Although state regulation in the modern market economy is carried out in a much smaller scale than it used to be in the command-administrative system, the economic role of government is still high enough, especially compared with the system of free competition.

State regulation of economy has become necessary for the implementation of social policy, and general strategy of socialization in the broadest sense. Collective consumption or satisfaction of social needs (healthcare, education, support for the poor, organization of scientific research, habitat protection, etc.) is impossible without the application of public instruments and institutions. State regulation of economy, thus, is determined by the emergence of new economic needs market cannot cope with by its nature (Zhang 169-196).

The facts run that with the development of market economy the economic and social problems emerged and intensified, which cannot be automatically solved basing on private property. There occurred the need for significant investment, marginal or uneconomic in terms of private capital, but needed to continue the reproduction on a national scale, while industry and general business crises, mass unemployment, violation of the monetary circulation, and competitive pressure in global markets required government economic policy.

Further in this paper, we’ll discuss the essence of market economy and possibilities of its state regulations, as well as set the criteria and scale of state intervenience in the economy. The paper shows that state regulation of economy in conditions of market economy is a necessary system of standard measures of legislative, executive and supervisory nature, carried out by competent state institutions and social organizations in order to stabilize and adapt the existing socio-economic system to changing conditions.

The functions of state regulation of economy

Theoretically, the concept of the state economic regulation is broader than the concept of state regulation of economy, since it can be based on the principle of laissez-faire in economic life (“laisser faire-laisser passer” economic liberalism principle). In the contemporary conditions, the non-interference of government in the socio-economic processes is impossible. It has long been debated not about the need for state regulation of the economy, but about its scale, form and intensity. Therefore, the terms “state regulation of economy” and “government economic policy” in our time are identical (“Regulatory Governance” 98-129).

Objective possibility of state regulation appears when a certain level of economic development, concentration of production and capital is achieved. Necessity that turns this possibility into reality is the growth of problems and difficulties, which the state regulation of economy is intended to settle.

Nowadays, the governmental regulation of the national economy is an integral part of reproduction. It solves various problems like, for example, stimulating economic growth, regulation of employment, promotion of progressive shifts in sectoral and regional structure, support for exports. Specific directions, forms, and scales of state regulation of economy are determined by the nature and severity of economic and social problems in a country in a specific period (Tepe, Gottschall and Kittel 653-684).