ABSTRACT
Policymakers and economists know that there often are many policy instruments to achieve a desired economic objective, but they may each be inclined to choose different ones. Policymakers have political economy considerations in mind, while economists usually focus on efficiency gains. Development economics emphasizes the role of the state in counteracting market failures that limit growth and in securing more socially desirable growth outcomes. The functionalist view of state behavior is a normative approach that assumes that government acts as a largely autonomous agent, actively pursuing its role as a social planner, and acting on behalf of society. In neoclassical economics, state interventions are motivated by market failures. In the industrialized countries, Keynesian policies had the objective of stimulating aggregate demand in a context of economic crisis due to underconsumption and labor market failures that prevented the economy from recovering under the drive of market forces.
