Lessons 12 · 1 lessons · E. Sariqov, B. Xaydarov. Fundamentals of Economic Knowledge (Economics), Grade 9, 4th edition. “Huquq va Jamiyat” publishing house, Tashkent, 2019
12
Economic functions of the state
Textbook: pp. 56–59
GoalKnow the economic goals and functions of the state, the issues the market cannot solve by itself, and the concepts of public goods and external effects.
New words
public goods · ijtimoiy ne’matlarexternal effect · qo‘shimcha tashqi ta’sirmonopoly · monopoliyaredistribution · qayta taqsimlash
Explanation
The state aims to create conditions in which citizens can engage in economic activity; its economic goals are economic freedom, efficiency, equality, security and growth. But the market cannot solve every issue by itself: a monopoly destroys competition, external effects such as pollution do not show up in the market price, and the market does not supply enough of needs such as defence, lit streets and education. So the state performs six functions: maintaining the legal and social basis; supporting competition and fighting monopoly; providing public goods; regulating external effects; redistributing income and wealth; and stabilising the economy. Public goods are consumed jointly by many people and no one can be excluded from using them even if they have not paid, so a private firm cannot sell them for profit. For a negative external effect the state sets fines and taxes, and for a positive one (for example in education) it gives benefits. There are different views on the state’s place in the economy: some prefer to reduce it, others to strengthen it.
Worked examples
Street lamps shine for the whole neighbourhood: everyone uses them together and one cannot allow only those who have paid to walk on the lit road, so the state (the local budget) provides them. Ice cream, in contrast, is consumed by whoever pays — a private good.
A factory’s smoke harms people around it (a negative external effect), so the state fines it for ecological damage. A school benefits not only the pupil but all of society (a positive external effect), so the state finances education from the budget and pays stipends.
Class activity
“State or market?” Cards: a bakery, national defence, a barbershop, the city fire service, a cinema, protecting a riverbank from floods. Pairs sort them into “market provides” and “state provides” columns and must give the reason.