State intervention in the economy is caused byobjective aspiration of government bodies to soften the inefficient and unfair functioning of a market economy. The reasons for regulating the economy are:
1) population growth;
2) addressing the problems of infrastructure and the environment;
3) addressing the problems of unemployment, health, education, poverty, etc.
The economy of the public sector is expressed innational income, which is in the hands of the government. In this case, the control takes place in a single center. This type of economy, for the most part, is characteristic of the socialist countries.
The public sector of the economy is a set offunctions of the state in direct and indirect regulation. The first includes the direct involvement of the government in the social sphere and economic activity. Indirect regulation is management without investment, when the state does without expenses on its part.
The economy of the public sector is aimed at the following tasks:
1) increasing its effectiveness;
2) ensuring equity in the distribution of income;
3) support for macroeconomic stability.
This can be done through policiesState expenditures and revenues or through a political fiscal mechanism. Meanwhile, the economy of the public sector shows a tendency to increase government regulation in the market. However, the market economy imposes certain rules and restrictions on the functioning of the government.
The market mechanism prohibits such a levelinterference of the state, in which this device can be destroyed. Indirect methods of regulation are effective, such as subsidies, taxes, and especially those that are organically built into the market system.
The public sector of the economy is aa system in which the state acts as an agent that receives income in the form of taxes and spends it on purchases. Traditionally, in developed as well as developing countries, public goods produced are the sphere of activity of the public administration sector. A part of the income from the private sphere is released in a tax way. And the state, in turn, directs these funds to the production of public values.
The economy of the public sector in the direct and indirect regulation of the state fulfills governmental functions:
1) use of the executive and legislative power to ensure effective private activity;
2) the government's implementation of a number of antitrust or anti-monopoly laws in order to strengthen competition for effective regulation of business;
3) reduction of income inequality in the society;
4) the creation of infrastructure or public goods to meet collective needs (national defense, information, health, etc.).
As a result, the government is included in the cycle of market activity and becomes an organic part of it.
