald, J.E. Stiglitz); postkeynesism (R. Harrod, J. Robinson, M.Kalecki, N. Kaldor, P. Straffy). postkeynesism (R. Harrod, J. Robinson, M.Kalecki, N. Kaldor, P. Straffy).

11 18th June, 2007 Economics and Management Department at University in Białystok11 In general according to Keynesists economical state functions can be brought down to: - allocational function, - redistributional function, - stabilizatory function.

12 18th June, 2007 Economics and Management Department at University in Białystok12 Realization of every of them result from the necessity of counteraction to inefficiency of a trade mechanism, as well as on the mikroeconomical level (public goods, external effects, uncompetitive markets, transactional costs and asymmetrical information) also makroeconomical (unemployment, inflation, coniunctural cycle, uneven economic growth). These inefficiencies lead to inefective allocation, and through this to unstability or significant inequality.

13 18th June, 2007 Economics and Management Department at University in Białystok13 Conceptions of economic functions of contemporary state The whole of political, economical and social changes of the last decade of 20th century has became an inspiration to search for an answer to new questions mainly connected with directions and range of economical role of the state. At the beginning of the 90 - ies a conception called „Washington’s consensus” appeared, being an attempt of combining guidelines of both schools aimed at economic practice.

14 18th June, 2007 Economics and Management Department at University in Białystok14 Aims of the consensus: To provide „form of building dynamical private sector and stimulation of economic growth”

15 18th June, 2007 Economics and Management Department at University in Białystok15 Consensus assumptions (state functions): - maintaining budget deficiency on the lowest level (not to let the rise in inflation), - Decreasing taxes, - Drifting public expences from traditional fields, that are exposed to political influences to neglected areas with high economic rate of return and relatively profitable redistributional effects,

16 18th June, 2007 Economics and Management Department at University in Białystok16 - Conducting the liberalization of a trade policy, - Privatization of state enterprises, - Being on guard of private property and free competition

17 18th June, 2007 Economics and Management Department at University in Białystok17 „Postwashington’s consensus” Aims: - economical growth stimulating, as in Washington’s consensus, - improvement of the standard of living, health care and education

18 18th June, 2007 Economics and Management Department at University in Białystok18 - Searching for the ways of permanent economical growth taking into consideration protecting natural sources and maintaining good environmental state, - Searching for the ways of justice developement, which effects would be available for society, - Searching for the ways of democratical developement, in which society could actively participate.

19 18th June, 2007 Economics and Management Department at University in Białystok19 State economic functions according to the World Bank: securing makroeconomic and mikroeconomic environment, which creates correct stimuli for effective business; securing makroeconomic and mikroeconomic environment, which creates correct stimuli for effective business;

20 18th June, 2007 Economics and Management Department at University in Białystok20 providing institutional infrastructure (private property, peace, law and order, rules) that favours the effectiveness of long-lasting investitions; providing institutional infrastructure (private property, peace, law and order, rules) that favours the effectiveness of long-lasting investitions; Guarantee of basic education, health care and technical infrastucture, that requires business and protection of natural environment. Guarantee of basic education, health care and technical infrastucture, that requires business and protection of natural environment.

21 18th June, 2007 Economics and Management Department at University in Białystok21 SpecificationCounteraction on effects of inefficiencies of the market Concern about public justice Minimal set of functions Providing „fine public goods”: - National defence, - Public law and order, - Property rights, - Makroeconomical management, - Public healthcare Protection of the poor: - Programmes of struggle with poverty, - Help to natural disaster victims Functions of medial level Reducing the influence of external effets: - Basic educational needs, - environmental protection Monopolies regulation: - Public services regulation, - politics of antimonopoly Protection before faulty information: - insurances (health, for life, retiremental), - Finantial regulations, - Consumer protection National insurance: - Pensions and retired pays are based on redistribution, - family allowances, - Unemployment insurance Functions of active state Coordination of private subjects activities: - activities for market development, - Iniciatives supporting the development of clastres Redistribution: - Stock redistribution Table no 1. Functions of the state Source: study based on The State in the Changing World. World Development Report. Oxford: Oxford University Press, 1997

22 18th June, 2007 Economics and Management Department at University in Białystok22 Contemporary economies are functioning in thoroughly different conditionings. These are: - globalisation, - internationalisation, - integration, - liberalisation, - infomatisation, - technitisation.

23 18th June, 2007 Economics and Management Department at University in Białystok23 In the face of unreliability of the market mechanism and state unreliability at the same time, economic functions of the country ought to constitude certain balance and what is more serve elimination of both inefficiencies.

24 18th June, 2007 Economics and Management Department at University in Białystok24 „Democratical idealism” „Every well-functioning economy requires a balance between state and market. This balance can be different in different countries and can change in time,it will also differ according to sectors and problems.” J. E. Stiglitz. Crazy Ninetees, publishing company PWN, Warsaw 2006, pg. 247

25 18th June, 2007 Economics and Management Department at University in Białystok25 Such a balance would be also the best method to achieve long-lasting growth and effectiveness. It would mean „Reinforcing the role of the country in one field as well as diminishing in others.

26 18th June, 2007 Economics and Management Department at University in Białystok26 Among domains, which requires more state activity Stiglitz has mentioned : - (against dangerous products and monopolistic practises), - Consumer protection(against dangerous products and monopolistic practises), - Investors protection, - Supporting scientific and technological researches, - supporting education, - environmental protection, - Increasing the feeling of citizens’ safety in field of health care, securing retirement pension and unemployment.

27 18th June, 2007 Economics and Management Department at University in Białystok27 Whereas limitting of the state activity ought to concern : - Elimination or restructurisation of surcharges to agriculture, - subvention for great corporations, - eliminating intervention that limit the rivalry, - running a business.

28 18th June, 2007 Economics and Management Department at University in Białystok28 Therefore, a fundamental duty of the state should be aspire to improve the efficiency and effectiveness of actions in these fields in which the market is unreliable, and at the same time by withdrawal from areas in which the efficiency of mechanism has increased.

29 18th June, 2007 Economics and Management Department at University in Białystok29 Conclusions - Traditional views of economists on the role of the state in economy focus attention on two tendencies,ie. Classical and Keynes’s school. First mentioned glorifies the role of the market, while second one is responsible for realization by the state three fundamental functions,ie. allocational, redistributional and stabilizatory functions.

30 18th June, 2007 Economics and Management Department at University in Białystok30 Conclusions – sequel The conception of J. E. Stiglitz is an attempt to combine theories of both Classical and Keyne’s schools, consequently balancing the role of the state and the market in economy. Its idea is complementing and not replacing and constant aspirations to rise the effectiveness in these areas where the activity of the state is more expedient. The conception of J. E. Stiglitz is an attempt to combine theories of both Classical and Keyne’s schools, consequently balancing the role of the state and the market in economy. Its idea is complementing and not replacing and constant aspirations to rise the effectiveness in these areas where the activity of the state is more expedient.

31 18th June, 2007 Economics and Management Department at University in Białystok31 Conclusions – sequel This balance, distinct in dependence upon specific conditionings of particular economies, might constitute the best method in achieving the long-lasting growth and effectiveness, and concern for citizen’s welfare. This balance, distinct in dependence upon specific conditionings of particular economies, might constitute the best method in achieving the long-lasting growth and effectiveness, and concern for citizen’s welfare.

32 18th June, 2007 Economics and Management Department at University in Białystok32 Conclusions – sequel The conception of economical functions of contemporary state of J. E. Stiglitz has great opportunities for becoming a specific axis, around which theoretical and empirical research will be developed, as well as attempts of their implementation in developing countries. The conception of economical functions of contemporary state of J. E. Stiglitz has great opportunities for becoming a specific axis, around which theoretical and empirical research will be developed, as well as attempts of their implementation in developing countries.

33 18th June, 2007 Economics and Management Department at University in Białystok33 Thank You very much for Your attention.


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