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Posted on May 4th, 2014, by

The specificity of the state’s position lies in the fact that it as a sovereign or a carrier of power makes the laws and administrative acts by itself; these acts are used by other economic actors, and they also may create civil law relations independently from the will of other business entities. In this context, the state uses immunity and keeps power functions even when it comes in civil law relations built on the principles of equality of civil law relations as an ordinary entity. The purpose of the state’s participation in public circulation is the effective administration of public authority, i.e. performance of certain public interest functions. And public economic policy serves as one variety of these features.

The public sector usually complements the private sector and manufacture socially important goods and services. The market model of government involvement in civil circulation is usually based on the monistic conception, when the main and the principal member of such a relationship is the treasury (fisc, budget). Once fixed fisc equality in relations with all other participants of civil turnover does not needs its further revision in the future, and creates an equal conditions of the participations to other economic entities, who are in strict relationship with the budget.

State regulation of the economy is normative phenomenon normative, i.e., it is also quantitatively defined. It comes from an analysis of the economic situation (diagnosis of the state’s condition) and from a specific and clear goal-setting. These objectives must be clearly formulated, quantified and grounded, i.e. their rationality can be verified by scientific analysis and comparison with similar situations in the own country and abroad. Further, the means (tools) that can convert the real economic situation in the direction of the set goals are developed.

To continue, we can note that economic theory is the basis of public policy. Economic theory and economic policy are in the interaction and influence on each other. Thus, before we consider how this happens, it is important to find out the essence of these concepts.

According to Rich (1994), economic theory is a system of scientific views on the economic life of society, which gives a comprehensive picture of the patterns of development. It not only explains how the society can act, but it also helps to prevent the repetition of some of the negative economic effects, makes it possible to predict the further development. In broad terms, the economic policy covers political relations, political organization, and political ideology as a certain unity. In the narrow sense the concept of the economic policy is the practical activity of the state. The latter carries out its activities in the socio-cultural, political, administrative, economic and business activities. In the context of this paper, we are interested in economic activities and economic policies implemented by the state.

Public economic policy is directed not towards abstract well-being, but to improve the economics of society in a particular order, its conditions and possibilities. In other words, to achieve economic success, the state must strengthen and improve the existing system.

Father of the theory of public economic policy is often called Keynes. For instance, U.S. President F. D. Roosevelt attempted to implement this policy into practice for the first time, and he called the introduced system of state regulation a New Deal. In addition, a great contribution to the development of state economic regulation has made representatives of neo-Keynesian and neo-liberal schools of economics.

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