State Paternalism and Paternalist Fialure in the Theory of Patronised Goods

The authors propose their view of the economic theory of modern state, being an important component of the theory of patronized goods and the general theory of mixed economy failures. Such an approach is based on the authors’ original understanding of irrationality, according to which individual behavior is considered irrational from the outside observer’s point of view, with his own preferences. The theoretical basis for this assumption is a known understanding of the social interest per se, without reducing it to the preferences of economic agents. This understanding provides more general definition to paternalism and find out the risks of its negative consequences. Analysis of state paternalism evolution, presented in the article, is important in the present research as it is reflected in the institute of state. Distinguished are several historic phases of change in its contents and trends of development. Presented the economic analysis of state-regulating models, models of social state, developing-state and «play-maker state», providing the institutions to create paternalist settings of the government, declaring its preferences as normative social interests. Alongside with the other failures of mixed economy the authors describe their special case – «paternalism failure», combining the failures of social choice and that of irrational bureaucratic activities. There are five types of government officers’ irrationality: Vjazemsky law, dilettantism, «teller effect», Parkinson law, and self-interest of bureaucrats generating «managerial failures». It is demonstrated that unlike the market failures and associated failures of government activities, the risks of paternalism failure of the government may be reduced by the institutes of the civic society and citizens’ self-organization due to their influence on creating the normative assumptions and limits to the bureaucratic tyranny.