Expanded Summary

The public sector of the economy was preceded by the objective prerequisites, which laid the foundation for economic development of this relatively new field.This issue is not within the narrow confines of a local issue; however, it is connected organically with other issues.The economic progress and development theories, on the one hand, and, on the other hand,progressive structural changes in the public production contributed to this process, including the technological sphere. As a result of transformation of capitalism, the turn into a new quality of economic system based on domination of private capitalistic property changed the trajectory to world development. Social orientation was recognized as the general feature of market system based on property pluralism, together with the realization of market principles, which in its turn, confirmed the correctness of Keynesian theory about the necessity of state regulation of economy. The government has taken the market "mistakes" rectification, which became the basis for the process of humanizing the world.

Formation of socially oriented economy that is market economy was estimated as time requirement, moreover, it became important tendency of development of the modern world and was recognized as the garantee of formation of new order and civil society.This circumstance promoted coming to the fore of moral values that left behind the requirements conditioned by previously installed in the roots, social instincts and stood on top of them. Two types of society were formed – closed and open. Closed- totalitarian society in conditions of which a person became a victim of a collective and open-human society that is prerequisite of development of democratic values.In the last period strengthen of tendency of sociality in the world adopted natural character. Social orientation made market economy politically viable.

Economy of social sector studies the ways of effective use of limited resources existing in state sector with the aim of maximum satisfaction of social requirements and the problem of optimal choice.Rational use of these resources is highly dependent on the economic situation, in particular, whether it is socially oriented. So, as much as possible, in order to satisfy the unlimited needs of the society special attention should be paid to the search of the ways of effective use of limited resources and the problem of optimal choice.

Industrial era, that  is linked to the strengthening and development, gave rise to the long-term historical cycle, which was characterized by the priority of the private interests of capitalist economic system in comparison with the social interests owing to "invisible hand". During this period, the focus was on a single firm, the problem of its cost minimization and profit maximization. It was the epoch of domination of individual conception of macro-economic paradigms and social well-being.Its ideology considered a person, as an economic phenomenon, as a mean of production and not as the aim of social production. Period of the priority of private interests on the public interests was marked by increase of corruption and other anti-social events, including the deformation of social ethic. This epoch comprises the period from XVIII-XIX centuries till 50s of XX century.

Keynesian model of regulation of market economy was successfully used in developed countries in terms of economic policy in the mid-70s. In this model the real embodiment is the start of practical implementation of an idea of establishing a socially oriented market economy in Germany and other developed countries. In USA exactly in this period a large-scale anti-poverty measures were undertaken, including such well-known in the field of health care programs, as “medicare" is, the social assistance program for pensioners and disabled people and “medicade”- the social program of protection of less provided layers.

Despite this, from the second part of 70s in the economy of Western countries too much state intervention has led to negative consequences of increased inflation, budget deficit and public debt rise, taxes increase, followed by a slowdown in economic growth. It is true, that "renaissance" of the opposing views of the Keynesian model created favorable conditions for the revival of classical theory of the "state minimum" and general provisions of neoclassical theory were reflected in the economic policy of developed countries. In this sense, the "neoclassical synthesis" played an important role.But the public sector has not lost its role in the realization of the public interest, especially in the early 90s after the recent developments.This is why the modern conditions are identified in the developed countries with special emphasis on important postulates of economic theory in the state and market relations.

The answer on the market economy triad - What? How? For who? can not be limited by the sphere of private goods and service reproduction. To solve the fundamental problems is not enough just taking into account the interests of individual consumers expressed only by the demand, it is necessary to defend public interests when the state has to perform the role of the conductor. The public sector based on the market's general theoretical principles, should regulate its activity in economy through the prism of the market and by taking into consideration the public interests.

The provision of the country's economic security is in the area of economic research of the public sector. The latter includes a wide variety of issues, the component of national security and is its material basis. Economic security strategy pays particular attention to the development of criteria  of economic safety and parameters that is the prerogative of the public sector of the economy.

As developed countries experience shows, the central place in the policy of state expenditures is occupied by the issues of provision of social stability. Together with financing of social programs that support  the groups of less wealthy population, a certain part of budgetary funds is allocated for the state programs of development of social and cultural fields.  Playing an active role in the social sphere a state gains the signs of socially oriented "welfare state". The state apparatus looses conservative bureaucratic character by strengthening of the middle class of the population, social responsibility of the private sector becomes stronger. The new problems arised by strengthening of civil society institutions and humanization process enriches the content of economy of the social sector.  Payments as the cost of the services rendered by the state to the public, as the most important leverage of economic stimulation and regulation and the main source of budget income, puts into the forefront the questions of theory of taxation in respect to interaction of economic efficiency and the state role in the functioning of the optimal taxation. From this aspect as well, the multi-faceted phenomenon of taxes is the subject of research of economy of the social sector.

The global problem of the state budget deficit gives the great importance to the issue of optimal division of state expenditures. With respect thereto, the research of the issues of budget federalization becomes more actual that is one of the spheres of study of public economic sector.

In post-communist countries the problems of transition period to market economy expands the area of research of public sector’s economy more and more. 

For right conduct of the process of economic transformation in Georgia, a special attention should be paid to the research of this field of economic science and to the preparation of personnel by this specialty. Financial dilemma of today’s Georgia gives us this task, and those acute macroeconomic problems, a partial solution of which even in this situation is impossible. Optimal combination of market "invisible hand" and the state "visible hand" is the necessary condition of effective socially oriented economy.

It is worth noting one very important fact: on the Third International Conference dedicated to public sector reform in St. Petersburg (still, June 2-3, 2000) was established the economy researchers Association (ASPE) of the public sector, the purpose of which is the study of economic problems of the public sector. It is informal association, which implements its activity in the frames of Stockholm University and St. Petersburg State University joint project and takes into account:  organization of the annual international scientific conference, publication of scientific reports of association, preparation of workshops, organization of lectures of foreign specialists and so on. This proven practice, I think, should be taken into consideration in the reality of Georgia.

In such critical situation for Georgia it is necessary to develop the scientific paradigm, which will take into account social, collective and individual needs balance. Therefore, we need not superficial evaluations, but deep analysis, which will be based on the fundamental concepts and will connect the causes and the results. This will allow us to distinguish the achieved and the desired, to get rid of illusions and additional losses. In this sense, the public sector research and preparation of appropriate personnel will contribute to the case of country's building.